Self-represented legal practitioners can no longer claim professional costs

Sep 2019 |

Originally published 12 September 2019. Article updated 27 May 2020. 

Material added on 27 May 2020 is in blue for ease of reference.

On 4 September 2019, the High Court confirmed in Bell Lawyers Pty Ltd v Pentelow1 that the so-called Chorley2 exception is no longer part of the common law of Australia.

Since 1884 it has been accepted that, as part of a successful party’s favourable costs order in litigation, self-represented litigants who happen to be solicitors, may recover professional costs for their time acting for themselves in the litigation. That entitlement is known as the Chorley exception. It is an exception to the usual rule that self-represented litigants are not entitled to costs other than disbursements (general rule).

In July 2018, the New South Wales Court of Appeal extended the Chorley exception to also apply to barristers.3 This has now been overruled by the High Court’s decision.

Facts

In the underlying proceeding, Ms Pentelow (a barrister) was involved in a dispute with Bell Lawyers for unpaid fees in relation to a brief she acted upon for Bell Lawyers.

The fee dispute was originally heard in the Local Court of New South Wales (at which Ms Pentelow was represented by a solicitor) and was subsequently the subject of an appeal to the Supreme Court4 (at which time Ms Pentelow was represented by solicitors and senior counsel). Of significance, in each proceeding, she undertook various tasks of a legal nature, such as preparing affidavit evidence and reviewing submissions. Ms Pentelow was successful in the appeal and obtained a favourable costs order against Bell Lawyers.

In claiming her costs of the Local Court proceeding and Supreme Court appeal from Bell Lawyers, Ms Pentelow sought approximately $44,000 for her own time (in addition to the costs of her legal practitioners). Bell Lawyers refused to pay the costs for Ms Pentelow’s time. On assessment, the costs assessor and a subsequent review panel rejected Ms Pentelow’s claim for the costs of her own time; in part, because the Chorley exception applying to solicitors did not extend to barristers.

Ms Pentelow was unable to persuade the District Court of New South Wales5 to allow the claim for the costs of her own time, but found favour in a 2:1 majority before the Court of Appeal.6

Bell Lawyers was granted special leave to appeal to the High Court.7 Despite the cost of running that appeal exceeding the relatively modest value of the sum in dispute, the issue was considered significant enough to warrant special leave being granted.

The decision 

In the grant of special leave, Gordon J articulated three questions for determination:

  1. Is the Chorley exception still good law?
  2. Does it extend to barristers?
  3. Does it extend to barristers who have retained a solicitor and counsel to appear for them?

All three questions were answered by the High Court in the negative.

The High Court unanimously allowed Bell Lawyers’ appeal. In a 6:1 majority,8 the High Court confirmed that the Chorley exception is not only anomalous, but described it as an affront to the fundamental value of equality of all persons before the law that cannot be justified by policy considerations.9

Particularly relevant to the High Court’s decision to reject the Chorley exception in Australia was that:

  • It is generally undesirable for a solicitor to act for themselves. Self-represented parties may lack objectivity due to self-interest, are unable to independently and impartially self-advise, and this may drive their legal costs up.10

  • Costs are awarded by the court as a partial indemnity for professional legal costs actually incurred in the litigation (not to compensate lost earnings or to reward success). The exception leads to an unacceptable situation where a successful litigant is allowed to both receive a judgment sum and profit from the conduct of the litigation in which they incurred no actual outlays on legal professional fees.11

  • Whether the value of legal services rendered by a solicitor is more easily measured than the value of a layperson’s time (which the Court doubted was the case) does not provide a persuasive basis for the continuation of the Chorley exception.12

  • The exception, although relatively rare in its application, raises the position of solicitors above that of other self-represented litigants. Its removal ensures all litigants are treated equally.13

  • Past decisions giving credence to the existence of the Chorley exception in Australian law did not establish a carefully worked out principle but proceeded on an uncritical acceptance of it.14

  • The exception is inconsistent with the provisions of the Civil Procedure Act 2005 (NSW) which empower the court to award costs and defines costs to mean 'costs payable in or in relation to the proceedings, and includes fees, disbursements, expenses and remuneration.'15 Although not accepted by Nettle J, the majority found that the legislative intent was that only costs payable by a party to another person for services rendered may be the subject of a costs order, and that the provisions left no room for the Chorley exception to remain.16 It was not suggested to the court that any other Australian state or territory’s statutory costs regime is drafted in a manner that required the continuation of the exception.17

Despite the High Court’s rejection of the Chorley exception, in-house lawyers employed by government and other corporate litigants remain able to recover the costs of their in-house lawyers' representation. Such situations are accepted as falling outside the general rule and being within the scope of costs capable of being awarded under the Civil Procedure Act 2005 (NSW).18

Subsequent decisions

The High Court in the Bell case was not required to come to a conclusion as to whether a solicitor employed by an incorporated legal practice of which they are the sole director and shareholder was in a different position when doing work for the incorporated legal practice.19

Since then, the state courts have extended the reasoning in Bell to confirm legal firm partnerships20 and incorporated legal practices21 that self-represent through their employed solicitors fall within the general rule and cannot recover costs for their solicitors’ professional time representing the partnership or incorporated practice. These subsequent decisions clarify that the mechanisms by which law firms might otherwise have avoided the general rule have been removed to reinforce the principle of equality of all persons before the law.

These subsequent decisions do not overrule the High Court’s finding that parties represented by their in-house lawyers remain outside the general rule and may recover the costs of their in-house representation. This means government and corporate parties represented by employed in-house lawyers are able to claim their legal professional costs; while self-representing law firms appearing through their employed solicitors are not. The distinction that sets the in-house lawyer apart from the general rule is that the party remains separate and distinct from the in-house lawyer on the record representing it (and so is not a self-represented litigant). Unlike an in-house lawyer, a law firm’s employed solicitor is supervised by a partner or director of the firm who is both a controlling mind of the party and responsible for carriage of the litigation (and so the party is a self-represented litigant despite appearing through an employed solicitor).22

An order for a party’s recovery of the costs of an in-house lawyer reflects a functional reimbursement of the salary and overhead expenses the party incurs in obtaining legal assistance. It is consistent with the principle that costs are awarded to provide a partial indemnity for costs actually incurred and is not inconsistent with the general rule.23

Comment

While the Chorley exception continues to be good law in some overseas jurisdictions,24 the High Court has abolished the controversial common law rule which dates back 135 years. The general rule now applies consistently to legal practitioners and non-legal practitioners alike.

This decision provides a timely reminder that:

  • The time and effort expended by all self-represented litigants is of equal value.

  • Neither solicitors nor barristers are entitled to claim the value of their time as part of favourable costs orders when they are self-represented in litigation in which they are a party.

  • All litigants (even where they are themselves legal practitioners) should consider obtaining independent and impartial legal advice and, where possible, legal representation.

.....

1 [2019] HCA 29.
2 London Scottish Benefit Society v Chorley (1884) 13 QBD 872.
Pentelow v Bell Lawyers Pty Ltd [2018] NSWCA 150.
4 Pentelow v Bell Lawyers Pty Ltd trading as Bell Lawyers [2013] NSWSC 111.
5 Pentelow v Bell Lawyers Pty Ltd [2016] NSWDC 186.
Pentelow v Bell Lawyers Pty Ltd [2018] NSWCA 150.
7 Bell Lawyers Pty Ltd v Pentelow & Anor [2018] HCATrans 264 (14 December 2018).
8 Kiefel CJ, Bell, Keane and Gordon JJ, with Gageler and Edelman JJ each providing separate judgments. In his dissenting judgment, Nettle J found no need to abolish the exception but nonetheless found against Ms Pentelow on the basis the exception does not and should not extend to barristers.

9 Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 at [3].
10 Ibid [18] and [19].
11 Ibid [32], [33] and [71].
12 Ibid [22] and [24].
13 Ibid [38].
14 Ibid [29],[30] and [62].
15 See s 98(1) that empowers a court to order costs and section 3(1) that defines costs.
16 Ibid [44] and [67].
17 Ibid [67].
18 Ibid [47] to [50] citing Commonwealth Bank of Australia v Hattersley (2001) 51 NSWLR 333 and Ly v Jenkins (2001) 114 FCR 237 with approval.
19 Ibid [51] referring to McIlraith v Ilkin & Anor [2007] NSWSC 1052.
20 United Petroleum Australia Pty Ltd (And Others According to The Attached Schedule) v Freehills [2020] VSCA 15.
21 D A Starke Pty Ltd v Yard & Anor (No 2) [2020] SASC 81.
22 See the discussion in United Petroleum Australia Pty Ltd (And Others According to The Attached Schedule) v Freehills [2020] VSCA 15 at [96] to [118].
23 Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 at [47] – [50]; United Petroleum Australia Pty Ltd (And Others According to The Attached Schedule) v Freehills [2020] VSCA 15 at [101].
24 New Zealand, England and Wales, for example, have enacted general statutory provisions as to costs that remain consistent with the continued operation of the Chorley exception.

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