HER HONOUR: The plaintiff in these proceedings sought to have bills of costs issued by the defendant solicitor assessed out of time. After the conclusion of the plaintiff's case and before going into evidence, the solicitor capitulated to the relief sought but resisted an order as to costs. This judgment determines the question of costs.
The hearing proceeded by reference to an amended summons which specified three grounds for the relief sought. As explained below, those grounds were the subject of shifting emphasis at various stages of the proceedings.
The proceedings were listed for hearing on 6 April 2017 with an estimate of half a day. The plaintiff's evidence was read and she and her two other witnesses were cross-examined. At the point when the Court adjourned for the lunch break, the defendant was due to go into evidence and to be cross-examined. When the hearing resumed, after requesting a short adjournment to pursue settlement negotiations, Ms Clemmett, who appears for the defendant, informed the Court that partial agreement had been reached in that the defendant consented to the substantive relief sought but opposed any order requiring him to pay the plaintiff's costs. The consent to the substantive relief sought was not conditional upon the resolution of the contest as to costs; the defendant was content to abide by the Court's determination on that issue.
The Court has a broad discretion as to costs, the exercise of which is ordinarily informed by the outcome of the proceedings. That proposition is reflected in r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), which provides:
Subject to this part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
It follows that, where parties reach a compromise on all issues except costs, the Court's discretion must, of necessity, be exercised without the benefit of what is ordinarily the determinative or at least the principal factor to be taken into account.
Bruce v Magee trading as Armstrong Legal [2017] NSWSC 1687 | Case summary | Zoe
The plaintiff's position was simple. She submitted that the defendant had, in effect, capitulated to the relief sought and accordingly that the relevant "event" was that the plaintiff succeeded and should have her costs.
Before explaining the defendant's position, it is necessary to record some of the procedural background. The plaintiff's amended summons was filed in the registry on 24 June 2016. However, the defendant took issue with the plaintiff's entitlement to file that document. That dispute gave rise to two interlocutory applications: an application by the defendant for summary dismissal of the proceedings and an application by the plaintiff for leave to file the amended summons.
Those applications were resolved by consent on 26 September 2016 on the basis that the dismissal application was dismissed and the plaintiff was granted leave to file the amended summons. On that occasion, the plaintiff consented to an order to pay the costs thrown away by reason of the amendment, which were specified to include the costs of the two applications.
The amended summons raised three issues for the Court's determination. The first was whether the plaintiff (who has been admitted as a solicitor but does not work as such) was a "sophisticated client" within the meaning of the Legal Profession Act 2004 (NSW). She capitulated on that issue in advance of the hearing. Secondly, there was a contest as to the form of the bills served, which did not include substantial amounts paid to counsel by way of disbursements (counsel's fee notes evidently having been shown to the client separately and paid in between the issue of the solicitor's bills). Finally, there was a difficult legal question as to whether the Court had authority, in the exercise of its inherent jurisdiction, to refer a bill for assessment outside the specific statutory regime directed at that issue (which imposes a limitation period).
Each party provided careful and compelling submissions on the issue of inherent jurisdiction. The proceedings were resolved at a time when it had become clear that there was a respectable argument either way. There is apparently no authority on point. In those circumstances, the defendant submitted that his consent to the relief sought should not be construed as a capitulation to the relevant "event" and that the fair order would be that each party pay his or her own costs.
Ms Clemmett drew my attention in that context to the decision of White J (as his Honour then was) in ISIS Projects v Clarence Street [2006] NSWSC 190, which provides a convenient summary of the relevant principles (at [64]):
As a general rule, costs follow the event, such that prima facie the successful party is entitled to recover its costs from an unsuccessful party. As a corollary, prima facie, where a party discontinues an action, he is liable to each other party for their costs. However, the principle that costs follow the event is usually applicable following a hearing on the merits. Where a dispute has been resolved without a hearing on the merits, and there has been no capitulation, the court does not try an hypothetical action to determine who would have succeeded in order to decide how costs should be borne. In such a case, the general rule is that there should be no order as to costs. In some circumstances however, the court may be able to conclude that one of the parties has acted unreasonably in bringing or defending the proceedings. In rare cases, it may be possible for a judge to feel confident that even though both parties acted reasonably, one party was almost certain to have succeeded if the action had gone to a hearing. The reasonableness or unreasonableness of a party's institution or defence of proceedings, and the question whether one party had a near certainty of success, are matters which must be resolved, if they can be, on undisputed facts disclosed by the pleadings, the affidavits, or documents tendered, or interlocutory relief granted. Where proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that interlocutory relief has been granted in exercising its discretion as to costs, but ordinarily the grant of interlocutory relief carries no implication as to the ultimate merits of the case, beyond the fact that it raises a seriously arguable issue.
The plaintiff opposed the order proposed by the defendant on two grounds. First, it was submitted that the argument for the existence of an inherent power in the Court to grant the relief sought was "very strong". While it is difficult to judge that submission without embarking on the very task obviated by the parties' agreement, there was certainly a strong argument for the contention that the Court would not lack power, as an aspect of its supervision of the legal profession, to refer a bill for assessment even outside the statutory regime. Secondly, the plaintiff relied upon the timing of the defendant's capitulation.
Mr O'Sullivan, who appears for the plaintiff, invoked a lovely analogy on that issue:
And to use an analogy that might appeal to Lord Sumption, who your Honour would know is an author of several textbooks on medieval warfare, the capitulation comes after the walls have been breached and the citadel is about to be sacked. And under medieval laws of war, no quarter was to be given or expected in those circumstances. Had the capitulation been forthcoming when the city was called upon to surrender, then it would have been spared the sword. As I said, that's an analogy which would probably appeal more to Lord Sumption than your Honour, but the short point I wish to make is that the submission was made just before the defendant was to be cross‑examined and in a hearing that was to finish within one day, which had approximately two hours left to run.
The submission might be thought to illustrate Ms Clemmett's wisdom in negotiating terms of capitulation (leaving the issue of costs to be determined by the Court) rather than a surrender at discretion.
Ms Clemmett submitted that the timing of the capitulation must be considered in the context that the plaintiff's submissions for the purpose of the hearing were served late. The submissions were due on 3 February 2017 but were not served until 4 April 2017. However, substantially the same issues were rehearsed in preparation for the dismissal application. The defendant has been on notice of the inherent jurisdiction issue since July last year when the amended summons was served.
As Mr O'Sullivan correctly apprehended, while I cannot speak for Lord Sumption, the prospect of submitting a capitulating litigant to the sword does not greatly appeal to me. It is relevant, in my view, to have regard to the benefit both to the plaintiff and to the Court of the defendant's concession, particularly when a case raises a difficult legal question. The Court must be astute not to discourage the resolution of proceedings by making orders which appear to operate as punishment for making a concession.
Conversely, it is necessary to pay due regard to the fact that the plaintiff had to press on to a hearing to obtain relief that, as the capitulation suggests, could have been consented to at an earlier point. She is already liable for the costs of the two interlocutory applications which also could have been avoided had the solicitor consented to assessment of the bills from the outset.
In the circumstances, I do not think the all or nothing approach suggested by the principles stated in ISIS Projects would achieve a fair result in the present case. I consider that the plaintiff, having effectively obtained the result she sought from the outset, should be awarded most of her costs but that there should be some concession for the uncertainty of the outcome which I have already explained. Doing the best I can, I consider the fair order is for the defendant to pay two-thirds of the plaintiff's costs of the proceedings, subject to existing orders.
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Decision last updated: 06 December 2017