Federal Court of Australia

Flinders Street Developments Pty Ltd v Bond Finance No 5 Pty Limited [2026] FCA 637

ORDERS

THE COURT ORDERS THAT:

1.    The applicants’ interlocutory application filed on 26 February 2026 be dismissed.

2.    The applicants pay the respondents’ costs of the application to be taxed in any event.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s interlocutory application filed on 31 March 2026 be dismissed.

2.    The respondent pay the applicants’ costs of the application to be taxed in any event.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

FEUTRILL J:

1    These reasons concern interlocutory applications the applicants in proceeding WAD 375 of 2025 and the respondent in proceeding WAD 28 of 2026 have made by which interlocutory injunctions are sought to restrain the other parties in each of those proceedings from continuing to instruct their legal representatives.

2    There are 30 applicants in proceeding WAD 375 of 2025. Those applicants are either the borrowers or guarantors under a deed of loan, as varied by a subsequent deed, by which the respondents advanced approximately $66.7 million as lenders. Although not entirely accurate, for convenience, in these reasons the applicants in that proceeding are referred to as the Borrowers and the respondents as the Lenders. Separately, the Lenders commenced proceedings in the Supreme Court of Queensland against Mr Lester (one of the guarantors and the thirtieth applicant in WAD 375 of 2025). That proceeding was transferred to this Court and is proceeding WAD 28 of 2026. In both proceedings ERA Legal are the legal representatives of the Lenders and also acted for the Lenders in relation to the transactions the subject of the proceedings.

3    The ground for the Borrowers’ applications is that interlocutory injunctions are necessary to protect the proper administration of justice due to an objective want of independence and impartiality of ERA Legal arising from allegations made in the proceedings concerning the fairness and reasonableness of legal costs ERA Legal charged the Lenders for which the Borrowers were liable to indemnify the Lenders under the loan deed. The Borrowers also assert that there is a likelihood that legal practitioners of ERA Legal will be witnesses in the proceedings.

Applicable principles

4    Section 23 of the Federal Court of Australia Act 1976 (Cth) confers power on the Court, in relation to matters in which it has jurisdiction, to make orders, including interlocutory orders, of such kinds as it thinks appropriate. The Federal Court also has an implied power to make orders necessary for the exercise of the jurisdiction conferred on the Court: Jackson v Sterling Industries Ltd [1987] HCA 23; 162 CLR 612 at 618-619 (Wilson and Dawson JJ), 622-624 (Deane J). These powers extend to restraining a legal practitioner from acting for a party in proceedings before the Court where necessary to ensure the due administration of justice: Maclean v Brylewski [2025] FCAFC 133; 312 FCR 318 at [13] (Jackson and Moore JJ).

5    The power to restrain a legal practitioner from acting for a party is to be exercised in accordance with well-established principles of this Court and the Supreme Courts of the States and Territories exercising equivalent powers of those courts. In a frequently cited judgment of Brereton J, after surveying a number of English, Canadian, New Zealand and Australian authorities, his Honour said the authorities established a number of propositions which, relevantly, may be summarised as follows: Kallinicos v Hunt [2005] NSWSC 1181; 64 NSWLR 561 at [33], [76] (citations omitted).

(1)    In general, the power is exercised in one or more of three circumstances: (a) where the party applying for the restraint is an existing client of the legal practitioner and the practitioner’s representation of another party in the proceeding gives rise to conflict of duties or interests arising from representing each client at the same time; (b) where the legal practitioner owes the party applying for restraint a duty of confidence with respect to information and that duty conflicts with the practitioner’s duties or interests arising from acting for another party in the proceeding; and (c) as an incident of the Court’s implied power to exercise supervisory jurisdiction over its officers and to control its processes in aid of the administration of justice.

(2)    The test to be applied in the exercise of the implied power over officers and to control the processes of the Court ‘is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice’.

(3)    The exercise of the implied power ‘is to be regarded as exceptional and is to be exercised with caution’ and ‘[d]ue weight should be given to the public interest in a litigant not being deprived of the lawyer [of that litigant’s] choice without due cause’.

6    The ‘correct’ principles were relevantly identified in similar terms in Porter v Dyer [2022] FCAFC 116; 402 ALR 659 at [113]-[114] (Lee J, Besanko and Abraham JJ agreeing) and Brylewski at [14]-[24]. In Brylewski Jackson and Moore JJ also emphasised that exercise of the implied power in the supervision of legal practitioners ‘concerns independence’ and arises from the Court’s concern that it should have the assistance of independent legal representation acting for the litigating parties. Their Honours drew attention to the proposition that the implied power is to be exercised where the Court is satisfied that the interests of justice so require and, while that proposition has been supplemented by the specific standard of the fair-minded reasonably informed member of the public, ‘no narrow view should be taken of the circumstances in which the jurisdiction is enlivened’. Further, the goal is not just to protect the interests of the individual litigant, but more importantly, to protect the public interest in the administration of justice: Brylewski at [15]-[19].

7    As to the third proposition, in Finch v The Heat Group Pty Ltd (No 2) [2016] FCA 791; 353 ALR 193 at [9] Pagone J, after observing that it is a ‘high test with a heavy burden imposed upon the party making the application’ and that the power has been described as ‘extraordinary and protective’ and to be applied only in a ‘clear’ case, said:

9    … There are many reasons for a heavy burden to be satisfied by the party making such an application. One reason is that a court should not make an order that interferes with the relation between the opposing party and that party’s chosen and trusted legal practitioners. Public confidence in the administration of justice depends in part upon litigants being able to choose who they have to represent them and in whom they place their trust and confidence. The proper administration of justice is assisted by trust and confidence existing between litigants and their legal representatives. The legal practitioner plays a crucial role in conveying the client’s case to a court for adjudication and the confidence and trust of the client in the chosen legal practitioner is an essential aspect of that role. An order restraining a legal practitioner from acting for a client interferes with that role, adversely affects the client and may unjustifiably interfere with the proper conduct of the client’s case. It may also have the effect of causing irreparable harm to the client’s case and is apt to undermine the proper administration of justice in all but the clearest cases. To restrain the legal practitioners from acting for a party in continuing proceedings may also confer an unjustifiable forensic advantage upon the party seeking the restraint.

8    As to the specific standard and the second proposition, Jackson and Moore JJ observed in Brylewski, by reference to Mumbin v Northern Territory of Australia (No 1) [2020] FCA 475 and Dyer v Chrysanthou (No 2) (Injunction) [2021] FCA 641, that there has been ‘some controversy’ in the authorities as to whether the applicable standard is ‘would conclude’ or ‘might conclude’, but their Honours declined to ‘enter into the controversy’ because it was not necessary in that case: Brylewski at [24]. In Mumbin at [39] Griffiths J expressed a preference for the ‘might conclude’ formulation. In Dyer at [133]-[138] Thawley J identified the different formulations and observed that ‘might conclude’ conforms or coheres more closely with the test for apprehended bias. In an earlier decision, sitting as a judge at first instance, Moore J also expressed the view that there ‘is a debate’ as to the relevant formulation of the test: Michael Wilson & Partners Ltd v Emmott [2025] FCA 1005 at [16].

9    On the other hand, Lee J (with whom Besanko and Abraham JJ agreed) said in Porter that although the ‘might conclude’ standard coheres more closely with the test for apprehended bias, the weight of authority favoured the ‘would conclude’ formulation: at [114]. Also sitting as a judge at first instance, Lee J expressed the view that Porter was authority for the ‘would conclude’ formulation and added that formulation ‘better reflects and gives effect to the exceptional nature of the power’ and that a ‘test requiring a high degree of satisfaction is apposite when one considers the rationale for the caution in exercising the power’: Farrell v Super Retail Group Ltd (Cross-claim) [2024] FCA 1189 at [43], [45].

10    The Lenders submit that the applicable standard is the ‘would conclude’ formulation. The position of the Borrowers is less clear. In their written submissions-in-chief they submit that the applicable principles are summarised in Brylewski, Farrell and Michael Wilson & Partners Ltd v Cronan [2025] FCA 1588. As already mentioned, Brylewski expressly left open the question of formulation while Farrell favoured the ‘would conclude’ formulation. In Cronan Goodman J cited Brylewski, Farrell, Porter and Mumbin and expressed the view that the principles as explained by Griffiths J in Mumbin at [39] were approved by the Full Court in Porter: Cronan at [202]-[204]. However, the principles explained in Mumbin included the ‘might conclude’ formulation which, as already mentioned, was said in Porter to be against the weight of authority. Then, in their written submissions in reply, the Borrowers submit that they ‘do not take issue with principles expressly stated’ in the Lenders’ submissions which include a submission that the applicable standard is the ‘would conclude’ formulation.

11    Having regard to the observations in Porter concerning the weight of authority, the rationale for the formulation given by Lee J in Farrell, and the absence of any real contest between the parties on this application regarding the correct formulation, to the extent that it may have any bearing on the outcome of this application, the ‘would conclude’ formulation of the standard should be adopted. However, the guiding principle to be taken from the authorities is whether restraint of a legal practitioner is necessary, in the particular circumstances of any given proceeding, to prevent prejudice to the proper administration of justice. The formulation of a standard involving what a fair-minded member of the public ‘would conclude’ or ‘might conclude’ is a useful way of identifying whether particular circumstances warrant such a restraint, but such a test or standard (whatever formulation is adopted) should not be applied rigidly or inflexibly and ‘no narrow view should be taken of the circumstances in which the jurisdiction is enlivened’: Brylewski at [17].

12    In the application of the principles, it may be necessary to prevent prejudice to the proper administration of justice to restrain a legal practitioner from acting for a party where a practitioner has a personal interest in the outcome of the proceeding beyond the recovery of legal fees for acting in the proceeding. A personal interest of that nature may arise where, as a result of allegations made in the proceeding, a legal practitioner is ‘in a real sense defending’ the actions or advice of that practitioner. In such a case there is a risk that the client will not be represented with the objectivity and independence to which the client is entitled and the practitioner’s paramount duty to the Court and the administration of justice demands: Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 at 589-590 (Thomas J); Afkos Industries Pty Ltd v Pullinger Stewart (A Firm) [2001] WASCA 372 at [29] (Murray J, Anderson and Steytler JJ agreeing).

13    The expression ‘in a real sense defending’ is used to indicate that not every circumstance in which a legal practitioner has some personal interest in the outcome of the proceeding or reason to depart from the duty owed to the Court warrants restraint. A degree of proportionality is required between the ‘personal interest’ and the feared corruption of independence and incentive to depart from the practitioner’s duty to the administration of justice. Further, in some circumstances, the spectre of disciplinary sanction for departure from professional standards may be sufficient to deter a legal practitioner from departing from the duty to the Court and mitigate any risk of prejudice to the proper administration of justice. In short, not every allegation raised in a pleading that calls into question the advice or conduct of a legal practitioner no matter how trivial or incidental to the principal issues in the proceeding will provide a sufficient incentive to objectively undermine the practitioner’s independence and duty to the administration of justice so as to warrant restraining that practitioner from acting for a party in the proceeding.

14    It may be accepted that, in general, it is undesirable for a legal practitioner to be involved in a proceeding as counsel or solicitor if that practitioner is likely to be called as a witness: Clay v Karlson (1997) 17 WAR 493 at 494-495 (Templeman J). The Uniform Conduct Rules for barristers and solicitors under the Uniform Law also contain proscriptions against practitioners placing themselves in a position in which they are at risk of becoming a witness and against appearing as an advocate or acting for a client in the proceeding: e.g., Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW) r 27. However, the mere circumstance that a legal practitioner will be a material witness, even on a controversial matter, will not of itself warrant restraining that practitioner from acting for a party in the proceeding. The ‘line is crossed only when the [practitioner] has a personal stake in the outcome of the proceeding or in their conduct’. The relevant stake may be reputational and need not be financial. It may include circumstances where the practitioner’s conduct and credit is likely to come under attack in cross-examination: Mitchell v Burell [2008] NSWSC 772 at [20]-[22] (Brereton J); Clay v Karlson at 495.

Is an injunction necessary to protect the proper administration of justice?

15    Although extensive affidavit evidence was filed, served and read in support of and in opposition to the injunctions sought in the applications, there was little reference to that evidence on hearing the applications and it is largely irrelevant. The resolution of the applications turns almost entirely on the nature of the issues raised in the pleadings.

The Borrowers’ pleaded case

16    The Borrowers have filed an amended statement of claim and the Lenders a defence in WAD 375 of 2025. The Lenders have filed a statement of claim and Mr Lester a defence and counterclaim in WAD 28 of 2026. Mr Lester’s defence and counterclaim raises substantially the same allegations by way of defence and counterclaim in WAD 28 of 2026 as the allegations that the Borrowers raise by way of claim in WAD 375 of 2025. However, the defence and counterclaim is a more recent document that contains greater detail and particularity of the allegations germane to the determination of the applications. Therefore, for the purposes of resolving the application in WAD 375 of 2025 and the description of the allegations made in the proceedings, the more detailed and particular allegations in WAD 28 of 2026 are adopted and applied in these reasons both to the Borrowers’ claims in WAD 375 of 2025 as well as Mr Lester’s defence and counterclaim in WAD 28 of 2026.

17    Broadly, the Borrowers’ allegations in the proceedings are as follows. The funds advanced under the loan deed were primarily for the purpose of refinancing a pre-existing loan. The Lenders offered to lend the funds on certain terms under a letter of offer. Acceptance of those terms resulted in the parties entering into a loan deed and deed of variation in circumstances in which it was known to the Lenders that refinancing the existing loan was urgent and if not obtained would result in loss of significant commercial opportunities for the Borrowers. Due to the circumstances in which the loan offer and loan deed were made the conduct of the Lenders procuring certain terms in the loan deed and (or) relying upon and taking steps to enforce those terms was unconscionable within the meaning of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth). The Borrowers also allege the Lenders engaged in misleading or deceptive conduct in contravention of s 12DA of the ASIC Act and breached certain terms of the loan deed. Further, the Borrowers allege that certain deeds of forbearance do not release the Lenders from the Borrowers’ claims on the proper construction of those deeds, or alternatively, it would be unconscionable for the Lenders to rely upon the deeds in the circumstances in which they were executed.

18    Part of the Borrowers’ allegations pertaining to the Lenders’ alleged unconscionable conduct relates to a liability of the Borrowers to indemnify the Lenders for legal costs under the terms of the loan deed. In this respect, the Borrowers’ allegations are not straightforward, but may be summarised as follows (all references to paragraphs in these reasons are references to the defence and counterclaim in WAD 28 of 2026).

(1)    The letter of offer that preceded the loan deed provided that a ‘solicitor/documentation fee’ of $50,000.00 would be payable. The loan deed contained a term to the effect that the Borrowers were to pay to the Lenders any fees or charges specified in the deed (including the Lenders’ legal fees and disbursements) which the Borrowers authorised and instructed the Lenders to deduct from the funds advanced. The Lenders instructed ERA Legal with respect to the loan transaction. The Lenders, through ERA Legal, provided the Borrowers with a direction to pay which the Borrowers signed. Pursuant to the direction to pay the Lenders were authorised to pay legal fees in the sum of $200,000.00. The Lenders recorded a further sum of $83,000.00 against the outstanding balance of the loan as a charge for legal fees. At no time before the direction to pay were the Borrowers informed that the ‘solicitor/documentation fee’ had increased from $50,000.00 to $200,000.00. In the pleaded circumstances, the Lenders’ conduct in requiring, alternatively facilitating, payment of $200,000.00 for legal fees was unconscionable conduct within the meaning of s 12CB of the ASIC Act: paras [48], [53], [55], [57], [61], [63], [66], [77]-[82], [86], [124]-[125].

(2)    By reason of the terms of the loan deed the Borrowers were ‘third party payers’ specifically ‘non-associated third party payers’ pursuant to s 171(1) of the Legal Profession Uniform Law 2014 (NSW) as applied by the Legal Profession Uniform Law Application Act 2014 (NSW). As non-associated third party payers, the Borrowers were entitled to:

(a)    request an itemisation of a lump sum bill of costs: s 187(1) of the Uniform Law (NSW);

(b)    request ERA Legal provide them with sufficient information to allow them to consider and, if thought fit, make an application for a costs assessment: s 198(6) of the Uniform Law (NSW); and

(c)    apply for a costs assessment of the whole or any part of the legal costs payable to ERA Legal: ss 198-200 of the Uniform Law (NSW):

paras [71]-[72].

(3)    The Lenders and ERA Legal entered into a costs agreement pursuant to which the Lenders agreed to pay ERA Legal on a time costing basis at certain agreed rates per hour for work performed relating to the loan transaction (ERA Costs Agreement). In addition, for urgent work ERA Legal was entitled to charge an urgency premium (Urgency Premium) of two times normal rates for urgent work performed during normal office hours, three times normal rates for urgent work outside normal hours on Monday to Thursday and four times normal rates for urgent work outside normal hours on Friday, Saturday, Sunday and public holidays. ERA Legal estimated its fee for the work the subject of the costs agreement to be $125,000.00 (ERA Cost Estimate). The Lenders knew or ought to have known, as was the fact, that the Borrowers were not provided with a copy of the ERA Costs Agreement or the ERA Cost Estimate: paras [56]-[61].

(4)    ERA Legal rendered an invoice to the Lenders (Invoice) for $283,000.00 in the form of a lump sum bill of costs (Billed Professional Fees). The fees charged were $142,805.00 for work performed at standard rates and $84,467.73 for an Urgency Premium (Billed Premium). The amount of legal costs charged in the Invoice (the Billed Professional Fees including the Billed Premium) was agreed between the Lenders and ERA Legal. The Lenders knew or ought reasonably to have known, as was the fact, that a copy of the Invoice was not provided to the Borrowers and that the lump sum charged for professional fees in the Invoice was not known to the Borrowers. ERA Legal withdrew $200,000.00 of funds held in trust in part payment of the Invoice. The Lenders applied $83,000.00 (the unpaid balance of the Invoice) against the Borrowers’ loan account (thereby increasing the indebtedness to the Lenders): paras [81]-[87].

(5)    The amount of the Billed Professional Fees was neither fair nor reasonable within the meaning of s 172 of the Uniform Law (NSW) having regard to the terms of the ERA Costs Agreement, specifically the Urgency Premium, and the Billed Premium: para [127].

(6)    The Lenders did not seek and obtain an itemisation of the Invoice, apply for a costs assessment under the Uniform Law (NSW) of the professional charges in the Invoice or otherwise object to the amount charged for professional fees in the Invoice or take any steps to avoid ERA Legal appropriating $200,000.00 of funds held in trust in part payment of the Invoice. If the Lenders had sought and obtained an itemisation of the Invoice they would have known, or ought reasonably to have known, as is the fact, that insofar as the Billed Premium related to work said to have been undertaken by certain fee earners outside normal office hours and on weekends it was ‘not correct for ERA Legal to state’, alternatively it was ‘highly doubtful’, that the proportion each fee earner worked outside normal hours or on weekends was as described in the Invoice: paras [128]-[129].

(7)    The Lenders took no steps to bring to the Borrowers’ attention: the terms of the ERA Costs Agreement; the ERA Cost Estimate; the Invoice; that the Billed Professional Fees were neither fair nor reasonable within the meaning of s 172 of the Uniform Law (NSW); and that the Lenders had not sought and obtained an itemisation of the Invoice, applied for a costs assessment in respect of the charges in the Invoice or otherwise objected to the amount charged in the Invoice or taken steps to avoid the appropriation of $200,000.00, so that the Borrowers could enforce their rights as third party payers under the Uniform Law (NSW): paras [56]-[59], [82], [86], [127] and [128].

(8)    In the pleaded circumstances, the failure to bring the relevant matters to the Borrowers’ attention and the failure of the Lenders to seek and obtain an itemisation, apply for a costs assessment of or object to the charges in the Invoice was unconscionable within the meaning of s 12CB of the ASIC Act: paras [55]-[61], [71]-[73], [82]-[86], [124], [127], [128], [130] and [131].

(9)    Further, and in the alternative, in the pleaded circumstances, the Lenders’ conduct in agreeing to the amounts of the Billed Premium and the Billed Professional Fees was unconscionable conduct within the meaning of s 12CB of the ASIC Act: paras [55]-[63], [82]-[86], [124], [127]-[130], [132].

(10)    By reason of the Lenders’ unconscionable conduct relating to the Invoice, Billed Premium and Billed Professional Fees, the Borrowers have suffered and continue to suffer loss and damage. That loss or damage includes that the amount of costs sought to be recovered from the Borrowers under the indemnity in the loan deed is greater than it should have been: paras [131]-[133].

19    The Borrowers submit that the Lenders should be restrained from continuing to engage and instruct ERA Legal in the proceedings because the legal fees ERA Legal charged are directly in issue in two ways. First, it is alleged that the terms of the ERA Costs Agreement were neither fair nor reasonable within the meaning of s 172 of the Uniform Law (NSW). Second, it is alleged that the amount charged for the Urgency Premium is in issue having regard to the work actually performed. The Borrowers also submit that, due to the second way in which ERA Legal’s fees are in issue, there is ‘plainly a real possibility that a solicitor from ERA Legal will need to give evidence as a material witness in these proceedings’.

ERA Costs Agreement issue

20    As to the terms of the ERA Costs Agreement, the relevance of the Uniform Law (NSW) to the Borrowers’ claims of unconscionable conduct, in general, and the relevance of s 172, in particular, is not very clear from the pleading. However, when the various allegations are taken as a whole, in substance, the Borrowers allege that the Lenders’ unconscionable conduct deprived them of the ability as non-associated third party payers to apply for a costs assessment under the Uniform Law (NSW). Alternatively, the Lenders’ unconscionable conduct resulted in the Lenders agreeing with ERA Legal to pay legal costs that were greater than the amount that would have been charged if the Lenders had applied for a costs assessment under the Uniform Law (NSW) or had objected to the amounts charged in the Invoice. As a consequence, the amount sought to be recovered under the indemnity provision in the loan deed is ‘greater than it should have been’ because it is greater than the amount that is ‘fair and reasonable’ within the meaning of s 172 of the Uniform Law (NSW).

21    Part 4.3 of the Uniform Law (NSW) contains provisions relating to legal costs. Division 1 deals with objectives, scope and definitions for the Part. Division 2 contains general provisions relating to costs (s 172 is in that division). Division 3 deals with costs disclosure; Div 4 with costs agreements; Div 5 with billing; Div 6 with unpaid legal costs; Div 7 with costs assessment; and Div 8 with miscellaneous matters. The provisions of Pt 4.3 recognise and extend the obligations of a law practice and protections afforded under that Part to all persons under a legal obligation to pay legal costs (third party payers).

22    The Borrowers plead, and it was common ground, that they are non-associated third party payers within the meaning of s 171 of the Uniform Law (NSW): para [71]. A person is a third party payer in relation to a client of a law practice if the person is not the client and is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client or has already paid all or part of those legal costs under such an obligation. A third party payer is an associated third party payer if the legal obligation is owed to the law practice, whether or not it is also owed to the client or another person. A third party payer is a non-associated third party payer if the legal obligation is owed to the client or another person but not the law practice: s 171(1).

23    Section 172(1) provides that a law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and in particular are proportionately and reasonably incurred and proportionate and reasonable in amount. Section 172(2) and s 172(3) set out a number of matters to which regard must be had in considering whether legal costs satisfy s 172(1). Section 172(4) provides that a costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable if the provisions of Pt 4.3 Div 3 relating to costs disclosure have been complied with and the costs agreement does not contravene, and was not entered into in contravention of, any provision of Pt 4.3 Div 4.

24    The obligation on a law practice imposed by s 172 is to charge costs that are not more than fair and reasonable in all the circumstances. As a non-associated third party payer does not owe a legal obligation to the law practice to pay legal costs, it is not obvious that a law practice charges a non-associated third party payer any costs within the meaning of s 172(1). Nonetheless, s 198(1)(b) provides that an application for an assessment of legal costs payable to a law practice may be made by a third party payer who has paid or is liable to pay them to the law practice of the client. Therefore, a non-associated third party payer may apply for an assessment even though that person owes no legal obligation to pay the law practice for the legal costs.

25    The ability of a non-associated third party payer to apply for a costs assessment is a form of consumer protection because many standard form mortgages and leases contain provisions that make a consumer liable for legal costs associated with the preparation of transaction documents. Where a non-associated third party payer applies for a costs assessment, each of the law practice and the client is to be given notice of the application and may participate in the assessment process and be bound by the assessment: s 198(8), s 198(9). But, the assessment does not affect the amount of legal costs payable by the client to the law practice: s 198(10). In conducting an assessment of legal costs payable by a non-associated third party payer, the costs assessor must consider whether it is fair and reasonable in the circumstances for the non-associated third party payer to be charged the amount claimed: s 200(4). These provisions contemplate that, by reason of the assessment process and the particular parties it binds, the amount a client is legally obligated to pay a law practice in respect of legal costs might differ from the amount a non-associated third party would have to pay the client under an indemnity between them: Boyce v McIntyre [2009] NSWCA 185; 78 NSWLR 152 at [18]-[22], [38]-[39] (Ipp JA, Macfarlan JA and Hoeben J agreeing). (Although that authority dealt with provisions of the Legal Profession Act 2004 (NSW) the applicable statutory framework and provisions were in similar terms with materially the same purpose or object.) It follows that what is ‘fair and reasonable in all the circumstances’ is affected by the nature of the legal obligation to pay the legal costs for the legal service provided to the client.

26    In the case of a client or associated third party payer, the legal obligation to pay legal costs is owed directly to the law practice. Division 3 contains provisions that impose obligations on a law practice to provide disclosure of certain information to the client and take certain other steps in relation to that disclosure. If a law practice contravenes the disclosure obligations the costs agreement concerned is void: s 178(1)(a). Division 4 contains provisions relating to costs agreements between a law practice and the client. A client has a right to require and have a negotiated costs agreement with the law practice: s 179. A costs agreement may be made between, amongst other people, a client and a law practice retained by the client or between a law practice and an associated third party payer: s 180. Subject to the Uniform Law (NSW), a costs agreement may be enforced in the same way as any other contract: s 184. A costs agreement that contravenes, or is entered into in contravention of, any provision of Div 4 is void: s 185(1). On a costs assessment, the costs assessor must determine whether or not a valid costs agreement exists; and determine whether the legal costs are fair and reasonable and, to the extent they are not, the amount of legal costs payable: s 199(2). In that context, it is understandable that a valid costs agreement would be prima facie evidence that legal costs disclosed in the agreement are fair and reasonable as between law practice and client: s 172(4).

27    In the case of a non-associated third party payer, the legal obligation is owed to the client and not the law practice that has provided the legal services to the client. The law practice is under no obligation to provide costs disclosure and none of the provisions relating to the form and contents of a valid costs agreement apply. It may be inferred from the absence of any requirement of disclosure to be made to non-associated third party payers for there to be a valid costs agreement that the legislature intended that, when assessing the legal costs for which they may be liable, no reference would be made to any costs agreement between the law practice and client or associated third party payer: Boyce v McIntyre at [41]-[46].

28    Relevantly, the Borrowers allege that the amount of the Billed Professional Fees was ‘neither fair nor reasonable’ within the meaning of s 172 of the Uniform Law (NSW) having regard to: the terms of the ERA Costs Agreement, specifically the Urgency Premium, that was not fair and (or) reasonable; and (or) the Billed Premium (the agreed amount charged for the Urgency Premium): para [127]. That plea is ambiguous because it does not make clear if it is alleged that the Billed Professional Fees were neither fair nor reasonable as between ERA Legal (as law practice) and the Lenders (as client) or as between ERA Legal (as law practice) and the Borrowers (as non-associated third party payers). The distinction is important because, as already mentioned, both a client and a non-associated third party payer may apply for a costs assessment under the Uniform Law (NSW) and the outcome of those assessments may result in different amounts that are fair and reasonable in all the circumstances.

29    If the allegation were confined to legal costs that are fair and reasonable as between law practice and non-associated third party payer, for the reasons already given, the terms of the ERA Costs Agreement would have no evident bearing on the assessment of those costs and the allegation that the terms of the ERA Costs Agreement were not fair and (or) reasonable would merely raise an irrelevant and false issue in which neither the Lenders nor ERA Legal would have any interest to defend. However, although the pleading is ambiguous, it is implicit that the Borrowers allege that the amount of the Billed Professional Fees was more than fair and reasonable legal costs assessed as between law practice and client and assessed as between law practice and non-associated third party payer.

30    It is implicit that it is alleged that it was more than fair and reasonable as between law practice and non-associated third party payer from the allegation that the Lenders failed to bring certain matters to the Borrowers’ attention, so that the Borrowers could ‘enforce their rights’ as ‘third party payers’ and the allegation that the costs sought to be recovered by the Lenders ‘is greater than it should have been’: paras [130], [131]-[133]. It is implicit that it is alleged that it was more than fair and reasonable as between law practice and client from the allegations that the Lenders agreed the amounts of the Billed Premium and the Billed Professional Fees in circumstances in which those amounts were not fair and reasonable, the Lenders had not, amongst other things, applied for a costs assessment in respect of the legal costs charged in the Invoice or otherwise objected to the amount charged for legal costs in the Invoice, and the costs sought to be recovered by the Lenders ‘is greater than it should have been’: paras [127], [128], [132], [133]. In that context, the Borrowers submit that ERA Legal has a ‘real stake’ in the outcome of the proceedings because the Urgency Premium is a standard term of that firm’s costs agreements and the extent to which charging the Urgency Premium was fair or reasonable within the meaning of s 172 of the Uniform Law (NSW), at least, exposes ERA Legal to the risk of harm to that firm’s professional reputation.

31    The Lenders read and relied on an affidavit of Mr Giuseppe Morello. Mr Morello deposes facts to the effect that the loan the Lenders made to the Borrowers was arranged through NWC Finance of which Mr Morello is a partner. Mr Morello deposes that he has had a long-standing relationship with ERA Legal. With respect to the loan arranged for the Lenders, ERA Legal provided costs disclosure and a written costs agreement to the Lenders that included standard terms and conditions of engagement. Mr Morello deposes that these documents ‘included ERA Legal’s standard urgency premium’. Mr Morello also deposes that he estimates that since 2007 he has provided instructions to ERA Legal with respect to more than 1,500 loans.

32    On the basis of these facts, it is accepted that some form of urgency premium forms part of standard terms and conditions of engagement upon which ERA Legal has contracted with lenders on whose behalf Mr Morello has arranged loans and instructed ERA Legal in the past. Further, it may be inferred that an urgency premium is likely to form part of any such terms of engagement in the future. Therefore, it is accepted that if a finding were made in the proceedings to the effect that inclusion of the Urgency Premium as a term of the ERA Costs Agreement is neither fair nor reasonable within the meaning of s 172 of the Uniform Law (as between law practice and client), that finding may have negative financial and reputational consequences for ERA Legal. Consequently, ERA Legal has an ‘interest’ in defending that allegation. However, for the reasons that follow, that interest is not of a kind that puts the integrity of the judicial system and the due administration of justice at risk in any material way.

33    As already mentioned, s 172(1) provides that a law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are proportionately and reasonably incurred and proportionate and reasonable in amount. The Borrowers’ relevant allegation is that the Billed Professional Fees were more than fair and reasonable within the meaning of s 172(1) having regard to the terms of the ERA Costs Agreement, specifically the Urgency Premium, not being fair and (or) reasonable. Therefore, the pleaded relevant ‘circumstance’ for the purposes of s 172(1) is that the terms of the ERA Costs Agreement were not fair and (or) reasonable. There is no element of this aspect of the Borrowers’ pleaded case that relies on the proportionality or reasonableness of the costs incurred or the amount charged. Evidently, the Borrowers’ pleaded case is to the effect that whatever legal costs were charged under the ERA Costs Agreement those costs were necessarily neither fair nor reasonable because the terms of the ERA Costs Agreement were not fair and (or) reasonable. It follows that this aspect of the Borrowers’ pleaded case depends upon the meaning of applicable terms of the ERA Costs Agreement and the meaning of fair and reasonable in s 172 of the Uniform Law (NSW). These are quintessentially questions of law.

34    The applicable terms of the ERA Costs Agreement either have or do not have the meaning for which the Borrowers contend. Likewise, whatever the meaning of the applicable term, merely charging legal costs in accordance with the applicable terms either can or cannot result in costs that are fair and reasonable within the meaning of s 172 of the Uniform Law (NSW). The personal incentive for legal practitioners of ERA Legal to argue for constructions of terms of the ERA Costs Agreement and provisions of the Uniform Law (NSW) that are consistent with the interests of the Lenders, but that may not ultimately be correct as questions of law, is not a matter that, in this case, strikes at the heart of the integrity of the judicial system and the due administration of justice. There is nothing in the materials upon which the Borrowers rely to suggest any constructions of the ERA Costs Agreement and s 172(1) of the Uniform Law (NSW) inconsistent with the Borrowers’ pleaded case would be unarguable, untenable, or have no reasonable prospects of success. Moreover, the Lenders’ legal representatives have briefed senior and junior counsel in the proceedings. Therefore, the risk of the administration of justice being undermined by the Lenders advancing untenable legal arguments in the interests of ERA Legal is remote.

Invoice work description issue

35    As to the work described in the Invoice and the allegation that the Lenders’ conduct agreeing to the Billed Premium and Billed Professional Fees was unconscionable because the Billed Premium was not reflective of work performed outside normal hours or on weekends, the pleaded allegations notionally raise an issue of professional misconduct in which ERA Legal, as the Lenders’ legal representatives, have a personal interest that would call upon legal practitioners of that firm to defend their actions. However, for the reasons that follow, the issue is merely notional because the Borrowers’ pleaded facts, upon examination, fail to disclose a reasonably arguable assertion of misconduct involving ERA Legal.

36    The Borrowers’ relevant pleaded allegations are as follows:

129.    Had the applicants sought and obtained an itemisation, they would have known, or ought reasonably to have known, as is the fact, that insofar as the Billed Premium related to work said to have been undertaken by Daren Anderson, Kylie Lundy and Tiffany Wass “outside normal business including late most evening and into the early hours of the following morning and on weekends”:

129.1    with respect to Daren Anderson:

129.1.1        total time billed was 47.3 hours;

129.1.2    the only material time billed for a weekend was 3.6 hours on 2 July 2022, with the balance of time billed for a weekend being 0.2 hours on 3 July 2022, 0.3 hours on 10 July 2022 and 0.1 hours on 17 July 2022;

129.1.3    of the time billed for weekdays, there were only 2 days for which more than 5 hours was billed, namely 6.8 hours on 20 July 2022 and 6.9 hours on 21 July 2022;

129.1.4    by reason of the above matters, it was not correct for ERA Legal to state, alternatively it was highly doubtful, that “at least … 20% of the work undertaken by (Daren Anderson) was undertaken outside normal business including late most evening and into the early hours of the following morning and on weekends”;

129.1.5    in the premises, insofar as it related to work done by Daren Anderson, the Billed Premium was neither fair nor reasonable and should not have been agreed by the applicants had they acted reasonably;

…

Each of paras [129.2] and [129.3] contain similar pleas with respect to two other fee earners (Kylie Lundy and Tiffany Wass).

37    Paragraph [129] includes a plea ‘as is the fact’. Therefore, an allegation is made that insofar as the Billed Premium related to work said to have been done by Mr Anderson, Ms Lundy and Ms Wass outside normal business including late most evenings and into the early hours of the following morning and weekends the proportion of the work undertaken at those times stated in the Invoice for each of those fee earners was ‘not correct’ or was ‘highly doubtful’. That is an allegation of serious impropriety to the effect that the Invoice included a false statement about the times at which work was performed for the Lenders by those fee earners.

38    While no point of pleading has been taken, para [129] falls well short of that which is necessary to properly plead, particularise and sustain the allegation that the proportions of work performed outside normal office hours ERA Legal stated in the Invoice were not correct (false) or highly doubtful. It has long been accepted that allegations of professional misconduct or other serious impropriety must be clearly and completely pleaded and particularised: Krakowski v Eurolynx Properties Ltd [1995] HCA 68; 183 CLR 563 at 573 (Brennan, Deane, Gaudron and McHugh JJ); Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; 278 ALR 291 at [605]-[606] (Murphy JA, Buss JA agreeing); Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255 at [35]-[38] (Ipp J, Wallwork J agreeing); Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486 at [26] (French CJ, Gummow, Hayne and Kiefel JJ).

39    The pleaded Urgency Premium term of the ERA Costs Agreement reflects that in the circumstance of work required to be performed outside ERA Legal’s usual time standards (i.e., urgent work) to perform the work in a short timeframe may require the work to be prioritised during normal office hours in preference to other work and (or) require work to be performed outside normal office hours. Urgent work required to be performed during normal office hours attracted a premium of two times normal rates. Urgent work required to be performed outside normal office hours attracted a premium of three or four times normal rates depending on whether work was performed during or outside the normal working week: paras [57.2]-[57.3].

40    Accepting that the question is whether it would be open to the Borrowers upon the pleading to prove facts at trial which would constitute a cause of action: Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 at 414 (Beaumont J), where, as here, the case alleged is inferential, the material facts pleaded must be at least capable of supporting a reasonable inference: J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Ltd [2014] FCA 581 at [18]-[19] (Pagone J). Without more, no reasonable inference arises from the mere fact that less than five hours of time (or less than six and a half hours of time) was billed on any particular weekday that the itemised work performed on that day was not required to be performed for the Lenders ‘outside ERA Legal’s usual time standards’ during normal office hours or otherwise required to be performed outside normal office hours. The mere fact that gross time billed on any given weekday was less than five hours does not exclude the reasonable inference that each fee earner performed work for other clients or on other matters on those days and work for the Lenders on the relevant loan transaction, due to the urgency of the matter, was required to be performed outside normal office hours for the Lenders on those days. As the facts pleaded and particularised are not capable, without more, of excluding an obvious alternative hypothesis, the pleaded fact that the proportions of work performed outside normal office hours stated in the Invoice were ‘not correct’ or ‘highly doubtful’ is mere speculation. Accordingly, the matters pleaded in paras [129.1.1] and [129.1.2] do not support an inference that the statement in the Invoice about the proportion of work undertaken by Mr Anderson outside normal business hours was not correct (or was highly doubtful) as pleaded in para [129.1.3]. The same observation applies to paras [129.2.1]-[129.2.3] and [129.3.1]-[129.3.3] with respect to the two other fee earners. Accordingly, these allegations are liable to be struck out on one or more of the grounds set out in r 16.21(1) of the Federal Court Rules 2011 (Cth).

41    Bearing in mind that the Borrowers apply to this Court to exercise a power that would deprive the Lenders of their chosen legal representation, the Court need not accept uncritically the allegations said to found disqualification of that legal representation. As matters stand, the Borrowers’ (and Mr Lester’s) allegations (assertions) do not, in point of pleading, make any allegations about the actions of ERA Legal that legal practitioners of that firm would be motivated to defend in any real sense.

42    Consistently with the paucity of the allegations (assertions) involving the actions of ERA Legal, the Lenders’ response to the relevant allegations is a bare denial. Therefore, the Borrowers (and Mr Lester) are merely put to proof of the facts (assertions) pleaded in para [129]. No positive defence is pleaded. Further, the Lenders, through senior counsel, represented to the Court that no legal practitioner of ERA Legal will be called to give evidence at any trial in the proceedings.

43    It follows that, notwithstanding the notional seriousness of the allegations, aside from making submissions regarding what inferences could possibly be drawn from the contents of documents, it is not at all obvious that ERA Legal would be called on to defend its actions (issuing the Invoice recording an agreed proportion of time the three fee earners worked outside normal hours and on weekends) in any real sense. Likewise, having regard to the nature of the allegations (assertions) and the Lenders’ response to them, it is not accepted that there is any real likelihood that a legal practitioner of ERA Legal will be called as a witness in the proceeding.

Disposition

44    For the foregoing reasons, a fair-minded reasonably informed member of the public would not conclude, nor might such a member of the public conclude, that the proper administration of justice requires that ERA Legal should be prevented from acting for the Lenders in the interests of the protection of the integrity of the judicial process and the due administration of justice. The injunctions sought are not necessary to prevent prejudice to the proper administration of justice and the Borrowers’ and Mr Lester’s applications should be dismissed with costs.

Associate:

Dated:    25 May 2026

SCHEDULE OF PARTIES