Sydney law firm escalates fee fight with senior counsel

The costs assessment manager allowed the extension in part due to Hale’s evidence that he had a prior “longstanding” association with the firm and had been promised by its solicitor, Michael Zwar, that he was entitled to his fees and that they would eventually be paid.

Hale gave evidence that his hand was forced due to limitation periods, leading to his filing of a statement of claim in February 2024. He then delayed service for six months on Zwar’s request, he alleged.

When defences were filed later that year, Hale said he first became aware that Diamond Conway and Zwar had issues with fee disclosures.

The NSW Supreme Court heard Hale made two offers to have the tax invoice assessed rather than litigate but did not receive a response. After being pressed a third time for the “simplest and cheapest” option, the firm insisted on its entitlement to have the motion heard.

In September 2025, the costs assessor allowed the assessment to proceed out of time, having determined greater prejudice would be experienced by the costs applicant if they were denied the opportunity to have their unpaid and outstanding bills assessed.

The following month, the certificate of determination specified the costs assessed, including interest, in the sum of $148,743.96.

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On its notice of motion for review of the manager’s extension decision, Diamond Conway advanced five grounds, including that the manager allegedly erred by allowing the extension as it was “not just and fair to do so”, and erred by their misapplication of the law.

The Supreme Court’s Justice Richard McHugh acknowledged Hale’s delay but said this was “powerfully explained by the uncontested material as to the representations that Zwar made to Hale, to the effect that his costs were reasonable” and no assessment was needed.

“Undoubtedly, Hale should be taken to have been aware of his right to apply for a costs assessment. But so long as he was operating on the basis of Zwar’s assurances, he had no reason to exercise that right,” Justice McHugh determined in his written reasons.

“Indeed, had he exercised that right, he may have been criticised for doing so in circumstances where he had every reason to understand that the firm accepted it was liable to pay his second invoice in full.”

The probabilities were also “very much against” the firm’s claim of prejudice, particularly given there was no dispute that Diamond Conway was responsible for paying Hale’s fees, and that liability to pay fees was not contingent on recovery of fees from the clients.

In those circumstances, Justice McHugh said the firm should be taken to be responsible for meeting Hale’s fees, and should have anticipated the risks that its clients would be wound up.

“In those circumstances, it is improbable that Hale’s delay caused the firm actual prejudice in recovering Hale’s fees from the clients.

“It is far-fetched to suggest that, in the counterfactual world in which Hale applied to have his costs assessed within the 12-month period … Diamond Conway would have taken some step to recover Hale’s fees from the client companies which it did not in fact take in reality.

“That being so, it is difficult to see how the firm could have suffered prejudice in this respect by reason of Hale’s delay in seeking to have his costs assessed thereafter,” Justice McHugh said.

None of the firm’s five grounds succeeded.

Citation: Diamond Conway Lawyers v Hale [2026] NSWSC 463.