Coshott v Woollahra Municipal Council

PARTIES : Robert Coshott v Woollahra Municipal Council

COUNSEL : Plaintiff in Person Mr M. Brabazon - Defendant

SOLICITORS : Plaintiff in Person Deacons Lawyers - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10821/05 - Robert COSHOTT v WOOLLAHRA MUNICIPAL COUNCIL

1 HIS HONOUR: On 9 March 2005, Robert Coshott ("the plaintiff") commenced proceedings against Woollahra Municipal Council ("the defendant"). These proceedings were unusual in that they coupled together two very distinct and differing claims for relief. The first, as appears from paras 1 and 2 of the summons, is an appeal from a Cost Assessment of a Review Panel under Part XI of the Legal Profession Act 1987. The second, evidenced by the declaration sought in para 3 of the summons, a completely separate application for declaratory relief in the original jurisdiction of the Supreme Court. Despite this rather unusual situation, there was, it appears, a commonality of sorts between the two types of relief sought. In the ultimate, it was agreed that the Court could proceed to deal with both aspects of the summons provided that each was dealt with separately and distinctly.

The first claim - an overview 2 Mr & Mrs Coshott were the proprietors of residential premises at 5 Gilliver Avenue, Vaucluse. They commenced proceedings in the District Court arising out of allegations of damage to their home connected with development approval, and subsequent demolishment and excavation work carried out at 7 Gilliver Avenue in the period August to November 1995. These proceedings were commenced in May 1999. (There had been earlier proceedings arising out of the development appeal process in both the Land & Environment Court and the Federal Court of Australia - these however relate to the plaintiff's second claim). In the ultimate, the District Court proceedings were settled as between the plaintiffs and all defendants except Woollahra Council. That remaining aspect of the plaintiff's claim was heard by Puckeridge DCJ in 2002. His Honour, after a lengthy hearing, entered a verdict for the defendant in those proceedings on 5 December 2002. Costs were ordered against the plaintiff. The costs went to assessment. The party/party bill of costs filed on 28 October 2003 claimed costs in the amount of $116418.10. 3 The assessor appointed by the Supreme Court was Mr Darryl Browne. Following an exhaustive exchange of correspondence and submissions, the assessor finally determined the plaintiff's liability to costs in the sum of $81,322.18. Unfortunately, by oversight, Mr Browne transposed the descriptions of the paying and receiving parties in his certificate, although nothing now turns on this. The plaintiff then applied for a review. The Review Panel chosen by the Court comprised Mr Robert Benjamin and Mr Gordon Salier. The review was completed on 16 February 2005. The Review Panel set aside the assessor's determination and issued a certificate in the same amount ($81,322.18), but this time correctly described the paying and receiving parties. The substance of the review was that the assessor's original determination was confirmed. 4 The plaintiff's appeal is from the decision of the Review Panel. Although the orders sought in the summons are said to be pursuant to s 384 of the Legal Profession Act 2004, it is now agreed that the relevant legislation for the purposes of this appeal is the Legal Profession Act 1987. That Act was repealed by the later legislation. The operation of Part XI however, was relevantly preserved by Schedule 9, Clause 18. Accordingly, the appeal is brought pursuant to s 208L of the 1987 Act. It applies to a decision of a Review Panel in the same way as it applies to the decision of a Costs Assessor. The appeal is a limited one and lies only for error of law by the Review Panel. 5 It may be helpful in gaining a general understanding of the grounds relied upon by the plaintiff as errors of law if there is set out in this decision the major part of the "Statement of Grounds" accompanying the plaintiff's summons. It is in the following terms: - " Introduction and Background The defendant filed an Assessment Application seeking assessment of the costs in respect of which it was entitled to be indemnified under a costs order made in its favour against the plaintiff in District Court proceedings between the parties. The plaintiff took the preliminary point that the defendant must prove it has paid or was legally liable to pay the costs and disbursements for which it sought indemnity in the Assessment Application. The defendant sought to meet its onus of proof by asserting that it has paid part of these costs and that the balance of these costs was paid by a third party "Premsure". The defendant then asserted that, as regards the costs it had paid, it was entitled to recover same under the "indemnity rule". It further asserted that it was entitled to recover the balance by way of "subrogation". It failed and refused to adduce any proof of payment of any of these costs, despite a section 207 notice to do so. The defendant's published accounts for the relevant years itemized in a Schedule to those accounts all payments made for legal costs during each of those years. There were no payments disclosed in respect of these District Court proceedings. The defendant over the next several months produced parts of documents, such as the Deed setting up "Premsure". "Premsure" was not a legal entity. It was not an insurer. There was no right of subrogation contained in the Deed. No evidence of any payments made by "Premsure" was produced by the defendant. The defendant then sought to produce to the costs assessor, unspecified "evidence" on the basis that this evidence was privileged and should not be disclosed to the plaintiff, but could be relied upon by the defendant. The plaintiff objected and submitted that if privilege was claimed then the documents should not be put into evidence and should not be relied upon by the defendant. If they were to be relied upon by the defendant, then the plaintiff should be allowed an opportunity to see those documents and to challenge or respond thereto. The costs assessor issued Certificates of Determination and published reasons allowing the defendant to rely on that evidence and denying the plaintiff the opportunity to inspect and challenge or respond to same. The costs assessor then proceeded to determine on the basis of that evidence that the defendant was entitled to be indemnified by the plaintiff for the costs. The assessor did not allow the plaintiff the opportunity to make objections to the actual items claimed, a right which had been reserved pending the determination of the preliminary point, in the event the assessor ruled in favour of the defendant on the preliminary point. The plaintiff sought review of the costs assessor's determination. The Review Panel found no error in law on the costs assessor's part. The Review Panel increased the amount of the costs determination on the basis of a submission made by the defendant after the costs assessor had issued his determination. They did not allow the plaintiff to make any submissions. The Review Panel reduced the costs assessor's assessment of his own fees. The defendant's published accounts disclose that it did not pay any of the costs claimed in the costs assessment, nor did it pay any of the costs which it has recovered from the plaintiff in respect of earlier related litigation between the parties in this Court and the Federal Court, totalling approximately $150,000.00 on the basis that it had, in fact, paid those costs."

The Premsure Scheme 6 There was voluminous material before the Costs Assessor and the Review Panel dealing with the nature of the Premsure Scheme. This Scheme was at the heart of the plaintiff's complaints during the costs assessment process. It will be necessary to say something about the scheme and its origins. 7 In 1988, a number of local councils (including Woollahra Council) entered into a Deed of Agreement for "joint municipal insurance". The Deed contemplated the management by those councils of certain liabilities of the councils, which might in the future arise in connection with the exercise by the councils of their powers, authorities, duties or functions. The Scheme thus settled might be aptly described as, in part, a mutual indemnity scheme coupled with a provision for joint insurance for major claims. An executive and management committee were each formed with representatives of the relevant councils involved. The Scheme contemplated that, for example, Woollahra Council would have the responsibility of meeting the first $50,000.00 of a professional indemnity claim made against it. Where the claim exceed $50,000.00 but fell below $1 million, the association trading under the name Premsure would indemnify Woollahra Council for the costs of the claim between those two amounts. This indemnity would come out of the "pooled cover". This was an amount represented by funds contributed by each of the councils during the relevant Fund Year. Where the claim exceeds $1 million, Premsure would purchase indemnity cover from an insurance company or companies at the best available rate. 8 It maybe convenient to refer to a number of the provisions of the Deed in this regard. For example, Clause 5.3 is in the following terms: - "The Executive Committee shall consider the recommendations of the Management Committee in respect of any claim made against the pooled cover and may in its sole and absolute discretion either in whole or in part and upon such terms and conditions as the Executive Committee may consider appropriate determine that the association will grant indemnity from the pooled cover in respect of any such claim". 9 It was the task of the Executive Committee to be responsible for a financial management of the Association. In that regard it had to determine the risks to be provided for from the fund of each Fund Year (5.4.3); it had to determine the amount of pooled cover to be provided to the councils from the fund of each Fund Year (5.4.4); and it had to determine the amount of indemnity cover to be purchased for the councils from the fund of each Fund Year (5.4.5). 10 The Deed provided that the councils were to establish a fund for each Fund Year in the amount recommended by the Executive Committee; and were, at the commencement of each Fund Year during the term of the Association, to contribute to the fund in the proportions determined annually by the Executive Committee (Clauses 8.1 and 8.3). These monies were to be calculated in a budget as necessary to meet, first, such claims as might be made against any one or more of the councils during the Fund Year in respect of risks to the extent of the pooled cover; secondly to meet each claim made upon any of the councils during a Fund Year, to the extent that the claim did not exceed the amount of the pooled cover, from the Fund; thirdly, to the extent that the claim exceeded the amount of the pooled cover, to meet such claim or claims from the Fund; and thereafter from indemnity cover, to the extent of that cover. Where the claim exceeded the amount of the pooled cover and the indemnity cover, the money was to come from the fund, the indemnity cover and then from the council against which the claim was made. (Clause (8.2) 11 Any surplus remaining in the fund at the end of a Fund Year, after allowance for the settlement of all claims, was to be distributed to each council in the proportion in which it was distributed. Any deficiency in the fund was to be met by additional contributions by each council in the proportion in which contributions were first made to the fund (Clause 8.4). 12 There were provisions for the appointment of a manager, the opening of a bank account, powers of investment and other matters of a general nature including the appointment of an auditor. 13 There was material before the Costs Assessor and the Review Panel (Statutory Declaration of John Comino, a Councillor of Woollahra Council and the then Chairman of Premsure) that Woollahra Council was, during the relevant period, a member of the Premsure Scheme and that the plaintiff's District Court claim against Woollahra Council was dealt with under that Scheme. On 24 November 1999, indemnity had been extended by Premsure to Woollahra Council for the District Court claim. The Council had to pay the first $50,000.00 inclusive of costs. This amounted, in effect, to a payment in the nature of an excess. The balance of the costs had been paid by way of indemnity out of the Premsure Scheme, a scheme to which Woollahra Council had regularly contributed. In its letter of 21 March 2004 to the Costs Assessor, the Council's solicitors indicated:- "At all material times Woollahra Council was a member of Premsure which is a mutual agreement between a group of Government Councils to manage public liability and professional liability claims. Premsure is not an insurer. It was determined that the agreement between Premsure and the council that the council had a deductible of $50,000.00 which it applied to the costs and disbursements incurred in the proceedings. The council's deductible was fully exhausted on legal costs and disbursements. The liability for costs above $50,000.00 was met by Premsure from a mutual pool of funds to which the council contributed. Deacons was retained directly by the council. All accounts up to $50,000.00 were paid by the council. Thereafter, the claim was managed by Jardine Law Thompson, the claims handling agent of Premsure. Instructions also continued to be given by the council".

The Costs Assessor's decision on the indemnity principle 14 The Review Panel simply confirmed the Costs Assessor's view on the legal issues raised before him. Mr Brown's original decision is, by contrast, very comprehensive and detailed on the point. Although it is lengthy, it may be convenient to set it out in full. I reproduce pages 9 to 16 of the Costs Assessor's decision, being the material between paragraphs 2 and 9 of that decision: - "3. INDEMNITY PRINCIPLE

In general terms the law prohibits a party who has obtained a costs order against another party recovering more from the other party than it is obliged to pay as its costs. This statement of law is commonly referred to as the "indemnity principle". The Costs Respondent's opposition to the Costs Applicant's claimed costs largely rests on this principle. The Costs Applicant's claim for part of its costs rests on an accepted exception to the principle. In its bill of costs the Costs Applicant lists items of work, which items include attendances (both physically and by telephone) upon an insurer and correspondence to and from an insurer. In its recital the bill of costs states that instructions were initially received solely from the Costs Applicant "but later, from February 2001, instructions were taken from the claims handler, Jardine Lloyd Thompson, and the insurer, Premsure": para 3 of bill of costs. In response the Costs Respondent has made these submissions: 3.1 party and party costs orders are an indemnity. The party in whose favour the order was made can only recover such amounts as he is legally liable for and has paid. 3.2 if an insurer has paid or indemnified the party's costs, the party has no right to recover costs as there is no liability to indemnify it against. 3.3 an insurer who has paid the costs may be able to recover the costs, in the name of the party, if it has a right of subrogation. 3.4 a right of subrogation is not an automatic right under the law. It is a contractual right. 3.5 the insurer must prove it has a right of subrogation under the contract of insurance under which it gave the parties (the insured) indemnity. It does so by producing the contract of insurance, evidence the granting of indemnity, and evidence of payment pursuant to the grant of indemnity. If it fails or refuses to produce same, it cannot seek to enforce the costs order. 3.6 the onus is on the applicant." See letter from HRC dated 20 February 2004 referred to at 2.8 above.

It subsequently transpired that Premsure was not an insurer, and that the arrangement between Premsure and the Costs Applicant only required Premsure to pay the Costs Applicant's costs above $50,000.00. The Costs Applicant also subsequently produced additional material, which is referred to below. In response, the Costs Respondent elaborated on his earlier submissions by submitting that: 3.1.1 the Costs Applicant could only claim indemnity costs under the costs order up to a maximum of $50,000.00: see letter from HRC dated 2 April 2004 referred to at 2.18 above. 3.1.2 to do so, the Costs Applicant must show that it actually paid its solicitor's costs up to $50,000.00 in relation to the District Court proceedings, rather than for other proceedings such as Land & Environment Court proceedings, Court of Appeal proceedings, Federal Court proceedings or full Federal Court proceedings: see letters from HRC dated 2 April 2004 (2.18), 7 July 2004 (2.29) and 6 October 2004 (2.28). 3.1.3 the published accounts for the Costs Applicant, which accounts list legal costs paid by the Costs Applicant for litigation in which it is involved, do not contain any reference to the District Court proceedings between the parties: letter from HRC dated 21 April 2004 (2.21). 3.1. 4 the omission of any reference to the District Court proceedings referred to in the accounts conclusively shows that the Costs Applicant "has not paid even $1.00 in respect of the costs which are the subject of "my assessment: letter from HRC dated 7 July 2004 (2.29) and 6 October 2004 (2.38). 3.1.5 there is no evidence adduced by the Costs Applicant that it has paid any costs claimed in its application: letter from HRC dated 7 July 2004 (2.29), and further 3.7 if Premsure is not an insurer it cannot have any right of subrogation: letter from HRC dated 2 April 2004 (2.18). 3.8 as Premsure is not a legal entity it cannot obtain any contractual rights of subrogation: see letter from HRC dated 6 October 2004 (2.38) 3.9 equity does not assist a volunteer: see letter from HRC dated 2 April 2004 (2.18) 3.10 the onus of proof must be satisfied by admissible evidence, not unsworn assertion: see letter from HRC dated 6 October 2004 (2.38)

On 14 May 2004, which was some months after the application was commenced, the Court of Appeal delivered its decision in Dyktynski v Titanium Minerals Pty Ltd [2004] NSWCA 153 and, when the decision came to my attention, I referred the parties to it: see 2.25 above, as it seemed to me that the decision was relevant in a number of ways which were pertinent to my assessment. 4.1 Mason P (with whom Davies AJA agreed) stated the indemnity principle, referred to its application in particular instances - see para 7, and then stated an exception as follows: "The situation is different if the client has the benefit of an indemnity from a third party, so long as the client remains under a legal liability to the solicitor": para 8 Applying that statement of law to this assessment: 4.1.1 if the Costs Applicant has the benefit of an indemnity from Premsure, the Costs Applicant can recover from the Costs Respondent the costs of the District Court proceedings paid by Premsure and not the Costs Applicant 4.1.2 provided the Costs Applicant remains under a legal liability to the solicitor. The statement in para 4.1.1 is also supported by McCallum v Ifield [l969] 2 NSWR 329 which McColl JA cites with approval at paras 77 and 78 of Dyktynski . None of the judges in Dyktynski suggest that the Costs Applicant's right of recovery is dependent upon Premsure having a right of subrogation. 4.2 In the process of explaining the statement of law set out at 4.1, Mason P (with whom Davies AJA agreed) referred to the following passage with obvious approval: "When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs": para 9 Applied to this assessment this passage establishes that: 4.2.1 if it is established that Deacons were acting with the Costs Applicant's knowledge and assent, the Costs Applicant became liable for Deacons' costs -in other words the proviso at 4.1.2 is satisfied. 4.2.2 unless it is proved that under no circumstances was the Costs Applicant to be liable for Deacons' costs. 4.3 The indemnity principle: 4.3.1 as McColl JA (with whom Mason P and Davies AJA agreed) explained, must be applied "to ensure that a real party with an interest in the litigation can recover the costs incurred in proceedings brought in another's name": para 95, or 4.3.2 in different words, operates "on the substance rather than the form to produce a sensible and just result": para 93, or 4.3.3 as Mason P put it (with whom Davies AJA agreed) the indemnity principle "requires a substantive as distinct from a formal approach in identifying the real party to the proceedings": at para 23. It is clear beyond sensible argument that Deacons acted with the Costs Applicant's knowledge and assent. The Costs Respondent does not submit, and I have not seen any material, which would suggest, that the Costs Applicant was not liable for Deacons' costs in any circumstance. As a result, applying Dyktynski , the Costs Applicant can recover from the Costs Respondent the costs of the District Court proceedings paid by Premsure provided the Costs Applicant has the benefit of an indemnity from Premsure for those costs.

By statutory declaration dated 18 June 2004 John Comino, a councillor of the Costs Applicant and the chair of Premsure: 5.1 declared that the Costs Applicant was a member of the Premsure scheme; 5.2 attached a Deed dated 4 August 1988 made between the Costs Applicant and three other councils whereby the four councils agreed to associate, under the name "Premier Joint Municipal Association", which was shortened to "Premsure", for the purpose of establishing and contributing to a scheme which would meet claims made against any of the councils to the extent determined by the executive committee of Premsure; 5.3 declared that from about 24 November 1999 the Costs Applicant was indemnified by Premsure for the District Court claim brought by the Costs Respondent ; 5.4 declared that the Costs Applicant had the responsibility to meet the first $50,000.00 (including costs) of a claim; 5.5 declared that Premsure would indemnify the Costs Applicant for the costs of the claim between $50,000.00 and $1,000,000.00; and 5.6 attached an extract from the Premsure member Council's Insurance Programme which disclosed insurance cover for Premsure for a claim of the type brought by the Costs Respondent.

In respect of the statutory declaration the Costs Respondent submits as follows (with my comments in relation to submissions following): 6.1 the Deed does not contain a subrogation clause and therefore Premsure has no right of subrogation (I have grave doubts that subrogation needs to be established by a contractual provision - see 8.1 above -but even if it does a right of subrogation is not required for Premsure to come within an exception to the indemnity principle: see 4.1 above.) 6.2 the Deed proves there is no right of indemnity (This submission is not supported by the Deed, the relevant provisions of which are summarised at 5.2 above) . 6.3 the Deed proves there is a once only $50,000.00 deductible (which includes expenses and legal costs) for each claim (This is not established by the Deed but by Mr Comino's statutory declaration: see 5.4 above) . 6.4 Premsure is not a legal entity. (Premsure is the name given to the association formed by the four councils.) 6.5 The right of subrogation can only vest in a legal entity. (See 6. I, but if a right of subrogation is needed, the right vests in the four councils) 6.6 Mr Comino does not declare that any of the costs claimed in the Costs Applicant's application have been paid by Premsure. (This is agreed, but the letter from Deacons, which is 2.35 above, specifically states the amount of costs paid by Premsure). 6.7 extracts of a document are not appropriate. 6.8 the extracts referred to at para 5.6 above have little use. (The extract merely establishes the aspects specified at 5.6 above). 6.9 the statutory declaration does not prove that Premsure agreed to pay on behalf of the Costs Applicant any claim. (This overlooks 5.3 and 5.5 above) 6.10 the declaration referred to in 5.5 above is incorrect as the Deed states the Association and not Premsure would indemnify. (This submission inadvertently overlooks the definition of the association as "Premsure": see cl 1 of the Deed.) 6.11 the Deed does not specify the claims against which the Costs Applicant is indemnified. (This is agreed but the statutory declaration - see 5.3 above -does specify that the Costs Respondent's claim was so indemnified.)

Mr Comino's statutory declaration establishes to my satisfaction that the Costs Application had the benefit of an indemnity from the four councils (which, for convenience, I will continue to call "Premsure") for so much of the Costs Applicant's legal costs as, with any other money payable by the Costs Applicant on the Costs Respondent's claim, exceeded $50,000.00. The letter from Deacons dated 15 September 2004: see 2.35 above, establishes to my satisfaction that the Costs Applicant itself paid $63,491.53 of its legal costs relating to District Court proceedings, and that Premsure paid $33,729.18 of those costs. This means that at least $97,220.71 of the Costs Applicant's costs (and I need not be concerned about any amount greater than that for reasons set out at 16 below) are recoverable from the Costs Respondent without any infringement of the indemnity principle (or an acknowledged exception to the principle). This conclusion deals with the Costs Respondent's submissions set out at 3 above but, for completeness: 7.1 dealing with the submission recorded at 3.1.3 and 3.1.4] The inference which the Costs Respondent asked me to draw from the absence of reference to legal costs for the District Court proceedings in the Costs Applicant's published account is not available given the Costs Applicant's solicitors' express statement to the contrary; 7.2 [ 7.4 ] In its letter of 5 March 2004 (see 2.13 above) the Costs Respondent's solicitors put this submission: ". . . if an insurer is to have any rights in respect of the insured's litigation or the fruits thereof, those rights are solely contractual and must be expressed in the policy document, ie the contract of insurance". Allowing for the incorrect reference to insurance, (which was not known to the Costs Respondent at the time of the submission) the submission that the Costs Applicant's rights to seek costs when indemnified must be contractual has been satisfied as a result of the Deed referred to at 5.2 above. 7.3 [3.5] The need for a right of subrogation is not supported by the relevant authorities: see 4.1 above. 7.4 [3.6] Given my task is an administrative one: Flexible Manufacturing Systems v Alter [2004] NSWSC 29, it must be doubted that either party has an onus of proof: the issue of onus appears to have been avoided by the courts, eg Melo v C oulter [l999] NSWSC 666 and Skalkos v Assif [2002] NSWSC 1221, specifically in relation to a costs assessment but Mahon v Air New Zealand [l984] AC 808 and Minister for Immigration v Wu Shun Liang [l996] 185 CLR 259 suggest that there is no onus where the decision maker exercises an administrative function; but if there is an onus I consider that the Costs Applicant has discharged it. 7.5 [3.10] It is inconsistent with the Legal Profession Act , s208(2), which provides: "In considering an application, a costs assessor is not bound by rules of evidence and may inform himself or herself on any matter in such manner as he or she thinks fit",

to assert that I must be satisfied by admissible evidence.

If subrogation needs to be established, and not simply a right of indemnity, I consider that: 8.1 subrogation is an equitable right and not a contractual right: the view to the contrary in England appears to have been rejected in Lord Napier v Hunter [l993] AC 713. 8.2 nevertheless contract may modify or exclude what would otherwise be a party's equitable right of subrogation; 8.3 there is no provision in the Deed which varies or is in conflict with the ordinary principles of subrogation; 8.4 subrogation arises from the circumstances and not because of the identify of the parties; and 8.5 to the extent that Premsure has paid the Costs Applicant's costs, which I have found to be for an amount of $33,729.18, it is entitled to be subrogated to that extent for the Costs Applicant's rights against the Costs Respondent. Effectively, therefore, the Costs Applicant and the Costs Respondent are in the same position, vis a vis each other, whether the Costs Applicant is able to recover as an exception to the indemnity principle or for itself insofar as it has paid its costs and, by reason of the right of subrogation, by Premsure, in its name, insofar as Premsure has paid the Costs Applicant's costs."

Points of law arising on the statutory appeal 15 There are, in effect, four issues raised on the appeal. These are: -

1. An assertion that the Costs Assessor (and hence the Review Panel) erred in relation to the application of the indemnity principle to the costs issue;

2. The Costs Assessor (and hence the Review Panel) erred in deciding that there had been a subrogation in favour of Premsure;

3. The Costs Assessor (and hence the Review Panel) erred in refusing to permit disclosure to the plaintiff of certain confidential documents which had been supplied to the Costs Assessor during the assessment process.

4. The plaintiff had been denied natural justice both in the original costs assessment and in the Review Panel process (the complaint here appears to be that the plaintiff was not given an opportunity to make detailed submissions in relation to individual items in the original Bill of Costs). 16 There were, it might be added, a number of other "sub-arguments" which appeared from time to time in both the written and oral submissions of the plaintiff. I shall endeavour to identify and discuss these when dealing with the principal grounds of appeal.

Ground 1 - Indemnity principle 17 The effect of the cost assessor's decision was that the defendant was not precluded from recovery of costs by the indemnity principle. This decision was confirmed by the Review Panel. In my opinion, no error of law has been displayed in the reasoning of the Cost Assessor nor in its adoption by the Review Panel. The principle known as the indemnity principle was explained in Gundry v Sainsbury (1910) 1 KB 645. This states that the fundamental purpose of an order that one party of the litigation pay the legal expenses or "costs" of another party is to provide an indemnity in relation to the whole, or usually part, of the legal obligation incurred by the other party to his or her lawyers. Where the party is under no legal obligation to pay lawyers fees, no amount can be recovered from the unsuccessful party. The principle also operates in the case where the lawyer has agreed to appear at a reduced fee below which that might, in the ordinary course, be recoverable or has agreed to appear without fee. (Wentworth v Rogers (2006) NSWCA 145 at paras 102-105 per Basten JA). In that decision, his Honour said at 104: - "The indemnity principle has been held to operate in two circumstances which might not obviously fall within its terms. The first is where the lawyers will be paid for their services, but not, as a matter of practice, by the client. Examples of that situation include cases where the litigant is indemnified by an insurer, by an association, such as a Trade Union, of which the litigant is a member, or where legal aid is obtained…in each case the primary liability was held to be that of the litigant or client and hence the indemnity principle was satisfied. In other circumstances, a lawyer may be employed by the litigant, either a trading corporation or some similar body, or the Crown." 18 (His Honour went on to consider the second circumstance, which is not relevant in the present matter. It relates to the involvement of a successful litigant in person who is a solicitor.) 19 Basten JA further noted (at para 126) that the purpose of an adverse costs order is to compensate or partly indemnify one party to litigation (usually the successful party) for the legal costs incurred in the course of the proceedings. The principle, he noted, does not require that the costs have been paid, but it does require that there be a legal liability to pay costs. 20 Santow JA in the same case did not agree with Basten JA in some respects. These matters of difference, important though they were, are not relevant to the present situation. There is no doubt, however, that Santow JA considered that the indemnity principle was one which was long established at general law. The principle continued to exist and have general application. His Honour thought, however, that the principle should be applied flexibly rather than made into a rigid rule. His Honour stated (at 45): - "Where a party to an action has an agreement with their legal advisor that they do not have to pay any costs, then the general or principle states that that party cannot have an party/party costs against their adversary: McCullum v Ifield (1969) 2 NSWR 329 at 330 per Taylor J citing Gundry v Sainsbury ". 21 The third member of the Court, Hislop AJA, concurred with the orders proposed by Santow JA and Basten JA, essentially for the reasons they had given. His Honour noted that there were areas where the conclusions of Santow JA differed from Basten JA. As those differences did not affect the overall result, however, he expressed no concluded opinion on them. 22 In Dyktynski v BHP Titanium Minerals Pty Ltd [2004] 60 NSWLR 203 Mason P (in agreeing with McColl JA and her analysis) expressed a corollary to the indemnity principle in the following terms: - "Another corollary is invoked by the respondent in the present case. If a party to an action has agreed with the solicitor that a party does not have to pay any costs, then costs cannot be recovered against the adversary under a party/party order…alternatively, if the solicitor/client agreement caps the amount of costs recoverable, this enures to the benefit of the client's adversary ( Tarry v Price [No 2] (1987) 88 FLR 270. The situation is different if the client has the benefit of an indemnity from a third party, so long as the client remains under a legal liability to the solicitor ( Adams v London Improved Motor Coach Builders Ltd (1921) 1 KB 495; Backhouse v Judd (1925) SASR 395; Angor Pty Ltd v Ilich Motor Co Pty Ltd (1992) 37 FCR 65; Wilson v Richmond River Shire Council [2000] NSWSC 71. The distinction is neatly stated by Bankes LJ in Adams , in a passage explaining why a plaintiff, who was a member of a Trade Union that instructed a solicitor on his behalf in a successful action, could recover the solicitor's costs. His Lordship said (at 501): "…When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs." 23 In Dyktynski, the Court of Appeal held that the costs agreement between the plaintiff and the solicitors in fact resulted in the situation where the plaintiff did not have any liability to pay costs to the solicitors. This did not determine the ultimate fate of the appeal however, since the view of the Court was that the situation in that case fell within a relevant exception to the indemnity principle, one which had been identified in an early Full Court decision in New Pinnacle Group Silver Mining Co v Luhrig Coal (1902) 2 SR (NSW) 50; 19 WN (NSW) 9. The plaintiff was in effect a nominal plaintiff, similar to the assignor of a chose in action who permitted the assignee to sue in the assignor's name or a beneficiary suing in the name of his trustee, subject to an indemnity as to costs. 24 Davies AJA agreed with Mason P with McColl JA. 25 In the present case, the assessor recognised that the defendant had the benefit of a partial indemnity arising out of the agreement with other local councils participating in the Premsure Scheme. The defendant had to meet the first $50,000.00 of its defence costs and the indemnity only applied above that amount. The plaintiff had retained the solicitors to represent it in the subject litigation. The assessor found that it had paid the first $50,000.00 and that several months into the litigation Premsure accepted the claim and took over management of the action. There was ample material to justify the cost assessor's finding that "it is clear beyond sensible argument that Deacons acted with the Costs Applicant's knowledge and assent. The cost respondent does not submit, nor have I seen any material which would suggest that the Cost Applicant was not liable for Deacons' costs in any circumstances". 26 It seems clear to me that the assessor formed the view, correctly on the material before him, that at all times Deacons were acting for the defendant with its knowledge and approval. Indeed, the Council continued to give instructions to Deacons even after the involvement of Premsure commenced. In those circumstances, the correct analysis was that the defendant remained at all times liable to the solicitors for costs; and that liability was not excluded merely because it was contemplated, and ultimately proved to be the fact, that costs above $50,000.00 would be met out of the fund operated by Premsure. It was simply not possible to go the further step identified by Mason P and hold that the Council would, under no circumstances, be liable for the costs of Deacons in the District Court proceedings. For that reason, the principal argument relied upon by the plaintiff failed before the Cost Assessor. It must also fail before me. There was no error of law on the part of the Cost Assessor nor on the part of the Review Panel, which adopted his reasoning. 27 The grounds relied upon by the plaintiff demonstrated a number of serious misconceptions on his part. He sought to argue, as a preliminary point, that the defendant must prove that it had paid or was legally liable to pay the costs and disbursements for which it sought indemnity in the assessment application. This approach represents a misunderstanding of the indemnity principle as I have stated it. Moreover, the plaintiff took the view that the defendant had to prove that it had paid costs in a manner analogous to proof in a court of law. Thirdly, the plaintiff argued that the defendant was obliged to produce to the Cost Assessor (and also to him) certain documents specified in a request made by the assessor pursuant to s 207 of the Legal Profession Act. 28 Finally, the defendant argued that the defendant had published accounts for the relevant years and there were no payments disclosed in the accounts in respect of the District Court proceedings. 29 As to all these points, it is necessary to say that the correspondence which passed between the Cost Assessor, the solicitors for the plaintiff and the solicitors for the defendant was, by any test, voluminous. There is no need for me to extract it in full. By the end of the assessment process, it was clear that the defendant had provided material to the satisfaction of the Costs Assessor but maintained that certain parts of this material were confidential (or privileged) and that the plaintiff was not entitled to copies of certain of those documents. In the ultimate, the Cost Assessor rejected the claim for privilege but found that certain of the documents were confidential and should not be provided to the plaintiff. For present purposes, the point is that the assessor had before him the fee agreement between Deacons and the Council dated 1 October 1999 together with a document entitled Provision of Legal Services dated 31 January 1997. The assessor also had copies of Tax Invoices forwarded by Deacons to the defendant. He also had a copy of Deacons time records. Ultimately, he also had copies of the cost agreements between Deacons and Senior and junior counsel, the Statutory Declaration of John Comino declared 18 June 2004, together with the Premsure Deed of Agreement and other relevant documents. 30 In addition, on 15 September 2004, Deacons had provided the Cost Assessor with Deacons Schedule of Receipts showing the identity of the payor of Deacons professional fees. This showed that Woollahra Council had paid Deacons professional costs (including soft disbursements) in the sum of $63,491.53. Premsure paid Deacons professional costs (including soft disbursements) in the sum of $33,729.18. The Schedule of Receipts did not include the payment of general disbursements and counsel's fees. Deacons made submissions to the Cost Assessor that the whole of the material with which he had been provided demonstrated that the relevant payments had been made as stipulated. Secondly, Deacons argued that the material sent to the Cost Assessor (including the Premsure Memorandum of Cover) demonstrated the existence of an indemnity pursuant to the agreement provided by Premsure to Woollahra Council. 31 It is clear that the Cost Assessor was entitled to have regard to the whole of the material before him to determine whether the defendant had paid part of the costs and whether Premsure paid the balance. It was open to the assessor to determine the precise amount of these payments and there was material before him, which would enable him to do so. In the ultimate, the Cost Assessor was satisfied that the relevant payments had been made as asserted by the defendant. He was also satisfied that the defendant had the benefit of an indemnity from the four councils pursuant to the Premsure Deed. That indemnity extended to so much of the defendant's legal costs as exceeded $50,000.00. The assessor expressly said that he was satisfied that at least $97,220.71 of the total costs were recoverable from the plaintiff without any infringement of the indemnity principle. The Cost Assessor gave reasons why he preferred the express evidence of the relevant payments to the suggested analysis of the council's accounts and annual reports. In each of these respects, in my view, the assessor was entitled to come to the conclusion he did and his findings demonstrate no error of law in that regard. The Cost Assessor was not bound by the rules of evidence and he was entitled to inform himself on any matter in such manner as he thought fit (s 208(2) LPA 1987). 32 In my view, as I have said, the submissions made by the plaintiff's solicitors during the assessment process revealed a misconception as to the nature of the indemnity principle. Further, they misconceived the obligation of the assessor, and, in particular, the way in which he might reach satisfaction as to the issues of payment. These misconceptions continued to assert themselves throughout the present proceedings, including both the appeal and the claim for declaratory relief. 33 One final matter needs to be examined in this area: the plaintiff argued both in relation to the indemnity principle and the subrogation argument that the decision of Windeyer J in Coshott v Schmierer (unreported 20 November 2002) compelled a conclusion that an error of law was manifest in the assessment process. In that case a company, Baramul Stud Pty Ltd had been the successful defendant in District Court proceedings. The plaintiff had been Robert Gilbert Coshott, that is the plaintiff in the present matter. An order had been made in those proceedings that Mr Coshott pay the defendant's costs to the defendant forthwith after assessment. Baramul Stud Pty Ltd was later placed in liquidation. The proceedings had been conducted for Baramul Stud by Henry Davis York solicitors. They had acted on instructions however, from CGU insurance. Mr Coshott had obtained a copy of the insurance policy under which Baramul Stud was said to be indemnified for the Coshott claim. It appeared in the evidentiary material before Windeyer J that Baramul Stud was not a party to the insurance contract. As a consequence, Windeyer J held, on the evidence before him, that the defendant company was not an insured under the relevant policy. His Honour held that there was no contractual right of CGU to conduct the proceedings in the name of the insured. In those circumstances he held that Messrs Henry Davis York was not retained by Baramul Stud and were not retained pursuant to some contractual entitlement or obligation between Baramul Stud and its insurer. The doctrine of subrogation accordingly did not arise and CGU were properly classified as acting as a volunteer in the proceedings. On the evidence, the solicitors had no retainer or instructions from Baramul Stud in the proceedings. 34 It will be seen that the rather unusual facts and circumstances in Coshott v Schmierer were very different from those in the present matter. Essentially, Windeyer J determined the matter on a factual basis and ruled in favour of Mr Coshott because of the absence of evidence to show a retainer between Baramul Stud and the solicitors. That situation is plainly distinguishable from the present. The findings of fact by the Cost Assessor in the present matter demonstrate that the situation in Coshott v Schmierer had no parallel whatsoever with the present matter.

Ground 2 - Subrogation. 35 Strictly speaking, it was not necessary for the defendant to establish in the assessment that the local councils who had associated together for the purposes of the Premsure Scheme had a right to be subrogated to the defendant's right to party/party costs against the plaintiff. They were not parties to the assessment nor are they parties to these proceedings. Moreover, the arrangements clearly fell within the indemnity principle, as the assessor found. As I say, strictly speaking there was and is no occasion to determine their right to be subrogated to the defendant's rights against the plaintiff under the costs order. Indeed, the Cost Assessor took this view himself and, in my opinion, he did so correctly. Nevertheless, he went on to consider the issue of subrogation and considered that it was established. He did so on the basis that there was plainly a contract of partial indemnity between Woollahra Council and the association of councils. In those circumstances, he considered that there was a basis for subrogation or, at least, a potential for subrogation (see the reference in s 8 of the Cost Assessor's decision to Lord Napier's case [1993] AC 713). 36 The material before the Cost Assessor plainly entitled him to conclude that the council would not profit by the assessment exercise. The plaintiff argued both before the assessor and in these proceedings that there was no express right of subrogation arising in the Premsure Deed. It seems to me that there would be little doubt, however, were the costs to be paid in accordance with the assessment, that the association would be entitled to compel the defendant council to account to it for monies recovered and referrable to the partial indemnity provided by the association to the defendant. Mr Brabazon assured me that this would, in any event, be the situation after payment of the costs but, for present purposes, the important point is that I have no doubt that such an action could be successfully maintained were it necessary to do so. 37 Of course, the reality here is that the council was a contributing party to the formation of the Premsure Fund. Its Executive Committee included at least one representative of the Woollahra Council and there could, in practice, be no doubt whatsoever that Premsure would be reimbursed if costs were in fact recovered from the plaintiff. In truth, having regard to the amounts paid, it is probably unlikely that very little money would go to the council at all. This is, in one sense, all beside the point, but it highlights the unreality of the submissions made on behalf of the plaintiff. 38 In any event, I am satisfied that no error of law has been established in the reasoning of the Cost Assessor nor in the adoption of those reasons by the Review Panel.

Ground 3 - Failure to order disclosure of confidential material 39 The Cost Assessor's reasoning is contained in sections 10, 11 and 12 of his reasons. There is no need for me to set out the reasoning in detail. His conclusion was that the confidential documents were not privileged documents, as had been claimed by the defendant. Even if they were, he concluded that this would not prevent him from considering the documents for the purposes of his determination. The Cost Assessor gave detailed reasons as to why he thought the documents were not privileged and there is no challenge in the present proceedings to his reasoning in that regard. 40 For present purposes, he held that the disclosure to him of the relevant bundle of documents, whether pursuant to a s 207 direction or otherwise, did not compel production of those documents to the plaintiff in the assessment process. The reasoning in this regard is set out in the following terms: - "But the disclosure to me of documents by the Costs Applicant, whether pursuant to a s 207 direction or otherwise, does not compel production of those documents to the Costs Respondent: see James Hardie & Co v Yeomans [2000] NSWSC 536 at para 32 and Kiwi Munchies Pty Ltd v Thai Airways International [2004] NSWSC 89(a) para 20. Clause 56 of the Regulations states the process for an application for assessment of court ordered costs. Relevantly the Costs Respondent must be sent a copy of the application before it is lodged with the Supreme Court. If more was required to be provided to the Costs Respondent, it would be natural to expect the Regulations to so provide. Section 208 requires all parties to have a reasonable opportunity to make written submissions. In my view it is wrong to confuse a provision which ensures that a party has an opportunity to make submissions before the application is assessed, with a requirement to receive all material provided by a party to an assessor before making submissions. Lastly, it is not usual for a Costs Respondent to have access to a Costs Applicant's documents in order to prepare its objections (nor for a Costs Applicant to have access to a Costs Respondent's documents in order to prepare its reply): Rickard at para 32. Ultimately it is my responsibility to assess a fair and reasonable amount for the Costs Applicant's costs. In some instances, to achieve that result, I may need input from a Costs Respondent on material provided by a Costs Applicant (or vice versa). In this assessment, I felt that the approach was not required. I felt that that action would probably further delay the assessment without tangible benefit. For those reasons I did not require the Costs Applicant to provide the confidential documents to the Costs Respondent before the Costs Respondent provided its submissions." 41 The plaintiff argued before the Cost Assessor that privilege did not attach to seven categories of the documents identified by the Cost Assessor on pages 18 and 19 of his decision. The plaintiff was successful in this argument regarding privilege but he lost on the confidentiality argument. In that regard, his argument both before the Cost Assessor and this Court was that he had been denied natural justice by not seeing these documents. The essential thrust of the Cost Assessor's response to this argument was that there was no compulsion in the assessment process to show this confidential material to the plaintiff. The authorities to which he made reference were decisions of Masters Malpass and Harrison (as they were then titled) in earlier decisions of the Court. These were important decisions and have been acted on now for a number of years. There were no submissions made before me to suggest that there was any error in the decisions of Associate Judges Malpass and Harrison. 42 In my view, there is no error of law contained in the reasoning of the Cost Assessor in coming to a conclusion that there was no obligation or need for the plaintiff to be supplied with the confidential documents in issue. Moreover, I consider that the same misconceptions I have earlier identified were operative in the arguments advanced on behalf of the plaintiff both before the Cost Assessor and this Court. This was a party/party cost assessment where the Cost Assessor himself may have needed to examine, for example, a costs agreement. But there was no denial of natural justice if such a document were not shown to the plaintiff. The plaintiff had every opportunity, as I shall explain later, to make written submissions in relation to determining a fair and reasonable amount of costs. The fact that he did not do so was really brought about by his allowing himself to be side tracked into an irrelevant pathway, one which continued to focus almost entirely on the indemnity principle argument. The plaintiff's wish and desire to inspect the confidential documents was allowed to overtake the real focus of the assessment process, at least so far as his submissions were concerned 43 I accept, as did the Cost Assessor, that in some assessments it may become necessary to disclose a confidential document to the party against whom the cost order has been made. Ultimately, this will depend upon the facts and circumstances of the assessment. In the present matter, the Cost Assessor felt that such an approach was not required and that disclosure of the particular documents would delay the assessment further without tangible benefit. In both these aspects he was plainly right. No error has been disclosed.

Ground 4 - Has the plaintiff been denied natural justice? 44 The simple argument advanced by the plaintiff here is that, as is undoubtedly the fact, he has never made any detailed submission raising individual objections to the items in the Bill of Costs. The plaintiff's complaint is that both the Cost Assessor and the Review Panel denied him natural justice by not allowing him the opportunity to make detailed submissions of this kind. 45 The defendant answers this complaint in two ways. First, so far as the proceedings before the Cost Assessor are concerned, the defendant asserts that the plaintiff was given every opportunity to make detailed submissions but simply declined to avail himself of that opportunity. Secondly, so far as the Review Panel is concerned, the plaintiff at no point asked the Review Panel to give any detailed consideration to the individual items assessed, commented on, or rejected by the original Cost Assessor. The defendant maintains in those circumstances that there has been no denial of natural justice. 46 In order to deal with these competing considerations, it will be necessary to set out something of the chronology of the cost assessment process. I shall turn to this now. 47 Puckeridge DCJ gave judgment for the defendant and ordered the plaintiff to pay costs on 5 December 2002. On 28 October 2003 the defendant made application for assessment of those costs. On 4 February 2004, the Cost Assessor notified the parties that he intended to set a timetable. It included the requirement that the plaintiff provide any objections to the cost applicant's application by 24 February 2004. 48 It is fair to comment there were many extensions of time granted either expressly by implication after this date. Early in the process, the solicitor for the plaintiff took a stance which he was to maintain throughout the entire process. In their letter of 24 February 2004, the solicitor wrote: - "Party and party cost orders are an indemnity. The party in whose favour the order was made can only recover such amounts as he is legally liable for and has paid. It is the legitimate and proper preliminary step for the Cost Assessor to determine if there is a liability to be indemnified and the quantum thereof. The Bill in this matter clearly discloses that there was an insurer involved. If an insurer has paid or indemnified the party's costs, the party has no right to recover costs as there is no liability to indemnify it against. An insurer who was paid the costs may be able to recover the costs, in the name of the party, if it has a right of subrogation. A right of subrogation is not an automatic right under the law. It is a contractual right. The insurer must prove it has a right of subrogation under the contract of insurance under which it gave the party (the insured) indemnity…". 49 The solicitor went on to inform the Cost Assessor that, in his view, unless evidence was produced of the kind identified in their letter, there could be no determination of what was properly recoverable. The letter concluded:- "We assume the date set in your letter of 4th instant for the respondent's objections was subject to full and proper compliance with notice to the applicant to produce additional documents". 50 On 24 February 2004, Deacons sent the Cost Assessor a considerable volume of particulars, information and documents. They included a number of documents for which confidentiality was claimed but otherwise indicated that the solicitors would comply with the time directions indeed, they agreed with the timetable set by the Cost Assessor. 51 Earlier correspondence between the solicitors for the plaintiff and the defendant indicated that, back in December 2003, the plaintiff's solicitor had prepared detailed notes of objection in draft form. It does not appear that this document was ever sent to the Cost Assessor. 52 On 3 March 2004, the Cost Assessor wrote to the plaintiff's solicitor. He noted that they had not provided any objections as at the date of his letter. He indicated that he would extend the time for the provision of objections until 9 March 2004. He indicated that, if he had not received a response by that date, he would proceed with the assessment on the material which he currently held. 53 On 5 March 2004, the solicitor for the plaintiff wrote to the Cost Assessor and provided him with a number of legal authorities on the indemnity principle issue. The letter said: - "We submit that the appropriate course is to have a final ruling upon all these preliminary matters before proceeding to the item by item assessment. If our submissions are accepted and the applicant fails to adduce evidence of its liability for and payment of costs, or the contract of insurance containing an express contractual right of the insurer to recover costs paid on behalf of the applicant and of the insured's liability for and payment thereof, embarking upon an item by item assessment would be a futile exercise. The course submitted by us has met with the Court's approval on a number of recent occasions, including by Windeyer J in the Schmeirer case". 54 The letter also contained an assertion that the respondent could not prepare proper objections 'whilst blindfolded' and that he should not be required to do so until preliminary matters had been ruled upon. 55 On 11 March 2004, Deacons had provided the assessor with certain further information and particulars he had requested. The solicitor maintained that he had sent "voluminous non-confidential documents" to the plaintiff's solicitor but that, in relation to the confidential documents, they maintained these were both confidential and privileged. The letter addressed this issue at some length. Finally, the defendant's solicitors maintained that the plaintiff's solicitor had been given ample time and information to prepare notice of objections and that they should be directed to file the same within 14 days. 56 The plaintiff's solicitor took up the cudgels in relation to the issues of confidentiality and privilege. This was done in further correspondence to the Cost Assessor. Deacons responded once more and insisted that direction be given to the plaintiff's solicitor to provide its detailed objections to the Bill of Costs. 57 In an endeavour to resolve the impasse, the Cost Assessor wrote to the parties on 15 April 2004. This letter required Deacons to produce certain documentation to the assessor. It required, however, that the plaintiff's solicitor raise any objections in relation to the amount claimed by the costs application by 13 May 2004. There were other directions given. The assessor said, after noting that these objections were made pursuant s 207 of the Legal Profession Act: - "I propose to conduct an assessment once this time frame has expired. On material presently before me I will only need to deal with the Coshott issue if the assessment produces an amount of costs which is greater than $50,000.00. If the issue arises I will deal with the issue on the basis from material that has already or may subsequently be provided by the parties. I have not made any final determination on the privilege issue raised by the parties representatives although on my present consideration of the material it is unlikely that I will require submissions from the cost respondent on aspects disclosed by documents for which privilege or confidentiality have been asserted. However, I have made no final decision on that aspect as I consider it is premature to do so until a complete assessment has been undertaken." 58 Deacons needed a little more time to comply with the directions given on the 15 April 2004 and sought this in correspondence sent to the assessor, and to the other side, on 21 April 2004. The plaintiff's solicitor noted the directions which had been made and made no complaint about it. He maintained, however, that the preliminary point should be determined. On 7 May, the assessor extended the time for the plaintiff's solicitor to provide objections to the assessment until 27 May 2004. There was a further extension of time taking both parties obligations to late June. 59 In mid-June, the assessor was provided with the Statutory Declaration of Mr Comino and the Premsure Deed of Agreement. 60 The assessor then received further submissions from both parties about the effect of the documentation which had been provided and its capacity to impact on the indemnity principle. Needless to say, the submissions were extensive on both sides. There were also further submissions exchanged on the issue of legal professional privilege. The plaintiff's solicitor's ultimate submission on 7 July 2004 was that the cost assessment process should result in the issue of a Certificate of Determination indicating that no costs at all were payable pursuant to the District Court order. 61 On 9 July 2004, the Cost Assessor wrote to the plaintiff's solicitor indicating that he proposed to allow his client until 22 July 2004 to raise any objections including making any further submissions. Deacons were required to make any reply submissions by 22 July 2004. 62 Once again both sides sought an extension to the timetable proposed by the Cost Assessor. Deacons were allowed to 6 September to comply with the directions effecting them and a similar allowance was made to the plaintiff's solicitors. The parties then exchanged further submissions in mid-September 2004. The plaintiff's solicitor's letter of 16 September 2004 was in the following terms: - "The respondent opposes any further extension of time for the applicant and urges a ruling upon indemnity and on subrogation." 63 On 24 September 2004, Deacons provide further submissions. In part their letter said: - "4.3 There has been no objection by the cost respondent to the quantum of the Bill of Costs. We request that orders be made with respect to the service of the Notice of Objections." 64 On 3 November 2004, the Cost Assessor, no doubt exhausted by the processes he had been required to endure, wrote the following letter to both parties: - "Neither parties is required to respond to this letter. This letter is to alert the parties that I am currently undertaking the assessment that the cost applicant costs payable pursuant to the Court order of 5 December 2002. In the course of that assessment I will consider all of the issues raised by each of the parties. I anticipate providing my Certificates of Determination and reasons by 30 November 2004". 65 On 22 November 2004 the assessor made his written determination. This was intended to convey that the plaintiff should pay the defendant $81,322.18. Unfortunately, the determination wrongly stated that the cost applicant was to pay the cost respondent. This however was corrected both by the Cost Assessor and later by the Review Panel. 66 In my opinion, the detailed procedure I have set out above plainly demonstrates that the plaintiff was given every reasonable opportunity to file a detailed objection to the Bill of Costs but, for his own tactical reasons, he declined to do so. Whatever else might be said about the earlier correspondence, there can be no doubt that by the time of the letter of 3 November 2004, it would have been open to the plaintiff to write to the assessor and give him detailed objections. The plaintiff, unfortunately for him, had taken the stance that he wanted a preliminary determination before putting any detailed objections before the assessor. Neither the assessor nor Deacons had agreed to this course of action and it cannot be said that the plaintiff was under any misapprehension as to the true situation. Section 208 of the legislation requires the assessor to give a reasonable opportunity and, in my opinion, this opportunity was given but deliberately not availed of by the plaintiff. 67 That this was the situation is made abundantly clear when one examines the Review Panel process. The facts there are within a short compass and may be briefly stated. 68 On 9 December 2004, this Court notified the parties that Messrs Benjamin and Salier had been appointed as the Review Panel. While it is true that the pro forma letter sent by the Court indicated that the Review was to be conducted on material that had been before the Cost Assessor and that the members of the panel did not require any submissions from the parties, there was nothing to prevent the plaintiff, if he had wished to do so, from sending a note to the Review Panel indicating that he wished, even at that late stage, to put on detailed objections to the Bill of Costs. The plaintiff did not take this opportunity however, and on 16 February 2005 the Review Panel published its determination and reasons. As I said at the outset, they endorsed the amount of costs certified by the original Cost Assessor. 69 The plaintiff argued that the pro forma letter sent by the Court may have inhibited him from putting on detailed objections. I do not accept this submission. It is clear from correspondence and the terms of the letter that there was nothing to preclude the plaintiff from putting on detailed objections had he wished to do so. The truth of the situation is that, many months before, the plaintiff and his solicitor had made a tactical decision that they would not file detailed objections but rather insist upon what was described as a preliminary ruling. This was never part of process agreed to by the Cost Assessor, the Review Panel or the solicitors for the defendant. 70 For these reasons, I am satisfied that there was no failure as alleged in the assessment process either by the Cost Assessor or by the Review Panel. No denial of natural justice occurred. There was no discernible error of law on this point. 71 For all these reasons, I am satisfied that the appeal against the Review Panel's determination of the costs assessment must be dismissed.

The second claim 72 The background to the second claim has as its genesis the dissatisfaction of Mr & Mrs Coshott with the process of development approval for the adjoining property at 7 Gilliver Avenue. First, there was an appeal to the Land and Environment Court in 1996. Mr & Mrs Coshott sought declarations that the development consent and building approval granted by the defendant council in relation to the property next to their own home were invalid. The application sought orders that the adjacent premises be demolished and that monetary compensation be paid to the Coshotts. It seems that there was an extended hearing before Bannon J. In the upshot, his Honour held that the development application was flawed but he declined, in the exercise of his discretion, to grant the plaintiff's application. No order was made as to the costs of the council in those proceedings. There was a later appeal from this decision to the New South Wales Court of Appeal. This was unsuccessful and costs were awarded in favour of the council. 73 In 1997, Mr & Mrs Coshott brought further proceedings in the Federal Court of Australia against a number of defendants including Woollahra Council. The matter went to trial against three of the original respondents, including the Council. Wilcox J dismissed the proceedings against all three respondents and made cost orders on 23 March 1999, including an order in favour of the Council. The costs were subsequently allowed at $120,000.00 but remained unpaid for some time. The present plaintiff filed a Notice of Appeal from Wilcox J's judgment. The appeal did not go to hearing but, pursuant to Short Minutes of Order signed on behalf of the parties, the Full Court (Lee, Emmett and Gyles JJ) made orders that the appeal be dismissed and that the Coshotts pay the respondents' costs. These costs were subsequently allowed at $11,232.25. They also remained unpaid for some time. 74 The defendant Council had retained Deacons to act on the Council's behalf in the Federal Court proceedings. According to the affidavit of Gary James (Exhibit 2) evidence was placed before this Court that Deacon's costs and disbursements were paid by the Council. Mr James is the General Manager of Woollahra Municipal Council and has held this position since February 1999. 75 On 16 February 2001 Wilcox J refused to set aside certain garnishment orders, which had been issued to Citibank Limited. The position in that litigation was somewhat complicated by the fact that the judgment debtor was identified as Mrs Coshott and no reference was made to Mr Coshott. It seems that Citibank had, as mortgagee exercising power of sale, sold the Coshott property on 18 November 2000. Citibank held certain monies after it had satisfied its own debt. It was these monies that were the subject of the garnishment notices. The sum of $131,232.55 had been paid into court and it was the subject of the arguments before Wilcox J in February 2001. The council sought payment out of the money which had been paid into court. It did so on the basis that these monies related to the unpaid costs of the two proceedings I have identified. The proceedings were resisted by the Coshotts. 76 In ultimate, Wilcox J ordered that the monies, which had been paid into court, should be paid out to the council or its solicitors to meet the unpaid costs. He also ordered that Mrs Coshott pay the costs incurred by the council in relation to the hearings before the Federal Court. 77 In the summons filed on behalf of the plaintiff, the following declarations and orders are sought relevant to the second claim: - "3. A declaration that the plaintiff is entitled to restitution of all monies paid to the defendant on account of legal costs. 4. An order that the defendant pay the plaintiff's costs of these proceedings. 5. Further or other orders." 78 It will be seen from the statement of grounds pursuant to Part 1A (set out earlier in these reasons) that the plaintiff claims that he (or perhaps more accurately he and his wife) paid approximately $150,000.00 to the council in relation to cost orders arising from "earlier related litigation between the parties in this Court and the Federal Court". The plaintiff has claimed that these monies should be given back to him because the defendant council did not pay any of these monies to the council's solicitors. His original contention - indeed his basic contention - was that these monies had been paid, or at least substantially paid, through the Premsure Scheme. 79 It is not precisely clear how the amount of $150,000.00 has been calculated. As I indicated, Wilcox J ordered that there be paid out of the Federal Court $131,232.25. It appears there may have been a third Garnishment Notice but precisely what it related to has not been made clear in the evidence before me. In any event, there is no point taken by the defendant to the proposition that the overall amount of the costs paid relating to any aspect of the Federal Court proceedings and the Land and Environment Court proceedings was approximately $150,000.00.

The basis of the plaintiff's second claim 80 I have indicated my understanding of the general nature of the plaintiff's claim. That this is so is made perfectly clear by the points of claim filed by Mr Coshott on 13 December 2006. It will be convenient to set these out in full: - " POINTS OF CLAIM 1. On or about 29.12.00, Woollahra Council received the sum of $150,136.97 in Satisfaction of party and party costs orders made in the defendant's favour against the plaintiff in Federal Court proceedings between them, in the appeal from the Land & Environment Court, and in the costs assessment arising therefrom. 2. In the course of the current costs assessment application, the plaintiff became aware the defendant had not paid all or any of the said costs it received from the plaintiff. The costs having been paid by Premsure. 3. Deacons, the solicitors acting in the proceedings, were retained and instructed by and on behalf of Premsure. 4. The said party and party costs orders were an indemnity in favour of Woollahra Council for costs it had paid. The costs having been paid by a third party, Premsure, which was not a licensed insurer and which had no right of subrogation or indemnity in regard to the payments made by it, Woollahra Council was not legally entitled to be indemnified in respect of those costs. 5. Woollahra Council has received monies to which it was not legally entitled. 6. The plaintiff paid the said monies under a mistake of law and/or fact. 7. Woollahra Council has been unjustly enriched at the plaintiff's expense. 8. The plaintiff seeks restitution in respect of the said monies and interest thereon from 29.12.00 to date and continuing." 81 The plaintiff's written outline of submissions tends to "run together" the two claims contained in the summons even though they are, as I noted at the outset, very distinct and differing claims for relief. It is clear, however, that so far as the amount of approximately $150,000.00 (referred to more precisely in some of the submissions as $150,136.97) the basic claim is that the Federal Court proceedings and perhaps the appeal to the Court of Appeal from the Land and Environment Court were proceedings, which attracted the operation of the Premsure Scheme. The assertion is that those amounts (or the greater portion of them) were paid to Deacons and others from the funds of the Premsure Scheme. 82 The simple answer to this aspect of the plaintiff's claim is that none of these proceedings had anything to do with the Premsure indemnity arrangements. In Exhibit 2, the General Manager of Woollahra Council, Mr James has made it perfectly clear that no payments were made to Deacons by Premsure or any entity on behalf of the council. Mr James gave evidence before me on 3 July 2007. In addition to being the General Manager for the defendant council, Mr James stated that he is currently the delegate for Woollahra Council in relation to the Premsure Scheme. He gave evidence that the whole of the costs relating to the Federal Court proceedings, both at first instance and on appeal, were paid out of the council's funds to Deacons. He said that this litigation was not part of the Premsure Scheme, "it was not a Premsure matter". It may be appropriate to extract the evidence at transcript page 30 between lines 20 to 55. It extends to and includes transcript page 31 line 30: - " HIS HONOUR Q. Are you able to say whether or not any payments were made to Deacons by Premsure in relation to these payments? A. No payments were made in relation to these two Deacons but Premsure, it was not a Premsure matter. Q. Why are you satisfied about that? A. Because it's not a matter that would fit within the ambit of Premsure in terms of the matters that would fit. It was not a Premsure matter or a public liability matter. It arose out of a development control matter, it was a matter the Council had to fund itself. It would not have been funded by Premsure as a legitimate claim.

Q. Sir, you are assuming that because you thought it wasn't a Premsure matter that payments were not made by Premsure and they were made by the Council; is that the assumption you worked on? A. It's more than an assumption, it's something I know because I would have been one of the persons responsible for referring to Premsure. There was no need to refer to Premsure given the terms of the claim.

Q. The District Court proceedings, why were they different? A. Because that was a legitimate public liability claim. That went to, I think, the performance of some of our staff in terms of whether they carried out their regulatory functions.

Q. The issues in the District Court proceedings related to damage in relation to the Coshott's property? A. That is correct and the Council was responsible for, under the Premsure arrangements, to self-fund the first $50,000 in relation to that particular matter.

PLAINTIFF: It related to the invalid consent which related to the Federal Court proceedings.

HIS HONOUR: Yes, I included that additional element.

PLAINTIFF: They were in the Federal Court proceedings until they were removed by Justice Wilcox but for a long period of time they were in the District Court and the exact same claims were in both proceedings.

Q. You say that Premsure paid the moneys in the District Court but didn't pay any moneys to Deacons in the Federal Court; is that what you're saying? A. That's correct. Q. The basis on which you put that is that you have a belief that it wasn't a Premsure matter? A. It's more than a belief, it's something that I know as being part of the Executive and it was our decision it would not be referred to them because it would not be accepted by Premsure.

Q. You're saying that Premsure was never involved in the Federal Court proceedings? A. They were never involved in the Federal Court proceedings." 83 It appears, clearly enough, that the plaintiff's second claim against the defendant is based on a misconception. The plaintiff believed that the Federal Court proceedings attracted the operation of the Premsure Scheme whereas clearly they did not. 84 Confronted with this apparent hurdle to his second claim, the plaintiff then argued that there was no evidence before the Court that would satisfactorily convince the Court that Deacons had been paid by the defendant Council. There were two aspects to this submission. The first relied upon a bundle of Annual Reports for the years between 1996 to 2001. These were Exhibit "A" and were tendered only in relation to the plaintiff's second claim. The second aspect of Mr Coshott's argument related to a notice to produce, which had been given by the plaintiff to the defendant on 27 June 2007. This was given only a few days before the hearing. I was informed by Mr Brabazon of counsel that, although it had been possible to produce a record of payments to Deacons, it had not been possible in the short time available to produce all the records that would enable confirmation of every invoice and every item. Mr Brabazon said that many days of work would be necessary for that to be done. The schedule of payments was admitted and became Exhibit "B". 85 As to the first matter relied on by the plaintiff, Mr James' evidence put paid to that submission. First, the General Manager made it clear that the section in each of the Annual Reports in which litigation involving the council was mentioned was not intended to be, and was not, a complete compilation of annual litigation costs for the council. Mr James made it clear that the council utilises this part of the Annual Report to summarise for ratepayers matters required under s 428 of the relevant legislation. They are there in summary form to give the public some indication of the activities of the council during the year but they do not extend to provide details of every single payment made for legal costs during the period. For example, payments made gratuitously or under the Premsure Scheme did not appear under this heading. They were, however, included in the Annual Report under "Corporate Services". This point of distinction, however, was not relevant, strictly speaking, to the plaintiff's second claim since the Federal Court proceedings did not fall within the Premsure Scheme. In addition, Mr James explained the way in which he accessed the council's records to satisfy himself that the solicitors had been paid the relevant amounts in respect of the Federal Court and Land and Environment Court appeal proceedings. He had checked some of the documentation himself but he had also placed overall reliance on the system that was in place in order to prove payments. This is known as the creditor's system and it operates on a voucher basis. 86 Mr James also gave specific evidence in relation to the payment of the costs for the Federal Court matters. This payment appears in part in the Annual Report 1998/1999 on page 26. There is an item relating to "7 Gilliver Avenue Vaucluse" where the costs were $199,392.55. The entry notes that the outcome of the proceedings was "Appeal dismissed". Again, Mr James said that this payment of $199,392.55 was in respect of a development control matter. For that reason, it had nothing to do with the Premsure Scheme. The whole amount had been funded by the council. Mr James conceded that he could not, without further extensive work, apportion precisely the amount between the Land and Environment Court or the Federal Court proceedings, although it is clear that the Land and Environment Court proceedings were completed in a much earlier period, namely 1996. If one turns to the "legal costs incurred" in the 96/97 year, it will be seen that $86,327.69 was paid in respect of "7 Gilliver Avenue, Vaucluse" and is described as an "ongoing matter". In the following year, the Annual Report notes that $29,857.30 was spent in relation "7 Gilliver Avenue - Coshott". These entries, taken together corroborate, in a general sense, Mr James' evidence that the council had paid its solicitors for the Land and Environment Court proceedings and also the Federal Court proceedings. They also give weight to his evidence that neither of these proceedings fell within the Premsure Scheme. 87 As to the second matter relied on by the plaintiff, the submission emerges from the material contained in Exhibit "B". Each party provided me with a "breakdown" of the material contained in Exhibit "B". These submissions are in the form of documents marked for identification but they vary significantly as to the conclusions they suggest I should reach. The plaintiff, for example, suggested that the material in Exhibit "B" identified only a relatively small amount of money as relating in precise terms to the costs paid to Deacons for the Federal Court proceedings. This was some $5,558.56. The defendant, on the other hand, indicated that Exhibit "B" aggregated the costs for all matters relating to Mr Coshott or the relevant properties in Gilliver Avenue at a figure of $270,148.17. The defendant's overall submission was that it was simply not possible to tell from the individual items in Exhibit "B" which related to the Federal Court proceedings and which did not. The inference most plainly suggested, it was submitted, was that the bulk of the monies paid in Exhibit "B" probably related to the Federal Court proceedings. 88 The submissions on each side in relation to Exhibit "B" are not really of very much assistance in resolving the present matters. First, Exhibit "B" is a compilation of items paid to Deacons between 1997 and 2002. I take it to be a computer search print out. It is not complete and it has not been verified by reference to individual vouchers and invoices. As an incomplete and unverified document, it has little probative value. Secondly, it does confirm, however, that the council has paid very substantial amounts of monies to Deacons for legal costs in relation to matters, which generally concern Mr & Mrs Coshott and their litigation. In that sense, it provides a general confirmation of the evidence of Mr James, although it does not do with any degree of exact precision. Thirdly, I reject Mr Coshott's attempts to "codify" only a small portion of the costs as related to the Federal Court proceedings. It is not appropriate, reasonable or fair to draw that inference from the document. 89 For these reasons, I reject the two submissions made by the plaintiff. There is however, a larger problem for the plaintiff's case in relation to the second claim. There is no doubt that the onus falls on the plaintiff to prove that the Federal Court proceedings and the appeal in the Land and Environment Court proceedings fell within the Premsure Scheme. He has plainly failed to do this. I accept the evidence of Mr James that neither of these pieces of litigation attracted the operation of the Premsure Scheme. Secondly, the plaintiff's fall back argument, based on an assertion that the council did not pay Deacons costs in respect of these proceedings, is one he has wholly failed to prove. Quite apart from the evidence of Mr James, which I accept, it is, with all due respect, fanciful to suggest that Deacons would not at this stage have been paid for litigation which concluded so many years ago. In the same way, it is fanciful to suggest that the barristers who were retained, and the consultants who may have given evidence would not have been paid as well. Be that as it may, the plaintiff here has failed to prove that the payments for costs of disbursements were not made in relation to the two sets of proceedings. Although no onus fell on the defendant to prove the fact of payment, it has done so, through the evidence of Mr James and the other material to which I have referred. 90 In those circumstances, the plaintiff's second claim must fail. 91 The orders I propose to make are: -

1. The plaintiff's appeal from the decision of the Review Panel dated 16 February 2005 is dismissed.

2. The plaintiff's claim for declaratory relief is refused.

4. I order the plaintiff to pay the defendant's costs both in relation to the appeal and the claim for declaratory relief contained in the summons.

6. Grant liberty apply re further costs argument, but only if necessary.

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