News — Third party payer - payment obligation to exists
at the time of assessment

Section 295 of the Legal Profession Act 2008 (WA) (“the LPA”) provides the mechanism for Third Party Payers to make an application for a costs assessment of legal costs which they have paid, or are required to pay in the future.

 

It is important to note that whilst the purpose and effect of the assessment process is to quantify the amount the Third Party Payer is obliged to pay in respect of legal costs, the process of assessment itself does not create an obligation to pay. Accordingly, a Third Party Payer, before applying for an assessment, must ensure that any obligation to pay the legal costs on behalf of another still exists at the time the application for assessment is brought.

Click here for the Court of Appeal’s recent judgment in Iron Mountain Mining Ltd v K&L Gates [2016] WASCA 166 (“IMM”). In IMM, a company paid a director’s legal costs for defending a proceeding pursuant to constitutional and contractual indemnities. Both indemnities were to operate subject to s 199A of the Corporations Act 2001 (Cth), which prohibits a company from indemnifying an officer for legal costs incurred in which the officer had been found guilty.  Prior to the director pleading guilty to three of the six charges, the company paid the director’s legal costs for defending the proceeding. Afterwards, the company (as Third Party Payer) sought to have the legal costs assessed pursuant to s 295 of the LPA.  The Court of Appeal held that s 295 (and s 253) of the LPA require a payment obligation to exist at the time of the application for assessment of costs is brought.