Amos v Monsour Legal Costs Pty Ltd

[4] Mr Amos appealed unsuccessfully to a judge of the District Court from Ms Bradford-Morgan's orders. This appeal was dismissed on 17 May 05[2].

[5] Ms Bradford-Morgan, under her original costs order, was required to assess costs.[3] The assessment extended over the whole of a day (27 June 05). At the conclusion of the taxation, she assessed costs at $49,996. The proceedings before me are in form an appeal from the Magistrate's assessment of costs.

[6] The following points are taken against the magistrate's assessment of costs: at the outset of the assessment the Magistrate was asked to set aside a number of subpoenas served by Mr Amos on Monsour, Mr Monsour personally, and on several solicitors involved in Mr Amos's unsuccessful action against Monsour. After argument the Magistrate set aside each of the subpoenas. It is said the decision to set aside the subpoenas was wrong.

[7] The second point taken relates to the method of calculation of indemnity costs in the magistrates court. The argument put forward is that the only solicitors costs which may be allowed are those costs specified in the appropriate scale (schedule 3 UCPR).

[8] The remaining points relate directly the actual assessment by the Magistrate: firstly, it is said that some costs associated with other unrelated litigation in the Supreme Court were mistakenly allowed in the assessment. This ground has been resolved by the agreement of the parties that charges amounting to $ 779 were wrongly allowed by the Magistrate.

[9] Secondly, the fee paid to senior counsel briefed to set aside a default judgment Mr Amos obtained against Monsour is said to have been wrongly allowed.

[10] Thirdly, the fees charged by Mr Dearlove were challenged. Mr Dearlove was retained under a costs agreement between Monsour and McInnes Wilson Lawyers to act as solicitor advocate. The argument put on appeal is that Mr Dearlove's charges for preparation, reading and research are unreasonable and should not have been allowed by the Magistrate on taxation.

[11] This last point raises a question about the taxation of fees charged under a time cost agreement by a solicitor advocate. The question of course only arises on an order for indemnity costs where the costs agreement will generally govern the assessment. In this case, Mr Dearlove acted both as solicitor and as a solicitor advocate. In acting in those capacities he charged a uniform hourly rate ($400 per hour). The Magistrate allowed Mr Dearlove's charges under the time costs agreement for time spent in preparation, reading, and research. On appeal the costs agreement between Monsour and its solicitor was not questioned, nor was Mr Dearlove's hourly rate under the agreement questioned. What is in issue is the time spent by Mr Dearlove in trial preparation, reading, and research.

[12] And finally, issue is taken with various other charges levied under the costs agreement for the attendance of another solicitor to instruct Mr Dearlove at trial, for Mr Dearlove's attendance at a directions hearing which preceded the assessment, as well as a number of other miscellaneous charges.

[13] The appeal therefore raises a number of discrete issues, which I will examine in turn.

[14] As a young law clerk from time to time I was required to attend on a taxing officer at a taxation of a bill of costs. The fundamental nature of a taxation of a bill of costs is unchanged under the UCPR.

[15] Under the UCPR an itemised costs statement is required to be prepared, filed, and served. Any documentary proof of disbursements or liabilities is to be attached to the statement.[4] My recollection of the old practice is that the solicitor (or clerk) took the file along to the taxation so that proof of a disbursement or liability could be produced to the taxing officer.

[16] The rules provide for a notice of objection, if there is to be an objection to any items claimed.[5] The notice of objection is to be in a particular form, and the reason for each objection is to be stated in the form. The objector is confined to the items identified in the notice of objection.[6] The rules also provide for a directions hearing, and arm the assessor with power to examine witnesses on oath, and require the production of documents.[7]

[17] The assessment of costs is essentially an administrative procedure carried out by an officer of the court. The UCPR allows for a review of any decision to a registrar, and if necessary a further review by a court.[8] When the Magistrate in this case carried out the assessment of costs, she exercised the jurisdiction conferred on a registrar by the UCPR to assess costs.

[18] When assessing costs upon the standard basis, the taxing officer "must allow all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed."[9] And, the effect of rule 719 is that in the absence of objection the taxing officer must allow the particular item claimed in the costs statement.[10] When assessing costs on the indemnity basis, the taxing officer "must allow all costs reasonably incurred and of a reasonable amount."[11] In discussing the test[12] the Chief Justice noted that "considerable liberality" should ordinarily be extended in assessing reasonableness. Usually the costs agreement will determine the actual costs incurred by the party. The reasonableness of the actual costs claimed is ascertained by reference to the costs agreement, the relevant scale of fees prescribed, and the charges ordinarily payable to a solicitor for the work.[13] The starting point in determining whether a claim should be disallowed on the ground of unreasonableness is normally the costs agreement.[14] In Bottoms v Reser the Chief Justice thought that it would be an unusual case where costs payable under a costs agreement would be disallowed under the test. In practical terms the test to be applied is that all costs are to be allowed unless unreasonably incurred or in an unreasonable amount. And, in applying that test, the receiving party is to be given the benefit of any doubt.[15]

[19] The idea to issue subpoenas returnable at the assessment appears to have been Mr Amos' own idea. The idea apparently occurred to him between the directions hearing and the assessment.

[20] The purpose of issuing subpoenas was to ensure that, if it became necessary to refer to any of the documents covered by the subpoenas during the taxation, the document would be readily available.[16] At the assessment, Mr Hartwell, who appeared for Mr Amos, said the purpose was merely to ensure the Magistrate had all the documentation before her (T 184).

[21] The Magistrate set aside each subpoena saying the subpoenas were oppressive, the material subpoenaed irrelevant, and the conduct money provided inadequate.[17] The use of a scattergun approach in explaining her reasons at least showed what the Magistrate thought of the subpoenas.

[22] I think there were problems in Mr Amos' resort to subpoenas. The issue of what materials should be available at the assessment should have been settled at the directions hearing. At the conclusion of the directions hearing the Magistrate could have exercised the power to direct that any relevant documents be available at the assessment, or even direct a party to subpoena any relevant document. Moreover, in a technical sense, the subpoenas were drafted in terms that were too wide:[18]

"Copies of all tax invoices statements and bills of costs ... to Monsour Legal Costs Pty Ltd; copies of all cheques and payments received ... from Monsour Legal Costs Pty Ltd; copies of all receipts for payment of costs and outlays by Monsour Legal Costs Pty Ltd ...; copies of all bank statements and bank records relating to the payment ... by Monsour Legal Costs Pty Ltd; the complete file ... in relation to the above action including all diary notes, memorandums, writings, records and entries made by ..."[19]

The subpoenas did not seek particular documents, or documents relating to particular disbursements paid or owed, but simply required all the documents in the categories identified in the schedules.

[23] The Magistrate, in rejecting the subpoenas on the ground of relevance, was, I suspect, stating in shorthand form the objection the subpoenas were drafted in terms that were too wide. In any event, she was I think entitled to reject the subpoenas even though the grounds she expressed may be open to criticism.[20]

The ground that solicitors work is limited by the appropriate scale

[24] This argument can be shortly dealt with. There are dicta that indemnity costs cannot be allowed in the Magistrates Court.[21] The appeal before me, however, is not from the order for costs to be assessed on the indemnity basis, but from the assessment made on an indemnity basis. Mr Ambrose submits that on an assessment on the indemnity basis any solicitor's costs are to be assessed by reference to the appropriate Magistrates Court scale (rule 690(4)).

[25] Rule 704(3) sets out the test to be applied in an assessment on the indemnity basis:

"When assessing costs on the indemnity basis, the registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to -

(c) charges ordinarily payable ... to a solicitor for the work."

Judge McGill has recently[22] adopted the view that an assessment of indemnity costs in the Magistrates Court should be carried out in accordance with the test in rule 704(3), and that rule 690(4) merely identifies the appropriate scale for the purposes of rule 704(3)(a). I respectfully agree with that approach. The Magistrate, in assessing costs in this case, adopted the same approach.

Mr Ambrose, in his written submission, advanced a public policy argument against the award of indemnity costs in the Magistrates Court. The argument is that an award of indemnity costs will discourage litigation because costs orders may be substantially greater than the claims giving rise to the costs orders. The answer to this argument is that indemnity costs may be ordered only in defined circumstances (which include cases such as the present where an action has been pursued without any reasonable prospect of success). The purpose of indemnity costs in a situation such as the present is to indemnify, as far as reasonably possible, the successful party for his or her costs of resisting the action. To twist the argument around, it is not in the public interest to encourage plaintiffs to litigate actions without prospect of success.

The retention of senior counsel for the application to set aside summary judgment

[26] Mr Ambrose's argument is at paragraphs 64 to 69 of his written submission, and Mr Wilson's at pp 32, 33 of his written submission. The argument is that it was manifestly unreasonable to retain senior counsel on the application and for a solicitor (a partner) to instruct senior counsel at the hearing. The objection is not to the quantum of the fees charged or allowed, which were quite modest for senior counsel, but to the fact that senior, rather than junior, counsel was briefed; and, as to the necessity for the solicitor's appearance at the hearing.

[27] What happened is that Mr Amos obtained a default judgment on 16 January 02. Mr Amos completed an affidavit of service in which he swore that a copy of the Claim and Statement of Claim was posted to Monsour. The application for default judgment was supported by affidavits by Mr Amos and by two solicitors. Mr Amos appeared personally before the registrar to obtain the assessment of damages on 6 February 02. Judgment was entered on the same date for the assessment. All of this occurred without Monsour's knowledge. When Monsour did learn of the default judgment it initiated an application to set aside the judgment.

[28] The application to set aside the default judgment was a contested hearing at which witnesses were examined.

[29] It was undoubtedly in Monsour's interest to set aside the default judgment as soon as possible. Mr Monsour has practiced in the area of taxation of costs for as long as I can remember. His reputation within the profession was potentially jeopardised by the judgment, which I was told was recorded in the Mercantile Gazette.

[30] Under the indemnity costs order, the Magistrate was required to allow the claim unless persuaded the decision to brief senior counsel was plainly unreasonable (or unless persuaded the amount claimed was in an unreasonable amount). In reaching a view on whether the claim should be allowed, the Magistrate exercised the discretionary judgment of a registrar (taxing officer).[23] One consideration emphasised by Mr Wilson was the importance of the action to Monsour (and Mr Monsour) as an adverse outcome would reflect on its (and his) professional reputation and livelihood.[24] Although such an approach may be criticised as over cautious on a party and party assessment, I am not satisfied the Magistrate made any error of principle in allowing the claim, and I do not think the claim is unreasonable.

The charge for trial preparation by Mr Dearlove

[31] The complaint put to me is that Mr Dearlove was occupied for an unreasonable period of time on trial preparation. Because of the agreed hourly rate for his services as solicitor advocate ($400 per hour), the costs charged for trial preparation ended up in the region of $20,000 for a one-day trial in the Magistrates Court. Monsour's business is the taxation of costs, accordingly, it must be assumed that Monsour wished to retain the services of Mr Dearlove as solicitor advocate at an hourly rate, even though very little of his actual charge would be recoverable on a party and party taxation. On an indemnity basis, the sole exclusionary criterion is that of unreasonableness irrespective of whether the charge is a lump sum in the nature of a fee on brief, or is calculated under a time cost agreement at an hourly rate.

[32] Rogers CJ Comm D in Singleton v Macquarie Broadcasting Holdings Ltd[25] discussed the nature of time cost charging (although not by reference to the work of an advocate). At pp 108-9 he wrote:

"The gap between party and party costs and costs payable by the client to his or her own solicitor, to which I earlier referred, became enlarged with the introduction by solicitors, and indeed by barristers, of the system of time cost charging. Till relatively recently, in taxing costs in respect of contentious work against the other party, and largely, also for the purpose of a detailed bill of costs to their own client, solicitors had been content to follow the system in charging for work in accordance with Schedule G, item by item, with additional loading for skill, care and diligence. As professional practices became more like a business, it was recognised that such a system of charging may have operated unfairly to the solicitor. Time charging was introduced, because it was perceived to be more fair to the practitioner in that the payment was more closely related to the actual work done. The hourly rate is meant to cover overheads of the practice as well as the need for appropriate remuneration for partners. Of necessity, this will vary from firm to firm depending on such tangibles as the rent paid and the intangibles such as the position of the practice in the legal firmament. However, quite apart from any other feature, time cost charges may have conspicuous elements of unfairness. Most obviously it rewards the inefficient and the incompetent. The same item of work may quit obviously take half an hour in the hands of a highly skilled practitioner and two hours in the hands of someone of considerably lesser ability. To some extent of course, this will be compensated for by the fact that the charge out rate for the less skilled is likely to be much lower than for the highly skilled practitioner. However, this is not necessarily so, and, in any event, the lower charge out rate may not sufficiently compensate for the greater amount of time occupied. As well, time cost charging loses the incentive to avoid unnecessary work or inefficient practices. Most importantly, it does not discriminate according to whether the practitioner is engaged in the highly skilled task of preparing a statement of evidence, or the more mundane task of making a telephone report to the client of what may have passed in court fixing the date for hearing. There is nothing in a time cost agreement which provides a discrimen between the two situations and this may argue for the proposition that such an agreement is so unfair, or unreasonable, that the court ought not to give effect to it."

He later (p 110) observed that a time cost agreement, by its very nature, does not enable the taxing officer to easily determine whether or not a particular charge is unreasonable.

[33] In Bottoms v Reser the Chief Justice emphasised the liberality to be extended in assessing the reasonableness of a charge, using the term "outlandish" to describe an unreasonable charge. In the case of a time cost agreement, the potential is that the time spent in preparation may become excessive and unreasonable. But when does caution become over caution, and over caution become over indulgence? One of the touchstones in the rules allows reasonableness to be assessed in the light of the charges ordinarily payable for the work (rule 704(3) (c)). In some cases, a complete disjunction between a particular charge and the fees ordinarily payable for similar work by the profession may help identify the charge as unreasonable. The first step in any analysis, however, is to identify the charges in dispute. I will do that now.

[34] Mr Ambrose set out the amounts claimed for preparation, including research, as follows:

G. Dearlove perusal of the whole file including the correspondence and the documents (97.87 units)

G. Dearlove conference in with F. Monsour prior to inspection (10.01 units)

G. Dearlove conference in re Monsour's evidence-in-chief (45.44 units)

G. Dearlove review of the file and the law looking at the issue of estoppel and the high court cases and considerations for addresses should they be required ex tempore (54.77 units)

G. Dearlove - preparation for cross-examination of Robertson's evidence (68.02 units)

G. Dearlove drawing document examination statement and perusal of documents for E. Amos (72.09 units)

G. Dearlove perusal and consideration of the court print-out of the previous actions (5 units)

G. Dearlove research law the GST point (25.12 units)

G. Dearlove perusal preparation of the cross examination of Collinson's evidence (27.33 units)

G. Dearlove perusal of evidence-in-chief of E. Costello (8.69 units)

G. Dearlove perusal of the file and getting exhibits and material read (15.01 units)

G. Dearlove telephone call to Vincent re standards required for expert witness (1 unit)

G. Dearlove perusal of the forensic accountants experts manual (3.44 units)

G. Dearlove conference in final conference with F. Monsour (15 units)

G. Dearlove drawing submissions on costs and research law (55.02 units)

G. Dearlove perusal of the material filed by E. Amos, the rule of joinder and the issue of res judicata (25 units)

G. Dearlove drawing outline of argument and research law (35.34 units) [for chamber matter noted at item 157]

G. Dearlove drawing submission on costs and research the law (55.02 units)

[35] Two points arise from this list. Because Mr Dearlove acted as both the solicitor responsible for the carriage of the action and as solicitor advocate at trial, not all of the time claimed is claimed as counsel's work as distinct from solicitor's work. Secondly, although rule 730(3) provides that the registrar may allow one fee for preparation for trial, that does not mean preparation must be claimed as one item. As I understand the purpose of this rule, it is to prevent double charging for the same work.[26] In this case the fact Mr Dearlove has itemised the work he performed assists the examination of the charge.

[36] Mr Ambrose grouped the charges for trial preparation functionally, and it is convenient to adopt his groupings. The preparation of evidence-in-chief and cross-examination (items 186, 189, 190, 194, 195, 201, and 202) is one group. The claim for witness preparation is in addition to charges for conferences (items 178, 180, and 203) and for perusing the file and ensuring the exhibits were "ready" for trial (item 200). The total amount claimed for preparation of evidence is $10,839.60.

[37] The remaining groupings are the time claimed for perusal of the file (items 165 and 181) and for research (items 150, 181, 193, and 206). These claims are also disputed.

[38] The Magistrate accepted Monsour acted reasonably in entering the costs agreement with its solicitors. I agree with that view. The claim against Monsour reflected upon its professional reputation (and upon the professional reputation and standing of Mr Monsour). In addition, Monsour could legitimately feel apprehensive about Mr Amos' conduct of the litigation because of the default judgment he obtained behind its back. The Magistrate also took into account the litigation was complex. I do not agree the litigation was complex. Acting for Monsour was not without its difficulties, and the nature of the litigation and its importance to Monsour (and to Mr Monsour) justified retention of Mr Dearlove, a person accepted as "experienced" in litigation and possessing "extreme" expertise in the relevant areas of law in issue.[27] The trial, however, was not complex, as I think can be easily demonstrated.

[39] Mr Ambrose, in his written submissions, identified the issues as follows:

"The issues were simply, who were the parties to the agreement, did the respondent owe the appellant a duty of care, on essentially agreed facts, was that duty (if it existed) breached by allowing certain matters (the detail of which was uncontested) and was the appellant, as a matter of fact and law, estopped from taking action against the respondent even if a breach of duty could be shown?"[28]

The Magistrate's reasons reveal she found, as against Mr Amos, that he was simply not in a contractual relationship with Monsour (paras 22 to 24). She was also satisfied the evidence of the expert witness called by Mr Amos to prove his case did not support a finding of negligence (para 48). During the hearing a limited number of documents were tendered (15) and the oral evidence in the case was completed in the day. From that sketch of the trial, it cannot be regarded as an example of complex litigation.

[40] I agree with the Magistrate's view the time spent on researching the GST issue was reasonable (and was not merely self-educational). I am more dubious of the time spent on research of estoppel[29] (5.7 hours) and of costs (5.5 hours). To me, 5.5 hours for research on when an order for indemnity costs is appropriate and for "drawing a submission" for an "extreme" expert borders on the unreasonable. In allowing these charges the Magistrate was exercising discretion. Ultimately, I am not satisfied she erred in her approach, or that, in the absence of any specific error, I should interfere with her exercise of discretion.

[41] The two perusals charged are items 165 (9.7 hours) and 181 (5.47 hours). The Magistrate in fact disallowed half of item 165. Item 181 is a mixture of perusal and research on estoppel. I agree with the Magistrate's treatment of these two items.

[42] The time charge for witness preparation (evidence-in-chief and cross-examination) is 18.5 hours. This time is in addition to conferences of 7.04 hours ($2,818: items 178, 180, and 203), research of 13.45 hours ($5,396.40: items 181, 193, and 206), and perusals. The time charge for witness preparation (examination-in-chief and cross-examination) is $7,422. These charges are in addition to Mr Dearlove's attendance at court on the day of the trial ($3,600). The time charge for conferences, research, and preparation for witness examination is 39.4 hours ($15,636.40). In this case the question is whether the time charged under the agreement is unreasonable. In light of the basis in which Mr Dearlove was paid, the relevant standard for comparison is that of an experienced and skilled counsel.

[43] The best advocates work at speed and at a high level of skill. For what was a one-day trial in the Magistrates Court in which the evidence fell short of establishing negligence, the time charged was excessive. Monsour was entitled to adopt a cautious, even an over cautious approach to the litigation. In turn, Mr Dearlove was entitled, in the circumstances, to prepare the case thoroughly and carefully. If he also adopted an over cautious approach to his trial preparation, then under the indemnity costs order it is not unfair that Mr Amos pay for that cautious, even over cautious, preparation. The time charged for witness examination is in my opinion unreasonable, measured against the standard of an experienced and skilled advocate. Although it is somewhat arbitrary, the charges for witness preparation will be halved (items 186, 189, 190, 194, 195, 201, and 202).

[44] The other objections to the Magistrate's assessment are, in my opinion, without merit. It was not unreasonable for another solicitor to instruct Mr Dearlove in court. I note the Magistrate did in fact reduce one of the miscellaneous items complained of by Mr Ambrose by the amount suggested by Mr Ambrose (item 162).

[45] In the result items 186, 189, 190, 194, 195, 201, and 202 will be reduced by 50 per cent. This calculates out as $3,711. The Magistrates assessment should be further reduced by various charges which the parties agree in fact relate to Supreme Court proceedings. A schedule signed by counsel sets out the various items and charges mistakenly allowed at taxation. A copy of a letter enclosing the schedule has been placed with the file. The total of these charges is $779. The assessment is therefore reduced to $45,506 ($49,996 less the sums of $3,711 and $779).

The appeal is allowed to the extent of $4,490 but is otherwise dismissed.

[1] Amos v National Australia Bank Limited (2001) QSC 31.

[2] Amos v Monsour Legal Costs Pty Ltd (2000)QDC, Wylie DCJ, delivered 17May05.

[12] Bottoms v Reser (2000) QSC 413.

[14] Per McGill DCJ in Henley and Anor v State of Qld and Anor (2005) QDC 094 at para 41.

[15] Bottoms v Reser (2000) QSC 413.

[17] Transcript of the proceedings below p 187.

[18] Mr Ambrose in his written submission noted the schedule to each subpoena was in substantially similar terms.

[19] Amended outline of submissions on behalf of Appellant prepared by Mr Ambrose para 12.

[20] The required conduct money was ultimately paid before the assessment, and the complaint of repression does not seem to me to be established.

[21] The principal statement is found in Beardmore v Franklins Management Services Pty Ltd [2002] QCA 60; (2003) 1 Qd R 1 per McMurdo P at 11 and Ambrose J at 22, 23.

[22] In Henley and Anor v State of Qld and Anor (2005) QDC 094.

[23] UCPR r 707 codifies the matters to be considered by the registrar on a taxation.

[24] This is an important consideration even on a party and party assessment: see in Gallagher v Gallagher (1965) NSWR 409 per Allen J at 411.

[25] (1991) 24 NSW LR 103.

[26] Crase v Downey (1982) VR 802.

[27] These representations are taken from the costs agreement.

[28] Amended outline of submissions on behalf of the Appellant prepared by Mr Ambrose para 76.

[29] From Mr Dearlove's statements during the assessment, I infer the bulk of item 181 was for research of estoppel.