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‘Unfair’ clauses in costs agreements need further guidance, tribunal says
While dealing with a firm’s fight over a $277,000 bill, a tribunal member suggested the Law Society provide further guidance on the operation of two “unfair” and “difficult to understand” clauses in costs agreements.
Naomi Neilson
An unsuccessful attempt by a former HopgoodGanim Lawyers’ client to overturn a costs agreement in the Queensland Civil and Administrative Tribunal (QCAT) revealed several concerns about the operation of two clauses relating to recovery of costs and internet scams.
As it is currently drafted, judicial member Peta Stilgoe OAM agreed clause 12.3 is unfair because it would have permitted HopgoodGanim Lawyers to charge recovery costs at a rate “far in excess of the scale” and in a way that may have resulted in a profit to the firm.
“I agree that the clause as drafted does allow the possibility that Hopgood Ganim may engage another firm, or debt collectors, to conduct the recovery proceedings and that the other entity may charge a lower fee. I also agree that this would be unfair,” Stilgoe said.
HopgoodGanim said the client was “fully informed” and pointed to the statement in the disclosure notice, which recommended she take the time to read the documents and to contact the firm with any questions.
The firm added the client acknowledged and confirmed she received this notice, knew she had a right to obtain independent legal advice, and was aware the professional fees exceeded any applicable court scale.
However, Stilgoe said this was not enough.
“Because it had the potential to profit from the operation of this clause … the firm should have explained the effect of clause 12.3 and how it differed from the usual position. It was obliged to make a full and frank disclosure. The failure to do so made clause 12.3 unfair,” Stilgoe said.
One of the client’s complaints about clause 19.2 relating to her contact with the firm being exclusively via email at a time when the “inception of emails and scamming of bank account details is well-known”.
While she had no issue with providing an indemnity for malicious acts by a third party, she alleged the clause goes further than that by purporting to absolve HopgoodGanim from “its own negligence or default”.
Even taking a restricted view of the effect of clause 19.2, Stilgoe considered the potential effects of internet fraud and scams through the email service “are sufficiently serious” that the firm should have explained to the client the effect of the clause.
“Without that explanation, the clause is unfair,” Stilgoe said.
While Stilgoe determined these two clauses were unfair, it does not mean the costs agreement would be set aside.
As HopgoodGanim pointed out, the clauses were not to the client’s detriment, and her other complaints fell short, including those relating to postage fees and personal liability for counsel fees.
Further, Stilgoe said adding clauses and explanations to “already lengthy” costs agreement and disclosure notices would not be to anyone’s benefit, particularly given the documents are “already difficult to understand”.
“It is not for me to comment on policy, but I note the Queensland Law Society already has guidance statements, including guidance statement [number two] on the ongoing costs disclosure obligations.
“If the clauses complained of here are common throughout the profession then, perhaps, the Queensland Law Society might provide further guidance on their inclusion, effect and ramifications for both lawyers and client,” Stilgoe said.
The case is Stevens v Hopgood Ganim Lawyers [2024] QCAT 584 (20 December 2024).
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
You can email Naomi at:
