District Court New South Wales Medium Neutral Citation: Pannetta v Parkview Constructions Pty Ltd [2014] NSWDC 341 Hearing dates: 8 October 2014 Date of orders: 08 October 2014 Decision date: 08 October 2014 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1) The default judgment is set aside. (2) Plaintiff's costs of the application be his costs in the cause. (3) Stand over for directions on Wednesday, 22 October 2014 at 10am before the list judge. Catchwords: COSTS – solicitor's costs DEFAULT JUDGMENT – setting aside – adequate disclosure of fees – costs of application Legislation Cited: Legal Profession Act 2004, s 309, s 310, s 311, s 312, s 316, s 317, s 321, s 332 Legal Profession Regulations 2005 Uniform Civil Procedure Rules 2005, r 42.1, r 42.7 Texts Cited: Ritchie's Uniform Civil Procedure NSW Category: Procedural and other rulings Parties: Rocco Vincenzo Pannetta (plaintiff) Parkview Constructions Pty Ltd (defendant) Representation: Counsel: Mr M Fantin (plaintiff) Solicitors: e.law SCL Pty Ltd (plaintiff) Salim Rutherford Lawyers (defendant) File Number(s): 2014/102358 Publication restriction: None Judgment 1. Rocco Pannetta acted as solicitor for Parkview Constructions Pty Ltd ("Parkview") from 2004 until 2008. On about 6 December 2005 Mr Pannetta sent to Parkview a costs agreement and a costs disclosure. A number of invoices he issued to Parkview were paid, however 21 invoices were issued on 6, 13 and 27 March 2008 and 20 and 30 April 2008 totalling $181,136.97, which are alleged not to have been paid. 2. Mr Pannetta commenced proceedings by a statement of claim dated 4 April 2014. He requested a defence on 2 May 2014 and again on 29 May 2014. Particulars were requested by Parkview on 30 May 2014 and answered by Mr Pannetta on 1 July 2014 and again Mr Pannetta requested a defence. On 10 July 2014 Parkview sought from Mr Pannetta an extension until 1 August 2014 to file a defence. Mr Pannetta agreed on 14 July 2014. On 1 August 2014 Parkview again wrote to Mr Pannetta complaining that the particulars were not satisfactory and suggested Mr Pannetta review the claims. On 3 September 2014 Mr Pannetta obtained default judgment and on 18 September 2014 commenced enforcement. The issue before me is whether that default judgment should be set aside. 3. On 24 September Parkview retained lawyers and filed a motion to set aside default judgment. Mr Pannetta made an open offer on 26 September 2014 to cease enforcement action, obtain an assessment of costs, and stay proceedings under 2 February 2015 to enable the assessment to be completed. The offer was not accepted. At the hearing before me Mr Pannetta accepted that the result of the application turned on whether Parkview had an arguable defence. Mr Pannetta sought to maintain his judgment only in respect of 13 invoices totalling $168,620.22 plus interest. 4. Parkview says that the claim of Mr Pannetta would fail for a number of reasons. 5. First, Parkview submits that Mr Pannetta in a number of respects gave no estimate or range of estimates of the anticipated costs, contrary to s 309(1)(c) of the Legal Profession Act 2004. Section 309(1)(c) provides: "309 Disclosure of costs to clients (1) A law practice must disclose to a client in accordance with this Division: … (c) an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs…" 1. Parkview submits that the costs agreement relied on by Mr Pannetta only applies to two litigious disputes and contains an estimate of likely costs in respect of one matter only. It relies on paragraph B of the costs agreement, which says: "The work we have been instructed to do is: • Conduct Abby Precast Dispute • Conduct Sydney Super Seal Dispute, • Ongoing commercial/corporate/construction/property law advice and legal matters for all Parkview entities and individual directors." 1. Parkview submits that the reference to "Ongoing" means that the agreement does not embrace new matters, and the references to the "Dispute" and to "legal matters" means that litigious matters other than the two disputes listed are not embraced by the agreement. 2. Parkview also relies on paragraph 4 of the costs disclosure, which states: "4. Estimate of Costs The following estimate is based on the information available to us to date for the Abby Precast dispute. It is an estimate, not a quotation and subject to change. 4.1 It is not possible at this time to provide an accurate estimate of the total costs. Instead a range of estimates is provided (all amounts exclusive of 10% GST): Stage 1: Instructions and investigation of the matter: $5,000.00 Stage 2: Arbitration and Litigation $10,000 - $30,000 Stage 3: Settlement negotiations $5,000.00 - $10,000 Total $15,000 - $35,000 These estimates are made on the information available to us at this time. They may, and probably will, change when more information is available to us. The major factors which will affect the estimates are: 4.1.1 length of time and parties involved in dispute; and 4.1.2 willingness of parties to settle." 1. In Parkview's submission, this clause confined the estimate disclosure to the Abby Precast Dispute. 2. Secondly, Parkview submits that later schedules relied upon by Mr Pannetta provide estimates in only five matters, provide a range of estimates without providing an explanation of the major variables, and do not satisfy the requirements for early disclosure under s 311(1) of the Legal Profession Act 2004 which provides: "311 How and when must disclosure be made to a client? (1) Disclosure under section 309 must be made in writing before, or as soon as practicable after, the law practice is retained in the matter." 1. Thirdly, Parkview submits that since the estimates given by Mr Pannetta were in some cases exceeded they were not properly to be regarded as estimates. 2. Fourthly, Parkview submits that it received no estimates of costs payable on a loss, or costs recoverable if successful, contrary to s 309(1)(f) of the Legal Profession Act 2004. 3. Section 309(1)(f) provides: "309 Disclosure of costs to clients (1) A law practice must disclose to a client in accordance with this Division: … (f) if the matter is a litigious matter, an estimate of: (i) the range of costs that may be recovered if the client is successful in the litigation, and (ii) the range of costs the client may be ordered to pay if the client is unsuccessful, and …" 1. The Costs Disclosure contains the following paragraph 13: "13. Costs in court proceedings 13.1 If court proceedings are taken on your behalf, the court may order the other party to pay your costs of the proceedings. This sum will not necessarily cover the whole of your legal costs due to us. It is possible that the court may make an order that you pay the other party's costs (if, for instance, you lose the case). These costs are payable by you to the other party in addition to the costs payable to us. 13.2 If you are successful in the litigation the following is the range of costs that may be recovered from the other party. The sums given below are merely estimates. 13.2.1 prior to hearing $_________ 13.2.2 up to and including a single day's hearing: $_________ 13.2.3 up to and including three days' hearing: $_________ 13.2.4 etc: $_________ 13.3 If you are unsuccessful in the litigation you may be ordered to pay the other party's costs. The sums given below are merely estimates, and based on our estimate of what the other party's law practice may charge. 13.3.1 prior to hearing $_________ 13.3.2 up to and including a single day's hearing: $_________ 13.3.3 up to and including three days' hearing: $_________ 13.3.4 etc: $_________ 13.4 If settlement of your claim is being negotiated, I/we will provide you before settlement with: 13.4.1 a reasonable estimate of our costs payable by you on settlement; AND 13.4.2 a reasonable estimate of the costs you would obtain from the other party on settlement if the settlement is favourable to you: OR 13.4.3 a reasonable estimate of the costs you may have to pay the other party (eg. [Your] case is weak, etc)." 1. Parkview submits that the blank entries demonstrate a failure to give disclosure of the estimates required by s 309(1)(f). 2. Fifthly, Parkview submits that there was no disclosure of substantial changes to costs contrary to s 316 of the Legal Profession Act 2004. 3. Section 316 provides: "316 Ongoing obligation to disclose A law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under this Division as soon as is reasonably practicable after the law practice becomes aware of that change." 1. Parkview submits that certain invoices increased from an estimated maximum amount of $35,000 to $46,000 to approximately $47,000 and approximately $56,000 without any disclosure. 2. Sixthly, Parkview submits: "Failure to charge costs in accordance with the agreement pursuant to s 309(1)(a)". 3. Section 309(1)(a) provides: "309 Disclosure of costs to clients (1) A law practice must disclose to a client in accordance with this Division: (a) the basis on which legal costs will be calculated, including whether a fixed costs provision applies to any of the legal costs, and …" Parkview submitted that the hourly rate of fees increased without disclosure. 1. Seventhly, Parkview submits that there was a "[f]ailure to charge the correct amount of interest under s 321 of the Legal Profession Act". 2. Section 321 of the Act provides: "321 Interest on unpaid legal costs (1) A law practice may charge interest on unpaid legal costs if the costs are unpaid 30 days or more after the practice has given a bill for the costs in accordance with this Part. (2) A law practice may also charge interest on unpaid legal costs in accordance with a costs agreement. (3) A law practice must not charge interest under subsection (1) or (2) on unpaid legal costs unless the bill for those costs contains a statement that interest is payable and of the rate of interest. (4) A law practice may not charge interest under this section or under a costs agreement at a rate that exceeds the rate prescribed by the regulations. (5) Subsection (1) applies in relation to a bill of costs given in the form of a lump sum bill even if the client afterwards requests or is afterwards given an itemised bill." 1. Although there was reference to the payment of interest in the costs agreement and in the invoices, Parkview submits that the correct rate was not charged. 2. The disclosure stated in cl 7: "7. Interest on unpaid costs If our costs are not paid within 30 days of receipt by you of our bill of costs, we may charge you interest on the unpaid amount at the rate prescribed in Schedule 5 of the Uniform Civil Procedures Rules in respect of unpaid judgments, which is subject to change. The current rate is 9% per annum." A similar reference was contained in the invoices. Although the amount actually charged by Mr Pannetta was less than the Uniform Civil Procedure Rules rates in Sch 5 and its subsequent replacement, and apparently also less than the Reserve Bank cash rate plus 2%, being the rate prescribed by the regulations under s 321(4) of the Legal Profession Act 2004 (see [36.7.10]‑[36.7.20] in Ritchie's Uniform Civil Procedure NSW for the rates), nevertheless, the rate was higher than the "current rate" of 9% stated in the agreement and the bill. Parkview acknowledged that the "current rate" so stated was incorrect and less than the statutory rate and the prescribed maximum rate. 1. Parkview also contended that interest was wrongly claimed for the first 30 days, contrary to s 321 of the Legal Profession Act 2004 which provided that no interest was payable for the first 30 days. 2. Eighthly, Parkview also submitted that there was "[n]o disclosure of the retainer of a barrister and his fees, contrary to s 310". 3. Section 310 provides: "310 Disclosure if another law practice is to be retained (1) If a law practice intends to retain another law practice on behalf of the client, the first law practice must disclose to the client the details specified in section 309 (1) (a), (c) and (d) in relation to the other law practice, in addition to any information required to be disclosed to the client under section 309. (2) A law practice retained or to be retained on behalf of a client by another law practice is not required to make disclosure to the client under section 309, but must disclose to the other law practice the information necessary for the other law practice to comply with subsection (1). (3) This section does not apply if the first law practice ceases to act for the client in the matter when the other law practice is retained. Note. An example of the operation of this section is where a barrister is retained by a firm of solicitors on behalf of a client of the firm. The barrister must disclose to the firm details of the barrister's legal costs and billing arrangements, and the firm must disclose those details to the client. The barrister is not required to make a disclosure directly to the client." 1. Mr Pannetta accepted that another barrister was retained. There was evidence of disclosure of this and of the barrister's fees. 2. Ninthly, Parkview submitted that two of the invoices were not signed as required by s 332(2). 3. Section 332(2) of the Legal Profession Act 2004 states: "A bill must be signed on behalf of a law practice by an Australian legal practitioner or an employee of the law practice". 4. These non‑disclosures, Parkview submits, mean that the costs are not payable until assessed pursuant to s 317 of the Legal Profession Act 2004 and proceedings for their recovery cannot be maintained pursuant to s 331 of the Act. 5. Section 317(1) and (2) provides: "317 Effect of failure to disclose (1) Postponement of payment of legal costs until assessed If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been assessed under Division 11. Note. Under section 369, the costs of an assessment in these circumstances are generally payable by the law practice. (2) Bar on recovering proceedings until legal costs assessed A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been assessed under Division 11. …" 1. Finally, Parkview also alleges a "Failure to comply with the Limitation Act s 14". Section 14 of the Limitation Act 1969 provides: "14 General (1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims: (a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed, …" 1. Parkview submits that 11 of the 13 invoices were issued before 4 April 2008 and were said to be time barred as a result. ANALYSIS 1. I have doubts as to whether several of these issues raised by Parkview are arguable. The limitation defence is only available if the cause of action arose before 3 April 2008. But an action with respect to the unpaid costs referred to in the invoices is not able to be maintained until 30 days after the service of the bill pursuant to s 331 of the Legal Profession Act 2004 and thus not until after 4 April 2008. 2. As to the various non‑disclosures alleged, it may not be enough to suggest in an application such as this that the evidence did not establish that the covering letters to the invoices were signed. An application to set aside a default judgment in favour of Mr Pannetta is not the occasion for Mr Pannetta to prove his case. There is no evidence that the covering letters were not signed. I was assured that there were signed letters available. Other evidence indicated, unsurprisingly, a practice of signing letters. If the matter was crucial and remained in dispute I would have allowed Mr Pannetta an opportunity to tender those letters. 3. Similarly, as indicated earlier, there was evidence that the use of a barrister and his fees were disclosed. And the interest claimed was within the Uniform Civil Procedure Rules schedule or its replacement as provided for in the agreement and was below the Reserve Bank of Australia cash rate plus 2% as prescribed by the Legal Profession Regulations 2005 made under s 321(4) of the Legal Profession Act 2004. It also appeared that the properly disclosed hourly rate (or something less) was charged by Mr Pannetta. 4. In my view the proper construction of paragraph B of the costs agreement is that "Ongoing" includes future work done by Mr Pannetta. The word "ongoing" means, "Continuing without termination or interruption". In the context of the nature of the work performed, the reference to "all Parkview entities and individual directors", and the word "advice", the word "ongoing" is properly to be understood as a reference to Mr Pannetta's continuing work for Parkview rather than suggesting that the agreement applied only to matters then in existence. 5. Similarly, "legal matters" according to its ordinary meaning, extends to litigious matters. Nor do I see the reference to the Abby Precast Dispute in cl 4 of the costs disclosure as confining the estimate to that dispute only. The natural meaning of the paragraph is that it extends to all disputes. The concluding words of the paragraph, after the estimated range of costs, indicate the significant variables impacting upon that range. 6. However, it is not necessary that any final determination be made on these matters because there are two areas, one not expressly raised by Parkview, where the disclosure is arguably inadequate and entitles Parkview to have the default judgment set aside. 7. The first matter, not expressly raised by Parkview, is that the estimate of costs in the costs disclosure quoted above is in a form which confines its ambit to disputes. This meaning is informed by the reference to "Arbitration and Litigation" and to "Settlement negotiations" in section 4 headed "Estimate of Costs". 8. This may be sufficient disclosure of costs in future litigious matters but it is inadequate to disclose the estimate of costs in non‑litigious legal work. More than half of the invoices, the subject of these proceedings, deal with non‑litigious matters. Mr Pannetta submitted that in respect of all non‑litigious matters costs were disclosed on an hourly basis. I do not think this is necessarily sufficient, since there needs to be a disclosure of "total costs". 9. If work is being done more or less continuously on a number of non‑litigious matters, it might be possible to provide an estimate of total costs on those matters for a period, say, on a per month basis. Alternatively, Mr Pannetta could have obtained a waiver of disclosure under s 312(1)(b) of the Legal Profession Act 2004 by obtaining, among other things, a written agreement by the client to waive the disclosure requirements. But generally it is not sufficient to disclose only an hourly rate without a disclosure of at least the estimated number of hours so that the substance of the estimate of total costs is revealed. 10. This apparent non‑disclosure might preclude recovery of the costs in the non‑litigious matters in the absence of an assessment. 11. Mr Pannetta relied on the disclosures in a document headed, "ESTIMATED COST FOR DISPUTES AND LARGER JOBS" but this document only contained numerative estimates of five uncompleted matters, and the date of the document raised a genuine question about whether, even in respect of those five matters, the disclosure was "as soon as practicable" in accordance with s 311 of the Legal Profession Act 2004. 12. The other matter that was specifically raised concerned the disclosure of costs likely recoverable (if successful) or payable (if unsuccessful) in court proceedings. This aspect of disclosure was referred to in cl 13 of the costs disclosure, but, as can be seen from the passage quoted earlier, it left blank those sections where figures were called for in the document. Thus, there has been no estimate as required by s 309(1)(f) of the Legal Profession Act 2004. 13. It might be arguable that the narrative in cll 13.1 and 13.2 amount to disclosure, that success will enable part of the costs (elsewhere disclosed) to be recovered, and that failure will oblige the client to pay up to the same amount again to the successful party. This argument is weakened by the table setting out the matters to be disclosed but left blank. Parkview's position that this is insufficient disclosure is at least arguable and justifies an order to set aside the default judgment in respect of litigious matters. 14. Mr Pannetta did not submit that there was some other written disclosure that satisfied s 309(1)(f). 15. For these reasons, there is an arguable defence available. 16. Mr Pannetta did not press any argument based on delay as a reason why the discretion to set aside the judgment should not be exercised. The delay was short and was explained to some extent by Parkview's letter of 1 August 2014 indicating an assumption that default judgment would not be obtained without notice. 17. No prejudice arising from the delay is alleged. Mr Pannetta did raise an issue about information conveyed ex parte to the Court on an earlier occasion, but I am unaware of the content of that information and it has played no part in my decision. 18. For these reasons, I propose to set aside the default judgment. COSTS 1. So far as the costs are concerned, this application resulted from Parkview's dilatoriness in filing a defence. On four occasions Mr Pannetta requested that the defence be filed. Mr Pannetta did not file for judgment until about five weeks after the expiry of the extended date agreed to by Mr Pannetta, that Parkview requested in order to file a defence. 2. I do not think the letter of 1 August 2014, while it may be an explanation of why Parkview did not file a defence, provides any real excuse or justification for that failure. I also take into account Mr Pannetta's open offer to proceed to assessment rather than persist with maintaining the default judgment, however, and noting r 42.1 and r 42.7 of the Uniform Civil Procedure Rules 2005, I am not persuaded that Mr Pannetta should receive his costs in the event that the proceedings fail. I have considered that Parkview has succeeded on the application, although on a number of grounds it would likely have failed. 3. In these circumstances, in my view the proper order is that Mr Pannetta's costs of the application be his costs of the proceedings. ORDERS 1. The orders of the Court are: 1. The default judgment is set aside. 2. Plaintiff's costs of the application be his costs in the cause. 3. Stand over for directions on Wednesday, 22 October 2014 at 10am before the list judge. ********** 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. Decision last updated: 26 June 2015