Judge finds legal professionals reasonably rejected former clients’ compromise offer
In a proceeding involving a costs dispute, the Australian Capital Territory Supreme Court ordered counsel to pay two ex-clients’ ordinary costs of the appeal, plus half of the assessment costs under s 302(2)(b) of the Legal Profession Act 2006 (ACT).
Danthanarayana v Fogarty & Ronald (No 2) [2026] ACTSC 293, arose from a costs dispute between the appellants, two clients, and the respondents, their former lawyers. The appellant clients took issue with the payment of four invoices and a court registrar’s costs assessment dated 14 February 2023.
The appellant clients alleged failures to properly disclose the costs arising from various matters handled by the solicitors, including a failure to meet updating obligations under the Legal Profession Act.
On 16 April 2026, the ACT Supreme Court set aside a costs assessment certificate dated 21 October 2022. In its assessment of costs, the court allowed:
On 14 August 2026, the ACT Supreme Court ordered the respondent lawyers to pay the appellant clients’ ordinary costs of the appeal and 50 percent of the costs of the assessment pursuant to s 302(2)(b) of the Legal Profession Act.
The appellant clients requested appeal costs on a solicitor-and-client basis from 8 May 2024, based on a 7 May 2024 offer of compromise that the respondent counsel rejected.
However, the ACT Supreme Court awarded appeal costs on an ordinary basis because the offer did not enliven the consequences under r 1010 of the Court Procedures Rules and because respondent counsel reasonably rejected the offer.
The ACT Supreme Court did not consider the offer effective under the Court Procedures Rules due to the fatal lack of reference to the offer being made under the relevant rule. The court acknowledged other potential difficulties with the offer, including:
The court noted that the assessed costs payable to the respondents after the appeal were $194,470.35, plus interest of $53,004.36, while the offer was for $175,000, including any interest and costs.
The ACT Supreme Court ruled that the appellant clients failed to show that the respondent lawyers’ rejection of the offer was unreasonable.
In reaching this conclusion, the court considered the lack of clarity in the terms, the short time the offer remained open, the additional requirements included, and the additional time to pay requested.
Regarding earlier offers for various amounts, the court also deemed them ineffective because the offers were not equal to or better than the award the respondent lawyers obtained and because the offers called for the withdrawal of caveats.
In awarding the appellant clients 50 percent of the costs of the costs assessment, the ACT Supreme Court applied the compensatory foundation for costs orders.
The court recognised that the appellant clients succeeded in establishing statutory non-compliances by the respondent lawyers, as well as the non-compliances’ meaningful impact on the total amount claimed.
Here are some other recent decisions by the Supreme Court of the Australian Capital Territory.
In a defendant’s application for security for the costs of engaging legal representation in proceedings, the ACT Supreme Court issued an 8 May 2026 decision stating that she could not recover legal costs until she actually engaged lawyers, with statements of future intention being unhelpful.
The ACT Supreme Court made a 21 April 2026 decision ruling that a corporate director’s reliance on generative artificial intelligence (genAI) to produce written submissions, including nonexistent legal authority, weighed against accepting his legal qualifications as a factor placing him above a lay person seeking to represent the corporation.
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