Cappello v HomeBuilding Pty Ltd

Ground 1(b)

1. The applicants next took issue with her Honour's finding, in relation to the costs of the Supreme Court proceedings, that "the final trial costs estimate was in fact only about two hundred dollars or so below the actual costed amount (on an indemnity basis)": J [24]. They submitted that this finding constituted an error of law on the face of the record for the following reasons: 1. It was not the "actual costed amount" of $142,747.33 that was to be compared to the disclosed amount, but rather the (much higher) amount of $158,160.45 that was the subject of the costs assessment application. I note that $142,747.33 was the amount specified in the Certificate of Determination as the total amount payable in respect of the Supreme Court proceedings less interest and the filing fee. 2. In any event, the last estimate that the solicitor disclosed was $96,000 (which included professional fees and disbursements), and both the actual costed amount and the application amount differed from the disclosed amount by much more than two hundred dollars.
2. Although her Honour did not expressly state the comparison she undertook, it appears to have been between the amount of the estimated professional fees set out in the costs disclosure dated 6 July 2020 (which was $68,000) and the amount of professional fees that the costs assessor allowed on the basis that they were fair, reasonable and proportionate (which was $67,620). Counsel for the first and second respondents accepted that when the amount for disbursements was incorporated, the "actual costed amount" was higher than the estimate by a significant margin. He also accepted that what was found to be fair, reasonable and proportionate was not the amount of costs that was applied for, which was higher still. Counsel's central submission on this alleged error was that, if made, it was an error of fact, not of law.
3. I accept counsel's submission that the alleged error was one of fact. As Meagher JA observed in Ahern at [2], by reference to Folbigg v Attorney General of New South Wales (2021) 391 ALR 294; [2021] NSWCA 44 at [12], the supervisory jurisdiction that the applicants have invoked is not available to review exercises in fact-finding. The alleged error is not amenable to review on this application and it should be dismissed.
4. I note that in the revised written submissions, under the heading "Sixth error of law on the face of the record", the applicants alleged that the primary judge made the same error with respect to the costs in relation to the Court of Appeal proceedings as she did for the costs of the Supreme Court proceedings. The applicants referred to her Honour's statement that "the costs disclosures for the Court of Appeal were similarly also only a few hundred dollars short of the assessed amount", and submitted that the difference between the amount disclosed and the amount claimed was, in fact, $5,317.28. The Amended Summons did not raise this contention, as part of Ground 1(b) or otherwise, but in any event it fails on the same basis.

Ground 1(c)

1. The applicants' next argument rested on her Honour's references, at [22] and [27] of the reasons, to a decision of Slattery J in Frontier Law Group Pty Ltd v Barkman [2016] NSWSC 1542 ("Frontier Law Group"). The applicants submitted that Frontier Law Group was not authority for the proposition for which her Honour relied on it, which they submitted was that "'close enough' is good enough to be compliant" with ss 174 and 175 of the LPUL.
2. As counsel for the first and second respondents submitted, the primary judge did not rely on Frontier Law Group for that proposition. In [22], her Honour did no more than cite the decision as explaining the operation of the disclosure provisions. Then, at [27], her Honour relied on the decision by way of contrast to the disclosure in the present case, stating: "I consider that the amounts identified in the costs agreement are close enough to warrant compliance with the disclosure obligations. I take into account the way in which the costs disclosure is presented in a careful fashion where the reasoning behind the estimate is set out. This is not a global sum of the kind deplored by Slattery J in Frontier Law Group Pty Ltd v Robert Glenn Barkman [2016] NSWSC 1542 at [38]. The failure to disclose, in those proceedings, was stark; in the present case, the complaint is that the costs total falls short of what the costs actually were. In addition, the total sum to be awarded was, in the case of both costs disclosures, revisited by the solicitors who had drafted it on several occasions, for the purpose of increasing the estimate."
3. Her Honour's reliance on the decision does not give rise to any error, let alone an error of law on the face of the record.

Grounds 1(d) and 1(e)

1. The applicants' written submissions addressed Grounds 1(d) and (e) together. They submitted that in circumstances where, on the evidence before her Honour, a costs agreement containing a revised costs disclosure was not provided in respect of the Supreme Court proceedings for an extended period (on their reckoning, 17 months), there was non-compliance with s 174(1)(b) of the LPUL; and that was sufficient to have the consequences for which s 178 of the LPUL makes provision. The primary judge did not, in their submission, deal with this argument.
2. Section 174(1)(b) of the LPUL provides that a law practice (which is defined in s 6) "must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client". Section 175, to which the applicants referred in ground 1(d), relates to the circumstance in which a law practice proposes to retain another law practice. Section 178(1) then provides: (1) If a law practice contravenes the disclosure obligations of this Part - (a) the costs agreement concerned (if any) is void; and (b) the client or an associated third party payer is not required to pay the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority; and (c) the law practice must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority or under jurisdictional legislation; and (d) the contravention is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any principal of the law practice or any legal practitioner associate or foreign lawyer associate involved in the contravention.
3. That her Honour understood that the applicants' solicitor was advancing an argument relying on these provisions of the LPUL is apparent from [2] of her Honour's reasons, which I have extracted above. It was also apparent from [21] of her Honour's reasons, where her Honour referred to the solicitor's submission that the costs disclosures were relevantly "not updated" and extracted a passage from Berardi v Russo t/as Russo & Partners [2015] NSWSC 1520 ("Berardi") at [43] on which he relied. The decision of Rothman J in Berardi pre-dated the LPUL, but the reference in the passage to s 317 of the Legal Profession Act 2004 (NSW) ("the 2004 Act") was a reference to the equivalent provision (s 178) of the LPUL. In the next paragraph (to which I have referred above in the context of ground (1)(c)), her Honour described Frontier Law Group as setting out "[t]he way in which the disclosure provisions work". In Frontier Law Group at [35], which is the paragraph her Honour cited, Slattery J referred to the provisions of both the 2004 Act and the LPUL, including s 317 of the 2004 Act and s 178 of the LPUL.
4. It thus cannot reasonably be argued that her Honour failed to consider the applicants' argument or the provisions of the LPUL on which they relied. Her Honour addressed the argument at J [21]-[32]. More generally, in the context of addressing the applicants' contention regarding the unsigned costs agreements, her Honour endorsed, at [16], the reasoning of the costs assessor as to why the issues that the applicants raised about the costs agreements and the costs disclosures were not relevant when the subject of a costs assessment was costs that have been ordered. The costs assessor stated at [4.4]-[4.7]: "4.4 The fact that there is a costs agreement does not mean that the charges disclosed will automatically be allowed in an ordered costs assessment. In an ordered costs assessment, the terms of a costs agreement are not to be applied: Section 77(2) of the App Act. If a charge disclosed in a costs agreement is not objectively fair, reasonable and proportionate then it will be reduced or disallowed. This is because the costs are payable by the unsuccessful parties as a result of a costs order and not as a result of entering into a contract. There is no costs agreement and no contractual obligations between the unsuccessful parties, who have to pay the costs, and the lawyers of the successful parties in the litigation. 4.5 The Respondents have raised some issues about the costs agreements… 4.6 Matters to do with the circumstances of entering into a costs agreement and making disclosure are matters to be considered in a law practice/client assessment. They have no relevance in an ordered costs assessment. Compliance with the indemnity principle is central to an assessment of ordered costs. 4.6.1 In Enterprise Finance Solutions Pty Ltd v Ciszek [2014] NSWDC 314, Her Honour Gibson DCJ confirmed that an assessment of ordered costs is not an occasion for enquiring into what (if any) failures there have been in relation to disclosure requirements for the purpose of reducing the unsuccessful parties' liability to pay costs. 4.7 Further, copies of invoices issued to the Applicants and receipts for payments made by the Applicants into trust have been produced so I am satisfied that there has not been a breach of the indemnity principle."
5. Her Honour did not make an error as alleged in Grounds (1) (d) and (e).

Ground 1(f)

1. By Ground 1(f), the applicants took issue with her Honour's references, in [31] and [39] of the reasons, to statements which counsel for the first and second respondents made to her Honour during the hearing to the effect that he had been paid in full and had a separate costs agreement which was not the subject of challenge. They submitted that her Honour erred in acting upon statements from the bar table as evidence of the facts asserted, particularly in circumstances where they had issued a notice to produce and no costs agreements from counsel had been produced.
2. Counsel for the first and second respondents pointed out that the notice to produce that was issued to the first respondent in the District Court sought "the costs disclosures produced on your behalf to the Costs Assessor in the costs assessments the subject of these proceedings". Although no costs agreements from counsel were produced in response to that notice, it does not follow that there were no such documents. As the primary judge noted at [19], the issues raised before her Honour regarding costs disclosure "were either not raised with the assessor or Review Panel at all or were raised so elliptically that the gravamen of the complaint was unclear".
3. As to the particular parts of the reasons with which the applicants took issue, her Honour's reference at [31] to what the respondents' counsel volunteered from the bar table formed no part of her Honour's dispositive reasons. Her Honour was there addressing the submission "that the failure to name Mr O'Connor as the barrister in the costs agreement was a fatal non-disclosure which breached the disclosure rules": J [30]. Her Honour concluded at [32] that the failure was a particularly technical complaint that was contrary to the approach that the costs assessor had adopted, "that an assessment of costs is not an occasion for the stranger to the contract to look for perceived defects of form or content in the hope of invalidating the contract".
4. As to her Honour's further reference, in [39], to what counsel for the respondents had volunteered, her Honour was there dealing with the submission that there could in any event be no practical injustice. It was unnecessary for her Honour to determine this submission, having already dismissed the applicants' submissions. To the extent that her Honour relied on what counsel volunteered in this context, it was thus not dispositive. Further, and in any event, the applicants would need to establish that her Honour made a legal error in referring to counsel's statements, in the absence of any evidence that the statements of counsel were objected to by the solicitor who was representing them at the time.
5. As with the other alleged errors, I do not accept that Her Honour erred in the manner alleged.

Practical injustice

1. The respondents contended that even if the applicants were to succeed on any of the grounds they advanced, there was no "practical injustice", such that relief should be refused. In oral submissions, counsel for the first and second respondents characterised this argument as one that would go to the exercise of discretion to grant relief under s 69 of the Supreme Court Act 1970 (NSW): see eg Riva NSW Pty Ltd v Fraser & Clancy t/as Fraser Clancy Lawyers [2020] NSWCA 210 at [14], [20] (Macfarlan JA, McCallum JA and Wright J agreeing). In circumstances where the applicants have not established any of the alleged errors of law on the face of the record, it is unnecessary to determine this question or the anterior question of whether "practical injustice" can be relied upon in a manner similar to the operation of s 382 of the 2004 Act (which has no counterpart in the LPUL).

Conclusion

1. It follows that the application should be dismissed with costs. The first and second respondents sought indemnity costs, submitting that the circumstances of the present case bore a similarity to the circumstances in Ferella v Stomo [2017] NSWCA 268 ("Ferella"), in which the Court ordered the applicant to pay indemnity costs. White JA (Macfarlan JA and Sackville AJA agreeing) stated at [36]: "The applicants' claim for relief by way of judicial review was hopeless. Even if the question of law raised had been answered in the applicants' favour, the application was bound to fail because the primary judge had given sound and unchallenged reasons as to why leave to appeal should be refused if s 89 of the Application Act applied. On this ground alone it was appropriate to order that costs of the summons for judicial review be payable on the indemnity basis. That conclusion was supported by offers from the respondent to accept materially less than what he was entitled to under the orders of the District Court. Those offers were unreasonably refused."
2. Sackville AJA (Macfarlan and White JJA agreeing) stated at [39]-[44]: "The institution of judicial review is an important component of the rule of law as understood in Australia. This no doubt explains, at least in part, why the institution has been accorded constitutional status, albeit limited to cases of jurisdictional error. But there is another aspect to judicial review. The availability of judicial review opens the way to a determined or obstinate litigant who has exhausted all rights of appeal to mount a further challenge by invoking the original (as opposed to the appellate) jurisdiction of the Court. As a general proposition the litigant can seek judicial review without having to satisfy a leave requirement and regardless of whether the cost of the proceedings is 'proportionate to the importance and complexity of the subject-matter in dispute'. The litigant perhaps may risk the application being dismissed on discretionary grounds and, if the application is baseless, may also be at risk of an order for indemnity costs. However a hearing is required and these orders are not made as a matter of course. In any event, the successful respondent may find the costs order difficult to enforce. Even if enforceable, the order will often not compensate for the stress, inconvenience and wasted effort associated with the unjustified prolongation of proceedings. This case is an example of the misuse of judicial review proceedings. Two costs assessments were the subject of Certificates of Determination of Costs. The Certificates together involved costs amounting to about $44,000, plus the costs of the assessments themselves. Mr Newton, who appeared for the applicants, was unable to say what amount of costs was truly in dispute. It is a fair inference that the amount genuinely in dispute is very modest indeed. The applicants pursued, as they were entitled to do, an application for review by the Review Panel and an application to the District Court for leave to appeal from the decisions of the Review Panel. Both applications were unsuccessful. The application to this Court, although challenging the decision of the District Court rather than that of the costs assessor or the Review Panel, is in effect a third appeal over a small sum of money. The ground of the application for judicial review was that the District Court (like the Review Panel) erred in applying the provisions of the Legal Profession Act 2004 (NSW) (LP Act) rather than the provisions of the Legal Profession Uniform Law (NSW). Mr Newton was asked what difference it would have made had the Review Panel applied what the applicants said were the correct provisions. His answer was 'On one view, it would make possibly not a lot of difference'."
3. The first and second respondents submitted that, as was the case in Ferella, the applicants brought the present proceedings after having been unsuccessful in the Review Panel and the District Court. At no stage did they challenge the assessed amount of costs; and the costs of the various proceedings were out of all proportion to the value of fees in dispute. The respondents also submitted that an interlocutory judgment of Basten AJA in Cappello v Homebuilding Pty Ltd [2023] NSWCA 61 put the applicants on notice that their case was "hopeless". In the face of that warning, the applicants persevered with their highly technical points which, even if made out, would not have affected the first respondent's right to have its fees assessed. They submitted that the applicants' conduct in bringing the judicial review application was oppressive.
4. As I noted above, when invited to make submissions on the application for indemnity costs, Mr Cappello relied on his written submissions. The submissions in reply stated the following on this issue: "For the defendants to put that Basten AJA as much told the plaintiffs their claim for judicial review was hopeless is patently obvious from reading the paragraph they cite incorrect[ly] The appeal from the costs assessments was on the grounds that the assessor and the review panel had erred in law. Errors in law are not 'artificial'. They are not highly technical. They involve compliance with the indemnity principle by non-compliance with legislative provisions. It is for this Court to determine if no error has been shown. The defendants make submissions as to facts that are not in evidence. They selectively omit that they have taken and lost a number of proceedings with costs against them and which they have not paid."
5. The Court has a discretion to award costs on an ordinary or indemnity basis. Usually costs will follow the event, unless the Court considers that some other order ought to be made: Civil Procedure Act 2005 (NSW), s 98; Uniform Civil Procedure Rules 2005 (NSW), r 42.1; Collier v Country Women's Association of New South Wales [2018] NSWCA 36 at [116] ("Collier").
6. For an order of indemnity costs to be made, the conduct of the party against whom such costs are sought must usually exhibit some special or unusual feature: Collier at [117]. The focus is on the way the litigation was conducted: Mead v Watson [2005] NSWCA 133 at [8]-[9]. For example, the discretion may be enlivened where a party persists in what should have been seen to be a hopeless case, such as where the case was unduly prolonged by groundless contentions: Ferella at [36]; Liverpool City Council v Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan and Ors) [2009] NSWCA 161 at [93] ("Liverpool City Council"). It has also been said that indemnity costs may be awarded where the unsuccessful party's conduct was unreasonable or delinquent: Amirbeaggi v Matrix Group Co Pty Ltd [2021] NSWCA 21 at [18].
7. The categories of circumstances in which the discretion may be exercised are not closed: Liverpool City Council at [93]. Ultimately, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on the ordinary basis: Liverpool City Council at [93].
8. As a general rule, a court will be more reluctant to order indemnity costs against an unrepresented litigant, but the circumstances may make it appropriate to do so: Quach v Australian Health Practitioner Regulation Agency [2021] FCA 313 at [48]. Some allowance should be made for the applicants' lack of knowledge of the law, unfamiliarity with court practices and lack of objectivity as unrepresented litigants: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 542 (Kirby P, Hope and Samuels JJA agreeing). The purpose of such an order is to provide compensation to a party for the expense incurred in defending the proceedings.
9. The applicants' status as self-represented litigants is a relevant distinguishing feature between the present case and Ferella, in which the applicant was represented and persisted in a highly technical argument which, counsel accepted, would make no difference to the outcome even if correct. Further, following the decision of Basten AJA in Cappello v HomeBuilding Pty Ltd [2023] NSWCA 61 (whose assessment of the merits was appropriately qualified given his Honour did not have the written submissions), the applicants amended their summons and provided revised submissions which focused on the errors alleged in the Amended Summons; and they did not take up any hearing time with oral submissions, instead relying on their written submissions.
10. Nonetheless, the alleged errors on which the applicants relied were without merit, for the reasons I have set out above. More significantly, the alleged errors were not directed at the amount of the costs that were the subject of the two costs assessments. Instead, the applicants advanced the technical arguments they had advanced, unsuccessfully, before Gibson DCJ, at a time when they were represented. Although challenging the decision of the District Court rather than that of the costs assessor or the Review Panel, the applicants attempted what was, in effect, a third appeal, in circumstances where the costs as assessed well exceeded the amount of money that prompted the proceedings in the Supreme Court. In my view, an order for indemnity costs is appropriate in the circumstances.
11. Accordingly, I propose the following orders: 1. The Amended Summons is dismissed. 2. The applicants are to pay the respondents' costs of the application to be assessed on an indemnity basis.
12. SIMPSON AJA: I agree with Mitchelmore JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 May 2023