By Sandra Costopoulos and Amy Pascoe
The dispute
From about 4 April 2006, the respondent law firm, Lavan, provided legal services to the appellant, Dr Gray, in relation to litigation in the Federal Court of Australia and the Supreme Court of Western Australia.
There was no written costs agreement between the parties. However, there were non-written informal retainer agreements in place. The retainers were agreements evidenced orally and by conduct.
Between 2006 and 2008, the appellant paid the respondent $4,477,068.33 for legal services provided (Solicitor and Client Costs). Subsequently, disputes arose between the parties about the provision of legal services, including the invoices. To settle these disputes, the parties agreed that the respondent would file bills of costs for taxation in relation to all work carried out for the appellant by the respondent pursuant to the Legal Practice Act 2003 (WA) (LPA).
Prior to the taxation of costs, the parties entered into a settlement deed (the 2018 Settlement Deed). The 2018 Settlement Deed required the respondent to pay the appellant $900,000 in three tranches. The parties expressly agreed that the $900,000 represented the amount that would have been ordered to be refunded to the appellant if there had been a taxation of the Solicitor and Client Costs. However, the parties agreed to leave open the option of litigating the issue of whether the appellant had a claim against the respondent for interest on the $900,000, being the repayment amount.
Pursuant to section 243 of the LPA, if a bill of costs is taxed and, as a result of that taxation, the amount which has been paid is more than the amount authorised by taxation, to the extent of the excess, the person charged has a claim for repayment. This repayment may be certified and enforced under section 240 as though allowed under that section.
Section 240 of the LPA provides that the taxing officer must certify in writing the amount at which a bill of costs, and the costs of an incidental to the taxation of the bill, are allowed by the taxing officer. Further, a certificate is binding and conclusive on both parties and bears interest and may be enforced, as if it were a judgment of the Supreme Court for payment of the amount in the certificate.
The Supreme Court and Court of Appeal
The appellant later commenced proceedings against the respondent in the Supreme Court of Western Australia for interest on the $900,000. The appellant contended that:
- the respondent had been unjustly enriched by its receipt and retention of the $900,000; and
- had the opportunity to use the $900,000 from the dates the appellant made payments of the invoices to when the respondent paid the final tranche of the $900,000.
Therefore, the appellant claimed an entitlement to interest (including compound interest) over that period.
The primary judge in the Supreme Court dismissed the appellant’s claim. The primary judge held that the appellant had no restitutionary claim and that the claim for interest necessarily failed for that reason. The appellant appealed the trial judge’s decision to the Court of Appeal of the Supreme Court of Western Australia. The Court of Appeal dismissed the appellant’s appeal, finding there was no failure of the basis or condition of payments. The appellant then filed an application for Special Leave to appeal the High Court, which was granted on 3 April 2025.
The High Court
The grounds of appeal to the High Court were that the Court of Appeal erred in holding that:
- there had been no failure of basis in respect of $900,000 excessively charged by the respondent and paid by the appellant, and that, accordingly, the respondent was not unjustly enriched by its receipt of that sum; and
- the respondent’s retention and use of the sum excessively charged for a period of some 10 years between the dates of payment and the dates of repayment did not give rise to any obligation to pay interest to the appellant.
The High Court held that the LPAprovides a comprehensive regime for the recovery of the principal sum paid for legal costs over the amount certified by a taxing officer, and interest on that sum, to the exclusion of any common law claim for restitution.
Those provisions did not provide for interest to be payable by a law firm on those excess amounts for the period prior to the grant of a certificate. And those provisions left no room for a common law restitutionary claim for principal or interest consequent upon such excess amounts. The 2018 Settlement Deed aimed to replicate the effect of taxation pursuant to those provisions and did not create any restitutionary claim. In the circumstances, it was not necessary for the Court to determine, in the abstract, the second grounds of appeal.
Key take-aways
The LPA provides a comprehensive regime for the recovery of both principal and interest where an amount paid exceeds the amount certified on taxation.
Accordingly, a law practice is not liable, based on restitution, to pay interest to a client on legal costs paid in excess of the amount of legal costs certified at taxation for the period between when the legal costs were paid and the costs were assessed.
While the case concerned the now repealed LPA, it is likely to remain relevant to solicitor and cost disputes to which the succeeding legislative regimes, the Legal Profession Act 2008 (WA) (repealed) (LPA 2008) and the Legal Profession Uniform Law (WA) (LPUL), apply.
Those regimes similarly contain a comprehensive framework for the assessment of solicitor and client legal costs and the recovery of principal and interest on legal costs where amounts paid exceed amounts certified on at taxation. Since the introduction of the LPA 2008 and the LPUL, any exposure for interest payable on repayments of legal costs following a solicitor and client assessment remains unchanged. That is, a law practice which is required to repay any legal costs to a client will be liable to pay interest on the refundable amount pursuant to the current provisions of the Civil Judgment Enforcement Act 2004 (WA). In particular, any interest accrues not from the date of the payment of any invoices that were refunded, but rather, from the date of the certificate of taxation until repayment of the refundable amount.
Read the full judgment here.
