When Costs Agreements Become Void: Consequences at Assessment Under the Uniform Law

Introduction

The Legal Profession Uniform Law has significantly changed how costs agreements are treated when disclosure obligations aren't met. Three recent Victorian Supreme Court decisions – Johnston v Dimos Lawyers [2019] VSC 462, Bennett (a pseudonym) v Farrar Gesini Dunn Pty Ltd [2019] VSC 744, and Shi v Mills Oakley [2020] VSC 498 – provide valuable insights into the consequences of non-compliance. Each case involved disputes over legal costs where the law firm had failed to provide adequate costs disclosure. In Johnston, a client disputed the costs of Family Law proceedings totalling approximately $253,000. In Bennett, an applicant challenged costs of approximately $490,000 for Family Law matters. In Shi, a Chinese national disputed costs of around $267,000 for commercial litigation.

The Harsh Reality of Non-Compliance

Under the Legal Profession Uniform Law, the consequences of non-compliance with disclosure obligations are significantly more severe than under previous legislation. Section 178(1)(a) explicitly states that if a law practice contravenes disclosure obligations, "the costs agreement concerned (if any) is void."

As Associate Justice Wood stated in Johnston v Dimos Lawyers: "Any failure to comply with any of the provisions in relation to disclosure in Part 4.3 of the Act renders the costs agreement void. Non-compliance therefore equals void. There is no discretion to be exercised around 'substantial' compliance."

This represents a marked departure from the previous Legal Profession Act 2004 (Vic), where disclosure failures might merely result in a discount of costs at the conclusion of taxation rather than invalidating the agreement entirely.

What Makes a Costs Agreement Void?

Section 174 of the Uniform Law mandates that a law practice must:

• Provide an initial estimate of total legal costs (including disbursements) when instructions are first given

• Update this estimate when there is a significant change to anything previously disclosed

• Provide these disclosures in writing

Common failures that have rendered costs agreements void include:

• Not providing any written estimate of total costs

• Excluding disbursements from cost estimates

• Not updating estimates when matters change significantly

• Using confusing or inconsistent methods to calculate estimates

• Providing estimates that are unreasonably low compared to actual costs

• Not disclosing increases in hourly rates

Consequences at Assessment: Not Always Catastrophic

Interestingly, while non-compliance renders a costs agreement void, this doesn't necessarily mean the law practice must fall back to court scales or minimum rates. As the three cases demonstrate, courts still have considerable discretion in determining the appropriate basis for assessment.

In Johnston v Dimos Lawyers, despite finding the costs agreement void, Associate Justice Wood determined that the costs should still be assessed using the hourly rates specified in that agreement. This approach was described as fair since the client had been given "a surprisingly accurate oral estimate of total legal costs" from the outset.

Similarly, in Bennett v Farrar Gesini Dunn, the Court found that "although both the First Costs Agreement and the Deferred Costs Agreement are void, as a general principle the respondent's costs are to be assessed on the basis of the hourly rates specified in them and counsel fees are to be assessed on the basis that they were rendered."

However, in Shi v Mills Oakley, Judicial Registrar Gourlay took a more nuanced approach. The Court held that for work undertaken in 2016 and 2017, costs should be assessed based on the rates in the void costs agreement. But for work after March 2018 (when County Court proceedings were issued), costs should be assessed using the County Court scale of costs. This reflected the Court's view that a new retainer had effectively commenced, requiring fresh disclosure.

Factors Courts Consider When Determining Assessment Basis

When deciding how to assess costs where a costs agreement is void, courts typically consider:

1. Whether the client was adequately informed about costs, even if technical disclosure requirements weren't met

2. Whether the rates in the void agreement were reasonable for the work performed

3. Whether the client had complained about costs during the retainer

4. The nature and complexity of the legal matter

5. Whether significant changes in circumstances justified fresh disclosure

6. The experience and specialisation of the legal practitioners

As noted in Johnston: "Irrespective of whether there is, or is not, a valid Costs Agreement the Court still has an obligation to determine what is fair, reasonable and proportionate" under section 172(1) of the Uniform Law.

Practical Implications for Practitioners

These cases highlight the critical importance of rigorous compliance with disclosure obligations. Law practices should:

1. Provide comprehensive written cost estimates at the commencement of all matters

2. Include all foreseeable disbursements in total cost estimates

3. Regularly review and update estimates when circumstances change

4. Document all communications about costs

5. Consider issuing new costs agreements when the nature of a matter changes significantly

6. Disclose rate increases promptly and in writing

As stated in Shi v Mills Oakley, there is "a prevalent misconception in the profession" about what constitutes adequate disclosure: "Demands for progress payments or the delivery of regular invoices for work already completed do not satisfy the Act."

Conclusion

While non-compliance with disclosure obligations automatically renders costs agreements void under the Uniform Law, courts retain discretion to assess costs on a fair and reasonable basis. The rates in void agreements may still be applied if appropriate, but practitioners should not rely on judicial discretion to save them from disclosure failures. The strict approach taken by courts underscores the importance of meticulous compliance with all disclosure obligations from the outset of any retainer and throughout the client relationship.

As Justice Wood aptly stated in Johnston v Dimos, "Non-compliance therefore equals void." The best practice is to ensure compliance from the start, rather than hoping for a favourable assessment after the fact.

Scope and Costs Estimates in Legal Retainers: Lessons from Shi v Mills Oakley

Introduction: A Cautionary Tale

The Supreme Court of Victoria's decision in Shi v Mills Oakley [2020] VSC 498 serves as a stark reminder of the critical importance of proper costs disclosure and agreement in legal practice. The case involved a Chinese national with limited English proficiency who retained Mills Oakley initially to assist with the sale of shares in his company. What began as a commercial transaction evolved into complex litigation when the purchaser, Mr Wu, issued proceedings against Mr Shi in the County Court. When the matter concluded, the total legal costs exceeded $267,000—far beyond initial estimates—and the law firm's costs agreement was deemed void for non-compliance with disclosure obligations under the Legal Profession Uniform Law.

The Importance of Proper Scope Definition

One of the fundamental issues in Shi v Mills Oakley was the failure to properly redefine the scope of work when the matter evolved significantly. The initial costs agreement provided an estimate of $50,000 (plus disbursements and GST) for what was essentially pre-litigation commercial work. However, when Mr Wu issued proceedings in February 2018, the nature of the retainer fundamentally changed.

Judicial Registrar Gourlay stated in paragraph 45 of the judgment: "It may be reasonable to consider that, when the County Court proceeding was issued, a new retainer began that warranted a new costs agreement and costs disclosure being given considering that the change in the applicant's instructions was so substantial and Mr Wu commencing proceedings was unexpected after 12 months."

When Does a New Retainer Come into Being?

The Shi case provides valuable guidance on when a new retainer may be considered to have come into existence, requiring fresh costs disclosure. The court identified several key factors:

1. Substantial change in scope: When the nature of the legal services changes significantly from what was originally contemplated (in Shi, from commercial dispute to litigation defence)

2. Passage of time: The court noted the 10-month gap in work before the County Court proceedings as significant

3. New explicit instructions: Receipt of instructions to undertake work substantially different from the original retainer (defending formal proceedings versus negotiating a commercial dispute)

4. Unexpected developments: Events that weren't reasonably foreseeable at the time of the original retainer

Judicial Registrar Gourlay concluded at paragraph 46 that "on the receipt of instructions to defend the Writ a new matter and a new retainer began. Therefore, any earlier costs estimate, including the one given on 11 November 2016, that did not consider the possibility of defending proceedings against Mr Shi has failed to comply with the disclosure requirements of s 174(1)(a) and (b)."

Legal Requirements for Costs Disclosure Under the Uniform Law

The case turned on the interpretation of sections 174 and 178 of the Legal Profession Uniform Law. Section 174(1) requires a law practice to:

• Provide the client with information disclosing the basis on which legal costs will be calculated and an estimate of total legal costs; and

• Provide updated information promptly when there is any significant change to anything previously disclosed.

Importantly, "legal costs" is defined in section 6 to include disbursements—a point that Mills Oakley failed to address adequately in their estimate. The court noted that each estimate specifically excluded disbursements, contrary to the definition of "legal costs" under the Act.

Updating Costs Estimates When Circumstances Change

The most significant lesson from Shi v Mills Oakley relates to the obligation to provide updated costs disclosures when circumstances change materially. Despite the matter evolving from a commercial dispute into full-blown litigation spanning multiple days of trial, the law firm's updates were found to be inconsistent and inadequate.

The court noted at paragraph 44 that: "It is clear that an estimate of total legal costs was never provided to the applicant. Each of the costs disclosures given were limited in some way or other by making reference to earlier conversations or by only disclosing future legal costs that excluded some disbursements."

The court was particularly critical of the practice of referring to earlier verbal estimates from 16 months prior, and of providing estimates that excluded foreseeable disbursements such as interpreters, subpoena costs, and transcript fees.

Consequences of Non-Compliance: The Void Agreement

The consequences of failing to comply with disclosure obligations are severe and non-discretionary. Section 178(1) plainly states that if a law practice contravenes the disclosure obligations, "the costs agreement concerned (if any) is void."

The court rejected the law firm's arguments that the approach to disclosure requirements should be "moderated by the fact that nobody knows the future." Citing Johnston v Dimos Lawyers [2019] VSC 462, Judicial Registrar Gourlay emphasized at paragraph 43 that: "Any failure to comply with any of the provisions in relation to disclosure in Part 4.3 of the Act renders the costs agreement void. Non-compliance therefore equals void. There is no discretion to be exercised around 'substantial' compliance."

The practical effect in Shi was that costs for work undertaken in 2016 and 2017 were to be taxed at the rates in the costs agreement, but costs for work after March 2018 (when the matter significantly changed) would be taxed on the County Court scale.

Distinguishing Johnston v Dimos Lawyers

The court distinguished Shi from Johnston v Dimos Lawyers [2019] VSC 462, where a costs agreement was also held void but costs were assessed by reference to the rates in the void agreement. In Johnston, the client had been given "a surprisingly accurate estimate of total legal costs" from the outset, and the non-compliance was considered "technical" in nature (a verbal rather than written estimate).

By contrast, in Shi, the estimates were neither accurate nor comprehensive, with no evidence that the law firm took steps to ensure the client (who had limited English proficiency) understood the costs implications as required by section 174(3).

Best Practices for Practitioners

To avoid finding yourself in a similar situation, consider these best practices:

1. Provide comprehensive initial estimates: Ensure estimates include all foreseeable costs, including disbursements, and are based on clearly disclosed charge rates.

2. Document all costs discussions: Unlike in Johnston v Dimos Lawyers where the law firm had detailed file notes of verbal cost estimates, Mills Oakley failed to produce documentation supporting their claimed discussions.

3. Recognise when a new retainer exists: When a matter fundamentally changes in scope, involves a significant time gap, requires substantially different work, or encounters unexpected developments, issue a new costs agreement rather than simply updating the old one.

4. Provide regular, written updates: Section 174(6) mandates that disclosures be in writing. Verbal estimates, while valuable, do not satisfy the statutory requirements.

5. Include all elements of "legal costs": Remember that "legal costs" include disbursements—excluding them from an estimate contravenes the Act.

6. Document client understanding: Section 174(3) requires that the law practice "take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs."

Conclusion

The Shi v Mills Oakley decision emphasises that costs disclosure is not merely an administrative burden but a cornerstone of the solicitor-client relationship. The court's analysis provides valuable guidance on when a new retainer comes into existence, requiring fresh costs disclosure—particularly when litigation commences unexpectedly after a period of relative inactivity.

Practitioners should view proper disclosure as an opportunity to build trust and clarity with clients. When scope changes significantly, a new retainer is likely formed, requiring a new costs agreement with comprehensive, written estimates that include all elements of legal costs as defined by the Act.

Failure to recognise when a new retainer has formed and to provide appropriate disclosure not only risks rendering your costs agreement void but may also damage the client relationship and potentially constitute unsatisfactory professional conduct.

In an environment where clients are increasingly cost-conscious, the lessons from Shi v Mills Oakley [2020] VSC 498 serve as a valuable reminder that clarity in costs is not just good practice—it's the law.

The "Interests of Justice" Exception in Defamation Costs Awards

Introduction: McIntosh v Peterson

The recent Western Australian Supreme Court decision in McIntosh v Peterson [No 3] [2024] WASC 446 provides valuable insights into how courts apply the "interests of justice" exception when awarding costs in defamation matters. In this case, veterinary clinic owners Andrew and Kay McIntosh, along with their business For Paws and Feathers Pty Ltd, sued animal rights activist Natasha Peterson, Jack Higgs, and V-Gan Booty Pty Ltd over a defamatory Facebook post. While the McIntoshes succeeded against Peterson and Higgs (receiving damages totalling $280,000), the claim against V-Gan Booty was dismissed, as were claims for injurious falsehood and civil conspiracy. When it came to costs, Chief Justice Quinlan had to navigate the complex interplay between statutory provisions, litigation conduct, and competing interests to determine the appropriate costs order.

The Statutory Costs Regime in Defamation Law

Defamation law in Australia provides a specific costs regime that differs from the usual "costs follow the event" principle. Section 40 of the Defamation Act 2005 (WA) creates a presumption in favour of indemnity costs in certain circumstances but subjects this to the overriding "interests of justice" exception.

Under s 40(2)(a), if defamation proceedings are successfully brought and the court is satisfied that the defendant "unreasonably failed to make a settlement offer or agree to a settlement offer proposed by the plaintiff," the court must order costs to be assessed on an indemnity basis - "unless the interests of justice require otherwise."

This "interests of justice" exception gives courts significant discretion to consider broader factors when determining costs, even where the statutory trigger for indemnity costs has been activated.

When Do the "Interests of Justice" Override the Presumption?

In McIntosh v Peterson [No 3], Chief Justice Quinlan found that the defendants had unreasonably failed to make a reasonable settlement offer. The defendants' offers of just $2,000 were found to be unreasonable in the circumstances, given that the plaintiffs had already suffered adverse effects and incurred costs. This triggered the presumption in favour of indemnity costs under s 40(2)(a).

However, His Honour went on to find that "the interests of justice require otherwise" for several important reasons:

1. The way parties conducted their cases: Section 40(1)(a) expressly allows the court to consider "the way in which the parties to the proceedings conducted their cases." In this case, the plaintiffs' counsel conducted cross-examination of Ms. Peterson in a particularly problematic manner by making unfounded allegations about her tax affairs. The cross-examination suggested she had declared only $70,000 in receipts from OnlyFans when her actual receipt was $385,000, implying tax fraud. In reality, Ms. Peterson had properly declared all income across her personal and company tax returns. This unfair attack on Ms. Peterson's character was reported in the media, causing reputational harm beyond the proceedings themselves.

2. Mixed success: The plaintiffs were wholly unsuccessful against V-Gan Booty Pty Ltd and failed in two entire causes of action (injurious falsehood and civil conspiracy).

3. Focus of the litigation: The plaintiffs' case had significant focus on Ms. Peterson's financial affairs and V-Gan Booty Pty Ltd's OnlyFans business, which the court found "permeated the plaintiffs' case" but was ultimately unnecessary to establish their defamation claims.

Understanding "Conducting a Case" in Context

The concept of how a party "conducts their case" is particularly important in defamation proceedings, where litigation tactics can significantly affect both the course of the proceedings and reputational impacts beyond the courtroom.

In McIntosh, the plaintiffs' conduct of their case extended beyond merely presenting their claims. Their litigation approach included:

1. Pursuing multiple defendants and causes of action, including against a company not incorporated at the time of the original Facebook post

2. Making an "elaborate case" suggesting Ms. Peterson's animal rights activism was "a ploy for making money"

3. Conducting cross-examination in a way that made serious allegations about tax impropriety that were unfounded and misleading

4. Focusing significantly on Ms. Peterson's financial affairs, which Chief Justice Quinlan found unnecessary for vindicating the plaintiffs' reputations

Quinlan CJ stated that "a party that conducts proceedings in that way should expect that it has costs consequences." This demonstrates that how parties choose to litigate defamation claims—particularly their focus, tactics, and treatment of opposing parties—can directly impact costs outcomes despite the statutory presumption.

Practical Implications for Litigants

The McIntosh decision offers several practical lessons for litigants:

1. Early resolution is crucial: The court described the settlement offers as revealing "the anatomy of a lost opportunity at resolution and... the metastatic effect that legal costs have on the prospect that proceedings can sensibly be resolved." Chief Justice Quinlan observed that much of the harm suffered by the plaintiffs could have been avoided if the matter had been resolved early.

2. Make reasonable settlement offers: Defendants should make genuine attempts to resolve matters with reasonable offers. The sum of $2,000 was deemed "simply unreasonable" even at an early stage.

3. Consider proportionality: In McIntosh, the court noted that some claims (particularly the clinic's claim) were relatively minor in monetary terms and even fell within the monetary jurisdiction of the Magistrates Court jurisdiction.

4. Focus on reputation restoration: Defamation proceedings should focus primarily on vindicating reputation rather than attacking the defendant's character beyond what is necessary for the claim.

5. The "interests of justice" exception has meaningful application: Even when the statutory preconditions for indemnity costs are met, courts retain a genuine discretion to make different orders where the interests of justice require.

Distinguishing Indemnity Costs from Special Costs Orders

It's important to note that the judgment in McIntosh also addressed a separate costs issue: whether to make a "special costs order" under s 141(3) of the Legal Profession Uniform Law Application Act 2022 (WA) to remove limits imposed by the relevant costs determinations. This is distinct from the question of indemnity costs under the Defamation Act.

While the court declined to award indemnity costs under s 40(2) of the Defamation Act, it did make a limited special costs order allowing:

• Removal of time limits for preparation of the case

• An increased hourly rate for counsel (to match senior counsel rates)

This highlights that courts have multiple tools for addressing costs and will apply them proportionately based on the specific circumstances of each case.

Conclusion

The "interests of justice" exception in s 40(2) of the Defamation Act provides courts with important flexibility to ensure costs orders reflect the overall conduct of proceedings and achieve fairness between parties. As demonstrated in McIntosh v Peterson [No 3] [2024] WASC 446, even where a party has technically triggered the presumption in favour of indemnity costs, the court will look holistically at all relevant circumstances.

For defamation practitioners, this case serves as an important reminder that how you conduct litigation—from the framing of claims to cross-examination tactics—can significantly impact costs outcomes. The interests of justice require not just consideration of who won, but how they won, and whether their conduct throughout the proceedings merits the significant benefit of indemnity costs.

Extensions of Time for Costs Assessments: When Will Courts Grant Relief?

Introduction

The recent Western Australian State Administrative Tribunal (SAT) decision in Kaya and WA Summit Lawyers [2025] WASAT 22 offers valuable insights into when clients may obtain an extension of time to have legal costs assessed. In this case, Ms Kaya engaged WA Summit Lawyers for a family law dispute but later became dissatisfied with both the representation received and the costs charged. She sought to have a particular bill (Invoice 107) assessed, but her application came approximately 7.5 months after the statutory 12-month time limit had expired. The Tribunal had to determine whether it was "just and fair" to allow the assessment to proceed despite being out of time.

The Legislative Framework

Under the Legal Profession Uniform Law (WA), s 198(3) requires that applications for assessment of legal costs must be made within 12 months after the bill was given to the client. However, s 198(4) provides that late applications may proceed if the designated tribunal "determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12-month period."

This provision balances the legitimate expectations of legal practitioners to have their bills finalized within a reasonable timeframe against the right of clients to challenge potentially excessive costs.

Key Factors in Determining Extensions

The Tribunal in Kaya referenced several significant cases that have established principles for determining when extensions should be granted. Drawing from Monopak Pty Ltd v Maxim Litigation Consultants [2007] WASC 112, the following factors are particularly relevant:

1. Reasons for Delay

The tribunal will examine why the client failed to bring the application within the statutory timeframe. In Kaya, the applicant's limited English proficiency, financial constraints, family responsibilities, and initial attempts to resolve the matter through the Legal Practice Board were considered adequate explanations for the delay.

2. Potential Injustice to the Client

Courts consider whether refusing an extension might result in injustice to the client. This involves evaluating whether there appears to be merit in the client's concerns about the bills.

3. Evidence of Potentially Excessive Bills

If there is preliminary evidence suggesting the bill might be excessive or contain charges for work not performed, this weighs in favor of granting an extension. In Kaya, the applicant asserted that the bill included costs for work that could not have been done on days for which costs were claimed.

4. Prejudice to the Practitioner

As noted in Frigger v Murfett Legal Pty Ltd [2012] WASC 447, law practices have legitimate expectations that bills will be finalized within the statutory period. They may arrange their business accordingly, and delays can prejudice them through fading memories or staff changes. However, in Kaya, the Tribunal noted that the firm had not provided evidence of any specific prejudice beyond delayed payment.

5. Practitioner's Reasons for Opposition

As officers of the court, legal practitioners should be acting honestly, ethically, and with proper motives when opposing an extension—not merely to prevent assessment. In Lin v WJ Legal (Aust) Pty Ltd [2023] VCS 52, the court noted that an unjustified reluctance to provide an itemized bill or serious delay in providing one might favor allowing an out-of-time application.

6. Statutory Purpose

The provisions exist to protect clients against excessive charges while preventing frivolous objections or tactical delays in payment. As Master Sanderson stated in Watson v Hewett & Lovitt Pty Ltd [2022] WASC 184, "the discretion, while unfettered, must pay particular regard to the length of the delay and the reasons for the delay."

Special Considerations for Self-Represented Litigants

The Kaya decision underscores that tribunals may give some latitude to self-represented litigants, particularly those with language barriers. The Tribunal acknowledged that navigating the legal system would likely be difficult for someone in Ms Kaya's position. Similarly, in Lin v WJ Legal (Aust) Pty Ltd, the court considered the applicant's incomplete knowledge of English as a constraint in enforcing his rights.

The Balancing Exercise

Ultimately, the question requires exercising a broad discretion to ensure that the interests of justice are properly administered. As Justice Dixon noted in Lin v WJ Legal (Aust) Pty Ltd [2023] VCS 52, the test "requires a consideration of the right of one party to seek an assessment against the legitimate expectation of the other party that any request for an assessment will be made within the statutory period."

Conclusion

For practitioners, the Kaya decision highlights the importance of maintaining detailed records of work performed and being prepared to justify charges if challenged, even outside the standard timeframe. For clients, while the 12-month limitation period should be respected, there remains scope for extensions where justified by the circumstances.

The case reinforces that the "just and fair" test is applied on a case-by-case basis, with tribunals weighing multiple factors to balance the competing interests at stake. While time limitations serve important purposes in finalizing legal obligations, they will not be rigidly enforced where doing so would produce an unjust outcome.

Delay in applying for security for costs

In Shoreside Pty Ltd v Wroxton Developments Pty Ltd [2023] WADC 112, a provider of construction services sued a property developer for unpaid invoices under a consultancy agreement. Applications for security for costs were made by the defendants just weeks before the trial, despite the case having commenced over 3 years earlier.

Judge Gething of the District Court of Western Australia considered the principles concerning delay in applying for security and the exercise of discretion under Corporations Act 2001 (Cth) s 1335.

His Honour observed that an unexplained delay is a factor against the grant of security for costs, citing the rationale given by Moffitt P in Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301 that a company is entitled to know its position early on before substantial sums are spent on litigation. However, Jackson J has noted the discretionary nature of security powers, finding there can be no strict 'entitlement' to early notice (Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jacques [2016] QSC 2). The position appears best reconciled, as French J put it in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, by the further the plaintiff has proceeded before a security application, the harder it will be to justify the order as not unfair or oppressive.

Critically, Judge Gething reasoned that fairness dictates security be sought early so a company can make choices about providing security or allowing proceedings to be stayed before too many resources are expended. The unexplained failure of the defendants to apply earlier weighed heavily against exercise of the discretion. Additionally, any order would likely require vacating the looming trial dates, causing prejudice and wasted costs, factors also weighing against security in Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [2009] WASC 299 per Kenneth Martin J. The balance in s 1335 is to avoid injustice to both parties, and vacating dates at this very late stage could not be justified.

Ultimately security was still ordered, but structured to avoid delaying trial. Rather than the full $150,000 sought or payment into court, Judge Gething ordered the plaintiff company's directors to personally undertake to pay up to $50,000 towards any costs ordered against the plaintiff. This middle ground approach avoided fully staying the claim which would prejudice preparations, but still provided some protection to the defendants. The undertaking was mutually exclusive, so together the directors remained liable for $50,000 maximum. This balanced the defendant's interests while preventing trial disruption. The orders demonstrate that even where delay weighs against security, the court retains a discretion to craft solutions mitigating potential injustice to defendants, provided the remedy does not itself cause disproportionate prejudice. Here, a compromised security undertaking maintained the trial dates without imposing an unrealistic financial burden on the individuals behind the plaintiff company.

This case demonstrates that unexplained delay in seeking security until close to trial will be an influential factor against ordering security for costs, given the potential for wasted expenditure and disruption to litigation at an advanced stage. While s 1335 confers a discretionary power, fairness generally mandates bringing security applications promptly so corporate parties can understand their position early on. Delayed applications without adequate explanation risk denial for being oppressive or causing unnecessary prejudice. The underlying policy is to balance protecting defendants from impecunious companies, with avoiding injustice by hampering companies from pursuing their cases.

Extensions of time for special costs orders

A special costs order allows a court to award legal costs above the amount that would normally be ordered under the standard costs determination.

This can occur where the court considers the standard costs award to be 'inadequate' due to the unusual difficulty, complexity or importance of the matter (see s 141(3) Legal Profession Uniform Law Application Act 2022).

Parties normally have 30 days from the date of judgment to apply for special costs (see Rules of Supreme Court O 66 r 51(3)). An extension of time is needed after this.

In Priest v Central Norseman Gold Corporation Pty Ltd [No 2] [2023] WASCA 385, the respondent mining company was successful in defending an appeal relating to the interpretation of mining safety laws. The mining company brought a special costs application over 15 months out of time. The other side, while not 'opposing' an extension per se, took no stance on the application.

The Court refused to grant the extension of time to apply for special costs.

A key reason was the lack of cogent explanation for the 15 month delay by the transnational law firm representing the mining company. The Court expressed understanding for personal issues facing the law firm's counsel, but held the firm should not have waited passively for over 12 months after those issues arose.

The Court outlined several key principles relating to extensions of time for special costs applications:

1. The consent of the parties does not determine the Court's discretion to grant an extension. The Court must still be independently satisfied the extension should be granted (see [13]).

2. Mere assertions without admissible evidence will not generally justify delay (see [14]-[19]).

3. Possible prejudice to the other side is only one relevant factor. The limit also promotes finality and prompt issue resolution (see Bartlett v Roffey [2023] WASC 3 at [46(d)(e)]).

4. The merits of the special costs application itself are relevant to whether an extension should be granted (see [23]).

Applying these principles, the Court refused to grant the extension due to lack of cogent evidence explaining the 15 month delay and lack of merit in the special costs application itself.

The takeaway is that parties should act promptly in seeking special costs and ensure they have solid justification for any delay.

Consent between parties will not make an extension automatic.

When considering an extension request, Courts will look at all factors including strength of evidence explaining delay and prospects of the special costs application itself.

Applications for Security for Costs: Key Principles

In a costs appeal, Frigger v Computer Accounting & Tax Pty Ltd [2023] WASCA 152, the Western Australian Court of Appeal considered principles relating to applications for security for costs in detail.

The case has its origins in a long-running dispute involving the winding up of Computer Accounting & Tax Pty Ltd (CAT) over a decade ago. Mr and Mrs Frigger brought a substantive claim in the original winding up proceedings against CAT's liquidator, Mr Kitay, regarding certain land assets they alleged should have been transferred to their self-managed superannuation fund. They also claimed damages for lost opportunities due to Mr Kitay's delay in transferring the assets.

That substantive claim was very similar to an earlier claim brought by Mrs Frigger alone against Mr Kitay, which was struck out for lack of standing. Importantly, by the time the new claim was filed, the costs order made against Mrs Frigger personally in the earlier proceedings stood at over $28,000 and remained unpaid.

The primary judge made orders staying the new Frigger claim until they paid into court both the unpaid costs from the previous claim, and $30,000 as security for costs in anticipation of Mr Kitay's strike-out application in their latest claim. The Friggers appealed those orders. Mr Kitay and CAT applied to the appeal court for security for their costs of defending the appeal.

Examining the application, the Court of Appeal set out key established principles, referring to George 218 Pty Ltd v Bank of Queensland Limited [2016] WASCA 56 [41]–[48]:

• The discretion to order security for costs serves the interests of justice and is unfettered, provided it is exercised judicially. 'Special circumstances' do not have to be shown.

• An appellant's inability to pay a costs order if their appeal fails will generally favour ordering security. However, if the respondent caused the impecuniosity, that may weigh against requiring security.

• Impecuniosity alone does not necessarily justify ordering security if it would, overall, be contrary to the interests of justice.

• Other relevant factors the court will consider include the strength of the appellant's prospects of success, whether ordering security would effectively shut them out of prosecuting the appeal, and any delay by the respondent in applying for security.

• Each case is dependent on its own particular factual circumstances. The amount of security set for an impecunious appellant should not be more than what is reasonably necessary.

The decision illustrates the wide variety of factors courts may consider with respect to ordering security for costs.

It shows that while a proven inability to pay is significant, the overarching consideration remains serving the interests of justice.

Determining what those interests require in a given case depends very much on the context.

The Principles Relating to the Award of Costs in the State Administrative Tribunal

Section 87(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act) gives the State Administrative Tribunal (the Tribunal) a discretion to order one party to pay all or part of the legal costs of another party. This article examines the principles that apply to the exercise of that discretion, with a focus on cases involving disciplinary proceedings against legal practitioners brought by regulatory bodies such as the Legal Services and Complaints Committee.

The Discretion to Award Costs

The starting point is that parties ordinarily bear their own legal costs in proceedings in the Tribunal, unless the Tribunal orders otherwise.[1] However, under s 87(2) of the SAT Act, the Tribunal has a wide discretion to order one party to pay all or part of the legal costs incurred by another party. The rationale for such an order is to compensate or reimburse the party in whose favour the order is made, rather than to punish the unsuccessful party.[2] Even so, an order requiring one party to pay the costs of another remains the exception rather than the rule.[3]

The Onus is on the Party Seeking Costs

As the party seeking the costs order carries the onus, it must persuade the Tribunal that it is fair and reasonable in the particular circumstances to reimburse it for legal costs incurred.[4] However mere identification of some unreasonable conduct by the other party that increased costs will usually be insufficient.[5] The Tribunal generally requires a party seeking costs to show that the other party acted unreasonably in a way that unfairly caused increased costs to be incurred.[6]

A Cautious Approach in Disciplinary Proceedings

In disciplinary proceedings against legal practitioners, if the regulatory body is successful on the substantive application, it is common for the Tribunal to order the practitioner pay all or some of the regulatory body’s costs. This reflects the public policy interest in regulatory bodies performing their disciplinary functions to uphold standards in the legal profession, often with limited resources.[7]

Conversely, if the regulatory body is unsuccessful in a disciplinary proceeding, the practitioner has no entitlement to recover costs from the regulatory body. This reflects the public policy interest in not discouraging regulatory bodies from pursuing disciplinary proceedings where success cannot be guaranteed, but which should be pursued in the public interest.[8]

As summarised by President Barker in Medical Board of Western Australia and Kyi [2009] WASAT 22, the Tribunal’s usual approach is that:

"unless it can be demonstrated that an application made by a vocational regulatory body lacked any reasonable basis or was not made in good faith, costs should not be awarded against [that body] simply because the application was not successful".[9]

The Bases to Award Costs Against A Regulatory Body

The well-established bases on which the Tribunal may award costs against a regulatory body that has unsuccessfully pursued disciplinary action against a legal practitioner are therefore where the proceeding:

• lacked any reasonable basis;

• was not brought in good faith; or

• amounted to an abuse of process in the way it was conducted.[10]

Each of those arguments sets a high threshold. As explained in Legal Services and Complaints Committee and Young [2023] WASAT 108 (Young), in applying those tests the Tribunal is guided by the principles applicable to determining applications for summary dismissal of proceedings under s 47(1) of the SAT Act.[11]

To establish the lack of a reasonable basis, it needs to be apparent that the disciplinary proceeding was manifestly groundless or that the regulatory body's case was so obviously untenable that it had no prospect of success.[12] This sets an extremely high bar. It requires more than merely showing that some aspects of the case lacked substance or were misconceived. Establishing an abuse of process requires clear evidence that continuation of the proceeding would cause unacceptable injustice.[13] Showing an absence of good faith in bringing the proceeding demands compelling evidence to that effect.

Withdrawal of Proceedings and Costs Applications

Where disciplinary proceedings are withdrawn prior to a substantive hearing, it can be difficult for the Tribunal to evaluate arguments that the proceeding lacked a reasonable basis or amounted to an abuse of process. As Young illustrates, in such situations the Tribunal will undertake a broad assessment of the basis for, and conduct of, the proceeding as a whole.[14] However given the exceptional nature of ordering costs against regulatory bodies, the Tribunal's starting point remains that withdrawal of proceedings does not of itself demonstrate they lacked a reasonable basis or were maintained other than in good faith.[15]

Conclusion

In summary, while the Tribunal has a wide discretion to award costs under s 87(2) of the SAT Act, an order that an unsuccessful regulatory body pay costs remains an exceptional course confined to the clearest of cases. As demonstrated in Young, the Tribunal applies caution in evaluating allegations of no reasonable basis, absence of good faith or abuse of process, even where disciplinary proceedings are withdrawn before a substantive hearing. It remains incumbent on the legal practitioner seeking costs to persuade the Tribunal that the high threshold under the governing principles has been met.

Footnote

[1] State Administrative Tribunal Act 2004 (WA) s 87(1)

[2] See Young at [39]; Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32 at [51]

[3] Young at [39]

[4] Questdale at [51]; Young at [39]

[5] Medical Board of Western Australia and Kyi [2009] WASAT 22 at [74]

[6] Medical Board of Western Australia and Kyi at [74]

[7] See e.g. Roberman v Medical Board of Western Australia [2005] WASAT 81 at [30]; Young at [41]-[42]

[8] See Motor Vehicle Industry Board and Dawson (2006) 41 SR (WA) 343 at [47]; Young at [42]

[9] Medical Board of Western Australia and Kyi at [73]

[10] See Young at [43]-[44]

[11] Young at [43]-[45]

[12] Young at [45], citing Agar v Hyde [2000] HCA 41 at [57]

[13] Young at [45], citing Medical Board of Australia v Woollard [2017] WASCA 64 at [136], [145]

[14] Young at [57]

[15] Young at [46], citing Medical Board of Western Australia v Roberman at [17]

Straightforward Applications, Convoluted Costs: Lessons on Service Out from ANZ v Defendant

The case of Australia and New Zealand Banking Group Ltd v Defendant [2023] WASC 428 concerned an application by ANZ for leave to serve a writ on a defendant outside of Australia. Justice Howard initially refused the application as ANZ had not included a draft writ, making it impossible to assess if the requirements for leave were met. After several further hearings and amended applications, Justice Howard granted leave, but expressed concern about the convoluted process for what should have been a straightforward application.

Justice Howard held that without a draft writ, the Court cannot assess if the plaintiff has shown its action falls within the required heads of jurisdiction under Order 10 Rule 1(1) of the Rules of the Supreme Court 1971 (WA) (paragraph 26).

His Honour emphasised that each cause of action must fall within the head of jurisdiction relied upon in the ex parte application (paragraphs 24, 25, 76 from Micon Mining and Construction Products GMBH & Co KG v MacMahon Mining Services Pty Ltd [2022] WASCA 56). Justice Howard also held the plaintiff must identify the precise rule under which leave is sought, and the proposed method of service (paragraph 22).

On costs, Justice Howard was concerned the defendant may be prejudiced by the plaintiff's failure to prosecute its application properly from the beginning (paragraphs 41, 67). His Honour considered it inappropriate for the actual costs of the convoluted process to be visited upon the defendant, whether by court order or contractually (paragraphs 68, 69). Justice Howard fixed the plaintiff's costs at $1,600 inclusive of filing fees, on condition the plaintiff provide an undertaking not to seek to recover more than this from the defendant (paragraphs 70, 71).

The case demonstrates courts may consider potential prejudice to defendants from a convoluted process when making costs orders. Applicants must prosecute such applications properly from the outset to avoid adverse costs consequences.

Awards of Costs in Guardianship Proceedings: Exceptions to the General Rule

Introduction

In CK [2023] WASAT 84, the State Administrative Tribunal considered whether to make a costs order in a guardianship and administration matter.

CK, an elderly man with dementia, was the subject of applications by his children P and V relating to the validity of enduring powers and the appointment of an administrator and guardian.

P sought an order that V or CK pay some or all of his legal costs.

The Tribunal held that the circumstances were not sufficiently exceptional to justify a departure from the starting position that parties bear their own costs.

Legal principles

The Tribunal's primary concern in guardianship and administration proceedings is the best interests of the person concerned (CK [2023] WASAT 84 at [15], citing Guardianship and Administration Act 1990 (WA) s 4(2)).

Under s 16(4) of the Guardianship and Administration Act 1990 (WA), the Tribunal has discretion to order costs be paid to a party by the represented person if satisfied the party acted in the represented person's best interests.

However, such awards are uncommon, generally only when the applicant's actions benefit the represented person (CK [2023] WASAT 84 at [16]-[17], citing Y and CO [2020] WASAT 166 at [32] and Re WA and IA Ex parte AA and JA [2011] WASAT 33 at [59]-[60]).

The starting point is that parties bear their own costs (CK [2023] WASAT 84 at [18]-[19], citing RK [2020] WASAT 53 (S) at [22] and State Administrative Tribunal Act 2004 (WA) s 87(1)).

Under s 87(3) of the State Administrative Tribunal Act 2004 (WA), the Tribunal may order a party to compensate another party's expenses resulting from the proceeding, although not to punish (CK [2023] WASAT 84 at [20], citing Blaskiewicz and The Owners of 7 Henderson Street Fremantle (Strata Scheme 74918) [2021] WASAT 56 at [61]).

The Tribunal has discretion to award costs in any proceeding, to be exercised based on the circumstances and whether it is fair and reasonable (CK [2023] WASAT 84 at [21], citing GD [2022] WASAT 33 at [59]).

Relevant considerations include whether a party unnecessarily prolonged the hearing, acted unreasonably, or caused increased costs through unreasonable conduct (CK [2023] WASAT 84 at [21], citing GD [2022] WASAT 33 at [59]).

Analysis

In CK's case, the Tribunal held the circumstances were not sufficiently exceptional to justify departing from the starting point that parties bear their own costs.

P argued legal representation was required due to the complexity and his fraught relationship with V. He was not precluded from applying without legal advice as he was an admitted but non-practicing lawyer.

The conflict and allegations were not unusually complex for guardianship proceedings (CK [2023] WASAT 84 at [27]-[33]).

Prior cases awarding costs involved greater incapacity uncertainty, property transactions by the represented person, or applicants unreasonably pursuing applications (CK [2023] WASAT 84 at [31]-[32], citing Re IO; Ex parte VK [2008] WASAT 8 and LC and JS [2007] WASAT 127).

Regarding V paying P's costs, the Tribunal held V's irrelevant evidence about P did not warrant compensation. P incurred further expense obtaining translations unnecessarily after investigations commenced (CK [2023] WASAT 84 at [37]-[40]). The flaws in V's submissions did not cause delay or obstruction (CK [2023] WASAT 84 at [41]-[42]).

Prior cases awarding costs involved more sustained unreasonableness or inappropriate conduct (CK [2023] WASAT 84 at [43]-[45], citing Re WA and IA Ex parte AA and JA [2011] WASAT 33, PJC and RJC [2008] WASAT 224 and WD [2022] WASAT 12 (S)).

Conclusion

The circumstances did not justify departing from the starting position that parties bear their own costs. Awards of costs in guardianship and administration proceedings remain exceptional.