JUDGMENT
1 His Honour: The plaintiff is a solicitor. He acted for the defendants in equity proceedings. The defendants were the unsuccessful party in those proceedings and the court made a costs order against them.
2 During the conduct of the proceedings, moneys were paid by the defendants in respect of costs and disbursements. At the time of the completion of the proceedings, a sum in the order of $132,000 had been paid in respect of costs and disbursements.
3 After the completion of the proceedings, the defendants reached a compromise with the successful party in the equity proceedings in respect of the costs payable to that party.
4 This compromise apparently brought the defendants to challenge the quantification of the costs payable by them to the plaintiff in respect of the proceedings.
5 The defendants made an application for assessment of the costs. The application was referred to a costs assessor (Peter Scammell).
6 The costs assessor was given three tax invoices. The first was dated 18 August 2003 and in the sum of $24,242.86. The second was an amended tax invoice dated 5 November 2003 and in the sum of $8,570. This document replaced another, earlier, invoice and added a further sum in the order of $1,400. The third invoice was dated 5 November 2003 and in the sum of $16,710.
7 In the application, the plaintiff conceded that no disclosure had been made as required by s175 of the Legal Profession Act 1987 (the Act). Accordingly, the costs assessor decided that costs should be assessed on fair and reasonable fee rates and that the plaintiff would be required to pay the costs of the assessment (being the fee paid for the application and his costs as assessor).
8 The costs assessor also decided that the invoices did not comply with the requirements of Regulation 45 of the Legal Profession Regulation 2002. He expressed the view that further particulars were required to enable him to assess the costs Subsequently, the plaintiff provided an itemised bill (Exhibit A).
9 On 1 March 2005, the costs assessor issued a certificate as to determination and his reasons. The determination saw a reduction in profit costs in the sum of $17,380. He ordered that the plaintiff pay the costs of the assessment in the sum of $5,967.50 (including an application fee of $1,300).
10 There is uncertainty as to how the sum of $17,380 came to be quantified. There was said by the costs assessor to be a reduction in the hourly rate from $300 to $250 and various items claimed in the itemised bill were disallowed.
11 The plaintiff sought a review by the Panel.
12 The determination was reviewed by the Panel and a certificate as to determination was issued on 7 October 2005. There was a later amendment to rectify a mathematical error in relation to counsel's fees.
13 There were three grounds of challenge. For present purposes, it is only necessary to look at two of them. One concerned the profit costs. The other concerned the costs of the assessment.
14 The Panel came to the view that the hourly rate of $300 was not unreasonable. However, regard was had to notes of the costs assessor appearing on the itemised bill. The view was taken that despite remarks having been made by the costs assessor to the contrary, he had in fact assessed the profit costs at the rate of $300 per hour. The Panel also took a more favourable view than the costs assessor as to disallowed items. An increased amount of $95,765.56 was allowed by the determination. However, this result was reached by error in calculation. I shall return to that error in due course.
15 The challenge to the decision made as to the costs of the costs assessment was founded on certain observations contained in a judgment I had delivered in Green v Browne & Co and Anor [2004] NSWSC 240. The Panel confirmed the view taken as to the costs assessor on the question of those costs.
16 On 3 November 2005, the plaintiff filed a summons in this court. It sought relief pursuant to both ss208L and 208M of the Act. The proceedings were heard on 11 April 2006. Counsel (Mr Marshall) appeared for the plaintiff. The defendant appeared in person (with Mrs Walker being the spokesperson).
17 The court had before a bundle of Rule 46.14 documents (which I understand had been prepared as a result of a direction from the Registrar). It also had Exhibit A. The defendants sought to put affidavit material before the court. Much of the content of that material was the subject of objection (one of the objections being that the material had not been before either the costs assessor or the Panel). As I am not in a position to determine such an issue, the matter cannot be resolved by me. It is not a matter of any consequence, as the material which is determinative of the present proceedings is already before me.
18 The plaintiff has relied on written submissions. These have been supplemented orally. I have heard oral argument from the defendants.
19 The two matters that were in issue before the Panel were the only matters in issue in these proceedings.
20 In dealing with the question concerning profit costs, it suffices to repeat certain of the material that appears in the plaintiff's written submissions. It identifies the error that was made. The material is as follows:-
14. What appears to have occurred is that the Costs Assessor performed his assessment on the itemised bill prepared for the solicitor by the Costs Consultant. In doing so, he reduced the itemised bill by $17,380.00. This appears to be the case as the Review Panel states in paragraph C2:
"The notes of the Assessor appear to be on the bill subsequently prepared by the Costs Consultant for the solicitor and that bill appears to have been assessed at $300 per hour …" (Bundle, p.11).
Also see the subsequent paragraphs in Item D, especially D5 (Bundle p.12 ff).
15. The problem lies in the fact that the itemised bill totals $51,112.60 (inclusive of GST) for professional costs and not $43,780.00, being the total professional costs rendered in the three tax invoices.
16. As the Costs Assessor disallowed items in the itemised bill, one would expect, in all fairness, for the Costs Assessor to have reference to the grand total of the professional costs in that itemised bill in working out the appropriate reduction. That was not done. Instead, the deductible, being the amount assessed of "$17,380 inclusive of GST" was taken off the sum total of the three tax invoices rendered by the solicitor, which one will recall, totalled a lesser sum of $43,780 inclusive of GST.
17. This was not known to the solicitor, or indeed to the parties, until the Reasons of the Review Panel were delivered. Despite the Review Panel determining that the solicitor should be allowed $4,715.70, the Review Panel has compounded the problem on the Review (Bundle p.13 para D9), leaving a reduction in the Walkers' favour of professional costs, inclusive of GST of $12,664.30.
18. The solicitor does not dispute the reduction of the itemised bill of $12,664.30. The solicitor contends that the reduction of $12,644.30 should not be assessed off the total of the tax invoices of $43,780.00. The difference between the total of the itemised bill and the three tax invoices is $7,332.60. That is the amount claimed under this ground of appeal.
21 It is unfortunate that so many errors should be made in an assessment process. A further error has unwittingly been made by the Panel. It is of a mathematical nature and unjustly disentitles the plaintiff of the sum of $7,332.60. It is an error that justice requires to be rectified. This can only be done by the granting of leave to appeal pursuant to s208M of the Act. Accordingly, I grant that leave.
22 The remaining matter concerns the question of costs of the costs assessment. In the light of the Legal Profession Act 2004 (the 2004 Act) it is a question that is now largely academic. In addressing this question, it is relevant to take into account many provisions of the Act.
23 It is necessary to first have a closer look at the provisions of s182 of the Act. It is to be found in Division 2 of Part 11. The provisions are as follows:-
182 Effect of non-disclosure of matters related to basis of costs
(1) If a barrister or solicitor fails to make a disclosure to a client in accordance with this Division of the matters required to be disclosed by section 175 in relation to costs, the client need not pay the costs of the legal services unless the costs have been assessed under Division 6.
(2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6.
(3) The costs of any assessment referred to in this section (including the costs of the costs assessor) are payable by the barrister or solicitor seeking to recover costs.
(4) Any failure referred to in this section does not of itself amount to a breach of this Act. However, the failure is capable of being unsatisfactory professional conduct or professional misconduct.
24 Division 2 is headed "Disclosure of matters relating to costs". It contains, inter alia, ss175 and 176. The former deals with the obligation to disclose to clients. The latter deals with the obligation to disclose to "instructing practitioner" (being another barrister or solicitor).
25 The judgment in Green contained the following:-
15 Section 182 is one of the statutory provisions which deal with the matter of disclosure of matters relating to costs. It purports to deal with the effect of non-disclosure. Subsection (1) provides that when there has been relevant non-disclosure, the client need not pay the costs of the legal services unless the costs have been assessed under Div. 6. Subsection (2) provides that in such circumstances the barrister or solicitor may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Div. 6. Subsection (3) provides that the costs of any assessment referred to under the section are payable by the barrister or solicitor seeking to recover costs.
16 Section 208A appears in Division 6. It has application where a costs assessor is assessing a bill given by a barrister or a solicitor to the client. Subsection (4) thereof provides that if the barrister or solicitor is liable under s 182 (3) to pay the costs of the costs assessment, the costs assessor is to determine the amount of those costs.
17 By way of contrast it may be observed that where the costs assessor is dealing with an application relating to costs payable as a result of an order made by a court or a tribunal, the costs assessor has the powers and duties conferred by s 208F (4) in relation to the costs of the assessment. The assessment of such costs is treated as part of the assessment process.
… … …
30 Before concluding this judgment, I will now mention the matters which later came to mind.
31 In the process of preparing these reasons I became concerned that it may have been erroneous to proceed on the basis that the first defendants were liable to pay the plaintiff's costs of the assessment before the Costs Assessor.
32 The view could be taken that such an assessment was not "any assessment" referred to in s 182. Section 182 deals with an assessment that is required to enable the barrister or solicitor to enforce payment and/or to maintain proceedings. In the present case, payment had been largely made and it was the client who had applied for the assessment.
33 I take these considerations no further as they have neither been argued nor raised in any way by the parties.
26 These observations were prompted by an assumption that had been made in that case, inter alia, by the Panel and the parties. I had a concern as to whether or not it was well founded and my observations were intended to provoke further consideration of the matter.
27 Once again, this question crops up in proceedings before me. Again, it has not been the subject of full debate. Whilst counsel for the plaintiff has made submissions, the defendants have not engaged in debate on the question.
28 The question is not free from difficulty. It involves the construction of various collocations of words appearing in the Act. The collocations have their ambiguities. There are the words "the costs of any assessment referred to in this section". Those words have to be seen in the context of that section and the Act. Whatever may have been the legislative intention, the language of subsection (3) might be thought to be restricting any such assessment to one in which the barrister or solicitor was seeking to recover costs pursuant to the Division 6 assessment process (being an assessment in which he or she was the applicant and which had been brought by reason of subsections (1) and (2)).
29 Subsections (1) and (2) provide statutory defences to an action brought by a barrister or solicitor seeking to recover costs. The legislature has chosen to identify an assessment "referred to in the section" as being the assessment in which the barrister or solicitor is to pay the costs of the assessment (as apposed to an assessment where there has been a failure to make disclosure). It might be thought that the words "seeking to recover costs" were intended to have significance. The intent behind subsections (1) and (2) is to require the barrister or solicitor to make an application for assessment pursuant to Division 6 if he or she wants to recover costs.
30 The words "unless the costs have been assessed under Division 6 which appear in subsection (1) afford little assistance (Division 6 being that body of provisions dealing with assessment of costs).
31 In the present case, the defendants had paid the costs and were seeking to recover part of the moneys already paid. The assessment was not one that was necessary to overcome the effect of either subsection (1) or (2). The applicants in the assessment process were the defendants. It was brought pursuant to Division 6. The bringing of the application was enabled by the provisions of s199. In dealing with such an application, a costs assessor may have regard to matters of disclosure in assessing what is a fair and reasonable amount of costs (see s208B(b)).
32 Section 208A of the Act contains the following:-
208A Assessment of bills generally
… … …
(3) Any amount substituted for the amount of the costs may include an allowance for any fee paid or payable for the application by the applicant.
(4) If the barrister or solicitor is liable under section 182 (3) to pay the costs of the costs assessment (including the costs of the costs assessor), the costs assessor is to determine the amount of those costs. The costs incurred by the client are to be deducted from the amount payable under the bill of costs and the costs of the costs assessor are to be paid to the Manager, Costs Assessment.
33 In one sense, these provisions may do no more than proliferate the ambiguity. On another view, they may reinforce the view that liability only arises in those cases where the barrister or solicitor is an applicant seeking to recover costs.
34 The provisions confer a general power (where an amount is substituted pursuant to subsection (2) thereof) to include an allowance for any fee paid or payable for the application by the applicant. Subsection (4) tosses the question of liability back to s182(3) of the Act. It imposes a duty on the costs assessor to determine the amount of those costs. Otherwise, it gives a direction as to the deduction of the costs incurred by the client ("from the amount payable under the bill of costs") and as to the payment of the costs assessor. There may be room for speculation as to what is contemplated by the words "costs incurred by the client". It may be that the application fees were had in mind.
35 There are references to be found to the payment of costs of the costs assessment in ss182(3), 208A(4) and 208F(4) of the Act. The reference contained in s208A(4) is the only reference to be found in the provisions dealing with the assessment of a bill of costs. There is no general provision similar to that to be found in s208F(4) (which is concerned with costs ordered by a court or tribunal). The making of orders of the costs of a costs assessment where a costs assessor is concerned with the assessment of a bill of costs (the restriction) is confirmed by the provisions of s208JA(1). It is in the following terms:-
(1) This section applies when the costs of a costs assessor or Manager, Costs Assessment are payable by a party to the assessment (under section 182 (3), 208A (4) or 208F (4)).
36 Section 208KH imposes a duty on a panel that conducts a review to determine the costs of the review. Subsections (2) and (3) provide directions as to the manner of performance of that duty.
37 After having regard to the various provisions of the Act which seem to be of relevance to the question, I have come to the view that an analysis of them does not provide the answer. I have looked at the parliamentary speeches. What is said therein does not assist in the resolution of the question. I have looked at the provisions in the 2004 Act that replace the non-disclosure provisions in the 1987 Act. For present purposes, the relevant provisions in the 2004 Act are ss317 and 369. The collocation of words used therein is different. It may be that the changes effectively dispose of the present problem (the law practice that provided the legal services concerned is to pay the costs of the costs assessment in relation to costs to which s317 applies).
38 Despite the indications in the language of the Act that suggest that s182(3) should have application only to those cases in which the barrister or solicitor is seeking to recover costs, I remain unpersuaded that it was the intention of the legislature to create a distinction between applications brought by a barrister or solicitor on the one hand and applications brought by a client on the other. It seems to me that the intention was to require the barrister or solicitor to pay the costs of a costs assessment where there has been non-disclosure. I consider that the problem I have been grappling with is just another product of poor draftsmanship. Accordingly I am not satisfied that I should disturb the decisions made as to the costs of the costs assessment.
39 Section 208M of the Act confers discretionary powers on the court. One is to grant leave to appeal (it is a discretion that is to be exercised having regard to the particular circumstances of the case before the court and so that the dictates of justice are best served). Another is to hear and determine the appeal.
40 In this case, the consideration of the question of leave to appeal canvassed and dealt with what would be the subject of any appeal on the matter. What is involved is the rectification of an error in calculation. Neither the interests of the parties nor the public would be best served by a further hearing. It would be a waste of time and put the parties to further trouble and expense. In the circumstances, it seems to me that the dictates of justice are best served by referring the matter back to the Panel for the correction of the error and the issue of a replacement certificate as to determination.
41 I may add that I regard the error in this case as falling within the category of "inadvertent error" within the meaning of ss208JB and 208KHA of the Act.
42 The certificate as to determination of costs is set aside. The matter is remitted back to the Panel for correction of the error and the issue of a replacement certificate.
43 As both parties have had success in the proceedings, I propose to make no order as to costs. The exhibit may be returned.
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