Introduction
The Federal Court of Australia in Armstrong Scalisi Holdings Pty Ltd v Piscopo (Trustee), in the matter of Collins [2017] FCA 423 has criticised an estimate given in a security for costs application which was based on numerous solicitors performing work ordinarily performed by counsel. Rares J said that it was time that the legal profession recognised that costs should be kept to a minimum and that having multiple lawyers involved in, for example, the drafting of a pleading or submissions, evidenced a failure to address a client’s best interests and the overarching purpose in Pt VB of the Federal Court of Australia Act 1976 (Cth) to minimise costs, and involved a degree of waste and unnecessary duplication of effort.
Background
The security for costs application was brought by the trustee of certain bankrupt estates against a company which had commenced proceedings seeking relief against the bankrupts’ estates in respect of property which had been registered in the bankrupts’ names immediately before they filed debtors’ petitions. Rares J was satisfied, in the circumstances of the case, that the company should provide security for costs but expressed concerns about the estimate given of the total costs and the amount of security sought.
The trustee’s solicitor had estimated that the trustee’s costs and disbursements in defending the claim would be approximately $239,485 exclusive of GST, and was seeking security in the sum of $143,691, exclusive of GST, which was 60% of the estimated total costs. The estimates were based on work being carried out by four solicitors of varying seniority, and by counsel. The hourly rates of the solicitors, with the exception of the most junior solicitor, were higher than counsel’s hourly rate. The estimates included:
- $21,920 for considering the statement of claim and drafting and settling the defence and any cross-claim, which included counsel’s fees of $6400; and
- $66,960 for preparation and conduct of an estimated two day final hearing, which included counsel’s fees of $16,000.
Concerns raised
The key points made by Rares J (at [17]; [20]-[28]) were as follows:
- The total estimate and the amount of security sought appeared to be very large and to involve the participation of a large number of solicitors in performing work at rates far greater than counsel’s rates for tasks that appeared, primarily, to be the responsibility of counsel.
- This division of work and costs:
- did not comply with the requirements of Pt VB of the Federal Court of Australia Act and the overarching purpose of the civil practice and procedure provisions (to facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible); and
- reflected an inefficient and inappropriate way of dealing with the preparation for, and conduct of the hearing of, the case.
- The case was one that should be substantively prepared and argued by counsel whose fees were less on an hourly basis than all of the solicitors’ fees, apart from the fees of the junior solicitor, and who should have the primary role in preparing and drafting the pleadings and submissions, after having received instructions about the facts, rather than having pleadings, or submissions, drafted by four solicitors.
- One of the significant concerns in Australia was the cost of access to justice, and individuals and small businesses would find it difficult to obtain access to justice when four solicitors at the one firm were each charging different, but substantial, amounts for doing what was essentially repetitive work of looking at one another’s drafts, documents or other communications, all of which, ultimately, would be (and should properly be) drafted and settled by counsel. There was no obvious reason why this kind of charging practice was appropriate, having regard to the solicitors’ fiduciary duties to their clients to ensure that cases were prepared as efficiently and as economically and reasonably as possible.
- This was not an isolated case but appeared to be part of a more general model where solicitors did work which was originally intended to be done by the separate bar of specialised and most cost-efficient advocates, namely, counsel. Thus, in security for costs applications, amounts estimated to be incurred by solicitors in preparing cases, as opposed to the amounts estimated to be incurred by counsel, too often involved a skewing of work towards the solicitors’ efforts that appeared not to be efficient or appropriate.
- Where counsel had to make the forensic decisions as to how the material facts should be pleaded, what pleadings were maintainable, what evidence should be led and what submissions should be drafted, it was vitally important that counsel undertake the burden of doing that work themselves and not have it duplicated unnecessarily. Furthermore, where solicitors did significant amounts of drafting work, it became much more difficult for counsel to delete material which counsel considered to be forensically useless because the solicitor’s client would have been charged for that material and resulted in counsel, at the hearing, often departing significantly from the written submissions that had been ordered to be filed. This was not the way that litigation should be conducted, having regard to the solicitors’ and counsel’s fiduciary duties to their client, their obligations to the Court and their client under Pt VB of the Federal Court of Australia Act and their ethical obligations arising from their being officers of the Court.
- Litigation should be conducted as quickly, inexpensively and as efficiently as possible, with the substantive work necessary to draft pleadings, and present evidence and argument in proceedings being essentially that of the advocate who appeared at the hearing. However, that was not how larger law firms tended to approach modern litigation.
- It was time that the profession recognised that costs should be kept to a minimum. Having five lawyers looking at, for example, the drafting of a pleading or submissions evidenced a failure to address a client’s best interests and the overarching purpose in Pt VB of the Federal Court of Australia Act to minimise costs, and involved a degree of waste and unnecessary duplication of effort.
His Honour noted (at [29]) that, after he had raised his concerns about the estimates, the trustee’s counsel had suggested a modification which accepted that most of the work would be performed by one solicitor and counsel (a suggestion which his Honour considered appropriate) and which resulted in a significant reduction of the amounts estimated.
In the result, his Honour concluded that the appropriate amount to be ordered by way of security was a total of $77,000 (about half of the original estimate), to be paid in stages.
Concerns not new
The concerns expressed above are not new. Similar concerns have been expressed by a number of other judges over the years. For a consideration of what some of those other judges have said about the costs benefits of the efficient division of work between solicitors and barristers, and the solicitors’ responsibilities which flow from this, see K Ottesen, “Costs of civil litigation: The solicitor’s duty to ensure that work is done at the lower cost”, 1 July 2014.
