New South Wales Supreme Court CITATION : Marano & Anor v Quagliero [2006] NSWSC 1364 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 21 September 2006 JUDGMENT DATE : 8 December 2006 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Harrison DECISION : (1) The appeal is dismissed; (2) The Costs Assessor's decision dated 31 January 2006 is affirmed; (3) The summons dated 17 February 2006 is dismissed; (4) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : Appeal against costs assessor's decision - whether costs agreement was valid - translation fees Family Provision Act 1982 (NSW) LEGISLATION CITED : Legal Profession Act 1987 (NSW) - ss 175, 208D Legal Profession Regulation 2002 (NSW) - Reg 45 Allen v Aldridge (1844) 5 Beav 401; 49 ER 633 Attorney General of New South Wales v Kennedy Miller Television Pty Ltd (1998) 43 NSWLR 729 CASES CITED : Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278 Kennedy Miller Television Pty Ltd v Lancken (Sperling J, 1 August 1997, unreported) Smits v Buckworth (Unreported, NSWSC Young J, 8 August 1997, 22 September 1997) Annamaria Bernadette Marano and PARTIES : Peter Michael McBride t/as McBride Harle & Martin - Plaintiffs Iolanda Quagliero - Defendant FILE NUMBER(S) : SC 10775/2006 COUNSEL : Mr M L Brabazon with Mr D Jenkins - Plaintiffs SOLICITORS : McBride Harle & Martin - Plaintiffs Ms I Quagliero - Defendant in Person LOWER COURT JURISDICTION : Costs Assessor LOWER COURT FILE NUMBER(S) : 90857/2004; 91474/2004 LOWER COURT JUDICIAL OFFICER : Mr J A McGruther LOWER COURT DATE OF DECISION : 31 January 2006 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON FRIDAY, 8 DECEMBER 2006 10775/2006 - ANNAMARIA BERNADETTE MARANO & ANOR v IOLANDA QUAGLIERO JUDGMENT (Appeal against costs assessor's decision - whether costs agreement was valid - translation fees) 1 HER HONOUR: By summons filed 17 February 2006, the plaintiff seeks to appeal against the costs assessment made on 31 January 2006 by Mr John Anthony McGruther, Costs Assessor, in two related matters, namely 90857 of 2004 and 91474 of 2004. 2 Annamaria Bernadette Marano and Peter Michael McBride t/as McBride Harle & Martin are the plaintiffs (McBride Harle & Martin). They are the former solicitors who acted for the defendant. Ms Iolanda Quagliero is the defendant. McBride Harle & Martin relied on two affidavits of Annamaria Marano sworn 9 March 2006. Ms Quagliero appeared at this hearing unrepresented. She submitted that the solicitor charged too much and, in particular, there were too many affidavits prepared which were not relied upon, the amount of A$350 for the solicitor's taxi fare in Italy was too much, as was the $1.00 per page photocopying fee when it only cost the solicitor 20 cent per page. 3 The costs in question are the legal services provided by the plaintiffs to the defendant in acting as her solicitors in litigation relating to her late mother's estate, lo Surdo v Public Trustee No 3317/2002. 4 Ms Quagliero's mother, Carmelia Cipolla died. She left her estate to Ms Quagliero. Mr lo Surdo claimed to be Ms Cipolla's natural son, born to her out of wedlock in wartime Italy. He sought provision from her estate under the Family Provision Act 1982 (NSW), including orders designating distributed property as notional estate. His application was made out of time and he sought an extension of time under the Act. The active conduct of the defence was carried by the present defendant as second defendant in the Equity proceedings. She contested the allegation that Mr lo Surdo was the deceased's son. She also claimed that, even if he was her biological son, he had been adopted as a baby in Italy and that disqualified him from being an eligible person. She further contested that provision ought to be made for him, and his claim for an extension of time. 5 The case was complex and hard-fought. After a nine day trial, Justice Hamilton held, firstly, that Mr lo Surdo was Ms Cipolla's natural son; secondly, that the legal status of the process by which he was placed with an Italian family as a baby (described in Italian legal documents by the word 'affiliato') was not equivalent to adoption; thirdly, that Mr lo Surdo was consequently an eligible person; and lastly, that the evidence relating to the subsequent relationship between mother and son and their respective circumstances did not establish the requisite expectation of testamentary benefaction or provision. The result was that Mr lo Surdo's claim failed. 6 The plaintiffs acted for the defendant from 8 May 2003 to 16 February 2004, being a period of just over nine months. Before and after those dates, she was represented by several other firms of solicitors. The plaintiffs rendered six bills, which the defendant paid. The defendant subsequently sought assessment of the six bills of costs by two separate applications (three bills in each). Both applications were referred to Mr McGruther for assessment. The Costs Assessor issued his determinations on 31 January 2006 (ABM pp. 11-33 & 34-45), his statement of reasons in the second matter adopting the same reasons and conclusions as in the first (p 38, para 1.6). 7 During the period between 8 May 2003 to 16 February 2004 the solicitors rendered six account, namely on 28 May 2003 in the sum of $16,996.99, 24 June 2003 in the sum of $17,479.77, 18 August 2003 in the sum of $30,413.46, 23 September 2003 in the sum of $31,307.38, 7 November 2003 in the sum of $18,205.71 and 17 February 2004 in the sum of $11,494.55 8 The six bills totalled $125,913.09, comprising profit costs of $86,812 plus GST of $8,681.20 and disbursements of $27,704.34 plus GST of $2,715.55. The Costs Assessor disallowed $14,812, comprising profit costs of $13,812 plus GST of $1,381.20 and disbursements of $1,000 plus GST of $100. Thus the solicitor's costs were assessed at $111,101.09. The deductions comprise mainly of solicitor's fees for English/Italian translation, reduction in hourly amount chargeable for work done by a law clerk and filing a notice of change of solicitor. The deductions made in relation to disbursements and GST are not the subject of challenge in this appeal. 9 There was a costs agreement between the parties dated 12 May 2003 (ABM p 48). The Costs Assessor rejected a challenge of unfairness under s 208D of the Legal Profession Act 1987 (NSW) (LPA) (ABM p 20). This assessment was one which fell under the LPA. While this assessment fell under the LPA, it should be noted that the LPA has since been replaced by the Legal Profession Act 2004 (NSW). Grounds of appeal 10 The plaintiffs appeal against the assessments made on 31 January 2006 by Mr McGruther, Costs Assessor on seven grounds. They are, firstly, the Costs Assessor failed to have proper regard to section 208B(d) of the LPA and the provisions of McBride Harle & Martin's costs agreement for the hourly rate of McBride Harle & Martin's law clerk and reducing the hourly rate other than that specified in the cost agreement; secondly, he failed to direct Ms Quagliero to supply to McBride Harle & Martin a list of objections and transcript of Md Quagliero's proceedings with Mr Carmelo Lo Surdo in matter no 3317 of 2002 in the Supreme Court of New South Wales so as to provide McBride Harle & Martin the opportunity to put forward further submissions on costs; thirdly, he failed to properly consider section 208C of the LPA; fourthly, alternatively, he failed to properly consider and apply the legal principles of estoppel, restitution and unconscionability to the costs assessment; fifthly, alternatively, he failed to apply the full terms of the costs agreement between McBride Harle & Martin and Ms Quagliero; sixthly he failed to consider rule 1.3 of the Solicitors Rules; seventhly, he exercised a power when he had no power to reduce McBride Harle & Martin's costs charged to Ms Quagliero. 11 There are two main areas of dispute. The first is whether there was a proper disclosure of the fee agreement and the second is whether the fees charged for the translation of the solicitor between Italian and English should have been allowed. The fee agreement dated 12 May 2003 12 The fee agreement dated 12 May 2003 set out (a) rate for Ms Marano, the solicitor at $300 hourly and for an employed solicitor at $275 hourly; (b) law clerk at $200 hourly (as distinct from a "clerk" at $90 hourly); (c) Clause 2.f "The rate referred to in [a] to [c] includes all work performed by legal secretaries or clerks in engrossing and typing documents, and generally carrying out all internal office functions and tasks necessary to carry out the solicitors' instructions." The fee agreement also set out a range of chargeable expenses; and provided an estimate for "the work" in the range of "$60,000 to $80,000" described as "up to and including settlement", with an estimate of "expenses" as being about the range "$5,000 to $10,000" (clause 3). Barristers fees were to be additional. 13 The fees far exceeded the estimate of "between $60,000 to $80,000 up to and including settlement." The total amount of the bills was approximately $126,000, for work spanning a nine month period and, up to that stage, the matter had not been set down for trial. 14 I accept that the fees exceeded the original estimate. However, when that estimate was given the subsequent unreasonable attitude adopted by the client would not have been apparent. Ms Quagliero's unyielding approach was to fight every issue regardless of merit. She steadfastly refused to make an offer to settle the claim. On 4 November 2003 (six months after the solicitors commenced to act) the solicitors put Ms Quagliero on notice in writing that she would incur further legal fees, perhaps somewhere in the order of $150,000-$200,000 overall in running the case and this figure "was an estimate, not a quote". 15 Under the heading "Billing Arrangements", the costs agreement stipulated "We will send you a bill for our charges and expenses: (a) at the end of each month or from time to time, during the progress of the Work; and/or (b) when the Work is completed." The bills were rendered on roughly a bimonthly basis. This provision gives the solicitor a fair degree of flexibility as to when she is obliged to render a bill. According to the costs agreement, the bills could be rendered at the end of each month or from time to time. The billing complied with the arrangements set out in the agreement. 16 The Costs Assessor, in his reasons [10.2] – [10.7], stated: "10.2 I turn to an analysis of the CA [costs agreement], including statutorily and including also in the context of the format and content of the Bills subsequently issued, and in the context also of submissions, including Objections, put relative to it. 10.3 The disclosure as to the basis for the charging of costs is obligatory and is described in s 175 LPA. S175(2) sets out specific matters for client disclosure. These include: " (b) If the amount of the costs is not known, the basis of calculating the costs; (c) the billing arrangements.. (f) any other matter required to be disclosed by the regulations ." 10.4 S193(1) relative to the form of Bills costs, empowers the prescription by regulations for Bills content. 10.5 Regulation 45 of the Legal Profession Regulation 2002, amongst other criteria, sets out obligatory particulars for inclusion in a Bill of costs, which include: " (e) the work done in providing the legal service, (f) the period over which that work was done.. (h) the basis on which the costs have been calculated and charged.. " 10.6 Relative to this statutory foundation, I comment briefly on certain pertinent aspects of the presentation before me, including some as have drawn Objection from the Applicant Q within assessment. I am not satisfied, in brief, that the CA or the Billings subject to this assessment which ultimately flowed from it, fully satisfy the statutory disclosure requirements referred to, and in the respects which are illustrated following. It is in this context also that I do not positively respond to the Respondent M's assessment contention that I should " decline to assess " pursuant to s208C of LPA. 10.7 For the reasons following, it is my view and determination that the CA (and the Billing format and content which followed) did not in all obligatory respects comply with the LPA and Regulations, and where all of the costs are put in dispute effectively before the assessment, there is no basis to " decline " to assess as the Respondent M submits here. That does not, however, remove the costs from assessment nor from consideration of whether work was reasonably done, required and as to an assessment determination of ultimate reasonableness as to costs including pursuant to the assessment criteria prescribed in s208A, and having regard to the considerations further set out in s208B, of LPA. That exercise has been done here including against that foundation and that appropriateness of approach." 17 The Costs Assessor stated (at 10.8 (a), (c) and (d)): "(a) that legal secretaries are not chargeable by specific reference to CA clause 2.f. It is noted that, throughout each of the Billings submitted to assessment, and in the Time Ledgers provided by M under requisition within assessment, there is a sequence of secretarial attendances charged on various grounds. The terms of 2.f, in my view, are a specific exclusion from the addition of secretarial charges of this type, and to that extent this is not requisite statutory or Billing disclosure; [Costs Assessor's emphasis] … (c) that charges by M for their own conducting of translation exercises are not within the retainer and are not valid, nor validly disclosed, "solicitor" charges, or chargeable or disclosed under the CA. As some assessment debate surrounded this particular aspect, I deal with it separately below; (d) … That a CA is found on determination within assessment to not satisfy full statutory compliance, or that Bill format or content equally does not comply, do not ground an automated consequential basis as to deliberateness of overcharging. There in fact can be absolute integrity in the conduct of proceedings, as on balance appears to be the case here, albeit that there may be deficiencies, in some respect, in statutory disclosure or Billing benchmarks. …" 18 Section 175 of the LPA appears in Part 11 Division 2 which is entitled "Legal fees and other costs". Section 193 of the Act also appears in Part 11 but in Division 4. 19 The Costs Assessor held that, as s 175 was not complied with, the costs were to be assessed in accordance with s 208A and B of the Act. 20 The Costs Assessor also referred to Regulation 45 of the Legal Profession Regulation 2002 (the Legal Profession Regulation 2002 has since been replaced by the Legal Profession Regulation 2005), which reads: "(1) For the purposes of section 193 (1) of the Act, the following particulars are to be included in a bill of costs: (a) a description of the legal service provided, (b) the total amount of the costs charged. … (e) the work done in providing the legal service, (f) the period over which that work was done, … (h) the basis on which the costs have been calculated and charged (whether on a lump sum basis, an hourly rate basis, an item of work basis, a part of proceedings basis or other basis), … (2) However, the particulars referred to in subclause (1) (e)–(i) need not be included in the bill of costs if: (a) the total amount of costs charged is the amount, or an amount calculated on the basis, set out in a costs agreement for the legal service made under Division 3 of Part 11 of the Act or disclosed in accordance with Division 2 of that Part, and (b) the bill of costs refers to the relevant costs agreement or disclosure document." 21 The Costs Assessor referred to Regulation 45 in the context that it sets out obligatory particulars for inclusion in the bill of costs. However, in Smits v Buckworth (Unreported, NSWSC Young J, 8 August 1997, 22 September 1997) Young J (as he then was) stated: "The classic definition of bill of costs was applied in cases after the 1993 amendment; see for instance Action Australia Pty Ltd v Frankel, Barr, AJ 23 December 1994, unreported. However, on 12 May 1995, Regulation 22A commenced. That regulation, made for the purposes of s 193 of the Act, set out the particulars that are to be included in a bill of costs. The particulars seem to eliminate the need for setting out a line by line statement of the date on which each item of work was done as had been mainly required by the traditional law because Regulation 22A provided that the bill was to specify the work done and the period over which that work was done. Even before that regulation, the judgment of Barr, AJ, as his Honour then was, accepted that a solicitor may send a bill itemising the days on which various pieces of work were done together with a time billing report showing what solicitor did the work, what was his or her rate and how much time was spent. … Accordingly, the only significance that a bill of costs has is that the solicitor may not sue under s 192 until he has served a signed bill of costs. The process of assessment of costs is, however, one which may be carried out though there is not a bill of costs in the ordinary form at all." 22 Regulation 22A is the precursor to Regulation 45. A bill of costs does not have to comply with Regulation 45 when it is submitted to a Costs Assessor for an assessment of costs to be made. Rather, a solicitor may not sue under s 192 until he or she has served a bill of costs which complies with s 193 and Regulation 45. However, when these bills of costs that form the basis of the costs assessment are examined, they give details of the date and description of the work carried out, the initials and the designation of the person who carried out the work. No units of time are specified, except where there is an actual attendance by the client. The client, after making an examination of each of those bills of costs, would be largely unable to ascertain whether or not the costs were charged in accordance with the costs agreement. 23 In Kennedy Miller Television Pty Ltd v Lancken (Sperling J, 1 August 1997, unreported), Sperling J had held that the Costs Assessor was "bound to give reasons for his determination, specifying the items which have been reduced by what amount and for what reason in each instance" – see also Attorney General of New South Wales v Kennedy Miller Television Pty Ltd (1998) 43 NSWLR 729 and Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278 at [33]). It would be difficult for the Costs Assessor to carry out this task if enough information was not provided in the bill of costs. 24 The plaintiffs submitted that, because of the error in approach in the reasoning in relation to Regulation 45, the whole of the decision is infected such that the matter should be remitted to the Costs Assessor for redetermination. I do not think so. While I accept Regulation 45 does not apply to the bill of costs furnished in the assessment process, enough information should be provided in that bill of costs to enable the client and the Costs Assessor to ascertain whether the fees charged are in accordance with the costs agreement. The approach by Barr J quoted by Young CJ in Eq in Smits achieves this outcome. It also provides the basis for the Costs Assessor to make his or her determination in accordance with the requirements set out in Lancken. The overall approach taken by the Costs Assessor was correct. 25 From my reading of the bills and the time ledgers produced by the solicitor, it appears that the client was billed for secretarial services, which was contrary to Clause 2(f) of the costs agreement. It was open to the Costs Assessor to come to his decision. It is my view that the Costs Assessor's decision should be affirmed. The Costs Assessor decided to apply the exclusion in s 208C(4) and declined to assess costs in accordance with the costs agreement as required by s 208C(1)(b) and (2). Instead, he conducted the costs assessment pursuant to ss 208A and 208B. There is no error in law. 26 If I am wrong, I turn to consider the items that relate to fees charged for translation which were disallowed. It was submitted to the Costs Assessor that these fees charged for translation were outside the terms of the retainer, so that even if the costs assessment was valid, the Costs Assessor was entitled to disallow those costs if he considered that they fell outside the terms of the retainer. The translation fees 27 The costs agreement dated 12 May 2003 defined the retainer. It stated: " The Work 1. The Work you require us to do is as follows:- To act on your behalf regarding a Family Provision Act Claim brought by Carmelo Lo Surdo." 28 The translation work formed a large part of the disallowed costs. The Costs Assessor gave careful and considered reasons in relation to the item referred to as "translation" at paragraph [11]. Relevantly, the Costs Assessor had before him a letter written by Ms Quagliero's current solicitor addressed to her dated 15 May 2005. At paragraph [1] it stated that some of the documents upon which Professor DePalma based his evidence were translated by Ms Marano and these documents (as objection has been raised by the opposing side) now needed to be translated by a translator. That is, part of the translation work was required to be redone by an independent translator. 29 At 11.7 the Costs Assessor concluded: "It is accepted that translation elements were obviously reasonably critical and, in themselves, not necessarily easy including as to dialect, and that comment applies equally to Italian legal and familial research (refers paragraphs 6-12 for example of Gzell J Judgment of 17 September 2003). But, howsoever in good faith some of the translation exercise was contributed by M it would appear, in its fullness at least, to be beyond the scope of the engaged retainer, including as to disclosure, and consequently drew objection in final Billings before the assessment. Again, this is stated not as a criticism of that contribution, but rather applying assessment criteria." 30 The plaintiff's counsel referred to Allen v Aldridge (1844) 5 Beav 401; 49 ER 633, where the Master of the Rolls, Lord Langdale said [at 405] that where a solicitor who fulfils another role such as a steward as well as that of solicitor: "…the business contained in a taxable bill may be business of which no part was transacted in any Court of law or Equity; but I am of the opinion that it must be business connected with the profession of an attorney or solicitor – business in which the attorney or solicitor was employed, because he was an attorney or solicitor, or in which he would not have been employed, if he had not been an attorney or solicitor, or if the relation of attorney or solicitor and client had not subsisted between him and his employer." 31 I accept that the solicitor performed the translation work, but would not have done so had the relationship of solicitor/client not subsisted between them. That does not mean that all work transacted outside of Court by a solicitor is necessarily connected with the profession of a solicitor, so that they may charge a client for it. The solicitor, in undertaking the translating work, ran a risk that her work may need to be redone as she could not be considered an independent translator. It was open to the Costs Assessor, after a detailed analysis, to reach a conclusion that some of the translation work went beyond the scope of this particular retainer. 32 The plaintiff also submitted that, where the Costs Assessor acted on, or did not entirely discount, submissions of the defendant in her letter of 30 May 2005 (referred to earlier in this judgment) to the Costs Assessor (ABM p 445 to 447), the Costs Assessor also failed to accord the plaintiffs procedural fairness by not requiring the defendant to comply with the matters set out at point 1 of the plaintiff's letter of 1 June 2005 to the Costs Assessor (ABM p 448) and that it was impossible fairly to assess the strength and weight of the defendant's submission without allowing its factual basis to be tested. 33 The Costs Assessor did seek the solicitor's comments on the issue raised in Ms Quagliero's letter dated 30 May 2005. The solicitor's reply was prompt. On 1 June 2005 she furnished a reply and requested that: "Mrs Quagliero should provide to us the grounds of objections, and advise which of the Affidavits this firm prepared were read and or not read. Mrs Quagliero should also provide a copy of the transcript of the proceedings relating to the matters she asserts so that we can further consider any additional submissions in answer to her letter of 30 May 2005." 34 The type of enquiry envisaged by the solicitor goes well beyond what is required in a costs assessment. The Costs Assessor must give the parties a reasonable opportunity to make submissions (s 208(1)(a)), "not chase every rabbit down a burrow". The solicitor was given an opportunity to reply to the views expressed by Ms Quagliero. The solicitor was certainly afforded procedural fairness. 35 Finally, it was submitted that if the costs agreement was valid, the solicitor should not have been required to pay the costs of the assessment pursuant to s 182(3) of the Act. The costs agreement is not valid and so the decision that the solicitor pays the costs of the assessment still stands. The appeal is dismissed. The Costs Assessor's decision dated 31 January 2006 is affirmed. The summons filed 17 February 2006 is dismissed. 36 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed. The Court orders: (1) The appeal is dismissed (2) The Costs Assessor's decision dated 31 January 2006 is affirmed. (3) The summons dated 17 February 2006 is dismissed. (4) The plaintiff is to pay the defendant's costs as agreed or assessed. ********** 12/12/2006 - Amended date of judgment from Friday, 7 December 2006 to Friday, 8 December 2006 - Paragraph(s) Heading DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.