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In a decision that highlighted the importance of strict compliance with costs disclosures, a Federal Court has rejected a law firm’s claim to a fruits of litigation lien worth up to $879,000.
Not only has AF Lawyers failed to secure a lien over a former client’s assets and property, but the Federal Circuit and Family Court of Australia (FCFCOA) (Division 1) has also ordered that it pay the costs of another firm in the sum of $35,666.08.
The firm had sought to appeal from orders made in Pirani & Pirani, which had the effect of rejecting AF Lawyers’ claims that it was entitled to the lien to cover the approximately $879,000 in professional costs and disbursements it was allegedly owed.
The primary judge found AF Lawyers did not provide their client with a costs disclosure and agreement “as soon as practicable”, in contravention of the Legal Profession Uniform Law (LPUL). Consequently, the firm’s costs agreement was voided, and the charge against its former client’s property was non-existent.
A second law firm, retained after AF Lawyers’ services were terminated in September 2023, was granted the lien.
On appeal, Deputy Chief Justice Robert McClelland, along with Justices Jillian Williams and Jacoba Brasch, found the primary judge’s findings were “certainly available on the evidence”.
The FCFCOA was told of a 16-day delay between AF Lawyers’ first meeting with the client and the delivery of the costs disclosure.
The firm said there was “pressing and urgent” work to be undertaken on behalf of the client, made more difficult by her ignorance of certain details, and it spent the 16 days attending meetings, conducting searches, and drafting material.
Deputy Chief Justice McClelland, Justice Williams and Justice Brasch agreed with the second firm that an examination of the actual work of AF Lawyers “does not support the proposition the appellant was so distracted and consumed” that it was unable to comply with the costs disclosure requirements any earlier.
“We reject any contention that prior to 10 May 2023, the appellant’s efforts to comply with its statutory disclosure obligations could be regarded as conscientious, when there were in fact, no such efforts,” the FCFCOA appeal bench said.
There was also no “cogent explanation” as to why it did not provide the prescribed information and an estimate of costs, and, following this, provide updated disclosure and estimates.
Similarly to the primary judge, the FCFCOA appeal bench took issue with AF Lawyers’ submissions that two clauses of its May costs agreement and an updated agreement in August continued to have efficacy, even if the costs agreement was voided.
The bench pointed to conditions under the LPUL, which imposes an obligation on a law practice that it ensures it “takes all reasonable steps to satisfy itself the client has understood and given consent” to the proposed action and proposed costs.
They said this objective could not be fulfilled in circumstances where a firm has failed to comply with its statutory disclosure and costs obligations, “and an ill-informed client has supposedly consented to charge their property whilst unaware of the extent of their financial obligations to the law practice”.
“To consider otherwise would be in direct conflict with fundamental statutory obligations between lawyer and client.
“It would be impossible for a law practice to meet the requirements of section 174(3) of the LPUL,” the bench said.
The second firm, joined as second respondent to the appeal, was awarded costs. AF Lawyers did not oppose.
