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Unfair costs assessment tossed out by court
A costs assessment issued by a Perth law firm was set aside by a court because it was “not fair and reasonable”.
Naomi Neilson
Boutique firm Delta Legal and sole director Mario Strbac were told to reissue bills to a family law client because the costs assessment made “misleading disclosures”, failed to highlight “significant” matters, and did not explain how certain charges were made.
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The firm began work in October 2018 and had billed the client a total of $87,593.20 by the time it terminated the retainer in August 2019.
The Supreme Court of Western Australia was told Strbac walked the client through the costs assessment during one of their first meetings and explained the costs estimate would be updated as the matter developed and she could terminate at any time.
In May 2019, Strbac verbally updated the client about her accrued costs and provided an estimate of future costs.
The client alleged the costs disclosure was “inadequate” both at the time it was issued and during the time the firm was retained.
In examination, the client said she was “fighting for my survival”, was not “unduly worried” about the costs at the time, and felt “pushed into a corner” by the family law matter when she signed the agreement.
She added she had “no previous experience of anything to do with the legal profession and never want any ever again”.
Justice Amanda Forrester said the client’s recollections of the first meetings were “coloured by her perception of subsequent events” and her overall dissatisfaction with Delta Legal.
As a result, Justice Forrester did not consider her evidence sufficient to determine the extent of the costs disclosures.
The court was also satisfied that Strbac gave an initial estimate of costs and had more conversations with the client during the retainer, as proven by the invoices issued during the early months.
However, the invoices did not set out how many units of time were spent on particular tasks, who performed them, or what hourly rates were being applied, Justice Forrester found.
Delta Legal argued the Legal Profession Act did not require identification because it was “not necessary to achieve appropriate disclosure of the basis on which legal costs will be calculated”.
This submission was rejected.
“The costs agreement did not merely omit to identify the determination which would otherwise be applicable; it was positively misleading as to the applicable determination.
“Even if it was not necessary to identify the applicable scale, having chosen to identify one, it was incumbent on Delta Legal to identify the correct one,” Justice Forrester said.
In addition to its failure to inform the client how legal costs would be calculated, Justice Forrester concluded the firm did not explain the consequences of entering into a costs agreement, “which enabled legal costs to be charged other than according to scale”.
Justice Forrester said there was also a failure to consider the client was “potentially vulnerable” as a family law client, “which must have been obvious to Strbac, at least to some extent”.
After the bills are reissued, Justice Forrester said the client can apply for a costs assessment and “that can be done in the ordinary way”.
