These proceedings concern the validity of a costs assessor's certificate in which the plaintiff seeks an order that it be set aside. The plaintiff seeks orders (see below) on a Notice of Motion filed on 15 October 2014.
The principal proceedings were commenced in this Court by the plaintiff on 10 May 2011 by way of summons. On 28 July 2011 the plaintiff's summons was dismissed. Schmidt J ordered that the plaintiff pay the defendants' costs.
On 29 March 2012 the defendants filed an application for an assessment of costs payable under the costs order. On 5 September 2012 the costs assessor issued a certificate of determination of costs in the amount of $32,870.30 payable by the plaintiff to the defendants.
On 9 October 2012 the Manager, Costs Assessment, sent a Certificate of Determination of Costs and other documents to the parties.
On 7 November 2012 the plaintiff applied for a review of the assessor's determination.
The determination was referred to a review panel on 20 November 2012. The defendants state that they were not notified of the Review Application in accordance with s 373(5) of the Legal Profession Act 2004 ("the LPA").
On 14 December 2012 the defendants filed a copy of the assessor's certificate dated 5 September 2012 in this Court pursuant to s 368(5) of the LPA.
On 23 January 2013 the review panel issued a certificate affirming the determination of the costs assessor and terminating the suspension of that determination.
Subsequently, the parties were sent letters on 2 September 2013 from the Manager, Costs Assessment attaching the Certificate of Determination of Costs by Costs Review Panel, Reasons for Review Determination and Certificate of Determination of Costs of Review.
There are no factual matters in dispute in these proceedings.
In the Notice of Motion the plaintiff claims relief as follows:
"1. The deemed judgment entered on 14th December, 2012 be set aside.
2. A declaration that s 368(5) of the Legal Profession Act 2004 (NSW) is not a valid enactment of the Parliament of this State.
3. The defendants pay the costs of and incidental to this motion."
[3]
Relevant Provisions of the Legal Profession Act 2004
Part 3.2 of the LPA prescribes the processes for costs disclosure and costs assessment. Division 11 of that Part is concerned with applications by parties to disputes for costs assessments. The relevant provisions are discussed in the paragraphs that follow.
Section 353(1) provides for with applications to be made for assessment of party/party costs. It provides:
(1) A person who has paid or is liable to pay, or who is entitled to receive or who has received, costs as a result of an order for the payment of an unspecified amount of costs made by a court or a tribunal may apply to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs.
Subdivisions 2 and 3 of Division 11 set out the procedure for obtaining a costs assessment and the processes that are to be followed by a costs assessor.
Section 368 contains a number of provisions that apply to the issue of a Certificate of Determination of Costs by an assessor. Importantly for the present case, s 368(5) states that if a certificate is filed in a court having jurisdiction to order payment, the certificate is taken to be a judgment of that court for the amount of unpaid costs.
Section 368 provides:
Certificate as to determination
(1) On making a determination of costs referred to in Subdivision 2 or 3 of this Division, a costs assessor is to issue a certificate that sets out the determination.
(2) A costs assessor may issue more than one certificate in relation to an application for costs assessment. Such certificates may be issued at the same time or at different stages of the assessment process.
(3) However, any such certificate may not set out the costs of the costs assessment within the meaning of section 369.
Note. Section 369 makes provision for the recovery of the costs of costs assessments relating to costs to which either section 317 (Effect of failure to disclose) or 364 (Assessment of costs - costs ordered by court or tribunal) applies. The section requires a costs assessor to issue a separate certificate setting out the costs of such costs assessments. That section also makes provision for the effect of such a certificate.
(4) In the case of an amount of costs that has been paid, the amount (if any) by which the amount paid exceeds the amount specified in any such certificate may be recovered as a debt in a court of competent jurisdiction.
(5) In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed.
(5A) The costs assessor must forward the certificate or a copy of the certificate to:
(a) the Manager, Costs Assessment, and
(b) each party to the assessment, unless subsection (6) applies.
(6) If the costs of the costs assessor are payable by a party to the assessment as referred to in section 369, the costs assessor must:
(a) forward a copy of the certificate to the Manager, Costs Assessment only, and
(b) advise the parties that the certificate has been so forwarded and will be available to the parties on payment of the costs of the costs assessor.
(7) Subsection (6) does not apply:
(a) in respect of a certificate issued before the completion of the assessment process under subsection (2), or
(b) in such circumstances as may be prescribed by the regulations. (Emphasis added)
Section 373 allows dissatisfied parties to seek a review of the determination of a costs assessor. The effect of an application for review on the determination of the original costs assessor is set out in s 377 which states:
377 Effect of review on costs assessor's determination
(1) If the Manager, Costs Assessment refers a determination of a costs assessor to a panel for review under this Subdivision, the operation of that determination is suspended.
(2) The panel may end such a suspension:
(a) if it affirms the determination of the costs assessor, or
(b) in such other circumstances as it considers appropriate. (emphasis added)
Section 378(1) requires a review panel to issue a certificate of determination to each party. Section 378(3) provides for a number of matters if a review panel sets aside a costs assessor's determination including in particular the effect of setting aside a determination upon a certificate. Section 378(3)(c) is in the following terms:
(c) if the costs assessor issued a certificate in relation to his or her determination under section 368 (Certificate as to determination) or 369 (Recovery of costs of costs assessment):
(i) the certificate ceases to have effect, and
(ii) any judgment that is taken to have been effected in relation to that certificate also ceases to have effect, and
(iii) any enforcement action taken in respect of that judgment is to be reversed.
[4]
Issues
The submissions of the plaintiff were directed to two issues:
1. Whether the defendants' filing and entry in the Registry of the Supreme Court of the certificate of determination of costs dated 5 September 2012 should be set aside due to illegality or procedural irregularity.
2. Whether s 368(5) of the LPA offends the constitutional principle established in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 and is subsequently invalid.
[5]
Plaintiff's Submissions on Issue 1
The plaintiff submitted that the filing of the original costs assessor's certificate of Determination dated 5 September 2012 by the defendants on 14 December 2012 was contrary to s 377(1) LPA which, as noted in paragraph 17, provides for a suspension of the operation of an assessor's determination upon a referral by the Manager, Costs Assessment of a determination of a costs assessor to a review panel. The plaintiff submitted that the effect of s 377(1) was to suspend the rights of the defendants arising from the assessor's determination including their right to file the Certificate of Determination in the Registry of the Supreme Court in order to make it enforceable.
The plaintiff contended that the filing of the certificate and its entry as "a notional judgment" of the Court should be set aside either pursuant to rule 36.15(1) Uniform Civil Procedure Rules or pursuant to the inherent or implied jurisdiction of the Court.
In the plaintiff's written submissions it was stated:
"13. The Plaintiff exercised her right to apply for review on 7 November 2012. The Manager Costs Assessment referred the review application to a review panel on 20 November 2012, thereby engaging the suspension of the assessor's determinations under s 377(1). Without the review panel having ended that suspension, the Defendants filed the assessor's certificates in this Court and procured their entry on 20 December 2012.
14. UCPR 36.15(1) provides that a judgment or order 'may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.' On its proper interpretation, the rule applies to a certificate which takes effect as a judgment. In any event, the implied and (in the case of the Supreme Court) inherent power of the Court is sufficient to set aside the filing and entry of a certificate contrary to the legislation and rules which empowered those steps.
15. Filing of the certificate on 14 December 2012 was contrary to LPA 2004 s 377(1), which suspended the assessor's determinations. Suspension is the temporary stopping of a person's right. Section 377(1) stops the rights which arise from an assessor's determination until the suspension is lifted under s 377(2) or the rights disappear by setting aside of the determination, as the case may be. One of those rights is the right to file a certificate of the determination and thereby engage a curial process of enforcement. An assessor's certificate is a document which formally 'sets out' the corresponding assessor's determination (ss 368(1), 369(5)), the chief purpose of which is to facilitate enforcement of the determination."
[6]
Defendants' Submissions on Issue 1
The defendants submitted that on the appropriate construction of the costs assessment and review provisions in the LPA, there was no qualification to the filing of a Certificate of Determination of Costs. The defendants submitted that regardless of the suspended status of the operation of the determination, the certificate could validly be filed. The defendants argued that their construction of the relevant provisions was supported by s 378(3)(c) which they contended presupposes that the certificate and the "notional judgment" obtained upon filing the certificate continued to have effect despite the suspension of its operation under the provisions in s 377(1).
In the defendants' submission there is a distinction between the suspension of the operation of a determination provided for in s 377(1) and suspension of the certificate itself. The liability for payment under the certificate, it was contended, continued to exist despite the suspension. Further, there was no intention apparent from the legislation itself that a party should or was to be deprived of his/her entitlement to claim interest from the point of filing the certificate by reason of the fact of a review.
The defendants also contended that if this Court was to exercise a discretion to set aside the judgment made upon filing of the certificate the relevant source of the discretion does not arise under r 36.15 of the UCPR as contended by the plaintiff as that rule applies only to judgments "given or entered" irregularly or illegally. In this case the defendants submitted the judgment was not "given" or "entered" but arose by virtue of the operation of s 368(5) LPA.
In any event, it was contended, the Court should not exercise its discretion to set aside the "notional judgment" arising upon the filing of the certificate, especially in circumstances where the original costs assessor's determination was affirmed in the defendants favour by the review panel.
[7]
Decision on Issue 1
The resolution of the issue as to whether the filing of the certificate on 14 December 2012, was as the plaintiff contends, "impermissible", turns upon the relevant statutory provisions of the LPA and their proper construction. Amongst other matters, it is noted that the provisions of the statutory scheme distinguish between:
"Determinations" made by a costs assessor as to costs assessments;
"Certificates" as to such determinations (before filing);
Certificates that take on the character of a judgment - that is, those that are taken to be judgments of the relevant court following filing in that court's Registry.
A "determination" is made by a costs assessor in accordance with the provisions of s 363(1) and (2) on the basis of what is "a fair and reasonable amount of legal costs". Whilst a determination is expressed to be "binding on all parties" (s 372), without more, it is not enforceable as such. Enforceability only exists when:
in conformity with s 368 the certificate is filed as specified in s 368(5), and
the certificate has been entered pursuant to s 133 of the Civil Procedure Act 2005 which requires filing in accordance with r 36.11 of the UCPR.
However, as has been observed:
"… the certificate may be enforced, but entry does not otherwise alter its legal effect and the section does not make it a judgment of the Court": Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172, at [40] per Handley AJA.
By operation of s 377(1), once the Manager, Costs Assessment refers a determination of a costs assessor to a panel for review under subdivision 5, which is entitled Review of Determination by Panel, "the operation of that determination is suspended". The section operates upon a "determination", not a certificate of determination.
Reference to the "operation of that determination" in s 377(1) clearly must be taken as referring to or including a suspension of any enforcement of the determination. That means that any other action that is not part of enforcement action but, for example, is only preliminary to such action, is not suspended for clearly no step by way of enforcing the costs assessor's determination has thereby been taken. Accordingly, the mere filing of a certificate, though a necessary step towards subsequent enforcement action, does nothing to put the determination into operation (in terms of giving it effect). As stated above, the operation of a determination can only occur once steps are taken to "enter" the certificate under UCPR r 36.11 as required by s 133 Civil Procedure Act. Entry of the certificate under that rule triggers enforcement action by which the determination is then given operation or effect. It is such action that is by s 377(1) "suspended" until the panel sets aside the determination or otherwise.
If a determination is set aside then s 378(3)(c) (set out at para [18] above) applies and the certificate, as well as any judgment taken to have been effected in relation to it, ceases to have effect:
Importantly the provisions of the LPA do not expressly prohibit the filing of a certificate at any stage, even after a determination of a costs assessor is referred to a panel for review and its operation is suspended under s 377(1). Further, as noted above, it is only if a determination is set aside, that the certificate pertaining to the determination "ceases to have effect" under s 378(3)(c) regardless of when it was filed. In other words, under the LPA nothing turns on the time at which a certificate is filed.
I accept, as submitted for the defendants, that the text of s 368 provides no qualification or restriction to, or on, the filing of a certificate pertaining to an assessor's costs determination. It simply permits the filing of the certificate and provides only one circumstance in which it ceases to have effect, namely, in the event that a panel sets aside an assessor's determination which, of course, did not occur in this case.
As noted in the defendants' Written Submissions at [8]-[10]:
"Parliament could have easily made provision for some qualification on the filing of certificates in cases where the determination had been suspended by referral to a review panel. The fact that it did not do so supports the defendants' construction, which is that regardless of the status of the determination (ie, suspended or unsuspended) the certificate can be filed in accordance with s 368(5).
The plaintiff's construction requires the addition of a qualification which the text simply does not support, or need.
Contrary to the plaintiff's submission that the filing of the certificate was contrary to s 377(1), that subsection contains no prohibition and the ordinary meaning of its words also do not support such a construction."
The filing of the certificate of determination did not contravene the provisions of s 377(1) or any other provision of the LPA. In particular, the statutory suspension of the determination did not, under that section or any other section addressed, affect or prohibit the filing of the certificate on 14 December 2012.
The mere filing a certificate, as discussed above, did not give effect to the determination or cause it to operate in any way. Further, the "suspension" only applies to a "determination" of a costs assessor and such suspension ceases if, as in this case, the panel affirms the determination of the cost assessor.
Whilst a certificate of determination issued by a costs assessor is "binding on all parties" it does not have any operation unless and until it is "entered" under UCPR 36.11(3).
In this case, no certificate was "entered" prior to the date of the review panel's determination.
The legislative scheme under the Act not only does not prohibit the filing of a Certificate of Determination even though the determination is suspended under s 377(1), it plainly allows or permits that to occur. An identifiable reason for permitting the filing of a certificate is found in the fact that by doing so any entitlement in a respondent to a cost assessment application to interest (notwithstanding that the Manager has referred the matter for review) is thereby preserved. A period of time will inevitably arise between the date of a determination and the issue of a certificate of a review panel.
In other words, the Act, in permitting the other party to a costs assessment application to file a certificate, preserves any right in that party to claim interest from the date the certificate is filed in the case of an unsuccessful review application by the other party.
I have concluded that, for reasons set out above, no basis exists or has been established for setting aside the certificate/judgment. The certificate was filed as permitted by the provisions of the LPA and there was no irregularity or illegality in doing so. There is, in those circumstances, no basis for any of the relief sought by the plaintiff in para [1] of the Notice of Motion.
As a matter of discretion, even if there had been a procedural irregularity in or about the filing of the certificate, no basis, in my opinion, has been established that would warrant or justify the exercise of the discretion in favour of the plaintiff.
In this latter respect, it is noted that the amount of the defendants' costs has been found by both the original costs assessor and the members constituting the review panel, to have, in fact, been fair and reasonable.
[8]
Plaintiff's Submissions on Issue 2
The plaintiff submitted that s 368(5) of the LPA is invalid in light of the Constitution and the principle that State parliaments may not confer powers or obligations on Chapter III courts, that is, courts capable of being vested with Commonwealth judicial power, which are incompatible with the exercise of the judicial power of the Commonwealth. This principle was enunciated in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51.
The plaintiff submitted that in the context of s 368(5), the determination of costs payable by one party to another under a costs order made by a court constitutes an exercise of judicial power because it involves an enforceable determination of rights and liabilities as between the parties.
[9]
Defendants' Submissions on Issue 2
The defendants submitted that there is nothing about the act of filing provided for in s 368(5) which affects the impartiality of the Court, and the costs assessment process does not involve the adjudication of any dispute.
In the defendants' Outline of Argument at [41]-[42] it was submitted:
"The role a New South Wales Court is required to play in the filing regime is a far cry from the roles required of courts in the criminal association cases recently decided by the High Court and which give content to the Kable implication.
In the filing regime established by the Legal Profession Act 2004 the 'court' is required to undertake a ministerial act, but in the following circumstances:
a. Where the Court is not in 'court session';
b. Where no Court has been convened to hear any matter;
c. Where no originating process has invoked the Court's authority to decide a dispute;
d. Where no judge of the Court is involved;
e. Where the act of receiving the filed certificate is carried out by registry staff who are not judicial officers;
f. Where the court has at all times (up until any referral of costs for assessment) power and jurisdiction over the quantification of party/party costs; section 98(4);
g. Where, if the court does not exercise the power under s 98(4), a costs assessor, appointed by the Chief Justice of the Supreme Court of New South Wales, and a legal practitioner of at least five years standing, has determined an amount of costs;
h. Where in carrying his or her function the costs assessor (including those costs assessors who constitute the review panel) has been obliged to:
vi. Accord procedural fairness;
vii. Issue reasons which amongst other things, are sufficient to give a real and not illusory right of appeal;
i. Where any party dissatisfied by that determination has a right to a review by a panel of two costs assessors;
j. Where the determinations are able to be appealed as of right under s 384 and by leave under s 385 to a court.
k. Where at all times the Supreme Court has supervisory jurisdiction over costs assessors and review panels."
It was further submitted for the defendant, at [47]-[49]:
"In the filing of a certificate there is no relevant 'dispute': parliament has made the adjudication of the dispute by a costs assessor or a review panel 'final and binding' subject to any review and/or appeal provisions or any judicial review as referred in paragraph 156.
Independence in the context of the Kable implication refers to the independence of the judiciary in its role of the quelling of disputes. In this case there is no involvement of the judiciary in the process and so the question can only be whether the filing regime impinges upon the institutional integrity of the court in some less specific way.
It is submitted that, for the reasons outlined above, the regime does not touch, in any relevant sense, the integrity of the court or impinge upon the independence or impartiality of those who have authority to decide or the institution generally and that, accordingly, the constitutional challenge must fail."
[10]
Attorney General's Submissions on Issue 2
The Attorney General for the State of New South Wales, as an intervening party, submitted that the plaintiff's submissions as to the exercise of judicial power by a non-judicial body (the costs assessor) were misplaced given that the doctrine of the separation of powers does not apply at the State level.
The Attorney General submitted that s 368(5) LPA is not "extraordinary" in the sense of the legislation considered in Kable. The Attorney General submitted that the filing regime set out in the LPA does not deprive courts of their judicial characteristics or impair their institutional integrity in the sense referred to in Kable. It was submitted by Mr Robertson on the Attorney's behalf that the plaintiff had not established a particular characteristic of the Court impaired by s 368(5).
In particular it was noted that the independence of the Court remains intact despite the operation of the costs assessment provisions in the LPA because the courts "retain their independent supervisory jurisdiction over the assessment process and retain the power to review or reopen any assessment made by a costs assessor". In this regard, it was noted that a number of roles are performed by the Court with respect to the determination of applications for costs assessments. It was contended that these roles evidenced the maintenance of judicial integrity despite the costs assessment procedure.
Finally the Attorney General submitted that a State legislative regime that deems certificates to be judgments of State courts, could only be invalid if it required courts to enforce determinations at odds with the fundamentals of the judicial process. This had not been established according to the Attorney General.
[11]
Decision on Issue 2
It was accepted by all parties that any argument that s 368(5) is constitutionally invalid depended upon whether the Kable principle had been breached in some way.
In Attorney-General (NT) v Emmerson (2014) 307 ALR 174 at [40] the Kable principle was summarised as follows:
The principle for which Kable stands is that because the Constitution establishes an integrated court system, and contemplates the exercise of federal jurisdiction by State Supreme Courts, State legislation which purports to confer upon such a court a power or function which substantially impairs the court's institutional integrity, and which is therefore incompatible with that court's role as a repository of federal jurisdiction, is constitutionally invalid.
Additionally in Emmerson the High Court observed at [44] that:
"Since Kable, it has been stated often that a court must satisfy minimum requirements of independence and impartiality, even though it is not possible to make a single statement embracing all of the defining characteristics of a court. In the context of the arguments advanced in this appeal, it is worth repeating the well-established proposition that independence and institutional impartiality mark a court apart from other decision-making bodies. A legislature which imposes a judicial function or an adjudicative process on a court, whereby it is essentially directed or required to implement a political decision or a government policy without following ordinary judicial processes deprives that court of its defining independence and institutional impartiality."
I accept the submissions made by the defendants and Attorney General that the impugned provisions in this case are far removed from the provisions invalidated in Kable and similar cases. The plaintiff has submitted that the integrity and impartiality of this Court is undermined by the fact that an assessment made by a non-judicial officer can be deemed to be a judgment of the court. There is, however, an important distinction to be drawn between something which is taken to be a judgment of the court and an actual judgment of the court. The defendants and the Attorney General, with respect correctly in my opinion, identified the filing process as one that only operates with respect to the enforceability of a costs assessor's determination. As observed in the discussion above, on the filing of a certificate the instrument is taken to be a judgment of this Court only for the purposes of enforcement. The certificate does not obtain the status of a judgment of the court, arrived at by the judicial processes of the court. The determination remains, despite its filing in this Court, a determination of a costs assessor and not a determination of this Court.
The costs assessment process in this case was enlivened by an order of this Court. As noted in [2] above, the relevant order was made on 28 July 2011. It then fell for this Court to determine whether to assess costs itself or make a referral. At no point is the Court required to refer a matter to a costs assessor. For that reason, the plaintiff's submission that the regime amounts to the Court being "essentially directed or required to implement a political decision or a government policy without following ordinary judicial process" in the sense described in Emmerson at [44] must fail. The adjudicative capacity of the court is retained.
Both the defendants and the Attorney General with respect, correctly, pointed to a number of other factors which they contended ensured the integrity of the Court remained intact despite the filing of a costs certificate. In particular, reference was made to the fact that the "notional judgment" is not the result of the Court being in session, and that it is not the result of the Court being called upon to resolve a dispute. These factors place the costs assessment process wholly outside the court's normal judicial processes.
The integrity, independence and impartiality of those processes cannot be threatened by an external process where the only involvement of the Court is to make the process enforceable through the filing of a certificate.
The Attorney General and the defendants also identified safeguards that are in place during the costs assessment process including the obligation on a costs assessor to afford procedural fairness, the ability of the Court to intervene during an assessment and the ability of the parties to appeal from decisions with leave on matters of law.
A costs determination is one that results from a procedurally fair process. Such a process, of course, is consistent with the Court's normal role in adjudicating disputes between parties and determining rights and liabilities.
The integrity of the Court is not, in my opinion, threatened by the process established by the Act, in particular s 368(5) in the Kable sense or at all. This ground, as argued by the plaintiff is without merit. The relief claimed in para [2] of the Notice of Motion filed 15 October 2014 should be refused.
[12]
Orders
1. The plaintiff's Notice of Motion filed 15 October 2014 is dismissed.
On the question of costs, costs normally follow the event. Unless the plaintiff makes written submissions to the contrary, the order will be that the plaintiff is to pay the costs of the proceedings. Any such submissions should be made within 7 days of this judgment otherwise the order is that the plaintiff pay the defendants' costs.
[13]
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: 12 March 2015