Carnavalesca Pty Ltd t/as Paragalli Haulage v Jenkins

District Court of NSW|2023-04-03

JUDGMENT

Before the Court for determination is a costs appeal brought by way of a Summons filed on 24 October 2022 in the Queanbeyan Registry by the plaintiff, Carnavalesca Pty Ltd trading as Paragalli Haulage, against determinations made by a costs Review Panel that certain amounts were owed by it to the defendants, Mr Roderick Charles Jenkins and Ms Julie Daley Jenkins. In substance, the Review Panel agreed with, and adopted, the determinations of the Assessor at first instance, Cost Assessor Ms Julie Wright, dated 3 May 2022.
The matter arises in relation to costs orders made in favour of the defendants against the plaintiff by a Magistrate in the Small Claims Division of the Local Court of New South Wales at Queanbeyan on 29 September 2021.
The appeal is brought by the plaintiff pursuant to s 89 of the Legal Profession Uniform Law Application Act 2014 (NSW) ("LPULAA").
Section 89 of the LPULAA permits a party to a costs assessment that has been the subject of a review by a Review Panel, to appeal against the decision of the Review Panel to the District Court but only with leave if the amount of costs in dispute is less than $25,000. The amount in issue in the present appeal is more than $25,000. In accordance with s 89(2) of the LPULAA, the District Court in an appeal has all the functions of the Review Panel.
Pursuant to its Summons filed on 24 October 2022, the plaintiff appeals from the whole of the decision of the Review Panel and seeks to set aside the Review Panel determination. In lieu thereof, the plaintiff seeks an order that the costs payable by the plaintiff to the defendants be assessed at $872. The ground relied upon by the plaintiff/appellant in the Summons is that the Review Panel erred in law in adopting the reasoning process of the Costs Assessor because the award of costs made in the Small Claims Division of the Local Court on 29 September 2021 cannot be assessed at a greater sum than an amount calculated in accordance with Rule 2.9(3) of the Local Court Rules (NSW), being the amount of $872. The ground of appeal further provides that there was no power in the Magistrate hearing the matter in the Small Claims Division of the Local Court to dispense with Rule 2.9(3) in the circumstances. The ground includes that the determination of the Review Panel was a nullity.

Evidence on the appeal

The plaintiff read the affidavit of Samuel Alexander Tierney dated 17 February 2023 on the appeal.
The defendants did not rely on any evidence.
Exhibited to the affidavit were important background documents including: 1. The transcript of the hearing before the Magistrate in the Small Claims Division of the Local Court on 29 September 2021; 2. The orders made by the Magistrate on 29 September 2021 which were entered on 30 September 2021; 3. Correspondence between the solicitors for the parties where the plaintiff's solicitors submitted that the costs which could be awarded against the plaintiff were capped under the Local Court Rules 2009 (NSW). This was rejected by the solicitors for the defendants; 4. Various submissions filed in relation to the cost assessment before the Cost Assessor; 5. The Costs Assessor's Statement of Reasons dated 3 May 2022 finding in favour of the defendants in the current proceedings; 6. The Certificate of Determination of Costs and the Certificate of Determination of Manager's Assessment Costs as determined by the Costs Assessor; 7. The Application for Review filed by the plaintiff on 16 August 2022; 8. The grounds for seeking a review. In substance, the plaintiff submitted that the Local Court of New South Wales sitting in the Small Claims Division has no jurisdiction to award costs of more than $1,259.20, and, accordingly, a Cost Assessor assessing a costs order made by the Local Court of New South Wales sitting in the Small Claims Division has no jurisdiction to expand any costs order beyond the statutory limit imposed on the Local Court. It was submitted that to do so would amount to an error. Reliance was placed by the plaintiff on a decision of the New South Wales Court of Appeal in Tonab Investments Pty Ltd v Optima Developments Pty Ltd [2015] NSWCA 287 ("Tonab"); 9. Submissions to the Review Panel on behalf of the defendants dated 8 September 2022. It was submitted, in substance, that the plaintiff was requesting the Review Panel to set aside or not comply with the orders made by the Local Court. It was further submitted that the Review Panel did not have jurisdiction to set aside the orders of the Magistrate. It was stated that the Review Panel was required to make its determination on the quantum of the defendant's costs in accordance with the Magistrate's orders. In the submission, it was contended that the Local Court Rules as to costs did not apply or had been dispensed with by the Magistrate; 10. The reasons for decision of the Review Panel dated 14 September 2022. The Review Panel adopted the reasoning of the Cost Assessor; 11. The Certificate of Determination of Review and the Certificate of Determination of Review Panel Costs both dated 14 September 2022.

The Legislative Regime relating to costs

The legislative regime applicable to the assessment and review of costs in New South Wales was considered by me in Gadd v Kozlowski t/as Lou Baker and Associates [2022] NSWDC 309 at [12]-[20]. In that case, I considered the legal principles in relation to a rehearing under s 89(4) of the LPULAA. I adopt those statements of legal principle. In the present case, the plaintiff submitted that the Review Panel had made an error of law. Thus, an appellate court determining an appeal by way of rehearing, as in the present case, is required to determine the correctness of the judgment under appeal in retrospect. Appeals from questions of law are inherently liable to review according to a correctness standard: Gazecki v McCabes Lawyers Pty Ltd [2020] NSWCA 98; (2020) 102 NSWLR 259 at [42]-[43]; Gilmore Finance Pty Ltd v Aesthete No 3 Pty Ltd [2020] NSWCA 114 at [8]-[9]. In a rehearing, the appellant must establish that the subject of the appeal was the result of some legal, factual or discretionary error.

The factual background

The factual background to the appeal, to the extent shown on the evidence before the Court, may be stated briefly.
Unless indicated to the contrary, what follows are my factual findings for the purposes of the determination of the appeal.
Proceedings were commenced by the plaintiff against the defendants in contract in the Local Court of New South Wales in its Small Claims Division in the Queanbeyan Registry in 2021. On 4 March 2021, an Amended Statement of Claim was filed in the Local Court Small Claims Division in the proceedings. Pursuant to this pleading, the amount of $20,000 together with interest and related fees was sought for goods supplied by the plaintiff. The total amount claimed was $22,048.72. The pleading alleged that on or about 1 September 2015, the defendants "personally…negotiated various purchases and deliveries from [the plaintiff] on an ongoing basis". Instructions were allegedly given to invoice a company associated with them, Emmadale Group Pty Ltd, in order for the invoices to be paid on their behalf. It was alleged that Emmadale Group Pty Ltd was deregistered on or about 6 October 2015. It was further alleged that between 1 March 2019 and 31 July 2019 various invoices were sent to the defendants totalling $20,031.55 which amount remained unpaid.
The defendants asserted that they were not the proper defendants to the claim and that the plaintiff had no claim or cause of action against them.
The defendants moved the Local Court for orders that the proceedings be dismissed against them.
It appears that the matter was listed before the Local Court at Queanbeyan on 28 September 2021 and was adjourned to 29 September 2021 so that counsel appearing for the plaintiff could obtain instructions.
On 29 September 2021, Mr Moffet of counsel appeared for the plaintiff. The transcript indicates that instructions had been given to Mr Moffet to file a Notice of Discontinuance with respect to the proceedings. Mr Moffet stated (at T1.20): "I conditionally am instructed to agree to a costs order in respect of the discontinuance".
The transcript shows that there was a disagreement between the parties as to the appropriate costs order. Mr Moffet for the plaintiff sought an order that the plaintiff pay the defendants' costs as agreed or assessed on the ordinary basis. The defendants submitted that the circumstances warranted an indemnity costs order in favour of the defendants.
The transcript establishes that Mr Moffet did not address the Court on any limitations, including statutory limitations, on the Magistrate's power to award costs, including indemnity costs, as sought by the defendants.
After hearing submissions, the Magistrate awarded costs to the defendants up until 18 March 2021 on the ordinary basis and on an indemnity basis thereafter. This order was made in the context of amended pleadings, a notice of motion and appearances on two days.
The formal orders made by the Court are as follows: "Order: 1/ Proceedings discontinued by the Plaintiff. 2/ Plaintiff to pay the Defendants' costs on an ordinary basis as agreed or assessed up to 18 March 2021. 3/ From 19/3/21 Plaintiff is to pay Defendants' costs on an indemnity basis as agreed or assessed."
On around 24 February 2022, the defendants made an application for a costs assessment seeking an assessment of their costs of defending the proceedings in the Local Court.
On around 4 April 2022, the solicitors for the defendants received a copy of a letter from the solicitors for the plaintiff to the Costs Assessor submitting, inter alia, that the Magistrate in the Small Claims Division of the Local Court did not have the power to make the orders made and that the costs in the assessment should be capped consistently with the Local Court Rules. The Costs Assessor asked for the defendants to respond to the submission. A responsive submission was provided disputing the plaintiff's submission.
As stated above, on 3 May 2022 the Costs Assessor provided her reasons for her assessment. The Costs Assessor determined the application by assessing as fair and reasonable costs the sum of $27,367.59. In relation to the argument about capped costs, the Costs Assessor stated as follows in paragraph 21 of her reasons for decision: "21. Capped costs pursuant to the Local Court Rules. I did not accept this objection. Aulich informed me that the Applicant made submissions to the Magistrate that the circumstances of the proceedings warranted an "unusual costs order" in its favour and the relevant orders were made on that basis. Although not expressly stated in the orders dated 29 September 2021, it is apparent from the terms of those orders that the Court has exercised its discretion to dispense with the Local Court Rules in relation to costs. Absent that discretion, the orders as made, which include, as set out above, that costs are payable from 19 March 2021 on the indemnity basis, would make no sense."
The plaintiff sought a review of the Cost Assessor's decision. The Review Panel was referred to the decision of the Court of Appeal in Tonab Investments Pty Ltd v Optima Developments Pty Ltd, above.
After referring to the submissions made to the Review Panel and to the reasons of the Costs Assessor, the Review Panel in paragraphs 25-27 of its reasons for decision, agreed with and adopted the reasons of the Costs Assessor. Accordingly, it formed the view that in making the orders in the Local Court, the Magistrate exercised his discretion to dispense with the Local Court Rules as to costs.
The Summons was then filed in this Court.

Local Court Act and Local Court Rules

Part 3 of the Local Court Act 2007 (NSW) relates to the civil jurisdiction of the Local Court. Under s 29(1)(b), for the purposes of Part 3 of the Local Court Act, the jurisdictional limit of the Local Court, when sitting in its Small Claims Division, is $20,000. As indicated above, the proceedings in question in the Local Court were in its Small Claims Division.
Division 3 of Part 3 of the Local Court Act deals with proceedings in the Small Claims Division. Under s 35(1) of the Local Court Act, the jurisdiction of the Local Court sitting in its Small Claims Division may be exercised by a Magistrate or an Assessor. Under s 35(2) of the Local Court Act, proceedings in the Small Claims Division are to be conducted with as little formality and technicality as the proper consideration of the matter permits. It is clear from s 35 of the Local Court Act that the legislative intent is for the proceedings to be generally informal with cross-examination to be limited. Under s 35(3), the rules of evidence do not apply to proceedings being heard in the Small Claims Division. There is no question in the present case that the Local Court had jurisdiction to hear and determine the case in question: see s 30(2) of the Local Court Act.
Except as provided by the "rules", the Local Court sitting in its Small Claims Division has no power to award costs: s 37 of the Local Court Act. The word "rules" as used in the Local Court Act is defined in s 3(1) of the Local Court Act as meaning the rules made under s 26. Section 26 of the Local Court Act gives power to the Rule Committee to make rules, not inconsistent with the Local Court Act, in relation to the practice or procedure of the Local Court and various other matters.
Having regard to the limitation on the power of the Local Court to award costs in s 37 of the Local Court Act, an examination of the Local Court Rules in relation to the Small Claims Division and costs needs to be made.
Part 2 of the Local Court Rules 2009 deals with civil proceedings in the Small Claims Division of the Local Court. Under Regulation 2.1, Part 2 of the Local Court Rules applies to proceedings in the Local Court sitting in the Local Court's Small Claims Division. Under Regulations 2.2 and 2.3, proceedings may be transferred from the Small Claims Division to the General Division if the jurisdictional limit on the Small Claims Division has been exceeded or the matter involves complex, difficult or important issues that need to be resolved or it is otherwise appropriate to do so.
Regulation 2.9 of the Local Court Rules 2009 deals with costs. It is as follows: "2.9 Costs (1) In this rule, costs include fees, disbursements, expenses and remuneration. (2) The Court may make orders for the payment of costs only in the following circumstances - (a) if proceedings are discontinued or dismissed, or a defence is struck out, at a pre-trial review or at a hearing, (b if proceedings are adjourned as a consequence of a party's default or neglect, including a party's failure to comply with a direction of the Court, (c) if proceedings on a motion are heard by the Court, (d) if judgment is given after a trial of proceedings. (3) The maximum amount of costs that may be awarded to a party under subrule (2) is - (a) in the circumstances referred to in subrule (2)(a), (b) or (c) - the amount of costs that would be allowable on entry of default judgment for a liquidated claim in the proceedings, and (b) in the circumstances referred to in subrule (2)(d) - the amount of costs that would be allowable on entry of default judgment for an unliquidated claim in the proceedings. (3A) Despite subrule (3)(b), the maximum amount of costs that may be awarded to the party under subrule (3)(b) is increased by 25% if the Court considers that - (a) the party made a genuine offer to compromise on the claim that was not accepted by the other party, and (b) it was unreasonable for the other party not to have accepted the offer. (4) Despite subrule (2), the Court may also allow costs for the following - (a) matters for which costs are fixed by a fixed costs legislative provision within the meaning of the Legal Profession Uniform Law (NSW), (b) court and service fees, (c) fees for expert opinion reports (limited to a maximum of $350 for each report), (d) search fees, (e) costs in relation to, or arising out of, the issue of a subpoena."
Thus, under Regulation 2.9(1), a reference to costs includes fees, disbursements, expenses and remuneration. Regulation 2.9(2) as set out above makes clear that the Local Court in the Small Claims Division may make orders for the payment of costs only in set circumstances. One of those is if the proceedings are discontinued as occurred in the present case. It is noted in the present case that the learned Magistrate made an order that the proceedings be discontinued, which seems somewhat unusual. The usual approach is to grant leave to discontinue the proceedings on terms.
Under Regulation 2.9(3), the maximum amount of costs that may be awarded to a party under Regulation 2.9(2) is set out, being, where proceedings are discontinued, the amount of costs that would be allowable on entry of default judgment for a liquidated claim in the proceedings. The present case did not proceed to a trial of proceedings with a judgment being delivered. Regulation 2.9(4) permits the Local Court to give additional costs for certain matters, such as costs in relation to a subpoena or fees for expert opinion reports.
The words "that would be allowable" in Regulation 2.9(3)(a) of the Local Court Rules appear to indicate the amount that would be permissible to award.

The LPULAA and Regulation

One then needs to go to the Legal Profession Uniform Law Application Regulation 2015, Schedule 1, Part 3, made under the LPULAA, to determine in relation to the Local Court the amount that would be allowable as to costs on entry of default judgment for a liquidated claim. That is because that is the maximum amount of costs that may be awarded by the Local Court under Regulation 2.9(3) of the Local Court Rules.
In the Amended Statement of Claim in the underlying Local Court case, $20,000 was sought by the plaintiff. Under items two and four of Schedule 1, Part 3, 80% of the amount of $912 is allowable, being $729.60. This was seemingly agreed between the parties in submissions as the relevant amount.
Section 75 of the LPULAA provides as follows: "75 Conduct of costs assessments of ordered costs (1) An assessment of ordered costs must be made in accordance with - (a) the terms of the order, rule or award under which the costs are payable, and (b) the rules of the relevant court or tribunal that made the order for costs, and (c) any relevant regulations, and (d) any order made for interest on costs under section 101 of the Civil Procedure Act 2005. (2) If a court or tribunal has ordered that costs are to be assessed on an indemnity basis, the costs assessor must assess the costs on that basis, having regard to any relevant rules of the court or tribunal and any relevant regulations."
Section 76 of the LPULAA provides as follows: "76 Criteria for costs assessments of ordered costs (1) In conducting an assessment of ordered costs, the costs assessor must determine what is a fair and reasonable amount of costs for the work concerned. (2) In considering what is a fair and reasonable amount of costs for the work concerned, the costs assessor may have regard to the factors in section 172(1) and (2) of the Legal Profession Uniform Law (NSW) (as if that section also applies to ordered costs and so applies with any necessary modifications)."
Division 2 of Part 6 of the Legal Profession Uniform Law Application Regulation 2015 deals with costs assessments and applications for costs assessment. Regulation 38 of the Legal Profession Uniform Law Application Regulation provides as follows: "38 Effect of Part 5 in relation to costs fixed by other legislation (1) An assessment of costs fixed by a regulation under section 149 of the Motor Accidents Compensation Act 1999 is to be made in accordance with that regulation (despite anything to the contrary under Part 5). (2) An assessment of costs fixed by a provision of any other Act, or a statutory rule made under any other Act, is to be made: (a) if the costs are fixed by a provision of any other Act - in accordance with that provision (despite anything to the contrary in Part 5), or (b) if the costs are fixed by a provision of a statutory rule made under any other Act - in accordance with that provision (but only to the extent that the provision is not inconsistent with Part 5)."
Regulation 38(2)(b) makes reference to Part 5. A number of regulations in this Part prescribe costs in certain situations.
The question which arises in the present case for determination is what amount should be allowed on an assessment in the light of the Local Court's orders, which included an order for indemnity costs, of 29 September 2021. This question arises in the context of the limitations in the Local Court's powers in Regulation 2.9 of the Local Court Rules 2009 as to costs and in s 37 of the Local Court Act 2007, as set out above, and in the context of the LPULAA and the Regulations made under it.

The decision in Tonab

Also relevant is the decision of the Court of Appeal in Tonab Investments Pty Ltd, above, relied upon by the plaintiff. In that case, proceedings were brought in the Small Claims Division of the Local Court by a town planning consultancy claiming an amount for work done and materials provided to the applicants at their request. Orders were made in favour of the plaintiff in an amount within the jurisdictional limit of the Local Court sitting in its Small Claims Division at the time. Subsequently, further orders were made by the Court, including an order for indemnity costs in the sum of $8,000 in favour of the plaintiff. At a later date, on the application of the plaintiff, the Magistrate ordered that the proceedings be transferred from the Small Claims Division to the General Division of the Local Court with effect from the date of the original orders.
The applicants appealed to the District Court submitting that the Magistrate lacked the jurisdiction to order indemnity costs. It was also submitted that the Magistrate erred by ordering the transfer of the proceedings from the Small Claims Division to the General Division after judgment had been given in the matter. A District Court Judge dismissed the appeal. The applicants sought judicial review of the decision of the District Court Judge and submitted that the Judge had committed either a jurisdictional error or an error of law on the face of the record.
The Court of Appeal held that the Local Court regulations and the Uniform Civil Procedure Rules, Part 36.17 (the slip rule), did not permit the transfer of proceedings from the Small Claims Division to the General Division after judgment had been entered. It was considered that the orders for indemnity costs and the transfer of proceedings were beyond jurisdiction and that an error of law on the face of the record had been made.
In the judgment, Justice Meagher agreed with Justices Ward and Leeming. In paragraph 48, Ward JA stated as follows: "48. Unless and until an order was made to transfer the proceedings to the General Division, it is clear that there was no power to make the indemnity costs order."
It had been conceded in the appeal that there was no power for a Local Court Magistrate to make an award of indemnity costs in a matter heard in the Small Claims Division: see at [43]. The order was thus made not within jurisdiction. Ward JA noted at paragraph 69 that there was nothing to suggest that the Magistrate in that case had adverted to the jurisdictional limit on costs orders in the Small Claims Division.
In paragraph 87 of Tonab, Leeming JA noted as a "major error", the assertion by the Magistrate that there was power to make an order for costs in the amount of $8,000 "or anything like that amount" having regard to s 37 of the Local Court Act. His Honour stated: "The rules make very limited provision for a costs order". Further, s 98 of the Civil Procedure Act 2005 was noted by his Honour as not applying to the Local Court in its Small Claims Division. Leeming JA then stated the following in paragraphs 118-121 of his Honour's reasons: "118. In their appeal in the District Court, Tonab and Ms Bechara squarely asserted that there was no power to make orders for costs in the amount of $8,000. They relied in terms on r 2.9 of the Local Court Rules. It is plain from the transcript of the hearing on 19 June 2014 that the submission was pressed on appeal. The submission was correct. 119. I would accept Tonab's and Ms Bechara's submission that the failure by the primary judge to address the absence of power to make the order as to costs amounts to jurisdictional error. 120. In Baker v David [2015] NSWCA 235 at [24] Meagher JA said, with the agreement of McColl JA and Sackville AJA, that: "In Whisprun Pty Ltd v Dixon [2003] HCA 48; 77 ALJR 1598 at [62]-[63] Gleeson CJ, McHugh and Gummow JJ described the trial judge's obligation properly to consider a party's case as a "paramount judicial duty". That does not mean that the judge has to deal with every argument and issue that might arise in the course of a case. However, "where an argument is substantial or an issue is significant, it is necessary to refer to and assign reasons for the rejection of the argument or the resolution of the issue": per Nettle JA (Batt and Vincent JJA agreeing) in Hunter v Transport Accident Commission [2005] VSCA 1; 43 MVR 130 at [21]." 121. The reason for this protracted litigation has been the order for $8,000 in costs made on 18 December 2013. The order was at all times beyond power, in a way that was readily demonstrable, which was plain on the face of the notice of appeal to the District Court and was put in submissions. Contrary to what the primary judge said at [67], the grounds of appeal did not all relate to procedural steps subsequently taken to correct matters of record after 18 December 2013. Accepting as I do that there may be difficult questions of degree, this is a case where a substantial component of the appeal was not addressed in the reasons of the primary judge at all. A failure to address a substantial component of a party's case can amount to jurisdictional error: see for recent examples Rodger v De Gelder [2015] NSWCA 211 at [89]-[96] and Buttrose v Attorney General of New South Wales [2015] NSWCA 221 at [25]. Given the prominence and importance in the circumstances of this case of the absence of power to make the $8,000 costs order, I would conclude that the decision of the court below was attended by jurisdictional error."
It appears clear in the light of Tonab that, to the extent the Magistrate in the present case was seeking to make an order for costs beyond that provided in the Local Court Act and the Local Court Rules, particularly the order for indemnity costs, such an order was at all times beyond power. However, the Court in the present case is not acting as an appeal court in relation to the Magistrate's orders of 29 September 2021. The question for determination is what were the allowable costs permitted on assessment in the light of the Local Court proceedings and the orders made by the Magistrate.

Submissions

The Court had the benefit of both written and oral submissions from the parties. The submissions clearly elucidated the various arguments for the parties' respective positions.

Submissions of the plaintiff

In its submissions in chief, the plaintiff, in general summary, submitted as follows: 1. The proceedings in the Local Court were in the Small Claims Division of the Local Court. The orders made by the Magistrate on 29 September 2021, which were entered on 30 September 2021, were entered in the Small Claims Division of the Local Court; 2. The jurisdictional issue as to costs was raised by the plaintiff before the Costs Assessor on 4 April 2022 as well as other specific objections to the claimed costs. Submissions as to the jurisdictional issue were also made before the Review Panel; 3. The appeal is brought pursuant to s 89 of the LPULAA and is to be conducted by the Court by way of re-hearing. The Court has all the functions of the Review Panel which would include the power to set aside the costs decisions below and to substitute its own determination as to costs; 4. The Costs Assessor and the Review Panel committed jurisdictional error by failing to apply the statutory cap on costs applicable to any costs orders made in proceedings in the Small Claims Division of the Local Court under the Local Court Act 2007 and the Local Court Rules 2009; 5. The material in evidence shows that in the Local Court proceedings, the proceedings were at all times conducted in the Small Claims Division of the Local Court; 6. At no time were the proceedings transferred to the General Division of the Local Court; 7. Whilst in the Small Claims Division, there was no power for the Local Court to dispense with the Local Court Rules in relation to costs as the Costs Assessor and the Review Panel accepted had been done. The cost capping provisions continued to apply in the assessment of any costs ordered; 8. No party before the Magistrate drew the Magistrate's attention to the cost capping provisions contained in the Local Court Act and the Local Court Rules; 9. The fact that counsel for the plaintiff did not draw the Magistrate's attention to the jurisdictional issue, whilst regrettable, is not fatal to the plaintiff's argument on appeal; 10. Nothing in the terms of the costs orders made by the Magistrate set aside, varied or extinguished the cost capping provisions applicable under the Local Court Act and Local Court Rules. The costs orders made by the Magistrate did no more than provide a basis on which the costs were to be assessed in the absence of agreement between the parties. The orders themselves do not remove or extinguish the cost capping provisions even if it was possible to do so; 11. As the cost capping provisions remain in force, upon assessment both the Costs Assessor and the Review Panel failed to comply with the requirements for the assessment process including the limitations in s 75(2) of the LPULAA and Regulation 38(2)(b) of Legal Profession Uniform Law Application Regulation 2015. Further, the only source of power in the Local Court to order the payment of costs when sitting in the Small Claims Division is as provided in the Local Court Act. Part 42.5 of the Uniform Civil Procedure Rules 2005 cannot override or modify the operation of the Local Court Act; 12. The Notice of Motion filed by the defendants dated 9 November 2022 should be dismissed. The appeal is clearly competent and the plaintiff has a statutory right to appeal under s 89 of the LUPLAA. The appeal is also not an abuse of process. The basis for an estoppel is not established; 13. The plaintiff does not seek to attack the costs orders made by the Magistrate but rather the assessment of costs under the costs orders must be undertaken in accordance with the statutory cost capping regime contained in the Local Court Act and Local Court Rules; 14. The decision of the Review Panel should be set aside and the defendants' Notice of Motion should be dismissed with costs.

Submissions of the defendants

The submissions made on behalf of the defendants/respondents, in general summary, were as follows: 1. The costs orders made by the Magistrate on 29 September 2021 in the Small Claims Division of the Local Court were costs payable by the plaintiff as "ordered costs" within Part 7 of the LPULAA; 2. Under ss 75(1) and 75(2) of the LPULAA an assessment of costs must be made in accordance with the terms of the order and, where made on an indemnity basis, the Costs Assessor must assess the costs on that basis, having regard to any relevant rules of court or tribunal or any relevant legislation. The plaintiff's argument is that despite an award of costs made in the Small Claims Division, it cannot be assessed at a greater sum than an amount calculated in accordance with Rule 2.9(3) of the Local Court Rules and there was no power in the Magistrate hearing the matter to dispense with Rule 2.9(3). In other words, an Assessor must cap their determination at the maximum amount of costs that may be awarded in the Small Claims Division under Part 2.9(3) of the Local Court Rules; 3. That submission should be rejected. First, conducting the assessment in the manner contended by the plaintiff would not be in accordance with the terms of the costs orders made by the Magistrate. Section 75 of the LPULAA requires the Costs Assessor to assess the "ordered costs" in accordance with the terms of the costs order. The reference to the "rules" in s 75 of the LPULAA are not to all rules in the Local Court Rules and the Uniform Civil Procedure Rules but only to those that pertain to the conduct of the assessment of the ordered costs and prescribe the task of the Costs Assessor; 4. These are different to rules which deal with the powers of the Court to make orders about costs. This is confirmed by the use of the term "awarded" in Rule 2.9(3) of the Local Court Rules. Rule 2.9(3) of the Local Court Rules is not relevant to how the costs are to be assessed by a Costs Assessor or what costs are to be allowed by the Costs Assessor. To restrict the costs allowed to that set out in the Local Court Rules would be inconsistent with Part 7 of the LPULAA as to what a Cost Assessor must do; 5. The Cost Assessor in the present case was obliged to assess the costs in accordance with the terms of the costs orders and did so and the Review Panel was right to affirm that decision; 6. The Summons ought to be dismissed with costs; 7. In relation to the Notice of Motion, as the plaintiff does not seek to attack the cost orders made by the Magistrate, the orders sought in it are no longer relevant.

Submissions in reply of the plaintiff

Submissions were also provided on behalf of the plaintiff in reply. In general summary, the plaintiff submitted as follows: 1. The distinction drawn by the respondent in relation to "rules" in s 75 of the LPULAA should be rejected; 2. The focus and conclusion of the defendants assume that the making of a costs order will result in an amount that will exceed the maximum permitted under the Local Court Rules. That may not always be a realistic assumption; 3. If a court ordered costs in a particular amount exceeding the maximum permitted under the rules, then the order in excess of jurisdiction is obvious. In other examples, such as where costs are to be paid in an amount as agreed or assessed, it cannot be known that an order exceeds the maximum permitted until the determination of an assessment even if the outcome could have been predicted. It also ignores the limitation in s 37 of the Local Court Act and Rule 2.9 of the Local Court Rules; 4. Where a general costs order is made it only has the potential to be beyond power which potentially is only realised on the making of the determination after assessment of an amount above the maximum permitted. Only then is there something for a party to appeal from; 5. The Local Court Act, the Local Court Rules and the LPULAA were part of a suite of provisions which must be given a practical operation; 6. The costs were "fixed" within Regulation 38(2) of the 2015 Regulation as they were readily ascertainable.

Consideration

In Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 the majority of the High Court in a case involving statutory construction stated as follows in paragraphs [69]-[71]: "69. The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed. 70. A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme. 71. Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. In The Commonwealth v Baume Griffith CJ cited R v Berchet to support the proposition that it was "a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent"."
In SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362 at [14] the majority of the High Court stated as follows. "14. The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected."
These principles have been followed in numerous later cases by appellate courts: see for example Stanley v Director of Public Prosecutions (NSW) [2023] HCA 3 at [19], [55] and [206] (footnotes in each case); NSW Commissioner of Police v Cottle [2022] HCA 7 at [23] (footnote).
It appears clear, having regard to the decision of the Court of Appeal in Tonab, above, and the terms of the Local Court Act that the Costs Assessor and the Review Panel were in error in deciding against the plaintiff's argument as to the costs being capped pursuant to the Local Court Rules by finding that it was apparent from the terms of the Local Court orders that the Local Court Magistrate exercised his discretion to dispense with the Local Court Rules in relation to costs. On the appeal before me, no party sought to maintain the Local Court decision on that basis. Although, of course, I am not considering an appeal from the Magistrate's orders, there does not appear to have been any power in the Magistrate, with respect, to have dispensed with the Local Court Rules if that was sought to be done in the present case.
The difficulty with this appeal lies in construing a number of legislative provisions in circumstances where it may well be that the legislature did not turn its mind to the complexities of certain provisions and their operation as a matter of practice. Section 37 of the Local Court Act 2007 is, in my view, clear where it provides that except as provided for by the "rules", the Local Court sitting in its Small Claims Division has no power to award costs. One must therefore turn to the Local Court Rules which under s 3 of the Local Court Act are defined as meaning the rules made under s 26 of the Local Court Act. Section 26 of the Local Court Act gives a wide power to the Rule Committee of the Local Court established under s 25 to make rules. There was no suggestion by any party to the appeal that the Local Court Rules 2009 were not validly made under the Local Court Act. Regulation 2.1 of the Local Court Rules 2009 applies to proceedings in the Local Court sitting in the Court's Small Claims Division. Regulation 2.9 deals with costs.
Despite the submissions made on behalf of the plaintiff, in my view, Regulation 2.9 of the Local Court Rules is directed at the power of the Local Court and is not directed to an assessment made in relation to cost orders of the Local Court. Regulation 2.9(2) limits the circumstances in which the Local Court may make orders for the payment of costs. Regulation 2.9(3) by use of the word "awarded" places a limit on the Court's powers to order costs under Regulation 2.9(2). In Regulation 2.9(3A) the use of the term "awarded" again suggests it is a reference to the Local Court itself. This, in my view, is confirmed by the use of the words "if the Court considers that" in Regulation 2.9(3A). It is highly unlikely that it was intended that an Assessor could increase the maximum amount of costs which a party could pay as opposed to the Court itself being granted that power. Increasing costs payable is essentially, in the statutory context, a curial function. Further, Regulation 2.9(4) expressly refers to the Court "allowing" certain costs.
If Regulation 2.9 is the only rule relating to costs in the Small Claims Division in the Local Court Rules where, other than under the rules, the Court in that Division has no power to award costs, then it seems that the Local Court Act and the Local Court Rules as to costs, limit the power of the Local Court in the Small Claims Division to order costs.
That is consistent with the clear statutory aim of the Local Court Act, when read as a whole, that in the Small Claims Division proceedings are to be conducted with as little formality and technicality as the proper consideration of the matter permits and with a limited jurisdiction: ss 29 and 35 of the Local Court Act.
Here, indemnity costs were awarded to the defendants by the learned Magistrate. Having regard to the limitations in the Local Court Act and the Local Court Rules and the decision of the Court of Appeal in Tonab, that decision appears to have been in error and beyond the jurisdiction of the Court.
The next question to determine is what an Assessor must do when faced with an order which appears, on proper analysis, to be beyond the power of a court. The plaintiff submits that the Assessor must assess costs consistently with the limitations in s 37 of the Local Court Act and Regulation 2.9 of the Local Court Rules. In doing so, the Assessor complies with the relevant statutory provision and statutory rules. The defendants submit that if there is an error by a Local Court Magistrate, the proper place to deal with it is on appeal not indirectly through the assessment process. It is submitted that the applicable legislation relating to assessment requires an Assessor to assess in accordance with the orders of the court. Here, that is the orders of the Court made on 29 September 2021.
In the present case, the order of the Court was clear: the plaintiff was to pay the defendants' costs on the ordinary basis as agreed or assessed up to 18 March 2021 and from 19 March 2021 the plaintiff was to pay the defendants' costs on an indemnity basis as agreed or assessed. In the context of the costs argument (as revealed by the transcript), it is clear in my view that the Magistrate assumed costs would be well above the capped costs.
The Local Court Act and the Local Court Rules set out the powers and jurisdiction of the Local Court. The regime for the assessment of costs is provided for in the LPULAA and the Legal Profession Uniform Law Application Regulation 2015.
The defendants point to the word "must" as used in s 75(1) and s 75(2) of the LPULAA. It is said that this is mandatory language. The plaintiff refers to and relies upon the requirement in s 75(1) of the LPULAA that each of the matters specified in that subsection are matters with which the assessment of costs must be made and the qualification in s 75(2) relating to indemnity costs to have regard to any relevant rules of the court or tribunal and any relevant regulations.
The defendants assert that the word "relevant" in s 75(1)(c) and in s 75(2) indicates that the rules and regulations to be taken into account by an Assessor are those which only go to the process of assessment and not to the process of the power of the court to make the costs orders in question. Thus a dichotomy is drawn between the power to make orders as to costs and the assessment function.
Although there is some tension in that approach with the clear intent of the scheme of the Local Court Act for Small Claims Division proceedings to be conducted with as little formality and technicality as the proper consideration of the matter permits and with a limited power to order costs, in my view, it is, on balance, the preferred approach when the whole of the LPULAA is taken into account.
It would seem to me to be not consistent with the intention of the legislature for an Assessor to construe a limitation to an order of a Local Court Magistrate, even in the Small Claims Division, which is not stated on the face of the order. The appropriate way in my view for a party to challenge an alleged irregularity in the order or a lack of power or jurisdiction to make the order is to appeal the order to the appropriate appellate court. That approach seems to give proper weight to the word "must" where it appears in s 75 of the LPULAA, particularly in s 75(2). To limit the assessment in the manner argued by the plaintiff would, in my view, not be in accordance with the terms of the orders made by the court on 29 September 2021.
The scheme of the LPULAA in Part 7 is for assessments to be conducted in accordance with that legislation and with the terms of any "ordered costs" as defined.
I also accept the submission of the defendants that the use of the word "relevant" in s 75 of the LPULAA limits the relevant regulations and rules which must be taken into account in an assessment so as not to take into account rules relating to the powers of a court as opposed to the process or manner of making an assessment. That recognises the different roles of a court and an Assessor. See Part 42.1 and Part 42.4 of the Uniform Civil Procedure Rules compared to Part 42.2 and 42.5. It is also consistent with the terms of s 76 of the LPULAA.
Regulation 38 of the Legal Profession Uniform Law Application Regulation 2015 does deal with the assessment of costs. However, I prefer the submission of the defendants that the use of the word "fixed" in Regulation 38 is not applicable in the present case where the costs which may be allowed by the Local Court are determined as a "maximum" amount of costs: see Regulation 2.9(3) of the Local Court Rules and Schedule 1, Part 3 of the Legal Profession Uniform Law Application Regulation. It would seem to me that stating a maximum amount of costs is different to "fixing" costs. Some assistance is provided in reaching that conclusion by the reference to Part 5 in Regulation 38(2) of the Legal Profession Uniform Law Application Regulation 2015. Part 5 does specifically refer to "fixed" costs.
The plaintiff in its reply submissions claims that an assessment limited to the maximum amount only permitted under the Local Court Rules would be consistent with the orders made. Whilst this is superficially attractive, the transcript negates this. The orders have to be seen and construed in their context. The Magistrate made the orders in the context of significant correspondence, a Statement of Claim and an Amended Statement of Claim, and at least two court appearances. It seems clear the Magistrate was not intending to limit the costs awarded to a nominal amount, particularly in the light of the indemnity costs order.
I concede that the above conclusions may not always be entirely satisfactory in practice. There may be circumstances where it is simply unclear to a party in the Small Claims Division what the legal costs incurred by the other side may be. The other party may have obtained legal advice before commencing or defending proceedings but otherwise have conducted the proceedings on their own behalf. If a party is unsuccessful and a general order for costs is made, when does that party contemplate an appeal? Is it immediately if costs have not been fixed as a maximum amount under Local Court Rules Regulation 2.9(3) or only after the amount of costs becomes clear? And if time limits for appeals have expired, what approach should be applied to an application for leave to appeal out of time?
There is also the option, as referred to by counsel for the defendants, for a party prior to orders being entered to apply to transfer a matter to the General Division of the Local Court if they know or suspect that their legal costs exceed the maximum amount permitted under the Local Court Rules. This option does not assist where the legal costs of the other side are uncertain.
In the end, the roles played by the court and assessors are distinct. It seems an unsatisfactory construction of the relevant legislation and rules in the present case to have assessors determining the validity of court orders and whether they were made within jurisdiction. A party's remedy against an order seemingly to be beyond jurisdiction is to appeal that order. The legislation and rules should, in my view, be interpreted consistently with that approach as I have outlined above.

Costs before this Court

In relation to the question of costs, it was accepted by the parties in argument that the Notice of Motion filed on 9 November 2022 should be dismissed with no order made as to costs.
In relation to the other costs of the appeal, as the plaintiff has not been successful in the appeal the defendants should have their costs of the appeal on the ordinary basis. In determining that, the appeal has been rejected from the Review Panel for reasons different to the grounds on which the Review Panel dismissed the appeal from the Costs Assessor.

Orders

Accordingly, the Court makes the following orders: 1. The Notice of Motion filed on 9 November 2022 is dismissed with no order as to costs. 2. The appeal is dismissed. 3. The plaintiff is to pay the costs of the defendants of the appeal as agreed or assessed.

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: 17 May 2023

Legal Profession Uniform Law Application Regulation 2015(NSW)

(2020) 102 NSWLR 259

At a glance

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Judgment (15 paragraphs)

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