BETWEEN : BRUCE ANGELO GATTI as trustee for the BRUCE GATTI FAMILY TRUST

Practice and procedure - Costs - Special order for costs on taxation - Delay - Prejudice

Rules of the Supreme Court, O66 r 11, O 66 r12, O 66 r 51

Collins v Westralian Sands (1993) 9 WAR 56

The Hancock Family Memorial Foundation Ltd & Anor v Porteous & Anor [2000] WASC 61

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA (Merkel J) 1363 1 October 1999

Mikuljanac v Wigmores Tractors Pty Ltd (1992) 9 SR (WA) 137

Snowtop Mushrooms Pty Ltd v Powley [1982] WAR 191

Pryles and Defteros v Green [1999] WASC 34

Stoddart & Co v Jovetic (1993) 8 WAR 420

1 WHEELER J: This is a practitioner's chamber summons for special orders on taxation as between solicitor and client. The chamber summons seeks that leave be granted to the practitioner to apply for special orders on taxation, and further seeks that the limit prescribed by items 21 and 23 of the 1996 Supreme Court costs determination not apply in relation to certain work performed by the practitioner. There is additionally, a practitioner's chamber summons for certain directions on taxation.

2 The applications arise out of three actions relating to an alleged farming partnership and rights to various parcels of rural property. The party charged, Mr Gatti, was the first defendant in those actions. They concerned, broadly, the appointment of a receiver (arising out of an allegation of an entitlement to partnership proceeds and certain constructive trust allegations) and the extension of a caveat. Two of the three actions were consolidated, and further consolidation took place later. In the end, after a variety of interlocutory steps, the matters proceeded to mediation and a settlement was reached on 30 April 1999. The terms of the deed of settlement signed by the parties included a provision that each party bear its own costs.

3 It appears from the affidavit material placed before me, that the party charged has already paid to his solicitor, Mr Davies, a sum of approximately $55,000 of which the client trust ledger shows some $35,000 approximately as being professional fees, with a variety of disbursements, and that in addition the party charged has provided to the solicitors cheques in the sum of approximately $40,000 to be paid to a variety of counsel as disbursements. It is common ground that, these actions having been begun by way of originating summons, then in the absence of special orders the sums already paid by the party charged would exceed any amount which would be allowed on taxation.

4 It is to be noted that although settlement was reached on 30 April 1999, the practitioner's chamber summonses are filed 31 March 2000, some 11 months later. The delay is the subject of a purported explanation to be found in par 15 of the affidavit of the practitioner, filed 31 March 2000. That paragraph reads as follows:

"This application is now made 11 months after the litigation was settled. The reason I have not made this application previously is twofold:

(a) Firstly, up until the end of July 1999 I had intended relying upon the Law Society of Western Australia's client/lawyer agreement previously annexed hereto and marked 'BKD1'. It was only at the end of July 1999 that I received advice in relation to the lawyer/client agreement.

Having regard to that advice and in the whole of the circumstances, I decided not to rely upon the client/lawyer agreement as a basis of charge. As a consequence of my decision to no longer rely upon the costs agreement, my bill of costs to Bruce Gatti had to be completely redrawn.

I instructed the Costs Consultancy to undertake that task and on 13 September 1999 the first draft of the bill of costs on scale was provided to Mr Richard Wilenski of Fiocco Hopkins Nash, the solicitor acting on behalf of Bruce Gatti.

(b) Secondly, since mid-June 1999 the parties had been engaged in negotiations. It has only recently become apparent that negotiations cannot proceed further without the question of special costs orders being resolved."

5 The practitioner further asserts in his affidavit that the delay has not caused prejudice to the party charged, Mr Gatti. It is alleged, somewhat curiously that, on the contrary, Mr Gatti has "had the benefit of ongoing negotiations".

6 I would refuse this application on discretionary grounds, because of the practitioner's delay. I will return to this issue shortly. However, although it is not necessary to resolve the point, it is perhaps desirable to consider some of the difficulties which arise in determining the court's jurisdiction to make an order of this kind, because of the way in which the application has been fought.

7 An issue arose during the course of submissions as to the court's jurisdiction to make an order of the kind sought in favour of a practitioner against the practitioner's client. The practitioner initially pointed to O 66 r 11(3) and r 12(1) of the Rules of the Supreme Court as the basis of such jurisdiction. There are a number of difficulties with that course. The first is that O 66 r 11(3) is not concerned with special orders at all but rather with a particular aspect of the difference between party and party taxation and solicitor and client taxation and with the effect of a special request from the client (there being no evidence of such special request in this case) so that that rule appears to be simply inapplicable. Order 66 r 12 on the other hand, does not appear on its face to be directed to solicitor and own client costs but rather to party and party costs, although I accept that there is room for argument as to the scope of its intended application.

8 However, more importantly, the argument based on the Rules appears to me to misconceive the nature of the Rules of the Supreme Court. They are not themselves the source of jurisdiction, but rather are the means by which the court regulates the jurisdiction which it has with respect to certain matters. The source of jurisdiction must be found elsewhere, either in express statutory provision or in the inherent jurisdiction of the court.

9 So far as the inherent jurisdiction of the court is concerned, the practitioner points to Woolf v Snipe [1933] HCA 5; (1933) 48 CLR 677 as explaining the court's jurisdiction as an inherent jurisdiction to "regulate" the remuneration of practitioners. A consideration of that case and of the authorities to which Dixon J refers in it, tends to suggest that the jurisdiction is one to prevent exorbitant demands, and gives rise to some doubt as to whether there is a jurisdiction to award a practitioner a sum by way of costs which is neither agreed to by the client, nor the result of performing work specially requested by the client (as in O 66 r 11), nor permitted by the scales (which are now, of course, in Western Australia, set by an independent authority). In particular, I note that the discussion of policy in cases such as Brown v Talbot & Olivier (1993) 9 WAR 70 stressed the importance of a client being able to ascertain before entering into litigation the way in which costs are likely to be calculated. The maters of principle referred to in that case as underlying disclosure to clients prior to entry into of a costs agreement would be of considerably less force if it were open to a practitioner, subsequent to litigation, and notwithstanding the absence of a costs agreement, to obtain remuneration from the client in excess of the scale by means of an application to the court.

10 In the particular circumstances of this case, it is not necessary to deal with the jurisdictional argument, and still less to go on and consider whether there is any basis for a special order on the facts of this case. This is because of the nature of, and reasons for, the practitioner's delay.

11 Both parties argued in relation to delay on the basis that the application for a special costs order should have been made by the practitioner within 30 days pursuant to O 66 r 51. This assumption begs the question "within 30 days of what?" It appears to have been assumed that the application should have been made within 30 days of the settlement agreement which determined that the party charged would be liable for his own costs. In my view, O 66 r 51 is not well adapted to the situation where there is apparently, as in this case, no court order or other step taken in court by reference to which a 30-day period may be calculated, and it is unlikely that it was intended to apply to the type of application before me. However, it appears to me that it is an appropriate period to apply by way of analogy, assuming the jurisdiction to make such an order exists, as a reasonable time within which an application of this sort ought to be made.

12 It is apparent from the affidavits before me that the parties have been in dispute for a very considerable period concerning the appropriate quantum of costs. That dispute arose almost immediately following the signing of the deed of settlement, although aspects of Mr Gatti's concern with the costs that he was charged appear to have arisen even prior to that time.

13 The practitioner's affidavit does not explain when it was that he first had concerns about the efficacy of the costs agreement which Mr Gatti had signed, and when he sought (as opposed to obtained) advice in relation to it. That lack of particularity may not in any event be of great importance, since it explains the delay only until the end of July 1999. Further, it was said by counsel for Mr Gatti, with some justification, that the enforceability of the costs agreement should in any event have been something within the knowledge of Mr Davies at all times. In the absence of any explanation as to what question of subtlety or complexity required counsel's advice, I would be inclined to assume that the doubtful validity of the costs agreement (assuming that to have been counsel's advice) should have been something which was apparent to Mr Davies from the outset. The "redrawing" of the relevant bills of costs following counsel's advice should not have been a task that would have occupied a great deal of time.

14 The only explanation for delay subsequent to July 1999 appears to be that the parties were engaged in "negotiations". To translate that rather nebulous expression into the circumstances of this case, it appears that since July 1999 the practitioner had been in possession of a substantial sum paid by Mr Gatti and that, following the decision not to rely on the costs agreement, the practitioner was prima facie not entitled to the entirety of that sum. Nevertheless, the practitioner engaged in negotiations with Mr Gatti about what the appropriate costs would be, in the meantime retaining the sum paid by Mr Gatti, and in about March this year the practitioner belatedly came to the view that one way of achieving what he saw as an appropriate outcome would be to make the present application to the court.

15 In these circumstances, it is my view that it was incumbent upon the practitioner to make an application, if he thought it possible to do so, promptly. There has been no adequate explanation for the failure to do so. Mr Gatti has prima facie been prejudiced by an inability to obtain access to funds presently in the possession of the practitioner while leisurely "negotiations" have taken place. It is apparent from Mr Gatti's affidavit that some of the concerns which he would no doubt seek to raise at taxation arise out of conversations he had with the practitioner or with the member of the practitioner's firm having the carriage of the matter and out of his observations of work which was done by the practitioner's firm and his observations of the manner in which it was done. Mr Gatti will be to a degree disadvantaged, therefore, in comparison with the practitioner, (whom one assumes has kept a complete written record of the work which he has performed) in any complex taxation such as would be occasioned by the making of a special order in this case.

16 If this were to be considered as an application for extension of time, the power to extend time is given for the purpose of doing justice between the parties and the discretion to extend time can be exercised in favour of an applicant only on strict proof that failure to exercise the discretion will work an injustice to the applicant. In order to make that determination, it is appropriate to have regard to the history of the proceedings, the conduct of the parties and the consequence for the parties of refusing to exercise the discretion.

17 In my view, it is appropriate to apply similar principles in this case in considering the question of whether, having regard to the delay which has elapsed, it would be appropriate to make an order of the kind sought by the practitioner. The history reveals that it is the practitioner's own reliance upon a defective costs agreement, which has caused the delay in making this application, to the extent that the delay is explained at all. The practitioner has failed to act promptly in circumstances in which prima facie the client would be entitled to a refund of some moneys in the possession of the practitioner. The failure to grant the application will not have the effect that the practitioner will receive no remuneration, but merely that the practitioner will be confined to the remuneration which the scale regards as appropriate for the usual cases of this type, notwithstanding that the practitioner submits that the work was of greater than usual complexity and that the amount of work done would justify an increase in the scale amount. The delay in making this application would mean that, were it granted, there would in all probability be some prejudice to the client in dealing with the complex taxation of costs which would ensue.

18 In those circumstances, it is my view that it is not appropriate to make an order of the kind sought by the practitioner, whether one regards this as an application pursuant to the Rules for which an extension of time must be sought, or as an exercise of the court's inherent jurisdiction to which the time limits provided the Rules apply only by way of analogy.