- The Chorley exception was considered in a number of cases this year. Three interesting developments await future consideration: whether it ought to apply to costs incurred by an incorporated legal practice, whether it applies to barristers who are not self-represented and whether it will remain at all.
- The nature of an appeal from a costs review panel under the Legal Profession Uniform Law Application Act 2014 is likely to receive further judicial consideration.
- The question of whether a party can enforce a costs agreement which contains oral terms arose in two cases this year.
- Following on from the High Court decision in Burns v Corbett, there is a real issue falling for future determination as to the ability of a costs assessor to resolve disputes between interstate parties.
Looking back over 2018, there have been a number of important cases which have illuminated issues in relation to legal costs. Some of them have been the subject of separate consideration in LSJ articles throughout the year. In this article, the authors have selected some interesting themes about which further developments may be expected in 2019.
Update on the Chorley exception
In the July 2016 edition of LSJ, we wrote about the application of the Chorley principle in NSW law (Johnson, Castle and Bailey ‘The Chorley exception: three strikes and out?’ 80-81). That principle has always been understood as allowing self-represented solicitors to claim party/party costs in the ordinary way, without regard to the fact that they are a self-represented party, and as an exception to the general rule that litigants in person do not recover for the costs of time spent under a party/party order for costs.
In July 2018, the NSW Court of Appeal handed down judgement in Pentelow v Bell Lawyers Pty Ltd  NSWCA 150 (‘Pentelow’). The Court held that a barrister who was not self-represented was permitted to recover costs under the Chorley exception for work she undertook in her own cause. An application for special leave to appeal that decision to the High Court has been filed and an oral hearing of the application has been set down in Sydney on 14 December 2018.
Meanwhile, the decision has been cited with approval by the Supreme Court of Victoria in Lake v Municipal Association of Victoria (No 2)  VSC 66 (‘Lake’) although Ginnane J indicated at , ‘[n]ot all of the features to which Beazley ACJ referred necessarily apply to Victorian barristers, as in Victoria there are scales of barristers’ fees stipulated in the Supreme Court Rules.’ The Court in Lake permitted a barrister, who represented himself, a limited recovery of fees for barristers’ work undertaken on an ordinary basis, together with disbursements.
A different aspect of the application of the Chorley principle was recently considered in Kessly v Benjamin & Khoury Pty Ltd  FCCA 2918 (‘Kessly’), where the applicant, a former client of the respondent law firm, was ordered to pay the solicitor’s costs after unsuccessfully applying to set aside a bankruptcy notice. The law firm was an incorporated legal practice and a director of the firm was the solicitor on record. The applicant argued that the law practice was not entitled to recover costs as it was a litigant in person and so the general rules applied. Baird J rejected the argument advanced at – of that judgment, not being persuaded that it was appropriate to distinguish the applicability of the Chorley exception on the grounds of incorporation or non-incorporation, of the legal practitioner litigant.
Nature of an appeal under Legal Profession Uniform Law
A party to a costs assessment that has been reviewed can appeal to the Supreme Court, or to the District Court of New South Wales. The appeals are as of right: the requirement for leave only being imposed where the amount of costs in dispute is less than $100,000 for appeals to the Supreme Court, or below $25,000 for appeals to the District Court (Legal Profession Uniform Law Application Act 2014, ss 89(1)(a), 89(1)(b) (‘Application Act’)).
Whereas previously under Legal Profession Act (‘LPA’), an appellant had to formulate questions of law, or apply for leave to appeal by way of rehearing, the position changes somewhat under Legal Profession Uniform Law (‘LPUL’). Appeals are by way of rehearing and fresh evidence, or evidence in addition or substitution for the evidence before the review panel or costs assessor, may be given with leave of the Court (Application Act, s 89(4)). Most importantly, the Supreme Court or the District Court on any appeal, are given all the functions of a review panel (Application Act, s 89(2)).
The question which arises is what is the nature of the ‘rehearing’? The word is frequently used in the context of rights of appeal but it’s meaning is not fixed. What is tolerably clear, however, is that the term ‘rehearing’ is ordinarily used in contradistinction to both an appeal stricto sensu and an appeal de novo. The proper construction of the terms is always an exercise in statutory interpretation.
One case which has been decided in relation to these provisions yielded a surprising result.
In Aesthete No 3 Pty Limited v Gilmore Finance Pty Limited  NSWDC 1 (‘Aesthete No 3’) the underlying proceeding involved orders for the removal of a receiver appointed over real estate. The substantive application was determined by the Equity Duty Judge and the costs were referred to the Registrar in Equity. The Registrar ordered that the costs were payable on the ordinary basis (at ).
On 3 March 2016, the appellant delivered an itemisation of costs seeking $147,349.08 pursuant to the order for costs. On 12 April 2016, the costs assessor delivered a certificate of determination for $77,864.08, and on 5 September 2016, the review panel confirmed the costs assessor’s determination (at ).
At the hearing the plaintiff adduced evidence, apparently without objection, which was not before the costs assessor but would have been available. The defendant adduced evidence in reply which would also have been available. The judgment contains no consideration of whether, on a rehearing, such evidence ought to have been permitted. Nor was there any grappling with the nature of the appeal. The Court set aside the determination of the review panel and costs assessor, and awarded the full amount claimed on appeal of $141,660.38, on the basis that the costs assessor and review panel had made various errors and that ‘[i]t is clear that the costs… were billed by Yates Beaggi Lawyers and paid by the appellant. I make findings accordingly.’ (at )
Two aspects of the decision give rise to doubts about its correctness. First, the appeal seems to have been conducted as an appeal de novo. There is no support for that approach either in the text of the relevant provisions or when the context is considered. The context is that costs are dealt with in the NSW costs assessment system. An application is decided originally by one costs assessor; any review is conducted by a panel of two costs assessors. Costs assessors have power to conduct an oral hearing and to receive evidence and administer oaths. That suggests that any relevant evidence ought to be adduced before the costs assessor, where it can be dealt with and determined in a procedurally fair manner. The appellate structure established under the Application Act is therefore one which occurs after the parties have progressed through that procedure, and any review. An appeal to the Court is the third level of determination. It seems unlikely that Parliament intended, therefore, for a party to be able to begin again on appeal.
The second aspect of the decision which raises a question is the outcome. The costs order was for costs on an ordinary basis. Three costs assessors, who are experts in matters of the quantification of costs under court orders, determined that the fair and reasonable costs were just over 50 per cent of what was claimed. On appeal, the Court determined, on evidence which could have been but was not before the assessor or review panel, and in the absence of costs being awarded on an indemnity basis, that almost 100 per cent was recoverable under the order. Both the procedure adopted on appeal and the outcome are unexpected and it is likely that the appeal provisions will receive further attention in due course.
[T]he Legal Profession Act 2004, which requires that a costs agreement be in writing (and prescribes additional requirements for conditional costs agreements), precludes the enforceability of oral terms … [furthermore] ‘a party cannot enforce as a matter of contract a conditional costs agreement which does not comply with the provisions of the LPA’.
Oral terms in costs agreements
Can a costs agreement have oral terms? The issue arose in two cases during the year. Indirectly in the first case, WKA Legal v Gleeson  NSWSC 318 (‘WKA’), about which we wrote in some detail in the May 2018 LSJ (Castle and Bailey, ‘To sue or not to sue? That is the question.’ 83-85). Practitioners will recall the factual matrix meant that the LPA 2004 applied to the assessment and, in circumstances where the costs assessor under the LPA has no power to take oral evidence, the Court was inclined to injunct the costs assessment and to have the matter continue to a contested hearing. The allegation was that the written costs agreement, which was on a standard non-conditional basis, did not reflect the parties’ real agreement, reached in conversations, that the work would be conducted on a conditional basis. That agreement was pleaded as having written and oral terms. In noting that proposition Kunc J said, ‘… If that is correct, then it is not a costs agreement under the Act because s 322(3) provides that “a costs agreement must be written or evidenced in writing”’ (at ). The implication is that such an agreement, if proved, can be enforced, though it would not answer the description of a ‘costs agreement’ under the LPA 2004.
This issue was raised again in Jefferis v Gells Pty Ltd t/as Gells Lawyers  NSWDC 288 (‘Jefferis’), where one of the questions was whether or not an agreement between a barrister and a solicitor could be constituted by a written agreement and an oral term, asserted to have established that the parties agreed that the barrister would undertake the matter on a speculative basis. Dicker DCJ determined that the LPA 2004, which requires that a costs agreement be in writing (and prescribes additional requirements for conditional costs agreements) precludes the enforceability of oral terms, concluding (at ) that ‘a party cannot enforce as a matter of contract a conditional costs agreement which does not comply with the provisions of the LPA’.
The constitutional implications of the costs assessment system
Practitioners may be aware of recent cases in relation to the jurisdiction of NCAT to determine disputes between residents of different states. In Burns, the High Court determined that NCAT lacked jurisdiction to determine a matter under the Anti-Discrimination Act where the dispute was between parties who were residents of different states. Whilst the High Court was unanimous in the result, there were a number of different reasons expressed for the conclusion. More recently, in Attorney General for New South Wales v Gatsby  NSWCA 254, the NSW Court of Appeal held that NCAT lacked jurisdiction to determine two separate disputes under the Residential Tenancies Act 2010 (NSW) where the parties to each dispute were residents of different states.
A question arising from these cases is whether a costs assessor under the NSW costs assessment scheme has jurisdiction to determine applications for assessment where the parties are residents of different states? This is an important but complex question and it is beyond the scope of this article to attempt an answer. A fuller exposition of the question and related issues which arise will be the subject of an article in the February edition of LSJ.