Cappello v Transport for New South Wales

District Court of NSW|2022-11-17

Judgment

In these proceedings, the plaintiffs (the "Cappellos") appeal against the determination of a Costs Review Panel arising out of a costs assessment and review of ordered costs (party/party).
The plaintiffs contend that the appropriate assessment that should have been issued by the Review Panel was an assessment of $nil. The bases for the plaintiffs' contentions are: 1. the indemnity principle was not satisfied because neither the Crown Solicitor nor counsel complied with the mandatory costs disclosure requirements of Part 4.3, Legal Profession Uniform Law (NSW) ("LPUL"); 2. alternatively, the Crown Solicitor was in a position analogous to an in-house lawyer because the defendant, Transport for New South Wales (TfNSW, formerly Roads and Maritime Services (RMS)), is a part of the NSW Government and the Crown Solicitor is an employee of the NSW Government. Accordingly, in light of the abolition of the Chorley exception, and the discussion of in-house lawyers' costs in Bell Lawyers Pty Ltd v Pentelow & Anor (2019) 269 CLR 333; [2019] HCA 29, such costs are irrecoverable from the plaintiffs.

Background

The Cappellos brought the substantive proceedings against RMS, challenging the validity of certain proposed acquisition notices for land at Haberfield of which they were the registered proprietors. The Cappellos had argued that the acquisitions were outside the scope of the purposes of the Roads Act 1993 (NSW), and were therefore unauthorised and ultra vires.
The Cappellos were unsuccessful at first instance and were ordered to pay the costs of the successful defendant: Cappello v Roads and Maritime Services [2019] NSWSC 439 at [58]. The Cappellos appealed, however, the appeal was also dismissed with costs: Cappello v Roads and Maritime Services & Anor [2019] NSWCA 227. Judgment at first instance was delivered on 18 April 2019, after an expedited hearing, and judgment in the appeal was handed down on 16 September 2019.
The present proceedings concern only the costs of the substantive hearing at first instance.

The costs assessment

On 14 May 2021, the defendant ("TfNSW") wrote to Mr Cappello enclosing a proposed Application for Assessment of Ordered Costs (the "Application") in relation to the first instance and appeal proceedings. The Cappellos responded in September 2021 with an undated, one-page objection predominantly on the basis that the Application did not comply with the requirements for an application for determination of party/party costs.
TfNSW filed the Application on 14 September 2021 and on 18 October 2021 TfNSW filed a submission in response to the Cappellos' Notice of Objection. In general terms, TfNSW's position was that it had been reasonable to carry out the work, which had been carried out in a reasonable manner.
The Cappellos filed general and specific objections on 1 December 2021. The objections took the form of four pages of general objections, together with a hand annotated bill of costs identifying specific objections. The gravamen of the general objections was that TfNSW had not satisfied the indemnity principle as the Crown Solicitor's Office, acting for TfNSW or RMS, was in the same position as an in-house lawyer, whose professional costs are irrecoverable. The objections further contended that the Application did not comply with the requirements set for an application for determination of party/party costs and that it had claimed several unreasonable items.
TfNSW provided its submissions in response to the further Notice of Objection on 23 December 2021. Relevantly, TfNSW's position was as follows: 1. the documents provided by way of disclosure demonstrated a legal liability to pay as per Wentworth v Rogers [2006] NSWCA 145; 2. the indemnity principle was to be applied on a global basis: CSR Limited v Eddy [2008] NSWCA 83 and Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2011] NSWDC 55; and 3. TfNSW joined issue with the non-compliance objections.
On 18 January 2022, the Costs Assessor issued a Certificate of Determination of Costs (Form C4) in the sum of $98,363.29 (comprising costs and disbursements in the sum of $83,305.15 and interest in the sum of $15,058.14). A further Certificate of Determination of Costs of Costs Assessment (Form C3) was issued in the amount of $6,708.90. A Statement of Reasons accompanied the certificates. Some of TfNSW's claims were disallowed.
The Statement of Reasons addressed each of the objections, the majority of which are not the subject of this appeal. Relevantly to the way in which the Cappellos frame their appeal in this Court, the Statement of Reasons included the following: 1. Requiring evidence of payment is discretionary and there is no reason to believe payment might not have been made. The physical signature on the Standard Terms of Engagement is not necessary to give it effect. 2. The Crown Solicitor's Office was analogous to a private solicitor whose costs were recoverable.
On 10 February 2022, the Manager, Costs Assessment, sent the Certificates of Determination and Reasons to the parties.

The Review Panel

On 23 February 2022, the Cappellos filed an Application for Review of Determination of a Costs Assessor. The grounds were: 1. the Costs Assessor erred in finding that the applicant had satisfied the indemnity principle on numerous grounds: 1. no complying costs agreement with, or costs disclosure by, solicitor or counsel was produced; 2. the disclosure obligations in ss 174 and 175, LPUL had not been complied with; 1. the effect of non-compliance was that there was no liability to pay any such costs, which were therefore irrecoverable from the Cappellos; 2. the payment of invoices did not override the consequences of non-compliance with disclosure obligations specified in s 178, LPUL; 3. Pentelow applied and the Costs Assessor erred by allowing the costs of a self-represented litigant represented by in-house lawyers; 4. mandatory requirements in the Application for Determination of Party/Party Costs had not been met; 5. the Costs Assessor erred in awarding interest; 6. the Costs Assessor erred in finding that the costs applicant had satisfied its onus of proving that intra-office conferences had contributed to the efficient conduct of the case; 7. the Costs Assessor erred in allowing intra-office reviews and settling of documents; 8. pre-commencement work should have been disallowed; 9. work was allowed at solicitors' rates which ought to have only been allowed at paralegal rates; 10. research ought not to have been allowed; 11. items had been duplicated; and 12. the bill contained insufficient detail.
On 30 March 2022, TfNSW provided its submissions in response to the Application for Review. TfNSW joined issue in relation to the indemnity principle and in relation to the allegations of non-compliance.
On 3 May 2022, the Review Panel issued a Certificate of Determination of Review - Affirmation (Form C6), a Certificate of Determination of Review Panel Costs (Form C8) and a Statement of Reasons.
Relevantly, the Review Panel accepted that TfNSW was a government authority at all relevant times, with the effect that it was exempt from the application of Part 4.3 of the LPUL. The Review Panel further accepted that the Crown Solicitor's Office was in a position analogous to a private solicitor and accepted the Assessor's reasoning regarding the recoverability of in-house lawyers' costs.
On 3 May 2022, the Manager, Costs Assessment sent the Certificates of Determination and Reasons of the Review Panel to the parties and on 21 June 2022, a Certificate of Judgment - Application to Register was filed in the Supreme Court. On that day judgment in the amount of $102,752.29 was issued by the Supreme Court.

The current appeal and application for leave to appeal

The Summons in the current appeal was filed on 3 August 2022. The pleaded grounds of appeal are: 1. the Review Panel erred in confirming the Costs Assessor's determination that the costs applicant had satisfied its onus of proof that it had satisfied the indemnity principle; 2. the Review Panel erred in failing to find non-compliance with s 178, LPUL and that thereby the Applications were nugatory or of no effect; and 3. the Review Panel erred by confirming the Costs Assessor's determination.

Leave to appeal

The Summons was filed out of time and, accordingly, the Cappellos require leave under s 89 of the Legal Profession Uniform Law Application Act 2014 (NSW) (the "LP Application Act") to proceed. In support of that application, the Cappellos rely on the affidavit of Ms Andrea Lee, solicitor, sworn 3 August 2022. Ms Lee deposes that the Summons was filed out of time due to an administrative oversight in the solicitors' office, when the appeal papers were not distinguished from another matter in which a review panel determination was being sought. Accordingly, the deadline was missed. In her affidavit Ms Lee apologised for the oversight.
Section 89 was considered by the Court of Appeal in Gazecki v McCabes Lawyers Pty Ltd [2020] NSWCA 98; (2020) 102 NSWLR 259 in the context of the LPUL's predecessor. Relevantly, the Court made the following observations with respect to s 89 at [36]-[42]: 1. an appeal only lies from a decision of a review panel; and 2. the court is not given specific powers but, rather, all the functions of the review panel.
Further, although the distinction between appeals on matters of law and appeals from the final determination of a costs assessment has been removed, it may, nevertheless, be appropriate to adopt a different standard of scrutiny with respect to each. Thus, questions of law are inherently liable to review according to a correctness standard; a lower standard of scrutiny may well be applicable to an assessment of what costs are fair and reasonable in the circumstances of the particular case. That is particularly so where a specific body of costs assessors, appointed solely for that function, reach evaluative judgments. Further, costs assessors are expected to ensure consistency of approach, being a standard which cannot readily be applied by a reviewing court with limited experience of such matters: Gazecki at [43].
The relevant principles governing leave to appeal with respect to costs were considered in Ackerman v Morgan [2019] NSWSC 1250 and restated by Walton J in Malvina Park Pty Ltd v Johnson [2019] NSWSC 1490. The principles relevant to the present application for leave may be summarised as follows: 1. An applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute: Zelden v Sewell; Henamast Pty Ltd v Sewell [2011] NSWCA 56 per Campbell JA (with the agreement of Young JA) at [22]. 2. Ordinarily it is appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable: Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 per Campbell JA (with the agreement of Young and Meagher JJA) at [46]. 3. An application for leave is not a proceeding in the ordinary course of litigation, but a preliminary procedure: Collins v The Queen (1975) 133 CLR 120 at 122; [1975] HCA 60. As such, it is "recognised by the legislature as a means of enabling the court to control in some measure the volume of appellate work requiring its attention": Coulter v The Queen [1988] HCA 3; (1988) 164 CLR 350 at 356 per Mason CJ, Wilson and Brennan JJ. 4. One of the factors to be taken into account pursuant to s 58 of the Civil Procedure Act 2005 ("CPA") is "the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction": s 58(2)(b)(vi). The requirement that a new trial not be ordered unless it appears that "some substantial wrong or miscarriage" has been occasioned, also reflects a principle of parsimony in requiring that the parties be put to the expense of a second trial: Be Financial Pty Ltd v Das [2012] NSWCA 164 per Basten JA at [36]. 5. Leave should be granted only where there are substantial reasons to allow an appellate review (Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564; [2000] FCA 1572), such as where there is an error of principle which, if uncorrected, will result in substantial injustice. 6. What constitutes a "substantial injustice" requires a balancing exercise in which the Court must take account of: (a) whether it can in a preliminary proceeding find the judgment below is attended by sufficient doubt; (b) the effect of delay and cost of further litigation which will constitute a form of injustice to the successful party below, whatever the outcome of the appellate process; and (c) the availability of the resources of the court and the appropriate allocation of resources by the parties: Be Financial at [37]. 7. The purpose of a requirement of leave to appeal is to act as a filter to exclude unsuitable appellant proceedings from being brought, given the demands placed thereby upon the resources of the Court, the burden placed upon other parties and the delay caused to other litigants: Chapmans Ltd v Yandell [1999] NSWCA 361, Fitzgerald JA (with whom Mason P and Davies AJA agreed) at [11]. 8. Section 60 of the CPA requires that the practice and procedure of the Court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute. Where the costs of the trial are disproportionate to the amount in dispute, the incurring of additional costs, for a potentially uncertain return, will be a factor weighing heavily against a grant of leave: Be Financial, per Basten JA at [39]. 9. Nevertheless, while the amount in issue on an appeal is a relevant consideration, the mere fact that the amount is small will not preclude the grant of leave where the appeal raises errors of principle, matters of public importance, or injustice going beyond what is merely arguable: Metziya Pty Ltd v ICR Engineering Pty Ltd [2016] NSWSC 1703 per Schmidt J at [12].
The grant of leave is discretionary.
If leave is granted, the appeal is by way of a rehearing rather than a hearing de novo. Fresh evidence or evidence in substitution for the evidence before the review panel is permissible with the leave of the Court, although there was no such application in the present case. Because the appeal is by way of a rehearing, it is necessary for the plaintiffs to identify an error (of law, of fact or of discretion) in the determination of the Review Panel.
In the circumstances, I consider it appropriate to grant leave. The plaintiffs contend that the present appeal raises issues of principle. I have also paid particular regard to the reasons that an appeal that otherwise may have been brought as of right required leave, being an oversight as to the deadline for filing the summons in this appeal. TfNSW has not argued that it would be prejudiced by the grant of leave, and was ready to argue the merits at the hearing. While, as may be seen below, I have rejected each of the Cappellos' arguments, I consider it in the interests of justice in the present case to deal with those arguments on their merits.

Appeal grounds and consideration

The Cappellos' argument in this Court is essentially as follows: 1. Both the Crown Solicitor and counsel were obliged to comply with mandatory costs disclosure requirements under ss 173 and 174, LPUL and they failed to comply with those requirements. Because of their failure to comply with the mandatory disclosure requirements, s 178 has the effect that TfNSW was not required to pay the legal costs until they had been assessed and, therefore, unless and until those costs had been assessed, TfNSW was not liable to pay such costs and could not seek to recover them from the Cappellos. 2. Both the Costs Assessor and the Review Panel ought to have found that the Crown Solicitor was in a position analogous to an in-house lawyer because TfNSW is a part of the NSW Government and the Crown Solicitor is an employee of the NSW Government. Accordingly, the Crown Solicitor is unable to recover its costs in light of the abolition of the Chorley exception and discussion by the High Court of the recoverability of in-house lawyers' costs in Pentelow. 3. Alternatively, TfNSW is not the same entity as RMS. RMS, an entity created under the Transport Administration Act 1988 (NSW), was dissolved and TfNSW, a statutory corporation, now stands in its place. Neither body is, or was, a government authority and s 170, LPUL does not apply.
It should be noted that the argument at [26(3)] above was not raised before the Review Panel. Accordingly, there can have been no error in that regard and the Cappellos cannot rely on that argument in the present appeal. It might also be noted that the Summons only raises the matter at [26(1)] above as an appeal ground.

Indemnity principle

When a court makes a costs order against a party, it aims to provide the opposing, successful, party some indemnity (but no more) for the legal costs the latter has been required to incur in vindicating or upholding his or her rights in court: [7.5], Law of Costs, G E Dal Pont, Lexis Nexis, 3rd edition, 2013.
The Cappellos' say that TfNSW (and its predecessor, RMS) have never been under any extant obligation to pay the costs as assessed because the Crown Solicitor, as a legal practice, failed to meet its disclosure obligations. Accordingly, under s 178, LPUL, RMS/TfNSW has never been obliged to pay such costs and cannot recover them from the Cappellos pursuant to the indemnity principle.
I do not accept the Cappellos' argument with respect to the indemnity principle.
Under s 170, LPUL, certain "commercial or government clients" are exempt from Part 4.3, "Legal Costs", with the result that a law practice is not required to make any form of disclosure to them.
Section 170, LPUL relevantly provides: 170 Commercial or government clients (1) This Part does not apply to - (a) a commercial or government client; or (b) a third party payer who would be a commercial or government client if the third party payer were a client of the law practice concerned - but this section and sections 181(1), (7) and (8), 182, 183 and 185(3), (4) and (5) do apply to a commercial or government client referred to in paragraph (a) or a third party payer referred to in paragraph (b). (2) For the purposes of this Law, a commercial or government client is a client of a law practice where the client is - …. (g) a government authority in Australia or in a foreign country; …
Section 6 of the LPUL defines "government authority" non-exhaustively as follows: government authority includes a Minister, government department or public authority of the Commonwealth or of a jurisdiction, and includes a body or organisation (or a class of bodies or organisations) declared in the Uniform Rules to be within this definition.
New South Wales is a state of the Commonwealth and is therefore a jurisdiction in the sense used in the definition of "government authority" in s 6, LPUL.
The substantive proceedings were commenced in 2019 and were heard in April of that year. At the time of the relevant disclosures, the defendant in the substantive proceedings was RMS. RMS was a corporation constituted under the former s 46 of the Transport Administration Act 1988 (NSW). Section 46 of the Transport Administration Act constituted the RMS as a corporation with the corporate name of Roads and Maritime Services. Under s 46(2) it was expressly constituted as a NSW Government agency. The functions of the RMS included functions imposed on it under the Roads Act 1993, which was the subject of the dispute in the substantive proceedings the subject of the costs orders in question in these proceedings.
The Cappellos contend (in their written submissions in reply) that as a corporation incorporated under the Transport Administration Act, RMS was not a public authority and therefore not a government authority within s 6, LPUL. Why RMS ought not be treated as a public authority, other than by reason of the bare fact that it was a statutory corporation, was not satisfactorily explained. RMS was not a private corporation in terms of ownership or function. It was established by statute. It exercised public functions, including administration under the Roads Act. In my view, these factors are sufficient to bring RMS within the inclusive definition of "government authority" in the LPUL.
RMS was dissolved pursuant to the Transport Administration Amendment (RMS Dissolution) Act 2019 (NSW) (the "Dissolution Act"), assented to on 21 November 2019. Schedule 1 to that Act comprises amendments to the Transport Administration Act. In general terms it effects the substitution of "RMS" with "TfNSW", wherever it appears in the Transport Administration Act. By Item 35 of the Dissolution Act, savings and transitional provisions are inserted into Schedule 7 of the Transport Administration Act. With effect from November 2019, Schedule 7 of the Transport Administration Act has relevantly provided: Part 29 Provisions consequent on dissolution of RMS 218 Dissolution of RMS (1) Roads and Maritime Services (RMS) is dissolved. (2) The assets, rights and liabilities of RMS are, on its dissolution, transferred to Transport for NSW. (3) Schedule 4 applies to the transfer of the assets, rights and liabilities of RMS by the operation of this clause and so applies as if this clause were an order to which that Schedule applies when this clause takes effect. (4) Any act, matter or thing done or omitted to be done before the dissolution of RMS by, to or in respect of RMS is (to the extent that the act, matter or thing has any force or effect) taken to have been done or omitted by, to or in respect of Transport for NSW. (5) A reference in any Act (other than this Act), in any instrument made under any Act or in any document of any kind to RMS is to be construed as a reference to Transport for NSW. (6) A reference in any Act (other than this Act), in any instrument made under any Act or in any document of any kind to the Chief Executive of RMS is to be construed as a reference to Transport for NSW. (7) Without limiting subclauses (2) and (3) and Schedule 4, any proceedings commenced by or on behalf of RMS but not completed before its dissolution are taken to have been commenced by or on behalf of TfNSW. (8) For the purposes of subclause (7), proceedings includes any prosecution, investigation or other enforcement action.
By reason of the insertion of Part 29 into Schedule 7, TfNSW succeeded to all of the assets, rights and liabilities of RMS. Any entitlement to recovery of costs that had vested in RMS as at 20 November 2019 was therefore transferred to TfNSW. There would be no need for TfNSW, contrary to the submission made on behalf of the Cappellos, to be joined as a party to recover costs formerly due to RMS.
For the reasons set out above, there can be no doubt that at the time of the substantive proceedings and the time at which any disclosure under Part 4.3 LPUL would have been required, RMS, in its earlier incarnation, was the defendant and that RMS was a "government authority" within the meaning of s 6, LPUL. Its subsequent dissolution and replacement by TfNSW, for the purpose of the Transport Administration Act, does not alter that status at that time. Accordingly, s 170, LPUL applied and there was no requirement for the Crown Solicitor, or counsel, to make any form of disclosure to it.
It follows that s 178 LPUL has no application in the current circumstances. For the sake of completeness, s 178 relevantly provides: 178 Non-compliance with disclosure obligations (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 …
As I have found that RMS was a government authority within the meaning of s 6 of the LPUL, the disclosure obligations in Part 4.3 do not apply in the present case and s 178 is not enlivened. As I have found that any disclosure obligation that could have arisen would have done so at a time when the relevant authority was RMS and not TfNSW, the status of TfNSW as a government authority or statutory corporation in the period after 20 November 2019 is irrelevant.
I am fortified in this conclusion by the decision of Gibson DCJ in Cappello v HomeBuilding Pty Ltd (District Court (NSW), Gibson DCJ, 9 December 2022, unrep). In that case, Mr Hall (who appeared for the plaintiff in those proceedings as well as in this appeal) advanced a similar argument to the effect that inadequate disclosure under Part 4.3, LPUL resulted in a costs agreement being unenforceable such that no obligation to pay costs could have arisen under the indemnity principle. Her Honour found no breach of the disclosure obligation in that case.

Error in confirming Costs Assessor's determination: abolition of the Chorley exception and in-house lawyers' costs

This ground of appeal relies on the proposition that the Crown Solicitor was in a position analogous to an in-house lawyer, because RMS/TfNSW is a NSW agency and the Crown Solicitor is an employee of the NSW Government. The Cappellos argued that NSW Government costs incurred by NSW Government solicitor employees were irrecoverable on the assessed basis. The submission would appear to contradict the submission with respect to disclosure so I have treated it as an alternative argument.
It might be noted that even on its own terms, the Cappellos' submission would not apply to counsel's fees. The contention that the costs be assessed at $nil would therefore still fail, even if the argument were accepted.
In their Statement of Reasons, the Review Panel agreed with and adopted the reasoning of the Costs Assessor. The Costs Assessor had found that the Crown Solicitor's Office was: "under the purview of the Justice Department and [had] nothing to do with Transport for NSW save to provide legal services. Transport for NSW [was] at liberty to instruct other lawyers from the non-government legal profession".
As a general rule, a self-represented litigant is not entitled to recompense for the value of time their spent in litigation. The "Chorley exception" was an anomalous principle pursuant to which a solicitor who successfully acted for himself or herself in litigation was entitled to the same professional costs as if he or she had engaged legal representation, except for such items as obtaining instructions or attendances, which were unnecessary as the lawyer and client were the same person: London Scottish Benefit Society v Chorley (1884) 13 QBD 872.
In Pentelow, a plurality of the High Court (Kiefel CJ, Bell, Gageler, Keane, Gordon and Edelman JJ) held that the Chorley exception is not part of the common law of Australia: at [3], [57], [63], [93].
The Cappellos' submission with respect to in-house lawyers' costs was not articulated in their written submissions or notes provided to the Court in reply. If I understand that argument correctly, it appears to be that the only recoverable costs are external costs and the costs associated with the employment of the solicitors who performed the work and, presumably, overheads.
In Pentelow, Kiefel CJ, Bell and Gordon JJ stated: [46] The respondent argued that serious inconvenience would be occasioned in relation to the use of in-house solicitors by governments and corporations, including incorporated legal practices, if the Chorley exception were not recognised by this Court as part of the common law. It was argued that governments and other employers, and incorporated legal practices operating through a sole director, would be prevented from recovering costs for professional legal services rendered by employed solicitors. [47] This submission fails to appreciate that in relation to the use of in-house solicitors, such arrangements have been treated as being outside the general rule because it is accepted that the recovery of the professional costs of in-house solicitors enures by way of indemnity to the employer, as is confirmed by the inclusion of "remuneration" in the definition of "costs" in the Civil Procedure Act. Where a government or corporate litigant has been represented by an employed solicitor, the courts have proceeded on the footing that the actual cost to the government or corporation of the legal services provided by its employed solicitor would not exceed, in any substantial amount, the sum recoverable by it for professional legal costs. In Commonwealth Bank of Australia v Hattersley (89), Davies A-J explained that: "[W]here an employed solicitor is involved, the traditional approach has been to award costs on a basis comparable to the costs which would have been incurred and allowed on taxation had an independent solicitor been engaged. The assumption has been made that, in an ordinary case, the indemnity principle will not be infringed by taking this approach." [48] In Ly v Jenkins (90), Kiefel J (as her Honour then was) adopted that explanation and the view expressed by Russell LJ, with whom Stamp and Lawton LJJ agreed, in In re Eastwood (Deceased) (91): "It is a sensible and reasonable presumption that the figure arrived at on this basis will not infringe the principle that the taxed costs should not be more than an indemnity to the party against the expense to which he has been put in the litigation." … [50] A decision by this Court that the Chorley exception is not part of the common law of Australia would not disturb the well-established understanding in relation to in-house lawyers employed by governments and others, that where such a solicitor appears in proceedings to represent his or her employer the employer is entitled to recover costs in circumstances where an ordinary party would be so entitled by way of indemnity. [Emphasis added, footnotes omitted]
Gageler J at [68] agreed: Recovery of costs by a party using an employed solicitor predated introduction of the Chorley exception (117). The better view, explained in a number of cases to which the Supreme Court of New Zealand appears not to have been referred, is that recovery of costs by a party using an employed solicitor is an application of the general principle rather than an exception to it (118). The general rule is engaged on the basis that the costs of using the employed solicitor are still awarded as indemnity for professional legal costs actually incurred in the conduct of litigation by the employer who is a party to the litigation, albeit that those professional legal costs are incurred in the form of an overhead and are therefore not reflected in a severable liability. [Footnotes omitted]
It may be seen, therefore, that Pentelow does not stand for the proposition that professional costs of in-house solicitors are irrecoverable or are only recoverable on a more limited basis than was the case in this matter. The Court will presume that assessed professional costs are not more than would be required to indemnify the successful party in respect of its liability for costs. If the Cappellos had sought to rebut that presumption and to demonstrate that the traditional approach identified in the above passages infringed the indemnity principle in this case, it was incumbent on them to raise it as an issue before the Review Panel and establish, as a matter of evidence, a disjunction between the remuneration and oncosts of Crown Solicitor employees, on the one hand, and the professional costs charged to the defendant, on the other. They have not done so, and do not appear to have attempted to do so. They have demonstrated no error in the approach of the Review Panel in this regard.
The summons in these proceedings should be dismissed with costs.

Orders

The orders of the Court are: 1. Leave to appeal is granted. 2. Summons dismissed. 3. The plaintiffs to pay the costs of the defendant as assessed or agreed. 4. Liberty to apply in relation to costs.

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: 06 April 2023

Transport Administration Amendment (RMS Dissolution) Act 2019(NSW)

(2020) 102 NSWLR 259

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