The Federal Court Rules establish a pro bono referral scheme. Under the scheme, the Court may refer a party to a lawyer for legal assistance by issuing a referral certificate. The Court may take into account:
the means of the party;
the capacity of the party to otherwise obtain legal assistance;
the nature and complexity of the proceeding;
any other matters the Court considers appropriate.
The referral certificate may state the kind of legal assistance for which the party has been referred. The Registrar will attempt to arrange for the provision of legal assistance in accordance with the referral certificate to a pro bono lawyer.
See Federal Court Rules 2011 (Cth) Division 4.2 (see also the repealed Federal Court Rules 1979 (Cth) Order 80).
Under regulation 4.19 of the Federal Court Rules 2011 (Cth) (see also repealed Order 80 rule 9) a pro bono lawyer must not seek or recover professional fees from an assisted party unless the pro bono lawyer and the assisted party have entered into a costs agreement. This regulation is the focus of many of the following cases.
In this case, a costs order was made in favour of a litigant who was assisted under the Federal Court’s pro bono referral scheme. There was a judgment debt owed by that litigant to the opposing party.
The relevant issue was whether the costs should be set-off against the judgment debt. The court held that it should, as Order 80 rule 9(2) only entitled the pro bono lawyer to recover costs directly from the assisted litigant. It did not entitle the pro bono lawyer to recover costs from the opposing party and therefore did not interfere with the opposing party’s equitable right to have the costs set-off against the judgment debt (Collier J at ).
In this case, Gray J explained how it was possible to award costs to litigants who were assisted under the Federal Court’s pro bono referral scheme.
Gray J conceived of Order 80 rule 9(1) and Order 80 rule 9(2) in terms of a general rule and its exception. The general rule – arising from rule 9(1) – was that legal practitioners could not recover professional fees or disbursements for the legal assistance they gave under the Federal Court’s pro bono referral scheme. The exception – arising from rule 9(2) – was that practitioners could recover fees and disbursements if a costs order was made in favour of a litigant who was assisted under the scheme.
The exception in rule 9(2) enabled the court to award costs to litigants who were assisted under the scheme (Gray J at ).
In this case, the applicant filed written submissions that appeared to have been written by a legal practitioner. The author of the written submissions was not disclosed to the Court.
Branson J considered that a legal practitioner must disclose when, and to what extent, they have acted on behalf of a litigant. His Honour outlined two policy reasons. First, the Court must be able to ensure that the practitioner upholds his or her duties to the Court. Second, the Court must be able to ensure that the Court’s obligation to provide reasonable assistance to unrepresented litigants is not abused.
When a legal practitioner draws a document that is filed in a proceeding, the practitioner is acting on behalf a litigant. Assuming that the author of the written submissions was a legal practitioner, his or her identity should have been disclosed to the Court (Branson J at -).
In this case, the defendants were represented on a pro bono basis under the Federal Court’s pro bono referral scheme. Heerey J ordered that the prosecutor pay some of the defendants’ costs, although the defendants were convicted of some of the charges and liable to pay the penalties.
The relevant issue was whether the costs should be set-off against the penalties. Heerey J held they should not be, as ‘… the practitioner appearing under Order 80 has a public role, in addition to the usual professional duties owed to his or her client.’ (Heerey J at )
In this case, Federal Magistrate McInnis granted an adjournment for an applicant who was assisted under the Federal Court’s pro bono referral scheme.
The fact the applicant was assisted by a pro bono lawyer was considered in the applicant’s favour. Federal Magistrate McInnis considered it relevant that the administration of justice was aided by pro bono lawyers and that refusing an adjournment would add to the burden of the pro bono lawyer in this case (McInnis FM at -).
In this case, a barrister agreed to represent an impecunious appellant on the basis that the barrister would only recover his fees if the appeal were successful and a costs order was made against the respondent. The appeal was successful and the costs order was made, but the respondent sought to have set-off against an outstanding costs order against the appellant. Although the appellant had not been referred under Order 80, the barrister sought to recover his costs directly from the respondent under Order 80 rule 9. The respondent submitted that the barrister’s agreement was contrary to law and public policy.
French J (as he was then) held that the barrister could not recover his costs, as O 80 is ‘entirely prospective – a referral under Order 80 could not be made retrospectively’ (French J at ). French J also held that the barrister’s agreement was not contrary to law or public policy as it ‘[did] not involve counsel taking an interest in the proceeding’. A barrister is entitled to agree to act for an impecunious client on the basis that the barrister will recover normal fees if a costs order is made in the client’s favour (French J at ).
Cost recovery when acting on a pro bono basis
The purpose of a costs order is to compensate the successful party in litigation for those costs necessarily incurred to obtain justice (the indemnity principle). However, the indemnity principle can only operate where a successful litigant is under an obligation to pay their lawyer. This is a key concern in the context of pro bono representation since the successful party does not need to be compensated where no loss has been incurred. The application of the indemnity principle in pro bono cases has been clarified recently by the Court in Mainieri & Anor v Cirillo  VSCA 227. Pro bono cases often involve a conditional obligation to pay costs, in which the client only has to pay the lawyer if they are able to recover costs from the other party. The indemnity principle was held by the Court to apply in such a case, which means that a party that only has a conditional obligation to pay their lawyer may be awarded costs by the court.
The Centre has long advocated for the abrogation of the indemnity principle to the extent necessary to ensure that litigation costs can be awarded in pro bono cases, and submitted to the Productivity Commission that this should be undertaken legislatively to overcome the indemnity rule at common law (see Submission to the Productivity Commission on Access to Justice Arrangements May 2014). In calling for legislative change, the key issue is not costs recovery but ensuring that a level playing field exists between the parties as to their risk to pay the other’s costs. Without this level playing field, the party being represented on a pro bono is at a significant disadvantage when it comes to negotiating a settlement offer.
In this case, the respondent was represented on a pro bono basis. The costs agreement between the respondent and her solicitors provided that she did not have an obligation to pay costs awarded by the Court.
The question before the Court was whether a contingent obligation to pay costs satisfied the indemnity principle. The indemnity principle means that costs cannot be awarded to a party unless they have an obligation to pay their lawyer. Pro bono representation often creates a condition subsequent, where the client only has to pay the lawyer if they are able to recover costs from the other party. However, this creates a dilemma: the client has no obligation to pay the lawyer until a costs award is made, but costs cannot be awarded unless the client already has an obligation to pay the lawyer.
The Court considered the opposing views of Santow JA and Basten JA in Wentworth v Rogers; Wentworth & Russo v Rogers  NSWCA 145. Agreeing with Santow JA, the Court found that because the Legal Profession Act 1987 (NSW) “now recognises conditional cost agreements… and draws no distinction between such a contingency expressed as a condition precedent or subsequent, the application of the indemnity principle should not depend on that distinction.” This recognises the importance of conditional cost agreements in promoting access to justice which may otherwise be unaffordable. Furthermore, the Court stated that because it is reasonable to allow an unsuccessful party to delay or defeat the recovery of costs, then predicating payment on successful recovery is not unreasonable. The Court also added that because doing so does not unjustly benefit the successful party nor does it punish the losing one, it is consistent with the rationale behind the indemnity principle.
Wentworth v Rogers
A series of cases in the NSW Supreme Court between Wentworth & Russo and Rogers, which date back to 1998, concern the interpretation of the agreement between the plaintiffs and their lawyers concerning costs in circumstances where the court has ordered that the plaintiff pay the defendants costs.
The allegation central to the plaintiffs’ challenge to assessments by a cost assessor was that there existed an unwritten agreement between them and their lawyers that no costs would be charged – that this was a ‘pure pro bono’ arrangement. The costs assessor construed the agreement as a no win/no fee agreement and ordered that the plaintiff was liable to pay the costs order.
Whether such a “condition subsequent” in the costs agreement creates sufficient legal liability between client and solicitor to be the basis of an indemnity upon which a court can make a costs order, has been in doubt for some time. In Wentworth v Rogers (2006) 66 NSWLR 474, Santow JA thought it did not matter whether the condition was expressed as a condition precedent or subsequent in order to justify a costs order. Basten JA, on the other hand, thought that there was a fatal circularity when the condition ‘made the existence of a right to charge dependent on recovery of the monies from which the charges would be paid and was of the view that there may be no extant legal obligation to be indemnified even when a costs order is made’.
The Queensland Court of Appeal in its judgement in King v King  QCA 81 has rejected the use of a condition, that the solicitor can recover costs from the client only in circumstances of a favourable court costs order, as a valid basis for the solicitor/client indemnity necessary for a court to make a costs order in the first instance. While the judgement did not turn on this point, and Wilson JA expressly declined to have a view on ‘the circularity argument’, this decision has come down clearly on one side of the differences of opinion expressed by Santow JA and Basten JA in the previous leading case of Wentworth.
This was an application for leave to appeal against a costs assessor’s decision. The assessor’s reasons showed that he considered that a ‘pure pro bono (ie, pro bono publico)’ agreement may have been reached, before concluding that a ‘no win/no fee’ agreement was reached instead. As it was not shown that the assessor overlooked any relevant matters, Barrett J denied the applicant leave to appeal against the assessor’s decision (Barrett J ).
This was an appeal against the decision of the costs assessor. In this case, the appellants argued that the respondent was not entitled to be indemnified for costs, as there was no written costs agreement between the respondent and his solicitors. Patten AJ held that the provision for written costs agreements in the Legal Profession Act 1987 (NSW) was not intended to require legal practitioners to enter into written costs agreements with their clients. In the absence of a written costs agreement, the general law determines costs. Under the general law, the solicitors were entitled to recover costs from their client. The respondent was thus entitled to be indemnified and the appeal was therefore dismissed (Patten AJ at -).
The appeal from the decision of Patten AJ was allowed and the construction of the “costs agreement” was referred back to the Supreme Court for further determination. Santow JA stated that “whether the overall costs arrangement falls foul of the indemnity principle depends ultimately on the content and construction of the costs arrangements” . Basten J supported this comment stating “whether the term ‘pro bono’ now extends to situations where the lawyer, satisfied that the client has a meritorious claim, nevertheless enters a speculative fee arrangement to charge a usual fee, taking some risk of non-payment, is a question of fact to be determined in the context of the particular case” .
Santow JA concluded that it did not matter whether the condition was a condition precedent or subsequent to the costs order to justify the order. Conversely, Basten J held that such liability could be contingent. However, Basten J argued that that there was a fatal circularity when a condition “made the existence of a right to charge dependent on the recovery of monies from which the charges would be paid” and was of the view that there may be no extant legal obligation to be indemnified even when a costs order is made .
This was an application by the plaintiff seeking to have the 2001 cost assessments set aside. Due to a lack of evidence supporting orders to set aside the certificates of assessment, Price J refused to set aside these certificates. However, the Court granted a permanent stay of both certificates of assessment. The Court did not consider the issue of pro bono.
The application concerned the variation of a costs agreement 15 minutes prior to the delivery of a judgment, which inserted a retrospective clause allowing the solicitors to recover legal fees and expenses only in the event a favourable costs order was made.
The critical issue was whether the cost agreement gave rise to a liability against which the applicant was entitled to an indemnity by way of a costs order. Given the lack of consideration and failure to specify the basis of charging, the Court rejected the use of this condition, with Chesterman JA describing it as ‘artificial and of doubtful validity.’ Even in the event that such a variation was valid, Chesterman JA noted the retention by the court of their discretion not to order costs in such circumstances as the ‘costs agreement appeared to be a contrivance to alter the nature of his representation ex post facto.’
Chesterman JA considered the position of Basten JA in Wentworth v Rogers, and supported the fatal ‘circularity argument.’ As stated by Chesterman JA, ‘Catch 22 it may be, but the reality is that the client’s liability to pay his solicitors stands on a whirligig which moves beneath it, and cannot support the need for an indemnity.’ The judgment was not determined on the basis of the circularity argument, however, and Wilson AJA expressly declined to comment on the argument.
The Court affirmed the orders that there be no order for costs, as ‘there would be an element of unfairness to the respondents if effect were given retrospectively to the change’ (Chesterman JA at ). Therefore, the Court held that such a condition was not sufficient to create an indemnity necessary for the court to make a costs order.