02 Oct 2014

Lawyers acting pro bono for successful litigant can recover costs from losing party

by David Hillard

A successful party in litigation who is represented on a pro bono basis can be awarded costs.

A decision of the Victorian Court of Appeal has clarified the issue of whether a successful party in litigation who is represented on a pro bono basis can be awarded costs.

The Court's decision in Mainieri v Cirillo [2014] VSCA 227 confirms the entitlement to such a costs award, giving much needed certainty to a previously grey issue in pro bono representation.

Clayton Utz and Dr John Glover of Counsel represented Mrs Rita Cirillo on a pro bono basis.

The client and the fee arrangement

Mrs Cirillo had sold her home and contributed the proceeds towards her son's mortgage. Her son had agreed that Mrs Cirillo could live with him indefinitely and that he would take care of her.

When the relationship between mother and son broke down, the son claimed that the money was a gift and that he had no obligation to repay it. The Victorian Court of Appeal held that Mrs Cirillo was entitled to an equitable lien or charge over the property, to secure repayment of her money with interest.

The relevant terms of engagement stated that Mrs Cirillo would only be issued with a bill for her lawyers' professional time if the Court made an order for costs in her favour. Mrs Cirillo's liability to pay was contingent on a costs order being made.

Contingent obligation to pay costs OK under the Legal Profession Act

The Victorian Court of Appeal unanimously adopted the views of Justice Santow in the NSW Court of Appeal decision of Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474.

In that judgment, Justice Santow recognised the availability under the NSW Legal Profession Act of a costs agreement clause which makes the obligation to pay contingent upon an award of costs, and expressly rejected the contrary position of the Queensland Court of Appeal in King v King [2012] QCA 31 (the NSW Act is in similar terms to the Victorian Act).

It clarified the previously uncertain question of whether a contingent liability to pay costs is sufficient for the purposes of the indemnity principle.

Benefits of this decision for pro bono clients

Costs are rarely awarded in pro bono matters. However the risk of having to pay costs if unsuccessful, incentivises the other party to behave prudently during litigation and to take a proper commercial perspective about settlement. They do not receive a free kick, because their opponent has a pro bono lawyer.

An unsuccessful pro bono client will be liable to pay an adverse costs order. It is only fair that if the other party forces a matter to proceed all the way to hearing and determination by a Court, that they face the same exposure to the risk of paying legal costs to the pro bono party when they lose.

Of course, there still must be a costs agreement which says that a client is liable to pay costs, contingent on an award being made.

What distinguishes the modern pro bono arrangement is that the lawyer has no expectation or commercial calculation of ultimately being paid for their work. If a matter may be settled without progressing to a final determination, and the low-income or disadvantaged client will receive the entirety of the settlement sum, so much the better.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.