Ruling notes obligation to repay relies on WA Legal Practice Act provisions
In a case arising from legal costs under retainer agreements, Australia’s High Court rejected a client’s common law claim seeking restitution from a law firm, given that the repayment obligation relied on provisions of the relevant statutory regime.
In Gray v Lavan (A Firm), [2025] HCA 42, the appellant client paid legal costs for work performed under retainer agreements with the respondent law firm.
Under the Legal Practice Act 2003 (WA), the firm had no right to retain a portion of a payment if – and to the extent that – it exceeded the amount a taxing officer’s certificate authorised on a taxation.
In 2018, before a taxation of costs, the appellant and the firm executed a settlement deed, which required:
The appellant initiated proceedings requesting simple and compound interest over the period between payment and repayment. The appellant alleged that the firm’s opportunity to use the $900,000 within that period unjustly enriched it, given the failure of the basis or condition for the payment of the principal amount.
The primary judge and the Court of Appeal of the Supreme Court of Western Australia denied the appellant’s interest claim. He appealed from the Supreme Court of Western Australia.
The High Court of Australia dismissed the appeal with costs.
The High Court noted that the appeal involved narrow circumstances, specifically the fees paid for legal work performed under the retainer agreements, the terms of which aligned with the relevant statutory scheme in part 13 of the Legal Practice Act.
In those circumstances, the High Court saw no room for a common law restitution regime operating concurrently with the statutory scheme’s conditions, including for the statutory recovery of payments exceeding the amount certified following the taxation of a bill of costs, as well as interest.
The High Court concluded that the primary judge and the appeal court correctly rejected the appellant's claim for interest.
The High Court saw a strong basis to conclude that the parties’ retainer agreements included a condition subsequent, which prevented the firm from retaining any part of the payments to the extent that they exceeded what a taxation authorised under the Legal Practice Act.
However, the High Court explained that the Legal Practice Act’s provisions constituted a comprehensive regime for recovering the principal payment for legal costs over the amount the taxing officer certified, as well as interest on that sum.
The High Court added that the provisions excluded a common law restitutionary claim for the $900,000 principal or interest arising from the excess amounts, including an interest claim against a law firm on those excesses for the period before the grant of a certificate.
Next, the High Court said the settlement deed sought to replicate the effect of taxation under the Legal Practice Act’s provisions.
The High Court found that the 2018 settlement deed did not create any restitutionary claim. The High Court noted that the parties could not contract out the statutory provisions.
According to the High Court, through the settlement deed, the parties deemed the conditions subsequent – pertaining to the firm’s right to keep $900,000 from the appellant’s payments under invoices the firm sent – to have failed due to the deemed issuance of a taxation certificate on 13 January 2019.
The High Court noted that the firm admitted that, under the settlement deed, the parties had agreed that the firm had lost its right to retain $900,000 from the paid amounts based on the fictional issuance of a taxation certificate on 13 January 2019.
Lastly, the High Court said the starting point to assess any common law entitlement to compound and other interest, representing the value of the firm's opportunity to use the principal amount of $900,000, was:
