Proving Your Costs Were Incurred: The Evidentiary Threshold for Costs Applications in the State Administrative Tribunal

An Analysis of Kaur and The Owners of Code Strata Plan 58103 [2026] WASAT 40

1. Introduction

In Kaur and The Owners of Code Strata Plan 58103 [2026] WASAT 40 (Kaur), the State Administrative Tribunal dismissed a costs application by the successful respondent strata company. The decision, delivered on 15 April 2026 by Member Oldfield and Sessional Member Smith, turned on a deceptively simple point: the strata company had lodged a clear and well-expressed schedule of costs, but had failed to adduce any evidence that those costs were actually incurred.

The decision warrants attention from practitioners who appear before the Tribunal because it provides a sharp illustration of a principle that is sometimes overlooked in costs applications: that the onus lies on the party seeking costs not merely to quantify the costs claimed, but to prove, by way of evidence, that the costs were in fact incurred. Submissions, however detailed, do not constitute evidence. The decision also addresses the distinct question of whether an unrepresented party’s failure to challenge a costs claim can be treated as an implied admission – the Tribunal held that it cannot, at least where the unrepresented party does not demonstrate a sound understanding of the applicable legal principles.

This article analyses the decision in Kaur, situates it within the broader framework of costs jurisprudence in the Tribunal, and provides practical guidance for practitioners preparing costs applications. The contrasting treatment of costs in Chiropractic Board of Australia and Ebtash [2020] WASAT 86 (S) (Ebtash) – one of the authorities cited in Kaur – is examined as an example of the evidentiary standard that a successful costs application must meet.

2. Relevant Legal Framework

The starting point for costs in the Tribunal is s 87(1) of the State Administrative Tribunal Act 2004 (WA) (SAT Act), which provides that each party is to bear their own costs unless otherwise specified. Section 87(2) confers a discretionary power on the Tribunal to order that one party pay all or a portion of another party’s costs.

The guiding principles applicable to costs applications, as summarised by the Tribunal in Kaur at [5], are well established. The onus is on the party seeking costs to satisfy the Tribunal that it is fair and reasonable to make an award of costs in all the circumstances. The rationale for a costs order is compensatory, not punitive: it exists to compensate or reimburse a party for costs incurred. The presumptions regarding costs which apply in court proceedings – including the general rule that costs follow the event – do not apply in Tribunal proceedings. Where there is a genuine dispute, parties should expect to bear their own costs unless the circumstances otherwise justify an order. A party’s failure to succeed does not, of itself, mean the party has acted contrary to the Tribunal’s statutory objectives.

These principles have been articulated and applied in numerous decisions, but the specific evidentiary requirement – that costs must be proved to have been incurred – was most clearly stated in Ebtash at [143]–[144]. In that decision, President Pritchard observed that the Tribunal must be satisfied that the costs claimed are reasonable and necessary, and that in respect of disbursements, the Tribunal “must know what disbursements have been incurred – a disbursement is unlikely to be allowed without an appropriate invoice being produced” (at [144]).

It is against this framework that Kaur must be understood. The principle that costs must be evidenced – not merely asserted – is not novel. What Kaur contributes is a practical demonstration of the consequences when that evidentiary step is omitted entirely.

3. The Facts of the Case

The substantive proceedings concerned an application by Dr Harjit Kaur under the Strata Titles Act 1985 (WA). The respondent was The Owners of Code Strata Plan 58103 (the Strata Company), which was legally represented by Taylor Smart. Dr Kaur was unrepresented throughout the proceedings (at [9]). The substantive decision was delivered orally on 19 February 2026 and was not published as at the date of these reasons (footnote 1). The Strata Company was entirely successful in defending Dr Kaur’s application (at [6]).

Following its success, the Strata Company applied for costs. The costs application was determined on the documents, without a hearing (at [3]). The material before the Tribunal comprised the Strata Company’s submissions lodged on 5 March 2026, Dr Kaur’s submissions lodged on 2 April 2026, and the Tribunal’s records of the proceedings (at [3]).

The Strata Company’s schedule of costs was described by the Tribunal as “clear and well expressed” (at [6]). However, the Strata Company lodged only submissions in support of its claim; it did not lodge any evidence – such as invoices, receipts, or an affidavit from its solicitors – supporting the schedule of costs (at [8]).

Dr Kaur did not explicitly agree that the costs had been incurred, nor did she specifically oppose the application on the basis that costs had not been proved. The Tribunal observed, however, that Dr Kaur’s submissions demonstrated she did not possess “a sound understanding of the applicable legal principles” (at [9]).

4. Analysis of the Tribunal’s Reasoning

The Tribunal’s reasoning proceeds in two steps, each of which merits analysis.

The evidentiary gap

The Tribunal first identified the fundamental deficiency in the Strata Company’s application: the absence of evidence. At [7], the Tribunal stated that “because costs are in the nature of compensation or reimbursement, it is necessary there be satisfactory evidence that the costs were in fact incurred.” The Tribunal cited Ebtash at [143]–[144] and Panegyres at [415] as authorities for this proposition.

This is the critical passage. The Tribunal drew a clear distinction between a schedule of costs (which quantifies the claim) and evidence of costs (which proves the claim). The Strata Company’s schedule, however clear, was a submission – an assertion of what was owed. Without supporting evidence – invoices, a solicitor’s affidavit, fee agreements, or trust account records – the Tribunal had no basis upon which to be satisfied that the costs were actually incurred.

At [8], the Tribunal put the point bluntly: “the strata company lodged only submissions, and submissions do not constitute evidence.”

The unrepresented party’s silence

The second limb of the reasoning addressed whether the Tribunal could treat Dr Kaur’s failure to challenge the quantum as an agreed fact. The Tribunal held that it could not, for two reasons. First, Dr Kaur did not explicitly agree (at [9]). Secondly, the Tribunal declined to treat her failure to oppose the application on the specific basis that costs had not been proved as an implied admission, because Dr Kaur was not legally represented and her submissions demonstrated a lack of understanding of the applicable legal principles (at [9]).

This reasoning reflects a broader principle of procedural fairness in Tribunal proceedings. The Tribunal was careful not to attribute forensic sophistication to an unrepresented litigant. It would be unfair to infer that Dr Kaur’s silence on a particular point constituted agreement, when her submissions as a whole revealed that she was not in a position to identify the evidentiary deficiency in the Strata Company’s application.

The combined effect of these two findings was decisive: the Tribunal had no evidence that the costs were incurred, and could not treat the absence of challenge as proof. The application was dismissed (at [10]–[11]).

5. Assessing the Consequences

The cost of the evidentiary omission

The practical consequence for the Strata Company was the loss of its entire costs claim. This is a stark outcome for a party that was entirely successful on the merits, and which had engaged solicitors to prepare what the Tribunal acknowledged was a clear and well-expressed schedule. The costs schedule presumably reflected fees that were in fact incurred – the Strata Company was represented by Taylor Smart throughout the proceedings. Yet the failure to take the elementary step of adducing evidence in support of the schedule was fatal.

The irony is that the evidentiary deficiency could have been remedied with relative ease. An affidavit from the solicitor with carriage of the matter, annexing copies of invoices rendered, would likely have been sufficient. The cost of preparing and filing such an affidavit would have been modest in comparison to the costs the Strata Company was seeking to recover.

Contrast with Ebtash

The contrast with the costs assessment in Ebtash is instructive. In that case, the Chiropractic Board of Australia sought costs of $233,899 (inclusive of disbursements and GST), ultimately recovering $178,500 (at [129], [201]–[202]). The Board supported its costs application with an affidavit from its solicitor, Ms M Naylor, dated 28 October 2020, annexing copies of all accounts rendered (at [129]). This enabled the Tribunal to undertake a detailed assessment of each item claimed, allowing or adjusting hours for each category of work. The evidentiary foundation was never in doubt; the only questions were reasonableness and necessity.

The juxtaposition is revealing. In Ebtash, evidence was adduced and costs were recovered. In Kaur, no evidence was adduced and costs were refused entirely. The merits of the underlying substantive proceeding and the quality of the costs schedule were irrelevant in the absence of proof that the costs were incurred.

6. Worked Example

Consider the following hypothetical scenario. ABC Pty Ltd successfully defends a building dispute application brought by a homeowner in the Tribunal. The dispute ran for two days and involved a jointly appointed expert. ABC’s solicitors incurred fees of $18,500 (exclusive of GST) and disbursements of $4,200, comprising the expert’s fee and filing costs.

Scenario A: The Kaur approach

ABC’s solicitors file written submissions in support of a costs application. The submissions set out the legal principles, describe the work undertaken, and attach a schedule of costs itemising the fees and disbursements claimed. No affidavit is filed. No invoices are annexed.

On the reasoning in Kaur, the Tribunal would likely dismiss the application. The schedule of costs, however detailed, constitutes submissions rather than evidence. The Tribunal cannot be satisfied that the costs were in fact incurred, and accordingly has no basis upon which to make an order.

Scenario B: The Ebtash approach

ABC’s solicitors file the same written submissions, but also file an affidavit from the solicitor with carriage of the matter. The affidavit deposes that ABC has been invoiced for the fees and disbursements particularised in the schedule, and annexes copies of each invoice. The affidavit also annexes copies of the expert’s invoice and receipt for the filing fee.

On this basis, the Tribunal has evidence that the costs were incurred. The inquiry shifts to whether the costs are reasonable and necessary – the familiar territory of costs assessment. The Tribunal may allow the full amount claimed or may reduce individual items, but the application will not fail for want of proof.

Analysis

The difference between the two scenarios is not the quantum of the claim or the merits of the underlying proceeding, but the presence or absence of evidence. The additional cost of preparing the affidavit and assembling the annexures in Scenario B would be modest – perhaps one to two hours of solicitor time. The failure to take that step in Scenario A forfeits the entire claim.

7. Practitioner Guidance: A Step-by-Step Framework

The following steps are derived from the principles stated in Kaur and Ebtash, and are intended to assist practitioners preparing costs applications in the Tribunal.

1.      Step 1: Identify the evidentiary foundation before drafting submissions

Before preparing written submissions in support of a costs application, identify the evidence that will be relied upon to prove the costs were incurred. This is the threshold question: without evidence, the application will fail regardless of the strength of the underlying submissions (Kaur at [8], [10]).

2.      Step 2: Prepare a solicitor’s affidavit

File an affidavit from the solicitor with carriage of the matter. The affidavit should depose to the total fees invoiced, the total disbursements incurred, and the fact that these costs were incurred in connection with the proceedings. The affidavit serves as the evidentiary bridge between the schedule of costs and the Tribunal’s assessment. In Ebtash, the affidavit of Ms Naylor provided this foundation (at [129]).

3.      Step 3: Annex all relevant invoices and receipts

Annex copies of all invoices rendered by the solicitors and, where applicable, counsel. Annex receipts or invoices for disbursements. In Ebtash at [144], the Tribunal stated that “a disbursement is unlikely to be allowed without an appropriate invoice being produced.” This applies equally to professional fees: the invoice is the primary evidence that the cost was incurred.

4.      Step 4: Prepare a detailed schedule of costs

The schedule should itemise the work undertaken, the time spent, the applicable rate, and the total for each category. In Ebtash, the Tribunal assessed costs item by item (at [157]–[199]), which was only possible because the Board had provided a sufficiently detailed breakdown.

5.      Step 5: Address reasonableness and necessity in submissions

Written submissions should address why each category of work was reasonable and necessary. Anticipate likely objections – for example, whether the time claimed for a particular task is proportionate, or whether it was necessary to brief counsel. In Ebtash, the Tribunal assessed each item against these criteria and reduced or allowed hours accordingly.

6.      Step 6: Do not assume silence is consent

Do not rely on the opposing party’s failure to challenge the quantum as an implied admission, particularly where the opposing party is unrepresented. The Tribunal in Kaur at [9] expressly declined to draw that inference. Practitioners should proceed on the basis that the Tribunal will require proof, irrespective of whether the opposing party engages with the application.

7.      Step 7: Consider the applicable rate

Be aware of the rates allowed under the applicable Costs Determination. In Ebtash at [145], the Tribunal adopted a blended rate of $368.50 per hour for non-counsel legal work, having regard to the two scales applicable over the period and the seniority of the practitioners involved. Practitioners should justify any departure from the Determination rates.

8. Evidence and Arguments Available to Each Side

The party seeking costs

A party applying for costs should assemble the following evidence and arguments:

Evidence of costs incurred. An affidavit from the solicitor with carriage deposing to the fees invoiced and disbursements paid, annexing copies of all invoices and receipts. This is the minimum evidentiary requirement identified in Kaur at [7]–[8] and Ebtash at [143]–[144].

A detailed schedule of costs. The schedule should be organised by category of work (e.g., preparation, interlocutory attendances, hearing, submissions) with time, rates, and totals for each. The schedule in Ebtash was organised into 22 items, each assessed separately by the Tribunal.

Submissions on reasonableness and necessity. Address why the costs claimed were reasonable and necessary having regard to the nature and complexity of the proceedings. Refer to the applicable Costs Determination to demonstrate that the rates charged are within, or proximate to, the Determination rates.

Submissions on the conduct of the opposing party. If relevant, identify any conduct by the opposing party that impaired the Tribunal’s statutory objectives (Kaur at [5](e)). However, be mindful that a party’s failure to succeed does not, of itself, justify a costs order (Kaur at [5](f)).

The party resisting costs

Challenge the evidentiary basis. If the applicant has failed to adduce evidence that costs were incurred, submit that the application must fail for want of proof, relying on Kaur at [7]–[10].

Invoke the presumption against costs. Emphasise that s 87(1) of the SAT Act provides that each party is to bear their own costs. Costs orders in the Tribunal are the exception, not the rule, and the onus lies on the party seeking costs to justify a departure from the default position.

Challenge reasonableness and necessity. If evidence of costs has been adduced, challenge the reasonableness or necessity of specific items. In Ebtash, Dr Ebtash challenged numerous items and argued that the Board had conducted the proceedings in a way that incurred disproportionate costs (at [139], [192]). Although most items were allowed, the Tribunal did reduce some categories.

Submit that the dispute was genuine. Where the dispute was genuine and the losing party’s position was reasonably arguable, submit that the parties should bear their own costs in accordance with the Tribunal’s general approach (Kaur at [5](d)).

9. Key Takeaways for Legal Practice

1.      Submissions are not evidence. A schedule of costs, however detailed and well-expressed, is a submission. It does not prove that the costs were incurred. Practitioners must adduce separate evidence – typically an affidavit annexing invoices – to establish the evidentiary foundation for a costs application (Kaur at [8]).

2.      The onus is on the party seeking costs. The Tribunal will not make a costs order in the absence of a sufficient evidentiary basis. The onus does not shift to the opposing party to disprove the claim; rather, the applicant must affirmatively prove it (Kaur at [5](a), [7]).

3.      An unrepresented party’s silence does not constitute agreement. The Tribunal will not treat a self-represented litigant’s failure to challenge quantum as an implied admission, particularly where the litigant’s submissions reveal a limited understanding of the applicable principles (Kaur at [9]).

4.      The compensatory rationale demands proof. Because costs orders are compensatory rather than punitive, the Tribunal must be satisfied that the costs claimed were actually incurred. A party cannot be “compensated” for costs it has not proved it incurred (Kaur at [5](b), [7]).

5.      Disbursements require invoices. A disbursement is unlikely to be allowed without production of an appropriate invoice (Ebtash at [144]). This principle extends naturally to all categories of costs: the Tribunal needs documentary proof.

6.      The Ebtash costs assessment provides a model. Practitioners preparing costs applications should study the Tribunal’s item-by-item assessment in Ebtash at [157]–[199] as a model for the level of detail and evidentiary support that a successful costs application requires.

7.      Success on the merits is necessary but not sufficient. The Strata Company in Kaur was entirely successful in defending the application. Its schedule was clear. Yet its costs application was dismissed. Success on the merits creates the opportunity for a costs application; it does not discharge the evidentiary burden.

8.      The cost of proving costs is modest. The evidentiary deficiency in Kaur could have been remedied with an affidavit and annexed invoices – a task that would have required one to two hours of solicitor time. The cost of not doing so was the loss of the entire costs claim.

9.      Adopt a robust but evidence-based approach. The Tribunal takes a “robust and broad-brush approach” to costs assessment (Ebtash at [134]) and does not descend into an inquiry into small items. However, that approach presupposes that there is evidence to assess. The broad-brush cannot paint without paint.

10. Conclusion

Kaur is a brief decision, but its practical significance should not be underestimated. It stands as a clear reminder that costs applications in the Tribunal require evidence, not merely argument. The distinction between submissions and evidence is fundamental – and the consequences of overlooking it are absolute.

The decision also carries a broader systemic message. In a jurisdiction where costs do not follow the event and where each party is presumed to bear its own costs, the evidentiary burden on the party seeking costs is not a mere formality. It reflects the Tribunal’s principled approach to costs: that no order should be made unless the Tribunal is satisfied, on the evidence, that it is fair and reasonable to do so.

Practitioners appearing before the Tribunal should treat the evidentiary requirements for costs applications with the same rigour they bring to the substantive proceeding. An affidavit, a set of invoices, and a detailed schedule are the minimum requirements. Without them, even the most meritorious costs application may fail – as the Strata Company in Kaur discovered.

Proving the Reasonable Costs of Rate Recovery: The Evidentiary Burden on Local Governments under s 6.56 of the Local Government Act 1995 (WA)

An Analysis of Sowden v City of Stirling [2026] WADC 31

1. Introduction

The decision of Curwood DCJ in Sowden v City of Stirling [2026] WADC 31, delivered on 14 April 2026, is a significant appellate statement on the evidentiary requirements that a local government must satisfy to recover its legal costs from a ratepayer under s 6.56(1) of the Local Government Act 1995 (WA) (LGA). The appeal was brought by an unrepresented ratepayer, Dr Miles Sowden, against an award of $53,344 in legal costs made by the Perth Magistrates Court in proceedings in which the underlying debt in dispute was $1,899.68 in unpaid rates for the 2023/2024 financial year.

The decision is important for three audiences. First, it directs local governments — and the law practices that act for them in rate recovery work — to a rigorous, itemised evidentiary standard that must be met before costs on the scale awarded by the trial magistrate can be recovered. Second, it equips ratepayers and their advisers with a clear framework for challenging what they contend are excessive legal costs. Third, for civil litigators generally, the judgment is a useful restatement of first principles governing the assessment of reasonable costs, including proportionality, the indemnity rule, and the evidential dependency on itemised billing information.

The jurisdiction is Western Australia. The areas of practice affected are local government law, civil debt recovery in the Magistrates Court, and costs assessment. The decision warrants attention beyond the immediate parties because s 6.56 recoveries — and the cognate levy recovery under s 36Z(2) of the Fire and Emergency Services Act 1998 (WA) (FESA) — are run in substantial numbers each year by every local government in the State. The judgment exposes, and then cures, a systemic evidentiary shortcut that has until now been widely tolerated: the practice of using scale maxima or privileged tax invoices as proxies for proof of reasonable costs.

2. Relevant Legal Framework

2.1 The statutory right of recovery

Section 6.56(1) of the LGA provides that where a rate or service charge remains unpaid after it becomes due and payable, the local government may recover it, as well as the costs of proceedings, in a court of competent jurisdiction. A near-identical provision applies to Emergency Services Levy recoveries under s 36Z(2) of the FESA. Curwood DCJ uses the collective term "rates" to cover all three charges (at [9]–[10]).

The text of s 6.56(1) does not expressly qualify "the costs of proceedings" by a reasonableness requirement. That qualification was supplied by the Court of Appeal in Parker v City of Rockingham [2021] WASCA 120, where the Court construed the provision as permitting a local government to recover its legal costs only to the extent that it proves them to have been reasonably incurred and reasonable in amount (at [108]). Parker also confirms that the legal burden of proving reasonableness rests on the local government; there is no evidential onus on the ratepayer defendant to demonstrate unreasonableness (at [123]).

2.2 First principles of costs recovery

Curwood DCJ situates s 6.56(1) within the broader common law of costs. The starting position, derived from Cachia v Hanes (1994) 179 CLR 403, is that a costs award is a partial indemnity only — a compromise between no provision for costs and full recompense (at 415). In Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 the Court of Appeal of New South Wales confirmed that the purpose of a costs award is not to compensate the successful party in full, but only to enable the recovery of costs strictly necessary, proper or reasonable for the disposal of the litigation (at [36]).

Three further principles inform the concept of reasonableness. The "sensible solicitor" test in W & A Gilbey Ltd v Continental Liqueurs Pty Ltd [1964] NSWR 527, 534–535 — cited with approval in City of Belmont v Saldanha [No 2] [2018] WASC 278 (Vaughan J) — asks whether the item was proper in the sense of what "a sensible solicitor sitting in his chair ... considers reasonable in the interests of his lay client". Gallagher v CSR Ltd (Unreported, WASC, Library No 940165, 31 March 1994) (Ipp J) introduces proportionality: the costs claimed must bear a reasonable relationship to the value of the subject matter. And the general party/party learning, summarised at [14] by reference to Zuckerman's Australian Civil Procedure (2nd ed, 2024) at pars 28.105–28.106, is that any doubt or uncertainty is resolved in favour of the paying party.

2.3 The state of the law before Sowden

Before Sowden, Parker had established the reasonableness requirement and the onus on the local government. What was left under-developed was the operational question: what, as a matter of evidence, must the local government actually lead at trial? Practice across the State had developed inconsistently. Some recoveries were run on the back of scale bills drafted by reference to the Magistrates Court Civil Scale; others on tendered tax invoices from which confidentiality or privilege prevented itemisation; others on generic witness evidence from a council officer who had no personal knowledge of the work performed. Sowden now supplies the missing operational content.

3. The Facts of the Case

3.1 The underlying debt

Dr Sowden was the sole registered proprietor of a residential property in Scarborough from 24 August 2022 (at [24], [30.2]). On 20 July 2023 the City of Stirling issued an annual rates notice for the 2023/2024 financial year in the sum of $1,899.68 (at [24], [30.4]). The rates were not paid. After internal escalation to the City's contracted debt collectors, ARMA, and a letter of demand dated 5 December 2023, the City's position was disputed by Dr Sowden, who asserted an entitlement to credit for historical payments (at [30.5]–[30.6]).

3.2 The Oakbridge phase

On 27 March 2024 the City engaged Oakbridge (lawyers), who commenced the City's general procedure claim on 7 May 2024 (at [30.8]–[30.9]). Oakbridge's total charges through to 10 March 2025 came to $2,992.41 exclusive of GST (at [30.13], [37]). As his Honour observed at [51], the Oakbridge evidence identified each specific task, the date it was performed, and the amount charged for it. Curwood DCJ accepted the entirety of the Oakbridge costs as reasonably incurred and reasonable in amount (at fn 16).

3.3 The MinterEllison phase

On 13 March 2025 the City replaced Oakbridge with MinterEllison (at [30.15]). MinterEllison provided an estimate of $32,000 to $38,000 plus GST for work including a without-prejudice settlement offer, briefing counsel, preparing and reviewing witness statements, preparing and reviewing submissions, and preparing for and attending the hearing (at [30.15]).

On 11 April 2025 — more than seven weeks before the trial — Dr Sowden paid the outstanding rates of $1,899.68 (at [2], [26]). On the same day MinterEllison wrote confirming the City would no longer seek penalty interest, and offering to settle for $3,218.40, being Oakbridge's charges through to 10 March 2025. Dr Sowden refused that offer (at [30.18]). From that point, the only issue remaining in the proceedings was the quantum of the City's reasonable costs (at [2]).

3.4 The trial evidence

At trial on 4 June 2025, the City's sole witness was Ms Chloe Fletcher, its Service Lead Rates and Receivables (at [30]). Her witness statement described the rates history and listed Oakbridge's itemised charges, but she had no personal knowledge of the work performed by MinterEllison or counsel after March 2025 (at [56(d)]).

Four MinterEllison tax invoices totalling $53,694.60 (exclusive of GST) were tendered as Exhibits 2 to 5 (at [31]). Because the City had not waived legal professional privilege in those invoices, they contained no itemisation of the work performed (at [32]). Two of the MinterEllison invoices contained ad-hoc "discounts" ($6,000 and $1,500) unexplained in evidence. The City supplemented the invoices with two scale-based schedules: an Annexure A to its submissions totalling $38,296 (work to 15 May 2025) and an MFI tendered at the hearing totalling $15,048 (work from 16 to 30 May 2025) (at [34]–[36]).

3.5 The magistrate's decision

The trial magistrate entered judgment for the City in the aggregate sum of $53,344, being the sum of the two schedules (at [3], [45]). Her Honour found that the City's engagement of two law firms was proper, that the excess over scale on two items was justified, and concluded that "the costs claimed were both reasonably incurred and reasonable in amount, as per Parker v City of Rockingham" (at [42]). Her Honour expressly rejected Dr Sowden's proportionality objection, noting that Dr Sowden "does not accept any responsibility for the costs of trial preparation increasing from 11 April as a result of his various emails, correspondence and his application to court" (at [43.1]).

4. Analysis of the Court's Reasoning

4.1 The two errors identified

Curwood DCJ identified two errors in the magistrate's approach. The first was that the award permitted recovery of costs for legal services which, in part, were unrelated to the recovery proceedings (at [6], [55.5]). His Honour pointed in particular to item 2 of the MFI schedule, which included $7,015 for "advising client including reading and relaying brief advice to client on defendant's complaints to complaints bodies and the Department of Local Government" — work which, on its face, was not costs of the rate recovery proceedings (at [38], [55.5]).

The second and broader error was the absence of any evidentiary foundation for assessing reasonableness. His Honour noted at [7] that the trial record contained no evidence of: (a) the hourly rates charged; (b) the practitioners who performed the work; (c) the nature of the composite tasks beyond general descriptions; or (d) whether any consideration had been given to duplication. In circumstances where the only issue at trial was the quantification of the City's costs, those omissions were fatal.

4.2 The assessment methodology — the seven factors

At [23], Curwood DCJ set out a non-exhaustive list of seven factors relevant to the assessment of reasonable costs under s 6.56. They are:

(a) the complexity of the factual and legal issues raised in the recovery proceedings;

(b) the work reasonably required by reference to those issues;

(c) the seniority and expertise of the practitioners engaged, including whether their fees were reasonable by reference to benchmark rates in any applicable scale determination;

(d) the number of hours reasonably required for the work that had to be carried out;

(e) duplication between practitioners where multiple practitioners performed tasks;

(f) proportionality — whether the costs bear a reasonable relationship to the value of the matter in dispute, read with the statutory purpose of s 6.56; and

(g) comparison of the amount charged with any applicable scale of costs.

Factor (c) imports the Zuckerman principle (par 28.135) that the reasonableness of engaging a particular practitioner is a function of the complexity and importance of the issues. The more complex the dispute, the more reasonable it is to engage a senior practitioner. The corollary — unspoken but essential — is that where the dispute is narrow and limited, engaging senior practitioners at top-of-market rates may itself be an error that renders the costs unreasonable in amount.

4.3 The privilege problem

His Honour offered a pragmatic path through the tension between legal professional privilege and the evidentiary burden. At [22] he identified three acceptable approaches. First, the local government may tender itemised invoices from its law practice. Second, where confidentiality or privilege prevents itemisation, it may tender a schedule outlining the work performed, the practitioner or paralegal who completed each discrete task, the time taken, and the hourly rate charged. Third, if the engagement was on a fixed-fee basis, that basis must be identified and proved.

What will not suffice is what the City put forward in Sowden: unitemised privileged invoices supplemented by a scale bill. A scale bill is a calculation construct, not primary evidence of time actually spent; it cannot bear the evidentiary weight that the City sought to place on it. As Curwood DCJ observed at [50], "in the absence of supporting evidence or analysis of how time was expended, whether by reference to hourly rates or some other methodology, it is difficult to be satisfied that the amount claimed was reasonable in amount".

4.4 The role of the Magistrates Court scale

The City had argued before the magistrate that the scale was not a cap, but that the scale maxima (allowing 50 hours at a senior practitioner rate on item 13) were reflective of reasonable amounts for the work in fact performed by MinterEllison between March and May 2025. Curwood DCJ held that to be "misplaced", and to the extent the magistrate accepted the submission, an error arose (at [52]). The scale is one comparator and one input into the assessment (factor (g) at [23]); it cannot substitute for evidence of the work actually undertaken.

5. Assessing the Consequences

The immediate consequence for the parties is a new trial before a different magistrate (at [58]). The City will have to elect: either waive privilege over the MinterEllison and counsel invoices, or prepare a non-privileged schedule of work conforming to [22]. Either course will require a level of preparation and disclosure that substantially exceeds what was done first time around.

The wider consequence is a shift in the economics of rate recovery litigation. The arithmetic is worth stating plainly. The underlying debt was $1,899.68. Oakbridge's costs to 10 March 2025 were $2,992.41. MinterEllison and counsel charged a further $53,694.60 between March and May 2025. Adding Oakbridge, total legal costs were $56,687.01 against a claim of $1,899.68 — a ratio of approximately 30:1. Against that background, the proportionality factor at [23(f)] cannot be dismissed as a mere "sense-check"; it assumes real analytical weight.

Two quantification points follow. The first is that costs will, in most ordinary rate recovery matters, be assessed by reference to time actually spent at reasonable hourly rates, with an overlay of proportionality. His Honour's emphasis on itemised time at [15]–[19] effectively recasts the s 6.56 assessment as a quasi-taxation exercise — informal in procedure but rigorous in content. The second is that unexplained discounts on tax invoices (as occurred here: $6,000 and $1,500) will not assist the local government. A discount is not evidence of reasonableness; it is merely evidence of billing practice. The court cannot tell, without underlying timesheet data, whether the discounted sum remains excessive.

6. Worked Example

Consider the following hypothetical. The Shire of Mondura issues a 2025/2026 rates notice to a ratepayer, Ms Tran, for $2,450. After a letter of demand and a refusal to pay, the Shire's solicitors commence a general procedure claim in the Magistrates Court. Ms Tran files a defence disputing her liability on the basis that she says the property is in her late father's estate. The claim is defended. On the morning of trial Ms Tran pays the rates. The only issue at trial is the quantification of the Shire's costs, which its solicitors claim at $18,500 — being 37 hours at a blended partner/associate rate of $500.

Applying the Sowden framework

Complexity (factor (a)). The only legal issue was the statutory charging effect of s 6.44 LGA and the status of the property in the estate. Modest complexity.

Work reasonably required (factor (b)). A short pleading, a short witness statement from the rates officer, correspondence, and short submissions. The hours reasonably required would ordinarily be in the order of 10–15, not 37.

Seniority (factor (c)). It is not reasonable for a partner to conduct the bulk of the work. On the Zuckerman principle adopted at [15], a junior solicitor of 2–4 years PAE is the appropriate level of resourcing.

Hours (factor (d)) and duplication (factor (e)). The Shire's schedule should demonstrate, for each task, who performed it and for how long. Where two practitioners attended the same conference, duplication must be justified.

Proportionality (factor (f)). Costs of $18,500 against a debt of $2,450 is a ratio of roughly 7.5:1. While s 6.56 recoveries frequently carry unusual ratios because of the ratepayer's conduct, the ratio invites close scrutiny.

Scale comparison (factor (g)). The Magistrates Court scale, as guidance, would yield substantially less than $18,500 for a matter of this character.

A magistrate applying Sowden would likely reduce the allowance materially — perhaps to the order of $8,000 to $10,000 — unless the Shire adduced itemised evidence of work done and applicable rates, and unless it could demonstrate on a fine-grained basis that the more senior resourcing was justified on complexity or time-critical grounds.

7. Practitioner Guidance: A Step-by-Step Framework

Step 1: Identify the recovery proceedings narrowly

Before costs are drawn, identify the work that is properly referable to the recovery proceedings, and quarantine work that is not. In Sowden, the inclusion of work on the ratepayer's complaints to complaint bodies and the Department of Local Government was fatal (at [55.5]). Regulatory complaints, media responses, and parallel political matters are not within s 6.56(1).

Step 2: Resource proportionately at the outset

Match the seniority of the team to the complexity of the matter, applying Zuckerman at par 28.135 as adopted at [15]. A simple debt recovery matter should be run by a junior solicitor with limited partner oversight. Over-resourcing at the outset is almost impossible to rectify at the assessment stage.

Step 3: Keep contemporaneous itemised time records

From the first attendance, ensure every time entry identifies the fee earner, the date, the task performed, and the units of time recorded. These records are the baseline contemplated by his Honour at [19]: "The information of what work was performed by whom and at what rate is a critical baseline".

Step 4: Decide early on the privilege position

Decide at the outset whether, in the event of a contested costs claim, the client will waive privilege over invoices. If not, plan to adduce a schedule in the form contemplated in Sowden at [22]: practitioner, task, time, hourly rate. Leaving this decision to the eve of trial invites the Sowden outcome.

Step 5: Prepare the evidence in an admissible form

The deponent of the City's evidence in Sowden had no direct knowledge of the legal work. The better practice is for evidence of the legal work to be given by an appropriate person — the instructing solicitor or a costs consultant — who can speak to the tasks performed, the fee earners, and the rates.

Step 6: Address each of the seven factors in submissions

Written submissions should work through the factors at [23] one by one. Complexity; work required; seniority; hours; duplication; proportionality; scale comparison. A submission that does not address each of these is vulnerable on appeal.

Step 7: Address proportionality squarely

Proportionality will often be the sharpest point against a substantial costs claim in a low-value debt recovery. The local government should confront it, not avoid it. Where the ratio is high, identify the specific conduct of the ratepayer that drove the costs up — voluminous applications, late documents, late adjournment applications — and tie the incremental costs to that conduct. This is effectively the approach the magistrate attempted in Sowden, but without the evidentiary base required to sustain it.

8. Evidence and Arguments Available to Each Side

8.1 For the local government

The local government should marshal the following categories of evidence:

(a) Itemised time records from each law practice retained, broken down by fee earner, date and task, with unit times and rates. Where privilege is maintained over the invoices themselves, a schedule in the form contemplated at [22] should be prepared.

(b) Rate reasonableness evidence — confirmation of the hourly rates, comparison with Legal Costs Committee scale determinations, and, where appropriate, expert costs evidence.

(c) Causal evidence — correspondence, applications, filings, and transcripts that demonstrate the ratepayer's conduct drove the incurrence of specific cost items. His Honour acknowledged at [43.1] that a ratepayer's conduct may be relevant, provided the link is proved.

(d) Scale comparison — a bill drawn by reference to the Magistrates Court Civil Scale as a cross-check, not as a substitute for primary evidence.

8.2 For the ratepayer

A ratepayer resisting a claim for costs under s 6.56 has the following points to deploy:

(a) Onus. Rely on Parker at [123] and Sowden at [12] — the local government carries the legal burden; there is no evidential onus on the ratepayer.

(b) Absence of itemisation. Where invoices are tendered without itemisation, object on the basis that the evidence does not permit an assessment of reasonableness (Sowden at [50]).

(c) Duplication. Cross-examine on overlap between fee earners, and between composite tasks such as "response to applications" and "preparing response documents" (Sowden at [37]).

(d) Extraneous work. Identify any items that relate to matters outside the recovery proceedings — regulatory complaints, media, political responses — and press for their exclusion (Sowden at [38], [55.5]).

(e) Proportionality. Rely on Gallagher v CSR Ltd and the ratio of costs to debt. The more extreme the ratio, the more detailed the justification required.

(f) Over-resourcing. Where partners or Senior Counsel have been deployed on straightforward issues, invoke factor (c) at [23] and Zuckerman par 28.135 to argue that the engagement was not reasonable.

(g) Doubt resolved in favour of paying party. Relying on [14], any doubt about the reasonableness or necessity of a claimed cost is resolved in the paying party's favour.

9. Key Takeaways for Legal Practice

1. Section 6.56(1) now has a detailed evidentiary content. The combination of Parker and Sowden means that a local government cannot prove its reasonable costs by tendering unitemised tax invoices and a scale bill. Primary evidence of work performed, by whom, for how long, and at what rate, is now required.

2. Privilege is not a shield against the evidentiary burden. If privilege is maintained over invoices, the local government must substitute a non-privileged schedule giving the same itemisation (at [22]).

3. The scale is guidance, not proof. Reliance on the Magistrates Court Civil Scale as a substitute for evidence of time actually spent was rejected at [50]–[52].

4. Discounts on invoices carry no evidentiary weight. The $6,000 and $1,500 "discounts" on the MinterEllison invoices were not treated by Curwood DCJ as a cure-all. A discounted invoice without time records does not enable the court to test whether the discounted figure is itself reasonable.

5. Extraneous work must be quarantined. Charges for advice on regulatory complaints, media, or parallel political matters are not costs of the recovery proceedings and cannot be recovered under s 6.56 (at [55.5]).

6. Proportionality has teeth. A ratio of roughly 30:1 between legal costs and the underlying debt — as here — invites intense scrutiny. The local government must tie any unusual ratio to specific conduct of the ratepayer, with evidence.

7. The evidence should be given by someone who knows. A rates officer cannot usefully prove the work of external lawyers. The deponent should be the instructing solicitor or a costs consultant.

8. Over-resourcing is a live objection. A modest debt recovery is not generally a matter that justifies instruction of a tier-1 firm leading a senior counsel. The Zuckerman principle adopted at [15] cuts both ways: less complex matters should be resourced less seniorly.

9. Section 36Z(2) FESA is now read the same way. Curwood DCJ's treatment of the LGA provision applies equally to levy recoveries under the near-identical FESA provision (see fn 2).

10. Systemic implications. Rate recoveries are a volume practice for local governments. The decision will require many councils to revisit their standing instructions, their retainers with external lawyers, and their costs-evidence templates. The cost of non-compliance is not merely a reduced award — it is a new trial and an appellate costs order on top.

10. Conclusion

Sowden v City of Stirling closes a significant gap in the law of rate recovery costs in Western Australia. Parker told local governments that the costs they recover under s 6.56 must be reasonable. Sowden now tells them — and their lawyers — exactly what must be proved, and how. Itemised time. Named practitioners. Identifiable rates. No duplication. No extraneous matter. And, always, proportionality.

For ratepayer defendants, the decision provides a structured set of objections and a clear allocation of onus. For local governments and the firms that act for them, it is a practical prompt to reform files, retainers, and evidence kits. And for the civil litigator, the judgment is a useful restatement of first principles — Cachia, Zepinic, Gilbey, Gallagher — pulled together into a workable, seven-factor framework that will have application well beyond the confines of the LGA.

The core practical message is straightforward. In this area of practice, costs will no longer be awarded on the basis of scale bills and unitemised invoices. Proof of reasonableness requires evidence, and evidence requires discipline at the outset of every matter.

Costs Payable "In Any Event" in Interlocutory Proceedings

Introduction

The District Court of Western Australia has developed a distinct practice regarding the timing of costs orders in interlocutory proceedings. Unlike the Supreme Court, which generally orders costs to be paid forthwith pursuant to Consolidated Practice Direction 4.7.1, the District Court maintains a "usual practice of ordering the payment of costs from interlocutory hearings to be payable 'in any event'": QBE Insurance (Australia) Ltd v Coffey [2015] WADC 110 (S) at [61]. This practice reflects important policy considerations regarding the efficient administration of justice and the fair allocation of litigation risks between parties.

The General Rule

As articulated by Davis DCJ in QBE Insurance v Coffey, the phrase "in any event" means that costs are to be paid at the conclusion of the proceedings, regardless of the ultimate outcome of the substantive matter. His Honour observed at [61] that "the practice in this court is not to make an order for payment of costs forthwith unless there is something out of the ordinary so as to warrant the making of such an order." This principle has been consistently applied in District Court decisions: see Dakin Farms Pty Ltd v Elite Grains Pty Ltd [2012] WADC 43 at [52] (Commissioner Gething); Herbertson v Morton [2013] WADC 7 (S) at [7] (Eaton DCJ).

Rationale for the "In Any Event" Rule

The policy justifications for ordering costs "in any event" rather than forthwith were comprehensively explained in QBE Insurance v Coffey at [62], drawing upon the Federal Court's analysis in Mango Boulevard Pty Ltd v Whitton; in the matter of Spencer (Bankrupt) (No 2) [2011] FCA 845 at [23]. Davis DCJ identified three primary purposes:

1. Avoiding Multiple Taxations

The rule promotes judicial economy by consolidating all costs issues to be dealt with at the conclusion of the proceedings. This prevents the inefficiency of multiple taxation proceedings throughout the life of the litigation.

2. Preventing Apparent Unfairness

As noted at [62], the rule "avoids the apparent unfairness which may arise if, at an early stage in the proceedings, the party who is ultimately successful is required to pay costs to a party who is ultimately unsuccessful." This recognizes that interlocutory success may not translate to ultimate success in the substantive proceedings.

3. Preventing Tactical Exploitation

The rule "prevents interlocutory proceedings being used as a weapon to exhaust the financial resources of one of the parties": QBE Insurance v Coffey at [62], citing Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503 at [20] (Besanko J). This is particularly important where there is a significant disparity in the financial resources of the parties.

When Costs May Be Ordered Forthwith

While the general rule favors costs being payable "in any event," the District Court retains discretion to order costs payable forthwith in exceptional circumstances. As stated in QBE Insurance v Coffey at [61], such an order will only be made where "there is something out of the ordinary so as to warrant the making of such an order."

The mere fact that interlocutory proceedings are "difficult, complex and important" or involve "substantial" quantum of costs does not, without more, justify departure from the usual practice: QBE Insurance v Coffey at [64]-[65]. In that case, Davis DCJ rejected arguments that costs should be paid forthwith despite the defendants' success in discharging a freezing order, finding at [70] that the plaintiff's application "was [not] ill-considered, or needless, or in the category of applications that ought to be discouraged."

Examples of circumstances that may warrant costs being paid forthwith include:

• Ill-considered or defective applications that fall within the category of proceedings that ought to be discouraged: Cristovao v Butcher Paull & Calder [2008] WADC 49 at [56]

• Needless applications that represent an abuse of process: Cristovao v Butcher Paull & Calder at [58]

• Unreasonable or reprehensible conduct by a party, coupled with long delays before final determination: Mango Boulevard Pty Ltd v Whitton at [24]

Relationship with Supreme Court Practice

It is important to note that the District Court's approach differs from the Supreme Court's practice under Consolidated Practice Direction 4.7.1, which provides that "as a general rule, when an order for costs is to be made against a party in interlocutory proceedings, the costs will be ordered to be paid forthwith or by a particular date": QBE Insurance v Coffey at [63].

However, as Davis DCJ acknowledged at [69], the Supreme Court's practice direction "may be a guide to the exercise of my discretion in an appropriate case in this court." The key consideration is whether the policy objectives underlying the Supreme Court's approach—particularly discouraging ill-considered or needless interlocutory applications—are engaged in the particular circumstances.

Practical Considerations

When considering whether to depart from the usual practice, the court should have regard to:

• The nature and merits of the interlocutory application

• The conduct of the parties

• Any disparity in financial resources between the parties

• The likely delay until final determination

• Whether the proceedings are likely to remain in the District Court or be transferred

As noted in QBE Insurance v Coffey at [74], where proceedings may be transferred to the Supreme Court, "there is no reason why taxation of the costs of these interlocutory proceedings could not take place in the Supreme Court, if this matter is transferred there, as the Determination also applies to the taxation of costs in the Supreme Court."

Conclusion

The District Court's practice of ordering costs "in any event" reflects a balanced approach to interlocutory costs orders that promotes efficiency, fairness, and access to justice. While the court retains discretion to order costs payable forthwith in appropriate cases, the general rule serves important policy objectives that should not be lightly displaced.

The Ethics of Time‑Based Billing: When Does “Padding” Become Professional Misconduct?

Few topics generate as much angst among clients—and as many disciplinary files for lawyers—as time‑based billing.

Lawyers practising under the Legal Profession Uniform Law (“LPUL”) face real regulatory peril if they cross the line from honest mistake to dishonest inflation.

This post unpacks how that line is drawn, the cases that illustrate it, and the practical safeguards every firm should adopt.

1. The Legal Baseline: “Fair and Reasonable” Fees

Since 1 July 2022 WA practitioners have operated under the LPUL. Section 172 is blunt: a law practice must not charge more than fair and reasonable legal costs. The law then ups the stakes—section 207 declares that charging above that mark is capable of amounting to unsatisfactory professional conduct or outright professional misconduct.

The Solicitors’ Conduct Rules reinforce the point. They require honesty, competence and proper supervision. Dishonesty in billing is therefore not just a costs problem; it is an ethical failure that can end a career.

2. What Counts as “Over‑Recording”?

• Padding – entering more time than the task consumed (e.g. billing an hour for a five‑minute email).

• Double‑billing – charging two clients for the same period of work.

• Phantom billing – charging for work that never took place.

• Over‑servicing – performing unnecessary work to justify more hours.

Each method inflates the fee. Whether a Tribunal calls it negligence or misconduct depends on why it happened and how bad the excess is.

3. Negligence v Dishonesty

Honest Mistake = Possible Unsatisfactory Conduct

A careless duplicate entry or poor supervision can still attract a reprimand, a fine or compulsory training. In Council of LSNSW v Kernaghan (No 2) [2022] NSWCATOD 64 the solicitor’s disclosure failures and some inflated attendances were labelled unsatisfactory professional conduct—but because there was no dishonesty the tribunal stopped at a reprimand and ethics training.

Deliberate Inflation = Professional Misconduct

Where intent is proved, tribunals show little mercy. In Legal Services Commissioner v Williams [2022] VCAT 806 the practitioner fabricated timesheets and misappropriated trust money. Result: professional misconduct, a nine‑year ban and payment of the regulator’s costs. Closer to home, LPCC v O’Halloran [2013] WASAT 105 saw a six‑month suspension for systematic padding across personal‑injury files.

4. How Much Is “Gross”?

Even without direct proof of intent, a fee can be so high that dishonesty is inferred. Courts ask whether the costs bear a rational relationship to the work and its importance. In Shalhoub v Johnson [2023] NSWDC 555 the District Court endorsed that proportionality test: a huge bill for a modest task is self‑evidently unreasonable.

How big is “huge”? There is no fixed percentage. If an assessor chops 15 % or more off a bill, LPUL s 204(2) usually saddles the firm with the costs of the assessment—another financial sting.

5. Evidence that Wins (or Sinks) a Billing Case

• Metadata never lies – native timesheet logs reveal when an entry was really made. A note created after a bill is issued “screams” reconstruction.

• File notes must match the narrative – vague descriptions such as “file review – 3 h” invite disbelief.

• Expert cost assessors set the benchmark – tribunals lean heavily on their view of what a competent solicitor would have charged.

• Patterns tell stories – a lawyer who always records a neat six hours per day, or rounds every unit to the next hour (see LSC v Panayi [2023] VCAT 39), quickly looks suspect.

6. Disciplinary Consequences

1. Reprimand or caution – for negligent over‑recording quickly rectified.

2. Fine – up to $25 000 in WA; often coupled with extra CPD or practice management training.

3. Conditions on practice – supervision requirements, trust‑account audits, or ethics courses.

4. Suspension – months or years off the roll for dishonest padding.

5. Strike‑off – the “nuclear option” when dishonesty is systemic or the practitioner shows no insight.

Whatever the disciplinary label, tribunals almost always order restitution: over‑charged clients get their money back, sometimes with interest.

7. A Practical Checklist to Stay Safe

• Record time contemporaneously. Reconstruction is where mistakes and temptations breed.

• Compare every draft bill to scale or market norms. Write off hours that look excessive.

• Supervise juniors. Partners remain responsible for systemic padding.

• Use clear narratives. Specify what was done and why it took the time recorded.

• Document write‑offs. They evidence judgement and help defend complaints.

• Invite questions. A bill‑review chat often defuses client anger and reveals errors early.

• Audit files randomly. Compare output to hours; anomalies tend to surface quickly.

• Educate the team. Circulate cautionary case summaries; make ethics part of KPIs, not just budgets.

8. Key Take‑Away

Time‑based billing is not inherently unethical, but transparency and proportionality are non‑negotiable.

The moment a lawyer knowingly records time that was not worked—or continues to bill an amount no reasonable peer could defend—the conduct shifts from sloppy to dishonest.

WA’s Uniform Law, the SAT and the courts have shown they will act decisively when that line is crossed.

A robust billing culture, built on contemporaneous records, active supervision and client‑centred communication, is the best protection.

Pre-Action Discovery in Western Australia

1. Introduction

Pre-action discovery is a procedural mechanism available in Western Australian civil litigation that enables prospective litigants to obtain information before commencing formal proceedings. The Supreme Court of Western Australia has developed a body of jurisprudence addressing various aspects of pre-action discovery, particularly under Order 26A of the Rules of the Supreme Court 1971 (WA) (RSC). This article examines the law relating to pre-action discovery through an analysis of four key decisions: Reynolds v Higgins [2024] WASC 260 (Reynolds), John Lovegrove & Co. Pty. Ltd. & A.J Lovegrove & M.H Lovegrove Trading as Lovegrove Electrical v Lumley [2024] WASC 59 (Lovegrove), Jako Industries Pty Ltd v City of Wanneroo [No 4] [2025] WASC 63 (Jako Industries), and Global Smart Cities Pty Ltd v Perkins (WA) Pty Ltd [2025] WASC 129 (Global Smart Cities).

These decisions collectively address applications for pre-action discovery in various contexts: to identify a potential party (Reynolds), to obtain documents from a former employee (Lovegrove), to extend time for compliance with pre-action discovery orders (Global Smart Cities), and to determine whether a potential cause of action exists (Jako Industries).

2. Legal Framework for Pre-Action Discovery

2.1 Pre-Action Discovery to Identify a Potential Party (O 26A r 3)

Order 26A r 3 of the RSC empowers the Court to order a non-party to give discovery to identify a potential party to an action. In Reynolds v Higgins [2024] WASC 260, Quinlan CJ summarized the principles governing such applications, stating at [31]:

"The principles relating to O 26A r 3 of the Rules of the Supreme Court 1971 (WA) are well settled. Order 26A r 3 empowers the Court to order a non-party to give discovery to identify a potential party to an action where the following conditions are satisfied: (a) the plaintiff wants to commence proceedings against the potential party; (b) the plaintiff has made reasonable enquiries; (c) the plaintiff has not been able to ascertain a description of the potential party sufficient for the purposes of taking proceedings against that potential party; and (d) there are reasonable grounds for believing that the non-party had, has or is likely to have had or to have, possession of information, documents or any object that may assist in ascertaining the description of the potential party."

This framework was further affirmed by reference to The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147 at [19] and NW v Bechtel (Western Australia) Pty Ltd [2014] WASC 375 at [13].

2.2 Pre-Action Discovery to Determine Whether to Commence Proceedings (O 26A r 4)

Order 26A r 4 allows for pre-action discovery to enable a prospective plaintiff to determine whether to commence proceedings. In Jako Industries [2025] WASC 129, Howard J referenced the Court of Appeal's summary in BWS v ARV [No 2] [2021] WASCA 62 at [28]-[37], explaining at [22]:

"The discretionary power under O 26A r 4(4) is enlivened if the court is satisfied that: (a) the applicant 'may have a cause of action against' the potential party; (b) the applicant wants 'to commence proceedings against' the potential party; (c) the applicant has made 'reasonable enquiries' for the purpose of obtaining sufficient information to enable him or her to decide whether to commence proceedings; (d) the applicant has not been able to obtain sufficient information to enable him or her to make a decision; and (e) there are 'reasonable grounds for believing' that the potential party had, has, or is likely to have had or have, possession of documents that may assist the applicant in making the decision."

3. The "May Have a Cause of Action" Threshold

A critical threshold for pre-action discovery under O 26A r 4 is establishing that the applicant "may have a cause of action" against the potential party. The courts have clarified that this is a lower threshold than establishing a prima facie case, but requires more than mere assertion.

In Jako Industries [2025] WASC 129, Howard J, referring to BWS v ARV [2021] WASCA 62 at [33], emphasized at [41]-[42]:

"In my view, there is nothing on the material which could be described as '... some tangible backing or objective foundation that takes the existence of the cause of action beyond a mere allegation, suspicion or assertion.'

While Jako Industries did not have to positively establish the existence of a cause of action, it has to demonstrate more than mere assertion, conjecture or suspicion."

This principle was further explained in Reynolds [2024] WASC 260, where Quinlan CJ noted at [40]:

"As reflected in the principles set out above, an order for discovery will not be made if the prospective action is merely speculative. This does not mean that the plaintiff seeking discovery as to the identity of a prospective party must demonstrate that it has a prima facie case. To use the words of O 26A r 3, the plaintiff must 'appear' to have a cause of action; it is not necessary, under the rule, to find that the plaintiff in fact has a good cause of action."

4. Discretionary Factors Governing Pre-Action Discovery

Even where the threshold requirements for pre-action discovery are met, the Court retains a discretion whether to order discovery. The Court of Appeal in BWS v ARV [2021] WASCA 62 identified several factors relevant to this discretion, which were summarized in Jako Industries [2025] WASC 129 at [26]:

"1. the likelihood that a cause of action of the kind suggested will be found to exist; 2. the nature and significance of the potential cause of action; 3. the likely effect of an order of the kind contended for on the potential party; 4. whether the applicant has any other adequate means of obtaining the information; 5. the nature and confidentiality of the documents proposed to be obtained; 6. the possible significance of the information in a documents to the decision whether to commence the contemplated proceedings; 7. whether the applicant is able to compensate the potential party for its costs of complying with the order; 8. whether there is any evidence of bad faith on the part of the applicant; and 9. the extent to which the cost and effort involved in undertaking the proposed discovery and inspection is proportionate to the likely value of the claim if successful."

In Reynolds [2024] WASC 260, Quinlan CJ applied these factors and concluded at [82]-[83]:

"In all of the circumstances, I am satisfied that the interests of justice favour an order for pre-action discovery of the trust deed of the Trust or such other documents that identify the trustee.

Senator Reynolds seeks to bring a bona fide claim to set aside the Trust pursuant to s 89 of the Property Law Act 1969 (WA). That claim is (a) not merely speculative, and (b), on the evidence before me, may be the only prospect of Senator Reynolds ever satisfying a potential judgment debt in the defamation proceedings. Those two matters in my view weigh strongly in favour of Senator Reynolds at least having discovery so as to enable such a claim to be formulated, and having received further advice including as to the prospects of success, commencing that claim."

5. Costs Principles for Pre-Action Discovery

The costs principles governing pre-action discovery applications have been addressed in several decisions. In Lovegrove [2024] WASC 59, Master Russell summarized the general approach at [15]-[17]:

"It was also uncontroversial that in an application for pre-action discovery, the usual rule is that the party seeking discovery should pay the costs of the application and the discovering party's reasonable costs and expenses of complying with any order made."

This starting position reflects the characterization of pre-action discovery as an "indulgence" sought by the applicant. However, the Court of Appeal in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S) established an important qualification to this general rule by creating a mechanism for potential recoupment of these costs when substantive proceedings are later commenced. The details of this mechanism and its practical application are discussed in Section 6.2 below.

The principles from Kelbush were further applied in Lovegrove [2024] WASC 59, where Master Russell noted at [24]-[25]:

"As observed by Martin CJ in the Kelbush Costs Decision, the proper course in proceedings of this nature is to order, in the absence of any reason to the contrary, that the applicant for the indulgence of pre-trial discovery pay both the respondent's costs of the application and the respondent's reasonable costs of complying with any order for discovery made.

I am not satisfied there is any reason in this case to justify any change from the usual course or why the applicant for pre-action discovery, Lovegrove, should not pay the costs of the application and Mr Lumley's reasonable costs and expenses of giving the discovery."

6. Confidentiality and Procedural Considerations

6.1 Confidentiality of Discovered Documents

The Court may impose confidentiality regimes on documents obtained through pre-action discovery. In Reynolds [2024] WASC 260, Quinlan CJ addressed confidentiality at [86]-[89]:

"Ms Higgins submitted that, in the event that I made an order for pre-action discovery, reliance upon the implied undertaking (i.e., the so-called Harman undertaking) in relation to the use of discovered documents would not be sufficient and that I should make particular orders to protect the confidentiality of the document (or documents) discovered.

I am satisfied that I should do so. The evidence before me confirms, and I would have to be living under a rock not to know, that litigation involving Ms Higgins is litigated as much in the public arena as it is in the courts: court documents are provided to media outlets prior to their being served or even filed, speeches and 'door-stop' interviews are regularly conducted on the doors of the courts and self-appointed experts dissect, analyse and predict the outcome of court proceedings before they have even begun...

The Court, however, can and should control the dissemination of private and sensitive documents that have neither been tendered nor adduced in evidence. This is particularly so in relation to documents produced under compulsion such as will occur in this case...

While I will hear the parties as to the precise terms of the orders, my preliminary view is that the document or documents discovered should be provided to a single nominated practitioner from the solicitors acting for Senator Reynolds, following the provision by the practitioner of a signed undertaking to the Court that he or she will retain possession and control of the document, not copy the document and not communicate the contents of the document, save for the purpose of taking instructions from Senator Reynolds and commencing the proposed proceedings (and for no other purpose)."

6.2 The Kelbush Costs Mechanism and Time Limitations

The Court of Appeal in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S) established a specific mechanism for addressing costs in pre-action discovery cases. Martin CJ (with whom Buss JA and Mitchell J agreed) set out the following principles at [2]-[4]:

"[2] ... the proper course in proceedings of this nature is to order, in the absence of any reason to the contrary, that the applicant for the indulgence of pre-trial discovery pay both the respondent's costs of the application and the respondent's reasonable costs of complying with any order for discovery made. Further, it is my view that the obligation to pay costs should not be deferred indefinitely merely because proceedings are subsequently commenced by the applicant against the respondent.

[3] However, as a matter of principle, there should be a mechanism by which such an applicant can recoup not only the costs that it is ordered to pay to such a respondent, but also its own costs of the pre-trial discovery application if it commences proceedings against the respondent and it appears to the court responsible for those proceedings that such costs should be ordered to be paid to the applicant...

[4] The mechanism by which those costs can be recouped would be by way of an order empowering the current appellant to make an application in the course of any subsequent proceedings for orders with respect to not only the costs that it is ordered to pay the respondent today, but also with respect to its own costs of the application before the master."

In implementing these principles, the Court of Appeal made the following costs order in Kelbush: "Appellant to pay respondent's costs of application for and compliance with orders for pre-action discovery" (as recorded in the "Result" section of the judgment). Importantly, as Martin CJ explained at [3], this was "subject to an order enabling recoupment of those costs" through the mechanism described in paragraph [4].

This costs mechanism typically includes a time limitation to ensure that costs issues are not left unresolved indefinitely. In Global Smart Cities v City of Wanneroo [No 4] [2025] WASC 63, Howard J considered an application to extend such a time limitation. The case demonstrated that this type of order concerning time limitations has become a common feature in pre-action discovery applications, as Howard J noted at [20]:

"The Master made Order 6, which is now commonly made in these actions. The idea being that these matters should be addressed promptly, and the question of costs not left to hang indefinitely, as the Chief Justice might have said."

The specific orders at issue in that case included:

1. Orders 5 and 6 made by the Master, with Order 6 placing a time limit on when the cost issues could be addressed through the Kelbush mechanism

2. Order 2 made by Howard J on 13 October 2023 extending that time limit in light of a confidentiality regime that had been imposed

3. An application to further extend the time period

As Howard J noted at [19]-[21]:

"I consider, in making his Orders 5 and 6, the Master recognised and adapted that mechanism but also sought to give effect to the statements of principle in [2] of the Chief Justice's reasons that the obligation should not be deferred indefinitely.

The Master made Order 6, which is now commonly made in these actions. The idea being that these matters should be addressed promptly, and the question of costs not left to hang indefinitely, as the Chief Justice might have said.

Order 2 I made on 13 October 2023 sought to extend that to a definable or knowable date to give effect to Order 6, as made by the Master, in light of the confidentiality regime which I considered should be imposed."

Howard J ultimately declined to further extend the time limitation, emphasizing at [27] that:

"It seems to me that the plaintiff has not taken advantage of the time that was extended by my Order, and it seems to me in the interests of justice that that time period ought not to be further extended."

This case demonstrates the courts' concern with balancing:

1. The right of pre-action discovery applicants to potentially recover their costs if they subsequently commence proceedings; and

2. The need to ensure that cost issues are resolved within a reasonable timeframe rather than being deferred indefinitely.

7. Conclusion

Pre-action discovery in Western Australia is governed by a body of jurisprudence that balances the interests of prospective plaintiffs in obtaining information necessary to make informed litigation decisions against the burden placed on potential defendants.

The courts have developed nuanced approaches to the threshold requirements, discretionary factors, costs principles, and procedural considerations involved in pre-action discovery applications.

While the courts generally recognize pre-action discovery as an "indulgence", they have also acknowledged its important role in facilitating access to justice by enabling parties to make informed decisions about whether to commence litigation.

The consistent theme throughout the jurisprudence is that pre-action discovery should be ordered where it serves the interests of justice and the proper administration of potential litigation, but with appropriate safeguards to prevent abuse and unnecessary burden on responding parties.

Apportionment of Costs in Defamation Proceedings: Greenwich v Latham (No 3)

Introduction

The Federal Court of Australia's decision in Greenwich v Latham (No 3) [2025] FCA 312 explains the principles governing costs orders in defamation proceedings where a plaintiff achieves partial success. This case represents a contribution to the jurisprudence on costs apportionment in defamation matters, particularly when dealing with multiple publications and imputations. Justice O'Callaghan's reasoning offers practical guidance on when costs should follow the event despite a plaintiff's partial success, and when indemnity costs might be warranted following the rejection of a settlement offer.

Background: Costs Principles in Defamation Proceedings

The apportionment of costs in defamation proceedings has evolved considerably in recent years, with courts increasingly willing to divide costs to reflect the parties' respective successes and failures. The legal framework for costs orders in the Federal Court includes s 43 of the Federal Court of Australia Act 1976 (Cth), which vests a wide discretion in the Court with respect to costs.

As summarised by White J in Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127 (Hockey (No 2)), the relevant principles include:

1. The wide discretion must be exercised judicially (Hockey (No 2) at 134 [37]);

2. Ordinarily, costs follow the event, with a successful litigant receiving costs absent special circumstances (Hockey (No 2) at 134 [37]);

3. Courts are increasingly prepared to apportion costs where a party succeeds on only some claims (Hockey (No 2) at 143 [88]);

4. A litigant succeeding on only part of their claim may reasonably bear the expense of litigating unsuccessful portions (Hockey (No 2) at 134 [37]); and

5. Apportionment may be appropriate where issues on which the plaintiff failed were "clearly dominant or separable" (Hockey (No 2) at 142 [87]).

Facts of the Case

Greenwich v Latham (No 3) concerned the costs determination following Justice O'Callaghan's judgment in Greenwich v Latham [2024] FCA 1050 (the primary judgment). The defamation proceeding was brought by Alexander Greenwich, member for Sydney in the NSW Legislative Assembly, against Mark Latham, an independent member of the NSW Legislative Council, regarding two publications: the "primary tweet" and the "DT quotes" (at [2]-[3]).

At trial, Mr Greenwich contended that each publication conveyed two defamatory imputations and claimed damages for non-economic loss, aggravated damages, and injunctive relief (at [3]).

Regarding the primary tweet, Justice O'Callaghan found that:

• The imputation that Mr Greenwich "engages in disgusting sexual activities" was conveyed and was defamatory (at [5], [9]);

• The imputation that Mr Greenwich "is not a fit and proper person to be a member of the NSW Parliament because he engages in disgusting sexual activities" was not conveyed (at [6]).

Regarding the DT quotes, Justice O'Callaghan found that:

• Neither pleaded imputation was conveyed (at [8]).

Justice O'Callaghan awarded Mr Greenwich $100,000 in damages for non-economic loss and $40,000 in aggravated damages (at [12]). A subsequent application for injunctive relief was dismissed in Greenwich v Latham (No 2) [2025] FCA 131 (at [13]).

The Court's Reasoning on Costs

Apportionment of Costs

Mr Latham submitted that each party should pay its own costs or, alternatively, that he should only be ordered to pay one quarter of Mr Greenwich's costs on a party-party basis (at [22]-[24]). This submission was based on Mr Latham's claim that he succeeded on a "preponderance of the issues" - specifically, the second pleaded imputation regarding the primary tweet and the entirety of the claim regarding the DT quotes (at [24]).

In contrast, Mr Greenwich argued he should be awarded the whole of his costs because he was successful in his claim and there was no reason costs should not follow the event (at [25]). Mr Greenwich's counsel, Dr Collins AM KC, submitted that it was misconceived to rely on a numerical comparison of issues (at [26]).

Dr Collins advanced five key reasons why the case would have been run in exactly the same way even if Mr Greenwich had sued only in respect of the primary tweet (at [27]):

1. The affidavit evidence relied upon would have been identical, covering necessary background, context, and damages (at [27(1)]);

2. All the same witnesses would have been called (at [27(2)]);

3. The DT quotes case was not severable from the primary tweet case due to "an unbroken chain of causation" between the publications (at [27(3)]);

4. The second pleaded imputation regarding the primary tweet involved only brief legal argument with no additional evidence (at [27(4)]); and

5. All evidence about serious harm would still have been necessary (at [27(5)]).

Justice O'Callaghan found these submissions "irresistible" and accepted that Mr Greenwich should recover his costs of the proceeding (at [29]). His Honour noted that while Mr Greenwich was unsuccessful in his application for injunctive relief, this was offset by delays and expenses caused by Mr Latham's insistence that Mr Greenwich provide sworn evidence about his sources of funding for the proceeding (at [30]).

Indemnity Costs

Mr Greenwich submitted that costs should be paid on an indemnity basis, principally because Mr Latham unreasonably rejected an offer to settle contained in a concerns notice dated 19 April 2023 (at [32]). The offer included terms requiring:

• A public apology and retraction;

• Permanent disabling of comments on the apology;

• Undertakings not to publish similar imputations in future;

• Payment of Mr Greenwich's reasonable expenses; and

• Payment of $20,000 compensation (at [33]).

After reviewing the principles governing indemnity costs following rejected settlement offers from CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 and Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40, Justice O'Callaghan was not persuaded that Mr Latham's rejection of the offer was unreasonable (at [44]).

His Honour reasoned that:

• The DT quotes were not defamatory, yet formed a significant part of the concerns notice (at [44]);

• The undertakings sought were "very broad and unlimited in time" (at [44]);

• The proposed terms would have imposed "onerous obligations to monitor social media that may have posed difficulties in enforcement" (at [44]).

Consequently, Justice O'Callaghan declined to award costs on an indemnity basis (at [46]).

Practical Application: A Worked Example

Consider the following hypothetical scenario:

Plaintiff X sues Defendant Y for defamation regarding three separate publications (A, B, and C). Each publication has two pleaded imputations. At trial, X succeeds on both imputations for publication A, one imputation for publication B, and fails entirely on publication C. X is awarded $150,000 in damages.

Applying the principles from Greenwich v Latham (No 3):

1. Consider whether the successful and unsuccessful claims are truly separable or whether they form part of an interconnected narrative;

2. Determine whether the same evidence would have been necessary even if only the successful claims had been pursued;

3. Assess whether the unsuccessful publications or imputations added significant complexity or length to the proceedings.

If the evidence and witnesses would have been largely the same regardless of whether publications B and C were included, a court would likely award X their full costs despite the partial success. However, if publication C required distinct evidence and significantly extended the proceedings, the court might reduce X's recoverable costs to reflect this unnecessary expenditure.

Guidance for Practitioners

When advising clients on costs in defamation proceedings with partial success, practitioners should:

1. Assess Practical Severability

• Consider whether the successful and unsuccessful claims share common evidentiary foundations

• Determine if the same witnesses would have been required even without the unsuccessful claims

• Evaluate whether preparation would have been substantially different if only successful claims were pursued

2. Evaluate the Relative Significance of Claims

• Consider whether the unsuccessful claims were peripheral or central to the overall case

• Assess the proportion of court time and evidence devoted to unsuccessful claims

• Determine whether unsuccessful claims significantly extended proceedings

3. Consider Settlement Offers

• Ensure settlement offers are reasonable and proportionate

• Make offers that acknowledge the strength and weaknesses of the case

• For defendants, consider the potential for indemnity costs when evaluating settlement offers

4. Prepare Detailed Records

• Document time spent on different aspects of the case

• Keep records that differentiate between work on distinct publications or imputations

• Be prepared to demonstrate how time and resources would have been allocated if only successful claims were pursued

Arguments and Evidence for Each Side

For Plaintiffs Seeking Full Costs

1. Evidence that the same witnesses would have been called regardless of unsuccessful claims

2. Documentation showing that preparation for successful and unsuccessful claims overlapped significantly

3. Evidence that the defendant's conduct necessitated pursuit of all claims together

4. Argument that unsuccessful claims formed part of a single narrative requiring comprehensive treatment

For Defendants Seeking Apportionment

1. Evidence that unsuccessful claims significantly extended proceedings

2. Documentation of distinct evidence pertaining solely to unsuccessful claims

3. Argument that unsuccessful claims were clearly separable and dominant parts of the case

4. Time records showing disproportionate resources devoted to unsuccessful claims

Key Takeaways for Legal Practice

1. Severability is Practical, Not Theoretical: The test for apportionment turns on practical considerations of how the case would have been run, not merely the numerical proportion of successful claims.

2. Evidence Overlap is Crucial: Where the same evidence would have been necessary even if only successful claims were pursued, courts are unlikely to apportion costs.

3. Careful Offer Construction: Settlement offers should be carefully constructed to make rejection unreasonable. Broad undertakings and coverage of ultimately unsuccessful claims may undermine arguments for indemnity costs.

4. Document Resource Allocation: Practitioners should document how resources are allocated between different aspects of a case to support or defend against apportionment applications.

5. Look Beyond Numbers: Courts will not merely count successful versus unsuccessful imputations but will assess their relative significance and the resources devoted to them.

Conclusion

Greenwich v Latham (No 3) represents a significant contribution to the evolving jurisprudence on costs in defamation proceedings. Justice O'Callaghan's decision reinforces that courts will take a practical approach to costs apportionment, looking beyond mere numerical success to consider how the case would actually have been conducted if only the successful claims had been pursued.

The decision also highlights the challenges plaintiffs can face in securing indemnity costs following rejected settlement offers, particularly where those offers encompass ultimately unsuccessful claims or contain broad undertakings that may be difficult to enforce.

Two Decisions, One Principle: How Pentelow and Birketu Together Reshape Law Firm Litigation Strategy

Introduction

The landscape of costs recovery in Australian litigation has undergone a significant transformation with two landmark High Court decisions: Bell Lawyers Pty Ltd v Pentelow (2019) 269 CLR 333 and Birketu Pty Ltd v Atanaskovic [2025] HCA 2. Together, these decisions establish a coherent framework based on the principle of equality before the law, while maintaining important distinctions that have practical implications for law firms engaged in litigation. This article examines how these decisions collectively reshape the ability of legal practitioners to recover costs when representing themselves or their firms, and the practical implications for litigation strategy.

Background: Bell Lawyers v Pentelow

In Bell Lawyers v Pentelow, the High Court abolished the so-called "Chorley exception" to the general rule that self-represented litigants cannot recover professional costs. This long-standing exception had permitted self-represented solicitors, uniquely among all professions, to recover costs for their own time spent in litigation.

The High Court held that the Chorley exception was an "affront to the fundamental value of equality of all persons before the law" and thus had no place in the common law of Australia. However, the Court made clear that its decision did not disturb the "well-established understanding" that where an in-house solicitor appears in proceedings to represent their employer, the employer remains entitled to recover costs.

The decision left open a critical question: could a law firm recover costs for work done by its employed solicitors (as distinct from partners) when the firm itself was a party to the proceedings?

Facts of Birketu v Atanaskovic

The Birketu case directly addressed this unresolved question. Atanaskovic Hartnell, an unincorporated legal practice, had commenced proceedings in the Supreme Court of New South Wales against former clients Birketu Pty Ltd and WIN Corporation Pty Ltd to recover legal fees. Mr. Atanaskovic, a partner of the firm, was the solicitor on the record throughout.

The firm was successful in the litigation, and Hammerschlag J ordered that Birketu pay Atanaskovic Hartnell's costs. When Atanaskovic Hartnell sought to recover costs, it claimed $305,463 for professional fees for work done by its employed solicitors, while making no claim for work done by Mr. Atanaskovic or any other partner.

Birketu objected, arguing that following Bell Lawyers, the firm could not recover costs for work done by its own employed solicitors. This question proceeded through the courts, with Brereton JA at first instance ruling that the firm could not recover such costs, the Court of Appeal (by majority) overturning that decision, and finally the High Court dismissing Birketu's appeal, thereby affirming the Court of Appeal's decision and allowing recovery of costs for employed solicitors.

Legal Reasoning in Birketu

The High Court's decision featured both majority and minority opinions.

The majority (Gageler CJ, Gordon, Edelman, Gleeson and Beech-Jones JJ) held that "an order for costs in favour of an unincorporated law firm entitles the firm to obtain recompense for legal work performed by an employed solicitor of the firm." They reasoned that the general common law principle applies to a litigant solicitor or unincorporated law firm in the same way as it applies to other litigants. Like any other litigant, the solicitor or firm cannot obtain recompense for their own legal work. But also like any other litigant, the solicitor or firm can obtain recompense for legal work done by their employees.

The majority distinguished this situation from the Chorley exception by emphasising that the expenses of salaries and overheads associated with having legal work done by employees constitute professional legal costs actually incurred by the solicitor or firm. The recompense is to the solicitor or firm for professional legal costs thereby actually incurred.

Justice Steward dissented, arguing that allowing recovery would "make a mockery of what was decided in Bell Lawyers, and would, in substance, resurrect the Chorley exception." He reasoned that when employed solicitors work under the supervision of a firm, that is the work of the firm itself. The time of employed solicitors is the firm's time, and when those solicitors work on the firm's own litigation, the firm loses the value of those hours which might otherwise have been profitably utilised for clients.

Justice Jagot also wrote separately, siding with Justice Steward's position.

Quantification of Recoverable Costs

The High Court in Birketu provided important guidance on the quantification of recoverable costs for employed solicitors. The Court addressed this in paragraphs 31-36 of the judgment, under the heading "Quantification."

The majority noted that concerns about law firms potentially profiting from litigation through employed solicitors relate not to "the availability of such recompense by way of an order for costs but to its quantification by way of assessment" (para 31). This is an important distinction—the principle of recoverability is separate from the method of quantification.

The Court explained the traditional approach in paragraph 33:

"The plurality in Bell Lawyers noted that 'the traditional approach has been to award costs on a basis comparable to the costs which would have been incurred and allowed ... had an independent solicitor been engaged' on the 'assumption', or more accurately the 'sensible and reasonable presumption', that application of the approach will not ordinarily result in an employer-litigant obtaining more than an indemnity for expenses actually incurred."

Critically, paragraph 34 establishes that this presumption is rebuttable:

"The presumption on which the traditional approach is founded has never been treated as more than a presumption of fact, it being open to an objecting party to show that application of the approach in a particular case would in fact result in the employer-litigant receiving more than an indemnity for expenses actually incurred."

The Court further noted in paragraph 35 that in assessment proceedings, while an assessor might investigate whether the principle of indemnity would be infringed, "this task is not one which should be undertaken without a good and sufficient cause." The mere fact that costs are being sought for work done by employed solicitors of a litigant law firm is not sufficient to trigger such an investigation.

The judgment also mentioned in paragraph 36 that there might be an alternative approach involving a different conception of "indemnity" which could affect quantification differently, though this was not fully developed as it wasn't necessary for resolving the case.

The Combined Impact of Both Decisions

Read together, Bell Lawyers and Birketu establish a framework for costs recovery that can be summarised as follows:

1. The general rule is that self-represented litigants cannot recover professional costs for their own time spent in litigation.

2. This rule applies equally to solicitors and law firms that represent themselves (the Chorley exception is abolished).

3. A law firm can recover costs for work done by its employed solicitors when the firm is a party to the proceedings.

4. The "in-house solicitor rule" remains intact: when a government department, corporation, or other entity is represented by its employed solicitor, that entity can recover costs.

5. In quantifying recoverable costs, courts will generally use the traditional approach of comparing the costs to those that would have been incurred had an independent solicitor been engaged, but this is subject to the presumption not resulting in the litigant obtaining more than an indemnity.

This framework has significant implications for litigation strategy for law firms that become involved in litigation themselves.

A Worked Example

Consider a hypothetical scenario from a former client's perspective:

Acme Corporation is sued by its former solicitors, Smith & Jones LLP, for unpaid fees totalling $500,000. Smith & Jones succeeds in the litigation, with Ms. Smith (a partner) acting as the solicitor on the record and the firm's employed solicitors performing most of the legal work. The court orders Acme to pay Smith & Jones' costs.

Smith & Jones submits a bill claiming $140,000 for work done by its employed solicitors, calculated at rates comparable to what would have been charged by independent solicitors. Acme, hoping to reduce this amount, considers challenging the quantification.

Following Birketu, Acme understands that while Smith & Jones can recover costs for work done by employed solicitors, the High Court emphasised that these costs should represent a true indemnity. Importantly, the Court noted (at paragraph 35) that although a costs assessor might investigate whether the principle of indemnity is being infringed, "this task is not one which should be undertaken without a good and sufficient cause." The mere fact that costs are being sought for work done by employed solicitors is not sufficient to trigger such an investigation.

To challenge the quantification of costs, Acme faces a multi-step task to establish that the assessment should be limited to a true indemnity rather than market rates:

Step 1: Understand what constitutes a "true indemnity"
A true indemnity in this context means the actual expense incurred by Smith & Jones in having employed solicitors work on the litigation. This comprises primarily:

• Salary costs: The portion of the employed solicitors' annual salaries attributable to the time spent on this matter (e.g., if a solicitor earning $60,000 annually spent 10% of their working time on the matter, the salary component would be $6,000)

• Overheads: The additional costs necessarily incurred in employing the solicitors, including office space, equipment, administrative support, professional indemnity insurance, and other practice costs that would not have been incurred but for the employment of these solicitors

• Opportunity costs: Though more controversial, potentially the value of other billable work the employed solicitors could have undertaken for paying clients during the time spent on this litigation. Arguments for including opportunity costs suggest they represent real economic loss to the firm and are consistent with the High Court's recognition in Birketu that firms incur actual costs when deploying employed solicitors on their own litigation. Arguments against contend that opportunity costs are speculative, difficult to quantify, and their inclusion might reintroduce the profit element that Bell Lawyers sought to eliminate from self-representation.

Step 2: Establish a prima facie case of "good and sufficient cause"
Acme must identify specific grounds suggesting that Smith & Jones' claimed costs substantially exceed a true indemnity. This requires more than mere assertion—Acme needs evidence suggesting a significant disparity.

Step 3: Gather available evidence
Without access to internal firm records, Acme must rely on indirect evidence such as market knowledge, prior dealings with Smith & Jones, and expert testimony about typical employment costs for comparable firms.

The critical challenge for Acme is meeting the threshold of "good and sufficient cause" with limited information, as the High Court has intentionally set a high bar to avoid routine investigations into firms' internal cost structures.

As a former client with limited insight into Smith & Jones' internal operations, Acme considers what might constitute "good and sufficient cause" and what evidence it could realistically obtain:

1. Evidence of profitability disparity: Acme could argue that allowing recovery at standard market rates would provide Smith & Jones with a significant profit rather than mere indemnity:

   • Publicly available financial information showing the firm's profit margin and ratio of revenue to salary costs

   • Evidence that the firm's business model relies on large markups between employed solicitor costs and billing rates

   • Comparison between the firm's published charge-out rates to clients (which include profit components) and the rates claimed in costs recovery

2. Alternative fee arrangements and discounting practices: Acme could demonstrate:

   • That Smith & Jones routinely offers substantial discounts from their standard rates to clients

   • Evidence the firm uses fixed fee arrangements that effectively discount hourly rates

   • Marketing materials where the firm promotes itself as cost-effective or offering competitive rates

3. Internal versus external rate disparities: Acme could seek to establish:

   • Different rates being charged to different clients for identical work by the same employed solicitors

   • Evidence from recruitment advertisements showing salary ranges that, even with overhead allocations, would result in costs substantially below claimed rates

4. Historical client relationship evidence: Acme could leverage its former relationship:

   • Prior invoices showing the firm's actual billing rates for the same employed solicitors

   • Records of fee discussions where the firm provided cost estimates at rates lower than now claimed

   • Evidence of how the firm described its fee structure during the client relationship

   • Contemporaneous records of which employed solicitors worked on Acme matters and their experience levels

5. Firm structure and staffing patterns: Acme could argue:

   • The firm's high leverage ratio (number of employed solicitors per partner) indicates a business model reliant on marking up junior solicitor time

   • That work claimed at senior solicitor rates was likely performed by junior staff under limited supervision

   • The firm has re-graded fee earners as more senior for costs recovery than how they were presented to clients

The key for Acme is establishing that quantification based on standard market rates would amount to providing Smith & Jones with a profit rather than a true indemnity for costs actually incurred. This aligns with the High Court's emphasis in Birketu that costs awards should provide indemnity for expenses actually incurred by the law firm, not a vehicle for profit from self-representation.

If Acme succeeds in establishing "good and sufficient cause," the costs assessor might then investigate whether the claimed $140,000 genuinely represents an indemnity for costs incurred by Smith & Jones. The costs assessor could potentially reduce the recoverable amount to more closely reflect the firm's actual expenditure on employed solicitors for the litigation.

However, without establishing such "good and sufficient cause," Acme would likely be required to pay costs based on the traditional approach—what would have been incurred had independent solicitors been engaged—even if this exceeds Smith & Jones' actual employment costs.

Key Takeaways

1. Partner/employee distinction matters: Law firms cannot recover costs for work done by partners representing the firm, but can recover costs for work done by their employed solicitors.

2. Quantification follows indemnity principle: The principle of indemnity governs quantification, with a rebuttable presumption that costs comparable to engaging independent solicitors is appropriate.

3. Burden on objecting party: The burden is on the objecting party to demonstrate that the assessed costs would exceed a true indemnity, and costs assessors should not investigate this issue without good cause.

4. Structure enables strategic choices: Different structural arrangements for legal representation provide strategic options for law firms involved in litigation, particularly regarding the allocation of work between partners and employed solicitors.

5. Balance of principles retained: The decisions balance the principle of equality before the law with the principle that costs orders should provide indemnity for expenses actually incurred.

Conclusion

The combined effect of Bell Lawyers and Birketu represents a nuanced approach to costs recovery for legal practitioners. While abolishing the special privilege that solicitors historically enjoyed to recover costs for their own time, the High Court has maintained the principle that litigants—including law firms—should be indemnified for actual expenses incurred, including those relating to employed solicitors.

For law firms, these decisions require thoughtful consideration of how to structure their representation when they themselves are parties to proceedings. While the costs associated with partner time remain non-recoverable, the ability to recover costs for employed solicitors provides significant strategic flexibility.

The decisions also highlight the importance of proper cost recording and allocation, as challenges to quantification may arise where the assessed amount would exceed a true indemnity. Law firms should ensure they maintain clear records that demonstrate the actual costs incurred through the deployment of employed solicitors on their own litigation matters.

The Judicial Reluctance to Engage in Hypothetical Merits Assessment for Costs Determination: An Examination of Lygina and the Ex parte Lai Qin Principles

Introduction

In litigation that concludes without a trial on the merits, the question of costs allocation frequently emerges as a contentious issue. The courts have consistently demonstrated reluctance to engage in hypothetical assessments of how a matter might have been determined had it proceeded to trial. This principle, articulated in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 ("Ex parte Lai Qin"), has been reaffirmed and applied in the recent decision of Lygina v Lawley Legal [2025] WASC 68. This article examines the tension between the presumption that successful parties should receive costs and the judicial reluctance to conduct hypothetical merits assessments when proceedings conclude without substantive adjudication.

The Lygina Decision: Facts and Context

In Lygina v Lawley Legal [2025] WASC 68, the plaintiff, Ms. Lygina, a former client of the defendant law firm, commenced proceedings in June 2022 seeking orders under s 288(2) of the Legal Profession Act 2008 (WA) to set aside costs agreements and requiring Lawley Legal to re-issue bills based on the relevant costs scale. Ms. Lygina's statement of claim alleged various failures by Lawley Legal to comply with obligations under the Legal Profession Act.

Significantly, Lawley Legal did not file a defence. Instead, on 10 November 2022, Registrar Whitbread made orders setting aside the costs agreements and requiring Lawley Legal to re-issue bills drawn on the relevant costs scale. These orders were made in terms proposed by Lawley Legal, which notably did not admit the allegations made in the statement of claim.

After securing these substantive orders, Ms. Lygina sought costs on an indemnity basis, arguing that the defendant's non-compliance with cost disclosure obligations was severe, that Lawley Legal had maintained an untenable defence, and that its conduct fell below professional standards.

Justice Palmer was therefore confronted with a costs application following proceedings that concluded without trial by virtue of the defendant effectively capitulating to the primary relief sought, while expressly not admitting the factual allegations that would ordinarily justify such relief.

The Ex parte Lai Qin Principles and Their Application in Lygina

In Ex parte Lai Qin, McHugh J articulated the fundamental challenge in determining costs where proceedings have been resolved without trial:

"When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order."

McHugh J distinguished between two categories of cases:

1. Cases where "one party, after litigating for some time, effectively surrenders to the other"; and

2. Cases where "some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs."

Justice Palmer in Lygina determined that the case fell into the first category, finding that "Lawley Legal's decision to agree to the substantive orders sought by Ms. Lygina involved a capitulation by Lawley Legal that establishes that Ms. Lygina was the successful party in these proceedings."

However, Justice Palmer declined to order indemnity costs, stating:

"Determination of whether Lawley Legal engaged in 'severe' non-compliance with its obligations, could not defend the proceedings because of that non-compliance, or engaged in unprofessional conduct as claimed by Ms. Lygina, would require the determination of the principal disputed matters of fact in these proceedings. I am not satisfied that it would be possible to properly determine these matters on the basis of the evidence presently available to the court."

Justice Palmer relied upon Basten JA's observation in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 that an order for costs should only be made "where that judgement is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon."

The Tension: Success Without Trial vs. Avoiding Hypothetical Adjudication

The Lygina decision exemplifies the tension courts face: on one hand, recognising that a party who secures the relief sought should ordinarily receive costs; on the other hand, refusing to engage in what would amount to a "trial on the papers" solely for costs purposes.

Justice Palmer resolved this tension by:

1. Determining that Ms. Lygina was the successful party based on Lawley Legal's capitulation to the primary relief sought;

2. Ordering costs on a party/party basis, reflecting her success; but

3. Rejecting indemnity costs, which would have required judicial determination of disputed factual matters central to the substantive case.

This approach honours both the principle that successful parties should receive costs and the principle that courts should not conduct hypothetical merit assessments of untried cases.

A Worked Example: Application of the Principles

Consider a hypothetical scenario involving Smith v Jones Professional Services:

Smith is employed by Jones Professional Services as an accountant. Their employment agreement contains a restraint of trade clause. When Smith subsequently leaves Jones and begins servicing former clients, Jones commences proceedings alleging breach of the restraint clause and seeking an injunction and damages.

After discovery reveals potentially problematic drafting in the restraint clause, Jones agrees to consent orders discontinuing the proceedings, with the orders expressly stating that Jones does not admit any of Smith's defences or counterclaims.

Smith then seeks indemnity costs, arguing that:

1. Jones knew the restraint was unenforceable when proceedings commenced;

2. Jones engaged in intimidatory conduct; and

3. Jones deliberately pursued unmeritorious litigation for an improper purpose.

Applying the Lygina principles, the court would likely:

1. Identify that Jones' agreement to discontinue constituted a capitulation, making Smith the successful party;

2. Award Smith costs on a party/party basis reflecting this success; but

3. Decline to award indemnity costs, as determining whether Jones knew the restraint was unenforceable or had improper purposes would require the very trial the consent orders avoided.

Key Takeaways

1. Capitulation vs. Settlement Distinction: Courts distinguish between a party's capitulation (which will normally result in costs following the event) and settlement due to supervening circumstances (which may result in no order as to costs).

2. Evidence Required for Indemnity Costs: Mere allegations of unreasonable conduct, improper purpose, or untenable defence will not suffice for indemnity costs if these allegations remain untested and disputed. Courts will not conduct a "hypothetical trial" solely for costs purposes.

3. Strategic Implications for Consent Orders: Parties agreeing to consent orders should carefully consider the costs implications. A non-admission clause will not shield a party from ordinary costs if the court characterises the consent as effective capitulation.

4. Threshold for Determining "Special Circumstances": Courts require clear, undisputed evidence of "special or unusual features" to award indemnity costs in matters resolved without trial. This evidence must be "manifest by reference to known circumstances, not in dispute."

5. Documentation of Conduct: Parties seeking indemnity costs should document the opposing party's conduct contemporaneously and seek to have unreasonable conduct acknowledged in correspondence or court proceedings, rather than relying solely on contested allegations.

Conclusion

The Lygina decision reinforces the courts' adherence to the Ex parte Lai Qin principles, demonstrating judicial reluctance to engage in hypothetical merits assessments solely for costs determination. While courts will identify "successful parties" based on practical outcomes (including capitulation through consent orders), they will not delve into contested factual matrices to determine whether conduct warrants special costs orders unless those facts are manifest and undisputed.

This approach balances efficiency with fairness: successful parties receive their costs without courts having to conduct "paper trials" of factual disputes that the parties themselves chose not to litigate to conclusion. Practitioners should therefore be mindful that while non-admission clauses in consent orders may protect against substantive liability findings, they will not shield a capitulating party from normal costs consequences.

Costs where there are Jointly Represented Parties

General Principles

The general principle that costs follow the event must be applied with careful consideration when litigation involves multiple parties who are jointly represented. This situation frequently arises where co-defendants share legal representation throughout proceedings, but the plaintiff succeeds against some defendants and fails against others. The court's discretion regarding costs remains unfettered, but established principles guide the exercise of that discretion.

As emphasized in Chittleborough v Troy Group Pty Ltd [No 2] [2025] WASCA 4 at [74], although many guiding rules of principle and practice exist with respect to the award of costs, the discretion remains unfettered and each case must be decided on its own facts.

The "Rule of Thumb" Principle

Origin and Rationale

Where co-defendants are jointly represented, a "rule of thumb" principle has developed to address the allocation of costs when one defendant succeeds but another fails. This principle originated in Ellingsen v Det Skandinaviske Compani [1919] 2 KB 567 and was further developed in Korner v H Korner & Co Ltd [1951] Ch 10.

The principle can be summarized as follows:

1. When defendants share legal representation, they share the costs of their defence proportionately.

2. A successful defendant can only recover their fair share of the joint defence costs from the plaintiff plus any costs specifically related to their individual defence.

3. Similarly, a partially successful plaintiff can only recover from each unsuccessful defendant their proportion of the shared costs, plus any costs specifically related to the case against that particular defendant.

A more modern explanation of the rule is provided in Currabubula Holdings Pty Ltd v State Bank of New South Wales Ltd [2000] NSWSC 232 at [93]-[105].

Application of the Principle

The objective of the rule is to achieve substantial justice in the awarding of costs between a partially successful plaintiff and various successful and unsuccessful defendants. It prevents either side from being unfairly enriched or burdened when success is mixed and representation is shared.

Example 1: Where a plaintiff sues three defendants who are jointly represented and succeeds against two but fails against the third, the court might order the plaintiff to pay one-third of the successful defendant’s costs, reflecting the proportion of the shared defence costs attributable to the successful defendant.Departing from the Rule of Thumb

The rule of thumb is not an inflexible rule but rather a starting point for consideration. Courts may depart from the principle when circumstances warrant.

Factors That May Justify Departure

In determining whether to depart from the rule of thumb, courts may consider:

1. The overall success on substantive issues litigated, not merely the formal outcome between specific parties.

2. The extent to which the defendants presented a unified or common defence.

3. Whether certain factual issues dominated the trial and which party succeeded on those issues.

4. The relationship between co-defendants and whether their interests were aligned.

5. The conduct of parties throughout the litigation, including settlement offers.

6. Whether applying the rule would lead to a just outcome in the particular circumstances.

Ng v Sevastos: A Case Study in Departing from the Rule

A Western Australian authority on this issue is Ng v Sevastos by His Guardian Ad Litem Vanessa Vershaw [2024] WADC 75 (S). The case provides valuable guidance on when courts might depart from the rule of thumb.

Facts of the case: The plaintiff, Mr. Ng, had advanced money for the development of a West Perth property. He sued both Peter Sevastos and Steven Sevastos (Peter's nephew) to recover $160,000. The defendants were jointly represented throughout the proceedings. Mr. Ng succeeded entirely against Peter for the full amount claimed but failed in his claim against Steven. Peter was declared bankrupt shortly after judgment was entered against him. The defendants had filed a joint defence, made joint settlement offers, and Steven was the primary witness for both defendants.

Although the formal outcome was that Mr. Ng failed against Steven (suggesting costs should follow the event), the court made no order as to costs between Mr. Ng and Steven, departing from the rule of thumb that would have typically awarded Steven a proportion of the defendants' shared costs.

Curwood DCJ explained this departure at [33]-[38]:

"I consider this is an appropriate case to depart from the 'rule of thumb' principle I have outlined which, if applied, would permit Steven to recover from Mr Ng half of the joint costs incurred by the defendants. For the reasons which follow, that would not be a just result and the circumstances of this case do not meet the general conditions for application of the 'rule of thumb' principle.

First, Mr Ng enjoyed a significant measure of success on the issues litigated in the proceedings... Although I did not find that Steven was a party to the agreement as Mr Ng alleged, that conclusion was not reached by accepting Steven's evidence. This was the only issue where Mr Ng did not succeed. The time spent at trial on determining the identity of the contracting parties was minimal.

Secondly, Peter and Steven had closely aligned interests, shared legal representation, and approached the matter collectively. They jointly advanced a defence which raised many factual issues which consumed most of the trial time."

The court concluded that ordering Mr. Ng to pay any of the costs of the jointly represented defendants would not lead to a just outcome, particularly since none of the factual issues litigated at trial were agreed by the defendants.

Practical Considerations

Identifying the "Truly Successful" Party

As emphasized in Frigger v Professional Services of Australia Pty Ltd [2011] WASCA 103 (S) at [12], in determining who is the successful party, the question to be answered is who was successful in the "underlying, real contest" between the parties.

This requires looking beyond the formal success or failure of claims to consider which party succeeded on the major contentious issues that occupied the court's time and resources.

Apportioning Costs - A Matter of Impression

The exercise of the court's discretion to make a costs order to reflect the limited success of a party should be approached broadly and as a matter of impression, rather than as an exercise in mathematical precision. See Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) v Moss [2007] WASCA 162 (S) at [6].

Example 2: Where three defendants are jointly represented but have individual issues specific to their defences, the court might not simply award one-third of the costs to a successful defendant. Instead, the court might consider what proportion of the trial was devoted to common issues versus individual issues and adjust the costs award accordingly.

Relevance of Settlement Offers

Settlement offers, including Calderbank offers, remain relevant considerations in the exercise of costs discretion in cases with jointly represented parties.

In Ng v Sevastos, the court considered various Calderbank offers made by both sides but concluded that they did not assist in determining the final costs order. The court noted that the defendants' offers were joint offers but for amounts less than the judgment against Peter, while the plaintiff's offers required joint payment obligations from both defendants - an outcome not achieved at trial.

Fairness and Justice as Guiding Principles

The fundamental principle guiding costs decisions is fairness and justice between parties based on each case's specific circumstances. As noted in Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 at [49], generally, the court operates from the starting position that the successful party should recover their costs.

However, in cases with jointly represented parties, determining "success" requires nuanced consideration beyond formal outcomes. As demonstrated in Ng v Sevastos, the court may depart from both the general rule that costs follow the event and the rule of thumb for jointly represented defendants when fairness and justice require a different approach.

Conclusion

The determination of costs where there are jointly represented parties requires careful consideration of multiple factors beyond formal success or failure. While the rule of thumb provides a useful starting point, courts retain an unfettered discretion to make costs orders that achieve substantial justice between the parties based on the particular circumstances of each case.

Where defendants present a unified defence, share representation, and have aligned interests, courts may be more inclined to depart from the rule of thumb if applying it would not achieve a just outcome based on the substantive issues litigated and determined.

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.