In 2018 we provided an update in respect of the matter of Pentelow v Bell Lawyers Pty Ltd [2018] NSWCA 150.

In that decision, the New South Wales Court of Appeal held that the ‘Chorley exception’ applied to barristers as well as to solicitors.

The Chorley exception is an exception to the well-established rule that a self-represented litigant is not entitled to professional costs for acting for him or herself in legal proceedings and provides that self-represented litigants who are solicitors are entitled to recover professional costs for work they have undertaken in legal proceedings.

In December 2018, the High Court of Australia granted special leave to appeal that decision and on 4 September 2019, allowed the appeal and overturned the decision of the New South Wales Court of Appeal.

Significantly, in doing so the High Court effectively abolished the Chorley exception in Australia.

Background and proceedings below

The case involved Janet Pentelow, a barrister who brought proceedings in both the Local Court and Supreme Court of New South Wales, seeking to recover unpaid fees following a dispute with her client (who had been her instructing solicitors). Although the Supreme Court awarded costs in Ms Pentelow’s favour in respect of both proceedings, the costs assessor later rejected in its entirety that part of the costs claimed by Ms Pentelow for preliminary work that she had undertaken herself prior to engaging legal representation, such as drafting the originating process and her affidavit of evidence.

During a subsequent review by the Costs Review Panel, Ms Pentelow’s claim for costs relating to work that she had undertaken was again disallowed on the on the basis that, relevantly, the Chorley exception did not extend to barristers. Ms Pentelow subsequently appealed to the District Court of New South Wales, however was unsuccessful on the same basis and thus sought judicial review of the decision pursuant to s69 of the Supreme Court Act 1970 (NSW).

In the New South Wales Court of Appeal, Beazley ACJ (with whom Macfarlan JA agreed) held that the Chorley exception extended to the work undertaken by a self-represented barrister, so long as that work was not expressly proscribed by the Bar Rules.  Significant in Beazley ACJ’s reasoning was the fact that there was now significant overlap in the work undertaken by both solicitors and barristers and the costs of each may be assessed under the same costs assessment processes.

The decision in the High Court of Australia

On appeal, Keifel CJ, Bell, Keane and Gordon JJ commenced their analysis by noting that:

the Chorley exception is not only anomalous, it is an affront to the fundamental value of equality of all persons before the law.  It cannot be justified by the considerations of policy said to support it.

Their Honours considered the rationale expressed to underlie the Chorley exception, which is that the professional skill and labour exercised by a solicitor litigant may be measured by the law, whereas the “private expenditure of labour and trouble by a layman cannot be measured”.

After noting that there was no reason in principle why the reasonable value of the time of any litigant could not be measured (citing the example of valuing the provision of labour in a quantum meruit claim), their Honours went on to note that:

there is an air of unreality in the view that the Chorley exception does not confer a privilege on solicitors in relation to the conduct of litigation… A privilege of that kind is inconsistent with the equality of all persons before the law.

There were only two previous decisions of the High Court of Australia in which the Chorley exception is referred to: Guss v Veenhuizen [No 2] and Cachia v Hanes (Cachia Decision).

The majority noted that because the existence of the Chorley exception in Australian common law was not in question in either decision, those decisions did not bind a later court to accept the application of the Chorley exception.

Furthermore, the majority in the Cachia Decision was critical of the decision in Chorley, describing it as “somewhat anomalous” and stating that the justification for the exception was “somewhat dubious”.The majority in Bell Lawyers noted that those criticisms “substantially undermine[d] the authority of the decision in Chorley” and that the possibility of a solicitor profiting from their participation as a litigant “is unacceptable in point of principle.”

Their Honours also cited the following statement of the majority in the Cachia Decision:

If the explanation for allowing the costs of a solicitor acting for himself are unconvincing, the logical answer may be to abandon the exception in favour of the general principle rather than the other way round.

Their Honours concluded that:

There is no compelling reason for this Court to refrain from taking the “logical step” identified in Cachia.  The Chorley exception is not part of the common law of Australia.

The remaining judges agreed that the appeal should be dismissed.  Both Gageler J and Edelman J agreed with the majority that the Chorley exception did not form a part of the common law of Australia.  Nettle J, however, found only that the Chorley exception did not extend beyond solicitors to barristers.

Practical consequences

It is unclear how common it is for legal practitioners to undertake legal work in litigation on their own behalf.

The most likely example may be circumstances in which a sole practitioner or firm undertakes debt recovery proceedings on its own behalf.  The apparent consequence of the decision is that a sole practitioner cannot recover legal costs from its opponent for work of this type.  Whilst that may lead to an increase in firms outsourcing their own debt recovery, that outcome is consistent with the majority’s view that as a matter of policy, it is better that legal work be undertaken with sufficient professional detachment.

Where an incorporated legal practice (ILP) undertakes legal work such as debt recovery proceedings on its own behalf, it appears that the firm remains capable of recovering legal costs from its opponent, due to the legal detachment between the litigant (the ILP) and the practitioner undertaking the work (an employee of the ILP).  Comments made by the majority, however, suggest that this position may be subject to review in future, in particular in respect of ILPs with a sole shareholder and director.