DCL Constructions v Di Lizio

LEGISLATION CITED : Legal Profession Act 1987 - ss 208L & M Uniform Civil Procedure Rules 2005 - Parts 50.3, 50.12

Graham v Aluma-Lite Pty Ltd (NSWCA, 25 March 1997, unreported) Hall Chadwick v Doyle [2006] NSWSC 1195 CASES CITED : Katingal P/L & Anor v Amor & Ors [2004] NSWSC 36 Muriniti v Lyons [2004] NSWSC 135 Wentworth v Rogers [1999] NSWCA 403 Wentworth v Rogers [2006] NSWCA 145

PARTIES : DCL Constructions Pty Ltd - Plaintiff Mario Di Lizio t/as Di Lizio & Associate - Defendant

COUNSEL : Mr M J Jenkins with Mr A Combe Mr Locke - Defendant

SOLICITORS : Carroll and O'Dea - Plaintiff Oliveri Attorneys - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

14867/2006 - DCL CONSTRUCTIONS PTY LTD v MARIO DI LIZIO t/as DI LIZIO & ASSOCIATES

JUDGMENT (Extension of time to appeal decision of Costs Assessor) 1 HER HONOUR: By summons filed 5 October 2006 the plaintiff seeks firstly, an order pursuant to Part 50.3(1)(c) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) for an extension of time to appeal a decision by the Costs Assessor dated 11 May 2005; secondly an order pursuant to s 208L of the Legal Profession Act 1987 (NSW) (the Act) to appeal against the decision as to a matter of law; fourthly, an order pursuant to Part 50.12(1)(c) of the UCPR extending time to seek leave to appeal the determination of the Costs Assessor dated 11 May 2005; fifthly, an order pursuant to s 208M(3) of the Act seeking leave to appeal the determination; and sixthly, an order pursuant to s 208M of the Act seeking to appeal against the determination. Orders 3, 7 and 8 of the summons were not pressed at the hearing. 2 While DCL Constructions sought administrative review of the decision of the Costs Assessor, it acknowledged that such review was not available from a Costs Assessor's decision. 3 The plaintiff is DCL Constructions Pty Ltd (DCL Constructions). The first defendant is Mario Di Lizio t/as Di Lizio and Associates (Di Lizio). DCL Constructions relied on two affidavits of Corrado Sanna both dated 19 December 2006, two affidavits of Sanjeev Sharma both dated 19 December 2006, the affidavit of Maithri Panagoda dated 21 December 2006 and the affidavit of Rahul Nand dated 21 December 2006. Di Lizio relied on his affidavit dated 22 February 2007. 4 It is agreed between DCL Constructions and Di Lizio that the Act applies to these proceedings. The Act has since been repealed and replaced by Legal Profession Act 2004 (NSW), but the provisions relating to an appeal and leave to appeal are similar.

Extension of time 5 The decision as to whether or not an extension of time to appeal (or seek leave to appeal) should be granted is a discretionary one. Consideration should be given firstly, to the plaintiff's explanation for delay; secondly, any prejudice caused to the defendant by the delay; and thirdly, merits of the appeal (or leave application). 6 DCL Construction's reason for filing this summons out of time is that it says that it was unaware that it had a right to appeal pursuant to the Act and that it has previously not received advice from the solicitor or barrister then retained as to the right to appeal from a costs assessor's decision. 7 Mr Di Lizio submitted that the explanation for delay given by DCL Constructions was incomplete and unsatisfactory in that while it asserted that no legal advice was received in respect of an appeal or the applicable limitation period, it was not asserted that any request made by DCL Constructions of its legal advisers for advice in relation to the remedies which may be available in respect of the decisions or determinations of the Costs Assessor. Further, according to Mr Di Lizio, no explanation was forthcoming in respect of the failure of DCL Constructions to seek a review of the determination of the Costs Assessor pursuant to s 208KA of the Act being a remedy available to it as of right, subject to an application for review of determination of the Costs Assessor being lodged within 28 days of the date of issue of the certificate of determination. However, I accept that if DCL Constructions did not know of its right to appeal against the decision of the Costs Assessor, it was unlikely to know of its right to appeal to a Costs Review Panel.

The delay 8 On 11 May 2005, the Costs Assessor, Christopher Gerard O'Brien, made a decision. On 5 October 2006, the summons seeking to appeal and leave to appeal was filed. The delay in filing the appeal is about 15 months which is a lengthy period.

The history of the costs dispute and the assessment 9 Initially, Mr Di Lizio, a solicitor, was retained to provide legal services to DCL Constructions in relation to a building dispute between it and Norman Browne Constructions Pty Ltd (Norman Browne), being proceedings No 3965 of 2001 in the District Court at Sydney. Those proceedings were of some complexity and occupied a total of 15 hearings, two appearances to take judgment and nine directions hearings in the District Court. Di Lizio acted for DCL Constructions for the period between 20 March 2001 and 12 February 2004, a period of almost three years. Shortly after judgment was obtained in favour of DCL Constructions, Norman Browne went into liquidation. After the completion of the District Court proceedings Di Lizio undertook further work for DCL Constructions including winding up proceedings in this Court. 10 On 29 March 2001, DCL Constructions entered into a written costs agreement with Mr Di Lizio. In about March 2004, Mr Di Lizio rendered a bill of costs to DCL Constructions. On 4 June 2004, Mr Di Lizio rendered an itemised bill of costs. DCL Constructions failed to pay those costs. On 29 June 2004, DCL Construction's new solicitors, Carroll and O'Dea wrote to Mr Di Lizio and relevantly stated that DCL Constructions was puzzled by the size of the bill and some items in the bill and that at no time had DCL Constructions been provided with a fee agreement. The letter went on to say that although DCL Constructions was successful in the matter against Norman Browne, due to the negligent handling of the matter, the judgment debtor had been able to get away without paying any money. DCL Constructions' assertion that there was no written costs agreement was wrong. 11 On 8 September 2004, Di Lizio filed an application in the Supreme Court for an assessment of the bill of costs (proceedings No 91501/2004). On 11 May 2005, the costs assessor issued a Certificate of Determination in respect of the bill of costs, assessing the balance due as $50,591.06. 12 On 5 July 2005, Di Lizio registered the Certificate of Determination in the District Court at Sydney. Pursuant to s 208J of the Act, judgment was entered in favour of Di Lizio against the Plaintiff in the amount of $50,591.06. No application has been made in the District Court to have this judgment set aside. DCL Construction's Counsel says that DCL Constructions will apply to have this judgment set aside. There is some debate in this Court as to the finality of a judgment entered under s 208J of the Act - see Hall Chadwick v Doyle [2006] NSWSC 1195 and Katingal P/L & Anor v Amor & Ors [2004] NSWSC 36. Section 208K of the Act provided that a costs assessor's determination of an application is binding on all parties to the application and no appeal or other review lies in respect of the determination, except as provided by this division. 13 On 27 January 2006, DCL Constructions commenced proceedings against Di Lizio in the District Court at Sydney proceedings No 285/2006 (the District Court proceedings). DCL Constructions sought to resist payment moneys payable under the judgment. The causes of action relied upon by DCL Constructions were founded upon the alleged oral costs agreement. 14 The Certificate of Assessment issued was on 11 May 2005. Over six months elapsed before DCL Constructions commenced District Court proceedings. Di Lizio had by this time served a statutory demand upon DCL Constructions requiring payment of the judgment sum. DCL Constructions had also filed a summons seeking to set aside the statutory demand. 15 On 7 April 2006, consent orders were made by J C Gibson J in the District Court proceedings including an order granting leave to the Plaintiff to amend the Statement of Claim by deleting paragraphs 29 - 34 inclusive. The claim in negligence is no longer being pursued. These District Court proceedings are currently stayed while DCL Constructions pursues this summons.

The merits of the appeal (or leave to appeal) 16 DCL Constructions disputed the bill of costs and claimed that Di Lizio had entered into an oral agreement with Carrado Sanna on behalf of DCL Constructions to the effect that, after payment of an amount of $10,000.00, no further payment would be sought from DCL Constructions in respect of costs and that Di Lizio would recover their costs from Norman Browne ("the alleged oral costs agreement"). 17 DCL Constructions said that in October 2002, Mr Sanna, the general manager of DCL Constructions, spoke to Mr Di Lizio on the telephone. The alleged conversation is as follows: Sanna: "Mario! Rahul asked me for money but I told him that I am not happy with the way the case is handled by you guys and I'm not going to pay you any more money until I speak to you. First you sent me a kid on the case. He sat through meetings with Gruzman without saying a word and without an understanding. Now you have put Rahul on to the case who does not know anything about building cases. I had to send Sunny to his office three times to explain the case to him. Sunny had to draft the affidavits. Sunny and I are doing the job that you should be doing. He is helping Gruzman in paperwork. Gruzman isn't happy either. I had to pass papers to him in the Court because Rahul was busy dealing with his Worker's Comp case in the Court rather than attending to our case. I lost Gruzman because your firm didn't check his dates and then I had to spend more money with Raffel, Barrister." Di Lizio: "Corrado, I understand your frustration but I couldn't attend to your case myself because of some personal problems. But if you pay invoice balance of $10,000 I will not bill you any more on this case. I will recover my costs from Norman Brown (sic) so could you please pay this amount because I need the money." Sanna: "Mario! I make it clear that I am not going to pay more than $18,000.00." Di Lizio: "Yes, I told you that I will not bill you any more." Sanna: "Alright! I will give a cheque of $10,000 to Rahul when I see him next time. Can you make sure that you ring him and confirm this agreement to him." 18 This version of events is disputed by Mr Di Lizio. On 31 October 2002 DCL Constructions paid a sum of $10,000. DCL Constructions had already paid $8,000 on 22 May 2002. Mr Gruzman's fees were paid directly by DCL Constructions. No complaint was made about Counsel's fees in the assessment process. 19 At paragraph [3] of his written reasons for decision, the Costs Assessor stated: "The Respondent contends that there was a discussion between he and Mr Di Lizio on 30 October 2002 in which Mr Di Lizio agreed to accept a further payment of $10,000.00 in full payment of all costs and indicated that any further costs would be recovered on a party/party basis. Mr Di Lizio denies that any such agreement was reached and points to the fact that he was absent from Australia between 29 October and 2 November 2002. There is a clear dispute between the parties as to this issue which is unable to be resolved by me within the paper driven cost assessment process. My task in this assessment is to determine the fairness and reasonableness of the bill of costs submitted for assessment." 20 Hence, the Costs Assessor did not consider that he was able to determine whether there was a subsequent oral agreement but rather his task was to assess the fairness and reasonableness of the bill of costs. 21 It is this approach taken by the Costs Assessor that DCL Constructions submitted is either an error of law (s 208L) or is a question of fact and law (s 208M) that gives rise to this appeal. 22 DCL Constructions contended that the Costs Assessor erred as a matter of principle in that he ought to have determined the liability issue, or alternatively, ought not to have continued with the assessment and allowed the parties to have the liability issue determined in a Court with appropriate curial powers. 23 The starting point, I think, is s 184 of the Act. Section 184 appeared in Division 3 of the Act which was headed "Costs Agreements". 24 Section 184 read: "Agreements about costs

(1) An agreement as to the costs of the provision of legal services may be made with a client by: (a) the barrister or solicitor who is retained by the client to provide the services, or

(b) the barrister or solicitor retained on behalf of the client by another barrister or solicitor. (2) An agreement as to the costs of the provision of legal services may also be made between the barrister or solicitor providing the services and another barrister or solicitor who retained that barrister or solicitor on behalf of the client.

(3) An agreement under this section is called a costs agreement .

(4) A costs agreement is void if it is not in writing or evidenced in writing.

(5) A costs agreement may form part of a contract for the provision of legal services.

(6) A costs agreement may consist of a written offer that is accepted in writing or by other conduct. A disclosure in accordance with Division 2 under section 175 or 176 may constitute an offer for the purposes of this subsection." 25 As previously stated, the parties entered into a written costs agreement on 29 March 2002. The issue that the costs assessor did not resolve was whether there was a subsequent oral agreement between the parties. However, under s 184(4) a costs agreement is void if it is not in writing or evidenced in writing. Therefore, why would a Costs Assessor concern himself or herself with determining whether or not there is an oral costs agreement, if it is void? 26 Section 208(3)(b) of the Act provided: "3. For the purposes of determining whether an application for assessment may be or is required to be made or for the purpose of exercising any other, function, a costs assessor may determine any of the following: … b) whether a costs agreement exists, and its terms." 27 Section 207(2) of the Act provided: "The costs assessor may, by any such notice, require further particulars to be furnished by the applicant, barrister, solicitor, client or other person as to instructions given to, or work done by, the barrister or solicitor or any other legal practitioner in respect of the matter and as to the basis on which the costs were ascertained. " 28 Counsel for DCL Constructions referred to Wentworth v Rogers [1999] NSWCA 403, Graham v Aluma-Lite Pty Ltd (NSWCA, 25 March 1997, unreported), and Wentworth v Rogers [2006] NSWCA 145. It also drew this Court's attention to Muriniti v Lyons [2004] NSWSC 135. 29 In Graham, the matter for determination by the Court of Appeal was a notice of motion as to which the appellant (Mrs Graham) was the respondent, and the respondent (Aluma-Lite Pty Ltd) was the applicant. Aluma-Lite contended that, a previous costs order obtained by Mrs Graham against it should not include counsel's fees because the services performed by the counsel had been undertaken pro bono. This costs assessment arose out of a costs order made on a party/party basis. 30 Priestley JA (with whom Mason P and Cole JA agreed) said (at page 11, BC9700842): "In addition, the matter raised in that point was something for the Costs Assessor to consider. It appears from the materials before us in this application that submissions were put to him on the point. Presumably, the proper way of pursuing that point would be to pursue whatever avenues of review or appeal may be available against the Costs Assessor ... The answer to the question would depend upon an examination of a number of considerations, including the actual terms upon which counsel agreed to the do the work he was asked to do on behalf of Mrs Graham... But, in any event, as I have indicated the question, in my opinion, is not one for this Court. It is for the costs assessor in the first instance and thereafter whatever the Supreme Court Act and Rules provide for review or appeal." 31 In Wentworth v Rogers [1999] NSWCA 403, Ms Wentworth had previously been ordered to pay the costs of Mr Rogers, and Mr Rogers had retained counsel and solicitors on a pro bono basis. An issue as to the liability of the appellant to pay costs in satisfaction of the order arose, in the event that the respondent was not entitled to recover any costs because he had incurred none. 32 The Court of Appeal (per Handley and Stein JJA, Sheppard AJA) in a joint judgment said: "55. Ms Wentworth and Mr Russo objected strenuously to the notion that the terms of the retainer of counsel and solicitor for Mr Rogers should be determined by a costs assessor. Confronting them, however, is the decision of this Court in Graham v Aluma-Lite Pty Ltd [citation omitted]. One of the questions which concerned the Court in that matter was whether the Appellant's costs could include anything for the Appellant's counsel's fees since counsel had been acting pro bono. It was submitted that pro bono meant `absolutely free of any charge'. In relation to this matter Priestley JA said (at 11): [quotation omitted]

56. During the course of the hearing we indicated to the parties that we were disposed to follow what Priestley JA had said. His judgment was agreed in by Mason P and Cole JA and it behoves us to follow it unless we are convinced that it is not correctly decided. In our respectful opinion, it is correctly decided. We do not see what other course there is that could be taken. It, follows that the submissions made by Ms Wentworth and Mr Russo that no order for costs should be made in favour of Mr Rogers because his counsel and solicitor had acted pro bono should be rejected.

57. Of course that does not mean that eventually Ms Wentworth and Mr Russo may not be successful on the point they have taken. The reason the submission has been rejected is because this Court is not the appropriate forum to deal with it. Even if Mr Rogers is not entitled to recover any professional costs for the work done by his counsel and solicitor, he may still be entitled to recover on an assessment for any disbursements and witnesses' expenses he has incurred.

33 In Wentworth v Rogers [2006] NSWCA 145, Santow JA and Basten JA gave separate decisions. Hislop AJA preferred to express no concluded opinion where the conclusions of Santow JA differed from those of Basten JA. The issue again was whether Ms Wentworth could have no liability to costs to Mr Rogers because Mr Roger's counsel and solicitor had acted on a pro bono basis. 34 Santow JA stated: "38. I consider that the decision of the Court of Appeal in Graham v Aluma-Lite Pty Ltd (NSWCA, 25 March 1997, unreported), relevantly affirmed in Wentworth v Rogers [1999] NSWCA 403, contains strong dicta supporting the proposition that a costs assessor undertaking an assessment pursuant to Pt 11 Div 6 of the Act does have power to consider the terms on which the legal practitioner was retained ... (the emphasis is that of Santow JA).

39. It will be self-evident that determining the terms of the retainer necessarily entails determining both the content of the costs agreement as well as its proper interpretation. The costs assessor is unconstrained by the rules of evidence (s208(2) of the Act). But a costs assessor does not have judicial powers such as to summon those involved, whether barrister or solicitor, to give evidence or to submit them to cross-examination. What a costs assessor can do is require the applicant to produce any relevant documents (s207(1)) and require by a notice further particulars as to the basis of which costs were ascertained (s207(2)).

40. The Court of Appeal implicitly accepted that with these powers, though falling short of curial, the costs assessor was not only empowered in the first instance to determine the terms of the retainer of counsel and solicitor but should do so ...

42. I consider that the Court of Appeal decision in Wentworth v Rogers (supra) must be followed. To the extent that the decision of Dunford J in Muriniti v Lyons [2004] NSWSC 135 is inconsistent it should not be followed ...

43. In Muriniti v Lyons (above), Dunford J concluded at [56]-[58] that the costs assessor, who set out to determine under s. 208A and s. 208B whether certain pre-conditions for the payment of costs had been fulfilled, should have declined to make a determination or issue a certificate. This was until the issue of whether or when the relevant costs were payable had been resolved by a Court with power to require sworn evidence and have it tested by cross-examination. That reasoning, though not in relation to court-ordered costs, was inconsistent with the reasoning of the Court of Appeal to which I have referred and should not be followed. " 35 Basten JA stated:

"185 There will be something of an irony in holding that a costs assessor had the power to determine questions of contractual liability, given the opposition to that conclusion raised by the Appellants in 1998. Unless it is necessary to determine that question in order to deal with the present appeal, in my view the question should be treated as open, for further consideration in a case in which it squarely arises. … 190 Assuming that the costs assessor has power to decide whether or not there is an agreement not to charge or to re-charge at a reduced rate, any decision that the assessor might make is open to re-consideration by leave pursuant to s.208M. If there is disputed evidence which, in substance, the costs assessor does not have power to deal with in the manner usually considered procedurally fair with respect to contractual disputes and absent countervailing considerations, it would seem generally desirable that leave would be given to allow those matters to be agitated in a relevant court or tribunal ... … 193. It would undoubtedly be desirable if a costs assessor had power to refer a question of law to the Supreme Court for determination, being the kind of power sometimes conferred on tribunals. On the other hand, it may have been thought sufficient that the costs assessor would have an implied power not to continue with the assessment of the application, so as to allow the parties to have the contractual issue determined in the court in which the proceedings arose. At least where that court is a court with appropriate jurisdiction, that approach would have much to commend it. In any event, it is not necessary to resolve the precise extent of the assessor's powers for present purposes. The existence of a dispute of this kind, combined with the lack of relevant procedural mechanisms for allowing a hearing and determination in an appropriate manner, would, absent other considerations, generally mandate a grant of leave pursuant to s. 208M of the 1987 Act. " 36 In Muriniti v Lyons [2004] NSWSC 135, Dunford J took a different view and stated: "56 Having regard to the status and powers of Costs Assessors and the ordinary meaning of the word 'assessor', I am satisfied that the powers of Costs Assessors are limited to determining the value of the work done or services rendered in circumstances where there is no dispute that cost are payable and the only issue is as to the amount. It is no part of their function to determine whether or when such costs are payable. The matters set out in s.208A which they must, and in s.208B which they may, take into account all matters relevant to putting a value on the work done or services rendered and the fairness or justice of the amount claimed; but are not matters which relate to the terms of a costs agreement (particularly if oral) and whether any conditions precedent to payment have been fulfilled. The determination of such questions requires the reception of sworn evidence, which can be tested by cross­examination, and an assessment of such evidence. Costs Assessors do not have the power to deal with such matters. … 58 It could never have been the intention of the legislature that where the liability, for a debt for costs was disputed, a party to the dispute could render the other party to the dispute liable for the debt without any judicial determination of the disputed issues between them simply by having the value of the work assessed by a Costs Assessor and a certificate of determination registered as a judgment in a court of competent jurisdiction. Yet this is precisely what the Defendant has sought to do in the present case. " 37 The Wentworth v Rogers decisions and the Graham decision address the issue of what is meant by "pro bono" and whether there is a liability to pay Counsel's fees. In Wentworth v Rogers [2006] Basten JA did not decide the issue [at 185]. Santow JA decided that the issue of whether there was a liability to pay pro bono costs was one that should be determined by a Costs Assessor. Santow JA expressed the view that Muriniti should be overruled. One of the considerations would be the actual terms upon which Counsel agreed to do the work he was asked to do. It seems to me that these cases involved the interpretation of a written costs agreement. However, dispute raised before the Costs Assessor in these current proceedings involve whether or not the parties made an oral agreement. This dispute depended on the credibility of the witnesses, which could only be resolved by the giving of evidence and cross examination and a Court is the appropriate forum. But even if there were an oral agreement, according to s 184(4) it would be void. It is my view DCL Construction's chances of success on appeal are slim. 38 While DCL Constructions submitted that Di Lizio will be able to adequately present their case of appeal, it does not follow that they have not suffered any prejudice. Di Lizio obtained judgment on 5 July 2005, almost two years ago. They have not received the moneys due and owing. Further, Di Lizio have been called upon to incur legal fees and expend time in defending themselves in the District Court in relation to the same bill of costs because DCL Constructions did not receive legal advice about the right to appeal but did receive legal advice to take District Court proceedings. It is my view, that firstly, because of the lengthy delay in bringing these proceedings; secondly, DCL Construction's low chance of success under s 208L and s 208M of the Act; and thirdly, because the solicitor has already been forced to defend himself in relation to the same bill of costs in the District Court, an extension of time to lodge an appeal or alternatively seek leave to appeal should not be granted. Therefore, the application seeking an extension of time to appeal or alternatively, leave to appeal is refused. The summons filed 5 October 2006 is dismissed. 39 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(1) The application seeking an extension of time to appeal is refused.

(4) The plaintiff is to pay the defendant's costs as agreed or assessed. **********

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