The battle over Administrative fees

A few weeks ago, I thought I had settled a motor vehicle accident claim on behalf of an insurer (I’ll call them Insurer X). The settlement was not anything spectacular; it was by and large a payment for the amount claimed in addition to an agreement to pay reasonable legal fees. What more can a Plaintiff possibly ask for? Administrative fees apparently.

Currently in Victoria, we are beginning to see motor vehicle repairers become heavily involved in litigious motor vehicle accident property claims. The exact nature of their involvement is somewhat clouded but they are claiming their costs as ‘Administrative Fees’ for various types of assistance they provide to the Plaintiff and the Plaintiff’s solicitors. 

Often times, in my view, these claims are not properly particularised; we are unable to discern whether they are charging for time spent, disbursements such as photocopying or whether a figure is simply plucked from the air (similarly to nineteenth century lawyers looking at the size of their file at the conclusion of a matter and guessing a fair cost for their work). 

Presently, it appears that the Victorian Magistrates’ Court is dealing with these claims on a case by case basis. The claims for administrative fees are coming in many different shapes and sizes. We have had instances where administrative fees are included in the initial estimate for cost of repairs. In other situations, they are claimed as part of the fair and reasonable legal costs of bringing an action. Further still, they are sometimes included in the Statement of Claim as a loss suffered by the Plaintiff. 

Accordingly, this means the applicable law varies from situation to situation. By way of example, I have been involved in a case where the repairer claimed administrative costs associated with the discovery process. A usual (and appropriate) cost of the discovery process is photocopying when a request is made for physical production of a document by one party of another. Further, when discovery is made against a third party unconnected with the proceedings (through formal processes such as orders for third party or non-party discovery), usually an amount of compensation is allowed for their involvement in the discovery process.  A Plaintiff, however, is not usually compensated for their time and effort in providing discovery, as a named party to the proceedings, they have a duty to adhere to the rules of the Court and make discovery. 

In this case, the Magistrate considered that the administrative costs which were charged to the Plaintiff by the repairer to assist with the discovery process were subject to the applicable costs cap pursuant to the Magistrates Court General Civil Procedure Rules 2010 which had already been paid. The Plaintiff was not entitled to any more. 

How does the insurance industry deal with such a milieu of individual situations set against a minefield of applicable legal principles? In the case with Insurer X, we decided to challenge the claim for administrative fees. They were claimed on the basis that they formed a part of the Plaintiff’s reasonable legal fees. The argument went before the court and the learned Magistrate agreed that the administrative fees claimed were not considered reasonable legal costs full stop. 

Although this is a useful judgment for future claims of this nature, it is not a decision that is binding on other Magistrates but is considered persuasive.

It may be that the only way to resolve the battle over administrative fees is to elect a strong test case to be heard in a superior court to set a precedent that will provide a framework for when and how administrative costs might be claimed by a motor vehicle repairer through a Plaintiff.  Even such a precedent may not provide an answer; the court will only hand down judgment with respect to the case put to it. It will not serve as a judgment on every variation of a claim for administrative fees. It may be that, like the Magistrates’ Court, we need to deal with these claims on a case by case basis.