Application of Saris; Elgammal v Saris

CATCHWORDS : PROCEDURE - costs - application by defendant for leave to apply for costs against former solicitors under Legal Profession Act s 348 - s 348 not applicable - defendant may seek to have costs assessed

LEGISLATION CITED : Legal Profession Act 2004 Contracts Review Act 1980

CASES CITED : April Fine Paper v Moore Business Systems [2009] NSWSC 867

PARTIES : Applicant: Vasilios Saris Respondent: Coleman & Greig Solicitors

COUNSEL : Applicant: G Slater Respondent: S Philips

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/289359 Application of Vasilios Saris; Elaraby Ismail Elgammal v Vasilios Saris JUDGMENT 1 HIS HONOUR: The defendant seeks leave to apply for costs pursuant to s 348 of the Legal Profession Act 2004 against his former solicitors, Coleman & Grieg. 2 The costs relate to the defendant's cross-claim against the plaintiff in these proceedings, which the parties settled on 8 March 2010. The plaintiff had sought declarations against the defendant that a loan agreement was valid and binding and that mortgages securing moneys owing under the loan agreement be set aside under the Contracts Review Act 1980, as well as other ancillary relief. The defendant had cross-claimed for: "1. A declaration that the Cross-Defendant is indebted to the Cross-Claimant in the sum of $105,026.18 being unpaid interest owing pursuant to two mortgages and a Guarantee & Indemnity Deed… and that such interest and debt continues to accrue … at the rate of $182.19 per day. 2. Judgment for the Cross-Claimant against the Cross-Defendant in the sum of $105,026.18 ("the Judgment sum"). 3. An order that the Cross-Defendant pay interest on the judgment sum accruing at the rate of $182.19 per day. 4. An order that the Cross-Defendant is liable to reimburse or indemnify the Cross-Claimant with respect to the costs and expenses incurred in relation to the mortgages or as a result of the Cross-Defendant's default under the mortgages. 5. Costs." 3 On 8 March 2010, by consent I made orders to dismiss the plaintiff's statement of claim and the defendant's cross-claim and for each party to pay his own costs. I also stood over the defendant's application for leave to apply for an order under s 348 to 11 March 2010, and gave leave to the defendant by his counsel or solicitor to provide written submissions to my associate (with a copy to Coleman & Grieg) in support of the defendant's application for leave. 4 Mr Slater of counsel who appears for the defendant on this application was not able to attend on 8 March 2010 for personal reasons. Through my associate, I informed Mr Slater by email of those directions and indicated that if submissions were provided, I would require submissions on the question of whether the proceedings were proceedings for a "claim for damages" within the meaning of s 348(1). I also indicated that if Mr Slater provided those written submissions, he would not need to attend on 11 March 2010. 5 Mr Slater did provide some written submissions in support of the application, but not on whether the proceedings were proceedings taken for a "claim for damages" within the meaning of s 348(1). There was no appearance for the defendant on 11 March 2010. 6 For the reasons below, I refuse to grant leave to the defendants to apply for costs under s 348. 7 Section 348 provides: "348 Costs order against law practice acting without reasonable prospects of success (1) If it appears to a court in which proceedings are taken on a claim for damages that a law practice has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the practice or of a legal practitioner associate of the practice responsible for providing the services: (a) an order directing the practice or associate to repay to the party to whom the services were provided the whole or any part of the costs that the party has been ordered to pay to any other party, (b) an order directing the practice or associate to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified. (2) The Supreme Court may on the application of any party to proceedings on a claim for damages make any order that the court in which proceedings on the claim are taken could make under this section. (3) An application for an order under this section cannot be made after a final determination has been made under this Part by a costs assessor of the costs payable as a result of an order made by the court in which the proceedings on the claim concerned were taken. (4) A law practice or legal practitioner associate of the practice is not entitled to demand, recover or accept from a client any part of the amount for which the practice or associate is directed to indemnify a party pursuant to an order under this section." 8 The first reason for refusing to grant the leave sought is that neither subsection (1)(a) nor (1)(b) of s 348 is applicable. Subsection (1)(a) does not apply because no party has been ordered to pay the other party's costs. Subsection (1)(b), which appears to be directed at litigation where a party's legal fees are paid by its insurer, clearly does not apply. 9 The second reason is that the defendant has not made any submission to show that it is arguable that the relief sought in its cross-claim included a "claim for damages". Although none of the cross-claims was designated as "damages," that is not necessarily fatal to this point. The cross-claim sought an indemnity for costs and expenses incurred in relation to the mortgages and the plaintiff's alleged default. It can be a difficult question whether an indemnity gives rise to a claim for damages or debt. The defendant provided no submissions to show that it was arguable that the claim was for damages. 10 Although the defendant is not entitled to an order under s 348, he is still entitled to have his costs assessed under Chapter 3, Division 11 of the Legal Profession Act, and in that way, may be entitled to pay lesser legal fees to his former solicitors. 11 Section 350 relevantly provides: "350 Application by client or third party payers for costs assessment (1) A client may apply to the Manager, Costs Assessment for an assessment of the whole or any part of legal costs. (2) A third party payer may apply to a costs assessor for an assessment of the whole or any part of legal costs payable by the third party payer. (3) An application for a costs assessment may be made even if the legal costs have been wholly or partly paid. (3A) If any legal costs have been paid without a bill, the client or third party payer may nevertheless apply for a costs assessment. (4) An application by a client or third party payer for a costs assessment under this section must be made within 12 months after: (a) the bill was given or the request for payment was made to the client or third party payer, or (b) the costs were paid if neither a bill was given nor a request was made.

(5) However, an application that is made out of time, otherwise than by:

(a) a sophisticated client … may be dealt with by the costs assessor if the Supreme Court, on application by the costs assessor or the client or third party payer who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12-month period. " 12 The considerations to which a costs assessor must and may have regard are set out in s 363, which provides: "363 Criteria for costs assessment (1) In conducting an assessment of legal costs, the costs assessor must consider: (a) whether or not it was reasonable to carry out the work to which the legal costs relate, and (b) whether or not the work was carried out in a reasonable manner, and (c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that section 361 or 362 applies to any disputed costs. (2) In considering what is a fair and reasonable amount of legal costs, the costs assessor may have regard to any or all of the following matters: (a) whether the law practice and any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf complied with any relevant legislation or legal profession rules, (b) any disclosures made by the law practice under Division 3 (Costs disclosure), (c) any relevant advertisement as to: (i) the law practice's costs, or (ii) the skills of the law practice or of any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf, (d) (Repealed) (e) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter, (f) the retainer and whether the work done was within the scope of the retainer, (g) the complexity, novelty or difficulty of the matter, (h) the quality of the work done, (i) the place where, and circumstances in which, the legal services were provided, (j) the time within which the work was required to be done, (k) any other relevant matt er." 13 As I said previously in April Fine Paper v Moore Business Systems [2009] NSWSC 867 at [13] in the context of s 364(1)(a) and (b): "[13] The first two matters a cost assessor is required to take into account under s 364(1)(a) and (b) are whether or not it was reasonable to carry out the work to which the costs relate and whether the work was carried out in a reasonable manner. In making that assessment a costs assessor must ask himself or herself whether the successful party conducted the litigation so as to achieve not only a just but also a quick and cheap resolution of the real issues ( Civil Procedure Act , s 56), and also whether the procedures invoked and the work done, and hence the costs incurred, were in proportion to the importance and complexity of the subject matter of the dispute. In Skalkos v T & S Recoveries Pty Ltd [[2004] NSWCA 281; (2004) 65 NSWLR 151], Ipp JA, with whom Sheller JA and Grove J agreed, said (at [8]): '[8] In my opinion, in determining whether costs have been reasonably and properly incurred, it is relevant to consider whether those costs bear a reasonable relationship to the value and importance of the subject matter in issue. See in this regard Szlazko v Travini [2004] NSWSC 610; Moore v Moore [2004] NSWSC 587, Gallagher v CSR Ltd (unreported, Supreme Court of Western Australia, 31 March 1994). This conclusion is supported by s 208G(f) of the Legal Profession Act .'"

14 Section 364(1) is in identical terms to s 363(1), and there is substantial overlap between s 364(2) and s 363(2) as to what the costs assessor may have regard in "considering what is a fair and reasonable amount of legal costs". 15 The documentary evidence filed by the parties in the proceedings did not raise complex issues. Nor did it indicate that the amount of money at stake was at all substantial. These are matters to which the costs assessor may have regard in assessing the costs payable by the defendant to his lawyers if the defendant decides to avail himself of Chapter 3, Division 11 of the Legal Profession Act.

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