De Costi Seafoods (Franchises) Pty Limited and Anor v Wachtenheim and Anor

District Court of NSW|2020-03-06

A. Introduction

Robert Newell and Leonardo Muriniti are legal practitioners who were found liable by the Court of Appeal to indemnify certain parties, herein "De Costi", in respect of certain costs.
The question of the amount of costs subject to the indemnity was the subject of a consent order of reference by this Court. Ms Alyson Ashe, a costs consultant, is acting as the referee. Mr Newell and Mr Muriniti have applied to have the reference to Ms Ashe terminated and for ancillary orders. Mr Newell appeared for himself and Mr Muriniti.

B. Issues

The parties have agreed to a preliminary determination of some of the issues raised in the application.
These issues can be listed as follows: 1. Was Ms Ashe validly appointed as a referee. 2. Should Ms Ashe be validly appointed as referee notwithstanding, or should her valid appointment as referee be terminated because of, any or all of the following: 1. The circumstance that she is not a costs assessor. 2. Her failure to require De Costi to provide an itemised bill of costs. 3. Her estimated fee of $200,000 exclusive of GST. 4. Her alleged connection with Lawcover. 1. What consequential orders or directions should be made.

C. The circumstances of the Reference

In dealing with the costs payable by Mr Newell and Mr Muriniti, the Court of Appeal indicated in the reasons of the President, to which the other members of the Court, agreed, [1] or generally agreed, [2] that: "an order for referral could be made under UCPR, r 20.14 so that the indemnity under both statutory provisions [s 348 Legal Profession Act 2004 (NSW), and s 99(1)(a) Civil Procedure Act 2005] could be determined at the same time." [3]
The parties, Mr Newell and Mr Muriniti, on the one hand, and De Costi, on the other, agreed to follow this indication and proposed a consent order which the Court made on 20 March 2019 ("the March Orders"). The order was as follows: "1. Pursuant to Rule 20.14 of the Uniform Civil Procedure Rules 2005 (the 'UCPR'), the issue of costs the subject of the Applicants' Amended Notice of Motion filed 15 March 2016 and the decisions in De Costi Seafoods (Franchises) Pty Ltd and Anor v Wachtenheim and Anor (No 6) [2016] NSWDC 378 and Newell, Muriniti v De Costi [2018] NSWCA 49, is referred to such person as the parties agree within 7 days being the Honourable Kevin Lindgren AM QC or alternatively an experienced costs assessor (the 'Referee') for the purpose of the Referee conducting an inquiry and providing a report as to the costs properly recoverable by the Costs Applicants. In the event that the parties are unable to agree on the identity of the Referee within 7 days, the question of the Referee to be appointed shall be referred to the President of the Law Society to nominate an experienced costs assessor available to act as the Referee. 2. Without affecting the powers of the Court as to costs, the Applicant and Respondents are jointly and severally liable to the Referee for the fees payable to him. 3. The Applicants shall deliver to the Referee forthwith a copy of this Order together with a copy of Division 3 of Part 20 of the UCPR. 4. The following directions are made: a. subject to Orders 4(b) and 4(c) below, the provisions of Rule 20.20 of the UCPR shall apply to the conduct of the proceedings under the reference; b. the reference will commence on a date ordered by the Referee; c. the Referee after hearing submissions from the parties will consider and implement such manner of conducting proceedings under the reference as he considers appropriate. d. the Referee is to have regard to the entirety of the decision of the Court of Appeal in Newell, Muriniti v De Costi [2018] NSWCA 49. e. the Referee is to submit the report to the Court in accordance with Rule 20.23 UCPR, addressed to Judge Taylor, within 6 months of the date of this Order, or such later date as the Referee shall determine. 5. If for any reason the Referee is unable to comply with the order for delivery of the report to the Court by the date in this Usual Order for Reference, the Referee is to provide to Judge Taylor an Interim Report setting out the reasons for such inability and request to extend the time within which to deliver the report to the Court to a date when the Referee will be able to provide the Report. 6. Liberty to apply is granted to the Referee or any party to seek directions with respect to any matter arising in proceedings under the reference upon application made on 24 hours' notice or such less notice ordered by the Court. 7. The question of costs and interest of the Applicant's Amended Notice of Motion be reserved pending the Referee's Report. 8. Liberty to apply on 3 days' notice."
The form of the March Orders appears to be derived from the text, Equity Practice and Precedents, [4] at [P15.50], p 215 headed "Usual order for Reference". A copy of this part of the text was provided to the Court. The text stated that the form of the order was "the usual order based on the former Commercial List Practice Note in the Supreme Court".
Order 1 of the March Orders made reference to a particular former judge. The parties had agreed on the particular former judge as the referee, but in the course of the making of orders for reference, the parties reconsidered whether a person with experience in costs matters might be more appropriate.
The parties were thereafter unable to agree on the identity of the person to be the referee. Mr Newell and Mr Muriniti were concerned that three costs assessors (not Ms Ashe) be excluded from those considered by the President of the Law Society.
On 3 April 2019 De Costi's solicitors, copied to Mr Newell and Mr Muriniti, sent an email to Ms Elizabeth Espinosa, the President of the Law Society of New South Wales, quoting order 1 of the March Orders and stating: "The parties have been unable to agree on a Referee, and have agreed to refer the appointment of the Referee to you, as the President of the Law Society. The parties request that, in accordance with Order 1 of the Short Minutes of Order dated 20 March 2019, you nominate an experienced costs assessor available to act as the Referee. When doing so, could you please have regard to the following matters: 1. The Referee's purpose is to conduct an inquiry and providing a report as to the costs properly recoverable by the Applicants. 2. The costs the subject of the Referee's report, relate to costs incurred from the period 2006 to 2013. 3. The costs assessor appointed is to have regard to the entirety of the decision of the Court of Appeal in Newell, Muriniti v De Costi [2018] NSWCA 49 (see Order 4(d) of the Short Minutes of Order). 4. The Referee is to submit the report to the Court in accordance with Rule 20.23 UCPR, addressed to his Honour Judge Taylor, within 6 months of the date of this Order, or such later date as the Referee shall determine (see Order 4(e) of the Short Minutes of Order). The parties request that any Referee nominated by you, has indicated his/her availability to act as Referee, in view of the above matters. The Referee nominated should have considered any issues of conflict prior to accepting to act as Referee." [5]
On 30 April 2019, the President, Ms Espinosa, wrote to De Costi's solicitors: "Presidential Nomination of an Independent Solicitor - pursuant to Order 1 of the Short Minutes of Order made by the District Court of New South Wales on 20 March 2019 in the matter of Newell, Muriniti v De Costi [2018] NSWCA 49 Pursuant to Order 1 of the Short Minutes of Order made by the District Court of New South Wales on 20 March 2019, I have nominated Ms. Alyson Ashe of Alyson Ashe & Associates…to act as Costs Assessor in the above matter. As a professional organisation, The Law Society of New South Wales is pleased to nominate independent solicitors in the appropriate circumstances. The President's role is simply to nominate a suitably qualified solicitor. Legal work undertaken by a nominated solicitor is not a matter over which The Law Society of New South Wales has any level of involvement and The Law Society of New South Wales expressly disclaims any knowledge of or responsibility for the outcome or otherwise of such. Any queries should accordingly be directed to the appointed solicitor. You are requested to cooperate with Ms. Ashe and to make all relevant documentation and information available to her." [6]
On 21 May 2019 Mr Newell and Mr Muriniti provided written submissions for the Referee, seeking that De Costi "prepare a bill of costs in assessible form" for them and the Referee, and other procedural steps be thereafter considered. [7] The submissions (as respondents) also referred to a concern about a "'global' claim", and concluded: "We do not depart from our frequently reserved position that our participation in this process should not been seen to constitute a waiver of our claim to set aside the orders of both the District Court and (consequently) the Court of Appeal by reason of the role of fraudulent collusion between the de Costis parties and the Respondents' insurers and their legal representatives." [8]
On 24 May 2019 Ms Ashe held an initial telephone conference involving Mr Newell, Mr Muriniti and De Costi's solicitors. Mr Newell reiterated the request for a bill of costs. Ms Ashe indicated that she had her own methodology, involving the preparation of a schedule or Excel working document for assessing costs, which would avoid the duplication involved in a bill of costs. [9] When Mr Newell was assured that he could "critically scrutinise" the costs claimed by De Costi by reference to the schedule, he accepted, or took no objection to, that course, [10] and, as indicated below, subsequently expressly agreed to it.
On 25 May 2019, Ms Ashe wrote to De Costi's solicitors and to Mr Newell and Mr Muriniti stating: "RE: Confidential and Privileged: Reference to Alyson Ashe re the De Costi costs to be indemnified by Messrs Muriniti and Newell pursuant to District Court Order for reference made on 20 March 2019 after remittal from the Court of Appeal: Newell, Muriniti v De Costi [2018] NSWCA 49 I refer to my appointment by the President of the Law Society as Referee in this matter on 30 April 2019 pursuant to Order 1 of the Short Minutes of Order of the District Court in Proceedings De Costi & Ors v Wachtenheim & Anor 2006/296319 made on 20 March 2019: Division 3 Pt 20 UCPR. I note that pursuant to those Orders of the District Court on 20 March 2019, the Reference should be concluded by 20 September 2019 (with liberty to apply for extension of time): Orders 4(e) and 5. Consequent upon the first Directions Hearing held in this matter by teleconference on 24 May 2019 (from 11.35 am to 12.22 pm) I confirm that, as part of the adjudication and report process, the parties are content for me to cause to be prepared and to work upon an Excel document based upon the tax invoices to the De Costi parties (re all costs and disbursements including counsel fees) in the District Court proceedings. My Excel document will be created by us for the purpose of my identifying (with the De Costi files) and determining the work fairly and reasonably to be indemnified pursuant to the orders of the Court of Appeal on 20 March 2018 in appeals 2016/385849 (Appellant Newell) and 2016/382130 (Appellant Muriniti) (the Appeals) and in light of the decision of the Court of Appeal declaring a liability to indemnify as set forth in Newell Muriniti v De Costi [2018] NSWCA 49. [If there is an order entered in each appeal could you please provide me with a copy.] My work with the tax invoices and the full files maintained in the litigation by McLachlan Thorpe Lawyers is in lieu of the indemnifying parties submission that the De Costi parties should have an itemised bill of costs prepared (presumably by a costs consultant) for their claim under the 'issues based' costs orders of the Court of Appeal (as above). In my view, this approach was neither cost effective nor helpful. The indemnifying parties also alerted me to the likelihood of a dispute as to the extent of the scope of recovery under those orders. Keeping in mind the over-riding principles of ss 56 to 60 CPA, and my experience, I am of the opinion that, not only will my approach avoid duplication of effort and cost, but that I am the appropriate person to construe the scope of the costs orders and prepare, what in effect, is a bill of costs of the work and then adjudicate upon it. The 'bill' will become the Working Document for my Report. I am also of the view that an electronic document will facilitate the process for me and for the parties and avoid wastage of costs and time in the Reference. Accordingly I direct that - 1. On or before Friday 31 May 2019 the De Costi parties provide me in electronic form all tax invoices of solicitors and counsel and all other disbursements for the whole of the proceedings De Costi & Ors v Wachtenheim & Anor 2006/296319 (the District Court Proceedings). 2. On or before 12 June 2019 the De Costi parties provide me any submissions in answer to the Submissions of the indemnifying parties made to me on 21 May 2019 in the Reference. 3. Note that, at the time of approval of my Report, a Court Book of all Submissions made to me will be required by me to be prepared by the De Costi parties for filing in Court. 4. The De Costi parties prepare and despatch to me all their client files in the District Court Proceedings together with an index to the detailed contents of each numbered box. The address for delivery of the materials is 53 Missingham Parade, Robertson NSW 2577. Before despatch I direct that a copy of the Index be emailed to me for review. 5. The De Costi parties provide me with all Appeal Books for the Appeals together with any additional Submissions provided to the Court of Appeal and also the Transcript of the Appeals (in pdf). 6. Even if the Appeal Books do contain the whole of the Transcript before Taylor DCJ, I direct that I be provided with a full copy of that transcript in pdf format. 7. Both parties have the right to submit further detailed submissions as to the scope of the claim under the orders and generally in an about the Reference. A timetable for further, submissions will be directed in due course. 8. The parties are at liberty to call for further joint teleconferences with me as may be required. 9. All communications with me must be copied to the other side. If the above directions omit any category of information that either party considers are relevant to the Costs Reference, please notify me as soon as possible. I will convene a further directions hearing if any contention arises in respect of the documents I am asked to consider. For current purposes and until I make an estimate in this matter the following hourly rates will apply to my work: 1. Basis upon which our fees will be calculated: 1.1 Work by Ms Alyson Ashe, Principal as Referee charged at an hourly rate of $500 per hour exclusive of GST ($550 incl GST); 1.2 Any time spent travelling at $200 per hour exclusive of GST($220 incl GST); 1.3 Work by our IT Assistant producing documents to facilitate the Reference - at $ 150 per hour exclusive of GST ($165 incl GST); 1.4 Plus disbursements for travel expenses, if any, including parking and taxis etc exclusive of GST. (That is our Tax Invoice will claim our fees and expenses plus GST which we will itemise.) The writer notes that the parties will be considering the manner (and the proportions) in which my fees will be paid from time to time as the Reference progresses. I await your correspondence in that regard. I also note of course that the reasonableness of my fees will ultimately be part of the approval process in the Reference." [11]
In accordance with direction 2 in that letter, submissions were provided by De Costi on 12 June 2019. Among other matters, the submissions (at [11] and [13]) [12] reflect an understanding that the Referee's "working documents" were equivalent to, and called, an "itemised Bill of Costs". Thereafter, in late June there was further correspondence regarding the parties being each responsible for half of the Referee's fees. Ms Ashe wrote that: "I incline to the view that - 1. The Applicants and the Respondents should be responsible for my fees 50:50 as is the usual situation for References and Mediations. Accordingly the Applicants are jointly and severally liable for 50% and Messrs Muriniti and Newell are jointly and severally liable for 50%. 2. Notwithstanding the assurances of ability to pay I consider that the Solicitors for the Applicants should be involved in the day to day management of the arrangement when it is decided upon and that the funds as estimated should be deposited in their trust account. In this way any problems will come to attention earlier than the receipt of my tax invoices. It will also be essential that an irrevocable authority be provided by the Applicants and the Respondents for payment out to me in accordance with the agreement. I am also of the opinion that the payment of my estimates from time to time should be a mandatory requirement and that the reasonableness of those estimates ought not to be in issue. Of course the reasonableness of my actual fees as invoiced can be a matter for dispute at the time my Report is to be approved. These latter issues can be the subject of your submissions as we progress to final arrangements. You may find the case of McLennan Asset Services Pty Limited v Macquarie Investments Limited [2017] NSWSC 1811 of interest in this regard. To progress the matter efficiently can the Applicants provide further comments by Monday 1 July 2019 and the Respondents by Friday 5 July 2019." [13]
On about 1 July 2019 Mr Newell and Mr Muriniti responded with further submissions confirming the agreement to the procedure of a "Bill of Costs" prepared by the Referee. [14] Those submissions relevantly stated: "6. The Costs Applicants note and agree that a procedure was agreed on 25 May 2019. The Costs Respondents concur. In light of this agreement, it is apparent that the next step is to frame submissions on the foundation of the material in the Bill of Costs. It is plain that what further questions or issues might be agitated depend for their coherence upon that document and its contents. … 9. In any event, the proposal which has been agreed by the parties and the Referee and by which the Referee will attend to preparation of a bill of costs, has provided for a more economical process without discounting the need for a just accountability." [15]
On 10 July 2019 the Referee wrote to the parties: "Dear all I refer to my directions on 26 June 2019 for resolution as to the machinery for payment of my fees. The De Costi parties have replied by 1 July (in fact by email of 28 June 2019) but I have not received any further response from Messrs Muriniti and Newell by 5 July as directed. It will be of assistance if McLachlan Thorpe can draft all documents to put the machinery in place for approval by me and then for signing by all parties. In the event that there remain any concerns between the parties (and noting the lack of response by Messrs Muriniti and Newell), those issues should be raised as soon as possible. In any event I will be preparing my tax invoice for work to 30 June 2019. As presently advised I remain of the view that my overall estimated costs will be in the order of $200,000 plus GST. Kind regards Alyson Ashe - Referee". [16]
Ms Ashe also included a tax invoice for $20,575 plus GST for 27.8 hours for her and 44.5 hours for her IT Assistant at the earlier stated rates. The invoice stated: "RE: Reference to Alyson Ashe re the De Costi costs to be indemnified by Messrs Muriniti and Newell pursuant to District Court Order for reference made on 20 March 2019 after remittal from the Court of Appeal: Newell, Muriniti v De Costi [2018] NSWCA 49. To our costs of and incidental to Ms Alyson Ashe, Principal as Independent Solicitor Referee charged (as set forth in letter dated 25 May 2019) at an hourly rate of $500 per hour exclusive of GST ($550 incl GST) in and about accepting the appointment as Referee; reviewing correspondence and submissions from the parties and the documents provided including overseeing the preparation of a Working Document from the Tax Invoices provided and making preliminary directions". [17]
On 23 July 2019 De Costi's solicitors sent correspondence to Mr Newell, Mr Muriniti and Ms Ashe proposing orders and machinery for payment of the Referee's fees. Mr Muriniti responded to that email, suggesting that the estimated costs of the reference were "out of all proportion" to "the costs that are likely to be recovered" and that De Costi "should pay all of the Referee's costs". The email also stated: "your client has persisted in seeking a global costs order rather than to identify with specificity those costs which can be identified as costs incurred in respect of the matters which were the subject of the court's findings". [18] The email was then forwarded by Mr Muriniti to the Referee.
On 30 July 2019 Mr Muriniti requested the matter be relisted before the Court, and the matter was relisted for directions on 7 August 2019. Ms Ashe was given leave to be represented.
On 5 August Ms Ashe sent the parties a proposed "Procedural Order" dealing with payment of her fees. [19] She also provided to the parties a "Report to the Court" which included a section where she quoted the relevant orders of the Court of Appeal, noted that she was required and directed to have regard to the entirety of the Reasons of the Court of Appeal, and stated: "My task is accordingly a complex one. It is, in effect, to determine an 'issues based costs order' of the type that courts have often adopted sophisticated or percentage based costs order with a view to avoiding such complexities in the costs assessment process. The Cross-Claim hearing occupied 75 days. The documents are voluminous and the Reasons for Decision of the Court of Appeal in Newell, Muriniti v De Costi [2018] NSWCA 49 and of Taylor DCJ in De Costi Seafoods (Franchises) Pty Ltd and Anor v Wachtenheim and Anor (No 6) [2016] NSWDC 378 together with the other interlocutory judgments in the Cross-Claim proceedings and the Motion heard on the statutory indemnity in its various stages (the subject of the Court of Appeal decision) traverse a wide course of conduct by the Respondents and work done in response thereto by the Applicants." [20]
On 6 August 2019 Mr Muriniti wrote to Ms Ashe in the following terms: "Dear Alyson Re: Muriniti & Newell v De Costi Seafoods DC JLN: 2008/296319 We refer to your recent emails. We relisted the matter because of a concern about the claim that your work would cost $200,000. However, our concerns have been exacerbated since that time. The matter will not be resolved in the context of a directions hearing although that seems to be your preferred course, judging by the manner in which you wish to participate and rush it on. We expect to file a motion terminating the reference and/or your appointment. We are prepared to hear what you have to say notwithstanding that that Motion is to be filed. We need to set out the material context: 1. On 24 May a telephone conference was held. We took a strong view that de Costis needed to properly document their costs claim in the customary way akin to a bill of costs in assessible form its claim for costs. 2. De Costis made some comments seeking to evade this and pretending to rely on notions of efficiency and proportionality. 3. You informed us that you considered it appropriate to do a schedule because that would obviate the duplication that might be involved in de Costis doing a bill of costs and the operation being repeated by you. 4. With the benefit of mature reflection, it is not apparent how the process can offer any efficiency. 5. In any event, we were induced to believe, and it is fair to say that there was a serious representation that de Costis would be required to present the properly documented and particularised claim and somehow it would be cheaper to proceed as you proposed. 6. You were informed, and you might in any event have inferred, that the recoverable costs involved in what might be recovered are marginal in that they arise from a disparate collections of isolated complaints. 7. You were told that the costs of Androulla Costi were only those costs which were incurred by reason of her formal joinder. There is no way that these could be usefully identified without a detailed justification of costs incurred by de Costis and as a consequence of that formal joinder as opposed to Ms Costi's inevitable involvement in the proceedings. It is easily contemplated that there are no costs attributable to her joinder as a party. If there are any costs the starting point is what affidavit evidence was made discretely necessary by reference to that joinder and only by reason of that joinder? De Costis have not been asked to produce any records to justify a claim that there were any costs incurred by reason of that joinder. 8. There was no suggestion in this context that the costs of the reference might be $200,000. It is unclear, at least, why a party other than the moving party might be called upon to pay your costs. 9. Pausing there, at the hourly rate that you have nominated, the work that you contemplate is proposed to take 10 weeks. It is impossible to see how that could be the case. Again, it is to be noted that this is a process which you held out as more costs effective than a bill of costs equivalent to confining de Costis to the costs claimed to have been incurred related to the bundle of disparate matters. 10. Despite the clear understanding which you encouraged that de Costis would be confined to properly particularised and justified costs relating to those bundles, de Costis have not still not been required to do anything to frame their claim. 11. Subsequent to the telephone conference on 24 May, de Costis produced submissions as to how they considered the matter had to be approached. This struck us as odd at the time because the matter had already been decided in favour of a particular procedure which satisfied our requirements and which meant that no further time would be wasted dealing with specious propositions about a 'global' analysis. 12. Despite the fact that de Costis was represented at the conference at which you induced us to understand that the claim would require to be properly particularised, de Costis inexplicably produced submissions which advanced a theory of global (read 'don't look at the facts') analysis. 13. The preparation of such submissions were a complete non sequitur given the firm understandings established at the meeting. They are however very useful if the manifest non sequitur was to be used to suggest down the track, that no such understanding was reached. 14. Further, de Costis did not suggest that the question of methodology be postponed until their counsel was available to prepare submissions. The claim on that date was that their counsel was not available to do submissions until 12 June 2019. This was odd given the understanding the subject of your serious representation. But it enabled the submissions to be produced after the matter had apparently progressed somewhat and to provide a record apparently inconsistent with the understanding reached. 15. We are concerned that in your unsolicited report to the Court you make the following statement 'My task is accordingly a complex one. It is in effect, to determine an issues based costs order of the type that courts have often adopted sophisticated or percentage based order with a view to avoiding such complexities in the costs assessment process.' 16. This statement is obviously inconsistent in a fundamental way with the understanding cultivated on 24 May. We were induced to believe that no such approach would be taken. We do not accept that in recording this comment in your unsolicited report that you are recording material which might be used to suggest that we acquiesced in something other than a properly particularised claim. We did not. There was never any question of us agreeing to be part of a process which, yet again, evaded the necessary transparency. We are extremely alarmed that you have created this record given that you are aware of our position and of the representation which you made. The pattern seems to involve the creation of a paper trail to suggest falsely that we might have concurred in such an approach. 17. Very recently, you provided an account in the sum of $22,000 without any indication as to what work had been undertaken. That amounts to 84 hours work. It is difficult to imagine what was done. We should not have to imagine. If the schedule was prepared, we should have been told and provided with a copy. If it was not, then we do not know what work might have been done to warrant 84 hours of your time. 18. A real question is how could it possibly be contemplated as a matter of common sense that the matter could progress without a clear statement of what de Costis claimed. As you are aware, the de Costi submissions could not constitute that statement because they are antithetical to understandings reached. How could the matter progress to the point of $22,000 without de Costis being required without the obvious first step being taken? 19. We are entitled to be assured that that [sic] you have not treated the de Costis submissions as a proper statement of their claim. And that that [sic] you have not sought to progress an analysis on the basis of that claim rather than by reference to properly framed justifications by de Costis. 20. On mature reflection, we do not have any proper idea what the contents of this schedule might be, how it is to be prepared without regard to what particular items de Costis is actually claiming to be justified by the orders. You presumably are not creating a claim for de Costis. 21. These events, in the overall context of the matter, are alarming. The only reason that this reference and these pernicious issues exist is because de Costis made a considered decision not to offer any credible particularisation for those elements. This was despite the fact that that [sic] part of the case was made to drag on for several years. You are aware of that matter. 22. De Costis refusal to justify the costs in a wasted costs jurisdiction was a considered if perverse and instructive decision. An entirely open inference, and one of which you must be aware, is that it was not in de Costis' interests to commit to a customary justification for the costs. That can only be in their interests if there was no justification for any costs that might have justified keeping an expensive application on foot for many years. It is a small step to ask whether de Costis had special knowledge that they might look forward to a perverse settlement with Lawcover and Suncorp which settlement concealed the lack of substance in the claim and evaded the natural inferences from that matter. 23. As this letter makes plain, there is a great deal to be canvassed and considered before the reference can be allowed to continue. Although we will be filing a motion, we remain open to hear what you have to say." [21]
On 7 August 2019 the Court listed the matter on 28 August 2019 in relation to payment of the Referee's fees.
On 9 August 2019 Ms Ashe sent the parties a further invoice for $10,412.50 plus GST, involving 19.25 hours of work by her in July and 5.25 hours by her IT assistant.
On 13 August 2019 Mr Muriniti wrote to Ms Ashe seeking a copy of the schedule or Excel working document, and raised concerns about her methodology and her estimated costs in the following terms: "Dear Ms Ashe, We note from your correspondence that you claim to have prepared a schedule in relation to the de Costi costs. Would you please forward to us a copy of the schedule in question at your earliest convenience, preferably by email. We also note that you claim that an excel working document was prepared by IT Assistant. Please provide us with a copy of the excel working document in question by return email if possible. We note that you assert that you have drafted 'part of my methodology of report and based on indications of CofA judgment'. Please provide us with any documents that you have prepared that describes that methodology and exposes the process of reasoning employed by you including what matters that you refer to as 'indications' in the Court of Appeal judgment that support your reasoning. Finally, we note the disconcerting statement from you in your email to our office dated 10 July 2019 in which you say the following: 'As presently advised I remain of the view that my overall estimated costs will be in the order of $200,000 plus GST''. We note that we have no record nor any recollection of you having expressed any view about the estimate of your costs either in writing or orally until receipt of your email of 10 July 2019. If it is intended by you in the quote referred to above to convey an understanding that you have previously disclosed at any time prior to 10 July 2019 an estimate of costs of $200,000.00 plus GST. Please provide us with any correspondence to that affect that you rely on or in the alternative, if it is intended by you to convey the understanding that you had expressed the view of your estimated costs orally, please advise as to when you assert such a view was expressed and to whom. For the record, we contend that the firs [sic] occasion any estimate of costs was provided by you was in our email of 10 July 2019 referred to above. We should be most grateful for your expeditious reply." [22]
A further email was sent seeking from De Costi's solicitors and Ms Ashe copies of all materials sent to the Referee. Later that same day, both De Costi's solicitors and Ms Ashe provided details of the materials sent and received by the Referee. Ms Ashe stated: "Dear Mr Muriniti, RE: Confidential and Privileged: Reference to Alyson Ashe re the De Costi costs to be indemnified by Messrs Muriniti and Newell pursuant to District Court Order for reference made on 20 March 2019 after remittal from the Court of Appeal: Newell, Muriniti v De Costi [2018] NSWCA 49 I refer to your email sent at 3.03 pm dated 13 August 2019 in which you have requested my 'Schedule in relation to the De Costi costs' and my 'Excel Working Document prepared by my IT assistant'. There is in fact only the one document variously described being the Excel Working Document. It is also compiled from the documents referred to in respect of the further email correspondence passing between us and McLachlan Thorpe today at 'item 4 below' and in respect of which the De Costi parties assert legal professional privilege. In any event, this document is part of my working papers and I do not consider it appropriate to provide a copy to the parties in the absence of a Court Order. In relation to the remainder of your email I consider it inappropriate for you to attempt to engage me in discourse about the conduct of the Reference in the manner that you have: I have been appointed by the Court to carry out the task of Referee under Rule 20.14 of the Uniform Civil Procedure Rules 2005 (the UCPR) to conduct an inquiry and provide a report as to the costs properly recoverable by the Costs Applicants. It is not appropriate that I be called upon to answer assertions made against me in the manner that you have. I note that your Motion supported by affidavit is to be filed and served tomorrow (14 August) and that the matter is next in Court on 20 August 2019. The Court is the appropriate forum for the resolution of these matters. By further email to me at 4.39 pm you have also requested (in electronic form) copies of all materials sent to me by McLachlan Thorpe. Further that you have by email at 4.34 pm requested McLachlan Thorpe to forward to you on a USB stick copies of all materials which you have forwarded to me. I note that Ms Ng of McLachlan Thorpe has responded to you and to me by email at 4.56 pm that - We have provided you with all the material we have provided to Ms Ashe, except the following: 1. Exhibit JN1 to the Affidavit of Juliana Ng affirmed 5 May 2015 in these proceedings - a copy of which was previously served on your office as part of the proceedings; 2 Dramatis personae prepared by MTP dated 8/6/12 - a copy of which was previously served on your office as part of the proceedings; 3. Appeal books - which we presume you have a copy of given the appellants were you and Mr Newell; 4. Index to MTP's folders and MTP invoices, which we do not intend to provide to you, on the basis that they contain privileged and/or confidential information. We also note your email to Ms Ashe at 4.39pm today. We have no issue with Ms Ashe providing you with the material identified in 1-3 above, but do not consent to Ms Ashe providing you with this (sic) material identified in 4 above. As to item 3 I have been sent the Appeal Books on USB (one copy only). In light of item 4 I note that the Working Excel Spreadsheet has been prepared from the MTP and other Invoices. Noting the consent of Ms Ng to items 1-3 I attach to the email sending this letter items 1 and 2." [23]
On 14 August 2019 Mr Newell and Mr Muriniti filed a motion seeking termination of the reference, and termination of the appointment of Ms Ashe. The motion was amended. On 8 November 2019, a second further amended notice of motion was filed seeking a determination of whether Ms Ashe has been appointed as referee.
On 20 August 2019 the Court made the following consent orders ("the August Orders"): "By consent: 1. Make orders in accordance with the handwritten Short Minutes of Order as amended by me and initialled and dated today by me. 2. List respondents' notice of motion filed 16/8/19 for hearing on Thursday, 10/10/19 at 10am before P Taylor SC DCJ (estimate of 1 day). HANDWRITTEN SHORT MINUTES OF ORDER AS AMENDED The Court orders: 1. The Respondents to serve a proposed list of questions and documents for production for the Referee by 27 August 2019 ('Proposed List'). 2. The Plaintiffs to respond to the Respondents' Proposed List by 3 September 2019. 3. The Respondents to serve on the Referee, the Proposed List, and the Plaintiffs' response by 4 September 2019. 4. The Referee to provide a response to the Proposed List, to both the Plaintiffs and Respondents, by 11 September 2019. 5. The Plaintiffs to file and serve any evidence in respect of the Respondents' Notice [of] Motion filed 16 August 2019, by 18 September 2019. 6. The Respondents to file and serve any evidence in reply by 25 September 2019. 7. Fix the Respondents' Notice of Motion filed 16 August 2019 for hearing on 10 October 2019. 8. Amend order 2 made on 20 March 2019 to read: 'Without affecting the powers of the Court as to costs: (a) The Plaintiffs and Respondents are jointly and severally liable to the Referee for the fees payable to her. (b) The Plaintiffs on the one hand and the Respondents on the other to pay 50% of any invoice of the Referee into the trust account of McLachlan Thorpe Partners within 7 days of the date of the invoice, to be paid to the Referee within 14 days of the date of the invoice, subject to (c) below. (c) No payments are to be made to the Referee prior to the determination of the Respondents' Notice of Motion filed 16 August 2019, subject to (d) below. (d) The Plaintiffs and the Respondents will each pay $10,000 inclusive of GST [each] into the trust account of McLachlan Thorpe Partners by 27 August 2019 which is to be paid to the Referee w/in 7 days. 9. The Plaintiffs to inform the Referee of the orders made today. 10. Liberty to apply on 48 hrs notice."

D. Appointment of referee

Whether Ms Ashe was validly appointed depends on the terms of the Uniform Civil Procedure Rules 2005 and the March Orders.
UCPR 20.14 provides: "20.14 Orders of referral (cf SCR Part 72, rule 2) (1) At any stage of the proceedings, the court may make orders for reference to a referee appointed by the court for inquiry and report by the referee on the whole of the proceedings or on any question arising in the proceedings. (2) The court must not make an order under subrule (1) in respect of a question to be tried with a jury."
By r 20.15, any person may be appointed as a referee.
Mr Newell and Mr Muriniti accepted that there was no requirement that the word "appoint" be used in the order for reference. The word "appoint" or its related forms was not used in the March Orders, nor in the standard form of order, referred to earlier, used to formulate the March Orders.
Mr Newell and Mr Muriniti submitted that the Law Society President, Elizabeth Espinosa, did not "appoint" Ms Ashe, rather she "nominated" Ms Ashe. The March Orders indicated the nominee was "to be appointed" which, it was submitted, never occurred.
The De Costi parties submitted that Ms Ashe was "appointed" by the President. They relied on Marshall v Fleming, which stated that there is "no power to delegate the power to appoint a referee to someone who is not at least an officer of the Court". [24] De Costi submitted that the President of the Law Society, as a solicitor at least, was an officer of the Court.
The proper construction of an order was considered in Wende v Horwath (NSW) Pty Limited. [25] The Court of Appeal decided: "In order to construe an order, a court should: (a) identify the statutory power under which the order was made (to avoid a construction leading to invalidity); (b) address the language used, to identify a plain meaning if one is available; (c) if latent ambiguity is alleged, refer to the reasons for judgment and the application to which the order responded; (d) in the event of ambiguity (or other uncertainty), not resolved by reference to the reasons for judgment and the terms of the application, look to the submissions and (possibly) other material before the judicial officer on the application." [26]
The statutory powers in r 20.14 and r 20.15 of the Uniform Civil Procedure Rules 2005 refer to the court appointing the referee. In connection with this reference, that court is the District Court of New South Wales. The District Court comprises judges of the court, and "includes all registries and offices of the Court". [27] Whilst in some respects the President of the Law Society may be an officer of the Supreme Court of New South Wales, she is not an officer of the District Court, nor, plainly, a judge, registry or office of the Court. No power of the court to delegate the power of appointment of a referee to the President of the Law Society was identified. Even in the Supreme Court it might be doubted whether the genus [28] indicated by the specific reference to "judges or associate judges" in Marshall would extend the meaning of the phrase "other officers of the court" in this context to legal practitioners generally.
In the result, the President of the Law Society had no power under r 20.14 to appoint a referee in the District Court. The Court should "avoid a construction leading to invalidity". [29] Thus, a construction of the order that involves appointment of the Referee by the Law Society President should be avoided.
Further, the plain or literal meaning seems not to compel that construction, but rather to favour a construction that the Court is appointing the Referee, and the President of the Law Society has only a power of nomination. The words "The Court orders", "pursuant to Rule 20.14", "the issue of costs…is referred" and "the President of the Law Society to nominate" all support this construction. I do not regard this construction to be displaced by the words "the question of the Referee to be appointed shall be referred to the President…to nominate".
This construction - that the President of the Law Society was empowered to, and did, nominate rather than appoint a Referee - was propounded by Mr Newell and Mr Muriniti, and I agree with it. The power of appointment was not delegated to the President of the Law Society. It may be that her nominee would be, or was, appointed, but that was by force of the Court's action or future action. No appointment was effected by the President, both because order 1 of the March Orders did not have that effect, and because the Court must make the appointment under r 20.14, as Marshall confirms.
Mr Newell and Mr Muriniti called in aid another passage in Marshall. At [14]-[15], the Court of Appeal held that an order is of no effect if it does not appoint a particular person as referee. In the present case, it was submitted that the order did not appoint a particular person as referee, and that the appointment of other than a specified person is invalid.
If this were so, it would follow that the Court must make an order after the deadlock resolution provision has been activated, because only then is a specific person able to be appointed. Even if the order for reference of 20 March 2019 expressly said that "the Court appoints the person nominated", a result that Mr Newell and Mr Muriniti accepted might be an available inference from, or implied by, the terms of the March Orders, still the Court has no power to appoint a person unspecified at the time of ordering the reference, according to their submission. In their submission, the words "to be appointed" were consistent with the need for a subsequent order for appointment of the specific nominee.
The upholding by the Court of Appeal in Marshall in [15] of the "third matter" in [14], read literally, appears to preclude an appointment of a person not yet identified at the time of the order for reference. But the context of the order in Marshall was different, at least so far as the reported decision reveals. In Marshall there was no consent to the appointment of a referee to be decided by agreed machinery, and no specific power of nomination was identified. The words of the order spoke of appointment of a "member of the New York Panel of Referees", but did not specify how the particular member appointed, or to be appointed, was to be identified. The Memorandum of Understanding in connection with the New York Panel of Referees referred to in the Marshall judgment "does not in its terms apply to a reference to a referee or referees under Division 3 of Part 20" but "contemplates the institution of proceedings". [30] This is unlike the order for the nomination by the President of the Law Society, and the nomination itself, which do in their terms apply to the reference.
It was submitted that as the March Orders refer to the Referee "to be appointed", further action was required by the Court. But the plain intent of the March Orders was that in the event of deadlock, the person nominated by the President would be the Referee appointed by the Court. Although that particular person was not identified at the time of the order, the person would be (and was) identified at the time of the nomination, and would be appointed by the fulfilment of the self-executing order of the Court (referring the costs issue to them) upon a nomination. Until the nomination, the executory order remained unfulfilled so the Referee remained "to be appointed". I do not think the words "to be appointed" compel a construction requiring a further order of the Court.
Section 56 of the Civil Procedure Act 2005 requires the Court to "give effect" to the "overriding purpose" "to facilitate the just, quick and cheap resolution of the real issues in the proceedings" when it exercises "any power" under the rules of court, such as the power in r 20.14 to appoint a referee, and when it interprets any rule, such as r 20.14. If the parties have agreed to accept as referee a person nominated, and orders have been made to effect the appointment of that person to be nominated, the requirement for the parties to return for a further order to confirm the appointment of the person nominated under the agreed procedure, seems not to be either "quick" or "cheap" in resolving the real issue the subject of the reference. Nor does justice demand it when the parties have consented to that procedure. In my view, s 56 supports the construction of r 20.14 as permitting a self-executing order to appoint a nominated person, and the March Orders have this effect.
For these reasons, I am of the view that, properly construed in context, the March Orders were effective to appoint Ms Ashe as referee once she was nominated by the President of the Law Society.
In the event that I am wrong, then the March Orders were ineffective to appoint Ms Ashe either because of their proper meaning, or because of the Court's lack of power to appoint a person as referee until that person has been strictly identified. On 20 August 2019 the Court made the August Orders, including by amending one of the March Orders. If there was a deficiency in the March Orders, was that cured by the August Orders?
By 20 August 2019 Mr Newell and Mr Muriniti were seeking to terminate the appointment of Ms Ashe. They submit it would be bizarre if orders in that context confirmed her appointment. Yet, at that time, they were not contesting the validity of her appointment. The defect, were it so, in the March Orders was a chronological one, that no formal order of reference was made after the nomination specifying Ms Ashe. The August Orders made orders in respect of the reference, including by amending one of the March Orders. They were made at a time when the identity of the referee was identified and known, and seem to me to be orders that remedy any unintended lacuna.

E. Validation or termination

If Ms Ashe had not been validly appointed, a question arises as to whether the Court should now validate the appointment either by a further order under r 20.14, or by an order under s 63 of the Civil Procedure Act 2005 to remedy the irregularity resulting from an omission. In that event, Mr Muriniti and Mr Newell accept that if an order is otherwise appropriate, there is no reason why it should not retrospectively operate from the date of Ms Ashe being nominated and accepting the role of Referee. Mr Newell and Mr Muriniti rely upon the same matters, and with equal force, to oppose a further appointment as to terminate an existing appointment, save for the following additional matter.

(a) Costs assessor

The additional matter Mr Newell and Mr Muriniti raise against appointment of Ms Ashe arises from the terms of order 1 of the March Orders. The March Orders required the President of the Law Society to nominate an "experienced costs assessor". Ms Ashe is an experienced costs consultant, but she is not an appointed costs assessor as defined in s 6 of the Legal Profession Uniform Law (NSW). Mr Newell and Mr Muriniti expressly disclaimed reliance upon this matter both as a reason for termination, and as a reason for why Ms Ashe's appointment was invalid. But they did assert it to be relevant as to why her purported appointment, if not valid, should not be now validated.
Mr Newell and Mr Muriniti submit that Ms Ashe was not a "costs assessor" and thus was outside the category of persons from whom the President of the Law Society could nominate under order 1 of the March Orders.
As I am of the opinion that the Referee was validly appointed by the Court and this matter is not propounded as a reason for termination, or as a reason why the appointment of Ms Ashe was invalid, the matter does not arise. In those circumstances, I do not propose to deal with it.
The remaining reasons asserted by Mr Newell and Mr Muriniti to justify the termination of the Reference are threefold: Ms Ashe's failure to require De Costi to prepare a bill of costs; Ms Ashe's estimate of $200,000 plus GST for the costs of the reference; and Ms Ashe's asserted connection with Lawcover.

(b) The bill of costs

It is convenient to begin with a summary of some factual matters recounted earlier. On 21 May 2019 submissions on behalf of Mr Newell and Mr Muriniti concerning the procedure to be adopted in the Reference were provided to the Referee. Those submissions sought a bill of costs be prepared and provided by De Costi, and that further procedures "be reserved until such time as the Respondents have had an opportunity to consider and respond to the Bill of Costs". [31] A telephone conference with the parties and the referee was held on 24 May 2019, when the bill of costs was again raised. [32] Ms Ashe at some stage during the conference [33] suggested that she had a methodology for preparing a schedule that would avoid the duplication of a bill of costs, and accepted that Mr Newell and Mr Muriniti would "be able to critically scrutinise the costs claimed by de Costis by reference to the schedule". [34] Mr Newell and Mr Muriniti agreed to this course. [35]
The following day Ms Ashe wrote to the parties in a letter quoted above. For present purposes, it is sufficient to note that the letter stated: "the parties are content for me to cause to be prepared and to work upon an Excel document based upon the tax invoices to the De Costi parties (re all costs and disbursements including counsel fees) in the District Court proceedings." [36]
The purpose of the document was to enable "identifying (with the De Costi files) and determining the work fairly and reasonably to be indemnified pursuant to the orders of the Court of Appeal on 20 March 2018". [37] This work in producing the Excel document was: "in lieu of the indemnifying parties submission that the De Costi parties should have an itemised bill of costs prepared (presumably by a costs consultant) for their claim under the 'issues based' costs orders of the Court of Appeal". [38]
The Referee stated that the earlier submitted alternative to her methodology was neither cost effective nor helpful. The Referee stated that she thought her approach avoided "duplication of effort and cost" and that she was "the appropriate person to construe the scope of the costs orders and prepare, what in effect, is a bill of costs of the work and then adjudicate upon it". [39]
The subsequent De Costi submissions [40] and submissions signed by Mr Muriniti [41] reveal the agreement of the parties to this approach. Mr Muriniti wrote: "the proposal which has been agreed by the parties and the Referee and by which the Referee will attend to preparation of a bill of costs, has provided for a more economical process without discounting the need for a just accountability." [42]
However, in late July 2019, after the fees estimate of the Referee had been provided on 10 July 2019, disagreement again surfaced, resulting in the decision by Mr Newell and Mr Muriniti on 6 August 2019 to move to have the reference terminated.
There was no evidence that indicated why the Referee's approach was defective. From 24 May 2019 until 23 July 2019, Mr Newell and Mr Muriniti consented to this approach, and advocated it in their undated reply submissions as a "more economical process". [43] This view appears to have changed when Ms Ashe provided an estimate of her costs of $200,000 plus GST for the reference.
The March Orders contemplated that the "manner of conducting proceedings under the reference" would be in accordance with what the Referee considered appropriate, and directed that UCPR 20.20 applied. Rule 20.20(2) provides: "(2) Subject to any direction under subrule (1) - (a) the referee may conduct the proceedings under the reference in such manner as the referee thinks fit, and (b) in conducting proceedings under the reference, the referee is not bound by the rules of evidence but may inform himself or herself in relation to any matter in such manner as the referee thinks fit."
Mr Newell and Mr Muriniti rely upon the failure of the Referee to order De Costi to prepare and provide a bill of costs in several respects: 1. The Referee failed to entertain Mr Newell's and Mr Muriniti's submissions concerning the procedure and thereby denied them natural justice. [44] 2. The reasons given by the Referee were flawed, [45] or inadequate. [46] 3. The Referee failed to explain her methodology. [47] 4. The Referee has misunderstood her task. [48]
Each of these matters fall to be considered in the light of the consent order for reference incorporating r 20.20, which left it to the Referee to determine her procedure and conduct the Reference in such manner as she thought fit. In this context, the arguments of Mr Muriniti and Mr Newell are unpersuasive.
As to (a), the Referee received Mr Newell's and Mr Muriniti's submissions three days before the telephone conference. She had, as Mr Newell acknowledged in another respect, three days to consider them. At the conference, she explained her working document/Bill of Costs proposal. All parties consented to that approach. That agreement persisted for almost two months from 24 May 2019 until 3 July 2019, when an email from Mr Muriniti challenged the economy of the agreed procedure. The Referee was not "peremptorily" rejecting a bill of costs, [49] but rather embracing it in a manner that the parties agreed.
If Ms Ashe was required to give consideration to the submissions advocating the need for a bill of costs, I am satisfied that she did.
As to (b), the requirement for reasons seems otiose in circumstances where the parties have agreed to the proposal. Reasons are to explain a decision determining a dispute, not to justify or speculate about why the parties reached agreement. In any event, if Ms Ashe was required to give reasons for why she preferred her working document, she did so both in the conference [50] and in writing the following day. [51]
As to (c), Ms Ashe explained her methodology which was to prepare what was "in effect…a bill of costs of the work and then adjudicate upon it", [52] "for the purpose of my identifying (with the De Costi files) and determining the work fairly and reasonably to be indemnified pursuant to the orders of the Court of Appeal on 20 March 2018". [53] Further, any demand for explanations was, in my view, premature. Ms Ashe was in the process of preparing the working document, indicating which costs appeared to respond to the Court of Appeal orders, so that the parties could "critically scrutinise" it. [54] The time for explaining the complete methodology of a decision (that would occur after that critical scrutiny) had not arrived.
As to (d), Mr Newell and Mr Muriniti put particular emphasis on the Referee's statement: "My task is accordingly a complex one. It is, in effect, to determine an 'issues based costs order' of the type that courts have often adopted sophisticated or percentage based costs order with a view to avoiding such complexities in the costs assessment process." [55]
The meaning in this passage might have been expressed more clearly; it might have been clarified if the words "in a case" were inserted after the reference to "issues based costs order". But the meaning is clear enough. In context, the Referee was noting that she had the complex task to determine, or assess, an "issues based costs order", the issues being those in the Court of Appeal's orders. She also noted that courts often (but did not in this case) avoid the complexity by ordering a percentage based costs order. I read her report and her correspondence as indicating a clear understanding of her task: to assess the costs incurred that fell within the particular indemnities in the Court of Appeal orders. When this construction was suggested by the Court during oral submissions, Mr Newell did not demur, but appeared to accept that this was the Referee's most likely meaning.
This intent of the Referee is made plain when answering a question about this passage subsequently. She stated: "The bill of costs I proposed to draw was to itemise the wasted costs for each of those issues [the items in the relevant orders of the Court of Appeal] and…would require a separate assessment in respect of each 'order'. I confirm that I had never considered a global percentage to dispose of the whole matter". [56]
It follows that any submission about an error of the Referee in using a "percentage based" approach is misconceived; the Referee was not proposing that course.
For these reasons, I am not persuaded that there is any substance in the complaint about the Referee failing to require the De Costi parties to prepare a bill of costs.
Mr Newell and Mr Muriniti also complained about the failure of the Referee to provide a copy of the working document, but I did not understand this to be alleged to be a basis for terminating the Reference. In any event, it seems premature to require the provision of the working document not yet finalised. At least, the time for the parties to "critically scrutinise" the working document has not yet arrived.
In the result, I am not persuaded that the procedure proposed by the Referee, which was agreed to by the parties and so far acted upon by the Referee, is defective, less still that it involves a denial of natural justice [57] warranting an order that she be removed.

On 10 July 2019 the Referee provided an estimate of her fees for the Reference, being $200,000 plus GST. In the August Orders made by consent, Mr Newell and Mr Muriniti agreed that they together would pay 50% of her fees. As a consequence, the Referee's estimate, if realised, would involve Mr Newell and Mr Muriniti paying the sum of $100,000 plus GST. They submit that this sum is excessive; although the manner in which it forms the basis for an order for termination of the Reference is not clear.
In a document created during the course of submissions, identifying and titled "Grounds of Termination of Alyson Ashe", the only reference to the estimate of fees was as particulars of an allegation that Ms Ashe was "guilty of misconduct" in failing "to act in good faith". [58] The relevant particulars are as follows: "b) Ms. Ashe failed or omitted to seek an agreement as to costs prior to undertaking work in purported conduct of the Reference. c) Ms Ashe sought to bind the Costs Respondents to a liability for a … costs regime involving monies to be deposited … into the MTP Trust account in advance of invoices without first alerting the Costs Respondents that the obligation would involve locating the sum of $110,000. d) Ms Ashe failed or omitted to disclose, in a timely way, that she would be seeking to create in the Costs Respondents a $110,000 advance payment obligation." [59]
As to particular (b), after the initial conference on 24 May 2019, Ms Ashe wrote on 25 May 2019 identifying the hourly rate initially applicable and invited correspondence about that. No challenge was made to those rates at the time, or since. Thus, Ms Ashe was seeking agreement as to her fees at the outset; she nominated her rates applicable until she made "an estimate in this matter"; [60] there was no objection to the rates at the time and to her fees at all for some two months thereafter; and she then proceeded with the work of the Reference. It may have been more prudent for her to have the parties sign an agreement in respect of costs at the outset, but that failure was not misconduct or a breach of good faith.
As to particular (c), Ms Ashe in late May 2019 did propose "a costs regime involving monies to be deposited … into the MTP Trust account", some six weeks prior to providing the estimate of $200,000 plus GST. The proposal was expressed in terms of "I incline to the view" and "These latter issues can be the subject of your submissions as we progress to final arrangements". It overstates this correspondence to describe it as Ms Ashe having "sought to bind" Mr Newell and Mr Muriniti. Advancing a proposal that was and remained subject to submissions is not failing to act in good faith. Ms Ashe in giving the estimate in early July 2019 stated "In the event that there remain any concerns between the parties (and noting the lack of response by Messrs Muriniti and Newell), those issues should be raised as soon as possible." The Referee was evidently concerned that six weeks had passed since she had disclosed her fee rates, and there remained no finalised agreement to them despite no objection being raised.
This proposal by Ms Ashe and the subsequent estimate is not misconduct, or a failure to act in good faith.
The same reasons apply to particular (d). Evidently Ms Ashe was not able to provide a reliable estimate of her total fees at the outset, but did so six weeks thereafter. That did not involve a "$110,000 advance payment obligation". The initial promise of an acceptable hourly rate until she was sufficiently informed of the magnitude of the task to provide a helpful estimate seems an entirely appropriate way to proceed, and did not involve any misconduct or failure to act in good faith.
Although it was not identified as a ground for termination, Mr Newell and Mr Muriniti submitted that the Referee's estimate of her costs of $200,000 is excessive. It is plainly a substantial amount. However, it is an estimate only, and the Court was not favoured with any evidence about the task, other than the hourly rate of Ms Ashe, about which Mr Newell and Mr Muriniti took no objection. No evidence or reasoned basis was advanced as to why the costs are either excessive for the work to be performed, or out of proportion to the costs to be assessed as part of the Reference.
Mr Newell and Mr Muriniti repeatedly submitted that the costs ordered by the Court of Appeal, properly understood, were a nominal amount. Yet in submissions, Mr Newell suggested that a cost consultant, in preparing a bill of costs, might charge "7% of the gross profit costs".
De Costi's costs in the proceedings were evidenced to have been identified by the Referee as $1,201,119.84 fees and $1,739,233.04 disbursements together with a further amount of $150,000 incurred by one of the De Costi parties, thus resulting in a total sum in excess of $3 million. [61] Ms Ashe appears largely to have completed the working document [62] at apparent costs of approximately $30,987.50, [63] the amount of her fees invoiced on 10 July 2019 and 10 August 2019. Thus, the working document, referred to by the parties as a "Bill of Costs", apparently cost substantially less than the costs of a costs consultant performing that task, as estimated by Mr Newell (7% of gross profit costs of $3 million is $210,000) and separately by Ms Ashe ($100,000). [64] There remains the task of assessing the value of the 11 items the subject of indemnity ordered by the Court of Appeal against Mr Muriniti, 8 of which were also ordered against Mr Newell.
In the absence of relevant evidence, I was not persuaded that the estimated costs were excessive or that on some unidentified basis it required a termination of the Reference.
Mr Newell and Mr Muriniti raised in submissions, as they did in correspondence, that the Referee first raised her estimated costs of $200,000 in an email where she said "I remain of the view that my overall estimated costs will be in the order of $200,000 plus GST". They took issue with the implication in the word "remain" (rather than "am"), that this was a view previously expressed. Apparently it was not a view previously expressed. But the Referee's words do not necessarily imply a previous expression of this view. The Referee's words may mean no more than that she had reached that view before 10 July 2019, the date of the email. Whether that is so or not does not seem to be significant. The circumstance that the clear costs estimate might have been more elegantly expressed is again no reason to terminate the Reference.
There was some narrative evidence about the hardship occasioned to Mr Newell. He gave this evidence: "22. Further, the order causes me considerable hardship. I am paid according to the hours I work (and on litigation matters only) for LC Muriniti and Associates. In respect of some matters, there is an agreement that the payment of my hours is deferred until recovery of costs in respect of those particular matters. The upshot is that at the moment the payment for my hours is largely deferred until recovery of costs in respect of a number of large matters. 23. This is complicated by the fact that much of my time has been taken up with a dispute which I and Mr. Muriniti separately have with Lawcover and which I have with Suncorp. This matter is an example. The result is that at this particular time, I have no money at all except that which comes from my mother's trust specifically given to me to meet the exigencies of living expenses. 24. My mother died in February this year. She left money in trust for me. That money was to be paid to me over a period of years subject to there being a current need for living expenses. The money which I have in my account was given to me by the trustee of my mother's trust and is to be used only for living expenses during the period that I [am] expected to have a need. This creates a difficulty that if those monies [are] used to pay Alyson Ashe (by reason of Suncorp's refusal to pay), I expect that it will cause hardship." [65]
The financial circumstances of a party could be relevant to whether a reference funded by the parties should be ordered. It was not, as it should have been, a matter raised at the outset, before the order for reference was made. Further, Mr Newell's evidence suffers from a lack of particularity. He gives no evidence of his present earnings, current assets, or the value of the trust left by his mother. After receiving the benefit of that trust, which commenced in February 2019, he consented to orders that he would be jointly and severally liable for the costs of the Referee on 20 March 2019, and on 20 August 2019 that with Mr Muriniti he would pay one half of the Referee's costs. [66] His evidence stopped short of asserting an inability to meet his share of the costs of the Referee, or of an unwillingness to meet the Referee's costs.
Mr Muriniti gave no evidence of his financial position or of any change to his agreement to meet his share of the Referee's costs.
Mr Newell and Mr Muriniti tendered evidence to establish that their professional indemnity insurers, Suncorp and Lawcover respectively, have refused to contribute to the costs of the Referee although the insurers do not deny indemnity. [67] Those insurers have given reasons for that position. It is not relevant to this motion to determine whether the insurers are acting within their entitlements, or are unjustified in the course they have taken. Mr Newell and Mr Muriniti have not sought to obtain a judicial determination of their rights against their respective insurers.
The Referee's estimate of costs neither requires nor suggests that the Reference should be terminated. However, if a party refuses to pay that cost, a Referee that is not to be reasonably remunerated cannot be expected to provide a report. On the other hand, if the existing agreement to pay the Referee's costs is adhered to by the parties or the Referee is otherwise paid, then the reasonableness of her costs can await a subsequent determination when adoption of the report is considered, and the Reference can proceed. Any termination of the reference for reasons connected with a lack of payment is premature until it is apparent that her fees will not be met.

(d) The connection with Lawcover

Mr Newell and Mr Muriniti submitted that Ms Ashe is "affected by a bias and/or her conduct gives rise to a reasonable apprehension of bias". The foundation for this submission was said to be that Ms Ashe had an "antecedent commercial and professional association with both the Law Society and Lawcover" which was not disclosed. [68]
The significance of a connection with the Law Society and Lawcover is that Lawcover was asserted to be a wholly owned subsidiary of the Law Society. Although there was no evidence of this, it did not appear to be disputed. Mr Newell submitted that Lawcover, the insurer of Mr Muriniti, and its legal representatives, together with Mr Newell's insurer, Suncorp, and its legal representatives, engaged in a "fraudulent collusion" with De Costi, and their legal representatives, to pervert the judicial process in respect of the claim for costs by De Costi against Mr Newell and Mr Muriniti. [69] The details of this fraud were not developed. Mr Newell and Mr Muriniti expressed in submissions that they do not seek to prove, and do not seek for the Court to determine, the merits of the fraud alleged by them. [70]
Mr Newell and Mr Muriniti submitted that all those parties to the asserted fraud had an interest in the costs being substantial. The interest of De Costi achieving such a result is plain enough. But Lawcover's and Suncorp's interest in that result, apparently adverse to them financially, is not so easy to discern. Mr Newell and Mr Muriniti asserted that this interest arose from some other litigation with which I was unfamiliar, litigation which was not the subject of evidence. Apparently contrary to this asserted interest, in an application to set aside subpoenas on the first day of this hearing, and in correspondence, Lawcover and Suncorp expressed an acceptance of liability for the costs awarded to De Costi, subject to the terms of the relevant policy.
Mr Newell's assertion against the Law Society was in the following terms: "13. Ms. Ashe's nomination miscarried (with the consequence that an impartial and reasonable observer would think that the nomination was affected by bias) in that: a. The President of the Law Society ('the President') knew at all material times that the Costs Respondents were in serious dispute with Lawcover. b. Lawcover is the wholly owned subsidiary of the Law Society. c. lnsofar as Lawcover had misconducted itself, the Law Society and the President would be responsible for the consequences of that misconduct. d. The Lawcover Dispute included that Lawcover's conduct (together with that of Suncorp) was alleged by the Costs Respondents to have given rise to seriously adverse professional consequences for the Costs Respondents. e. The President was charged with the task of enquiry as to the possibility of a potential conflict affecting Ms. Ashe ('The Enquiry Obligation'). Particulars i. The Enquiry Obligation was necessarily implicit in the task that the President was mandated to perform. ii. The Enquiry Obligation was a necessary and obvious incident of the President's knowledge that the Costs Respondents were in serious dispute with Lawcover ('The Lawcover Dispute') and Lawcover had a necessary involvement in the matter. iii. lt was incumbent upon the President to know the nature of the Lawcover Dispute, and whether and what further allegations or litigation were expected as a consequence of that dispute ('the Material Knowledge') and in any event, it is to be inferred that the President had the Material Knowledge iv. The Material Knowledge included that the Costs Respondents were representing themselves because they had declined to permit Lawcover or Suncorp to represent them as a consequence of the Lawcover Dispute. v. The Enquiry Obligation was expressly conveyed to the President by email from Juliana Ng on behalf of the parties dated 3 April 2019 which stated that there was no need to name the 3 costs assessors which Muriniti contended were conflicted because 'our letter requests that any assessor nominated by you to act as referee, consider any issues of conflict prior to acting as referee.' vi. The email referred to in (v) transmitted a letter which stated that any referee nominated by the President should have considered any issues of conflict prior to accepting to act as referee. f. The President failed or omitted to enquire as to whether Ms. Ashe had a material relationship with Lawcover or the Law Society, or if she did so enquire, or had access to the relevant knowledge, the President failed to act on that knowledge in effecting her nomination." [71]
This reference to the Law Society can be disregarded at the outset, both because it was abandoned by Mr Newell and Mr Muriniti before the close of submissions, and because Mr Newell and Mr Muriniti in the March Orders agreed for the President of the Law Society to have the power of nomination, even though their complaints with Lawcover long preceded that date. Nothing occurred after 20 March 2019 that caused, or could cause, in the mind of a reasonable fair-minded lay observer, the President of the Law Society to be a less than appropriate person to nominate the Referee.
There was evidence of bankruptcy proceedings by Lawcover and Suncorp against Mr Newell and Mr Muriniti, and, as indicated above, evidence of disagreements between Mr Newell and Mr Muriniti as to the conduct and funding of these proceedings. It is evident that the interests of Mr Newell and Mr Muriniti, on the one hand, and their insurers, Suncorp and Lawcover respectively, on the other, are not aligned.
The existence of a divergence of interest between Lawcover and its insured, Mr Muriniti, is of itself insufficient to establish any basis for apprehended bias in the Referee. The test of apprehended bias is whether a hypothetical fair-minded lay observer might reasonably apprehend that the decision maker might not bring an impartial mind to the resolution of the question the decision maker is required to decide. [72] It is a finding not to be reached lightly.
Two steps are involved in reaching a finding of apprehended bias. First, identify that which might lead a decision maker to decide the case other than on its factual and legal merit - it might be pecuniary or other interest, conduct, association or extraneous information. [73] Secondly, a causative path must be identified - "How will the claimed interest, influence or extraneous information have the suggested effect?" [74]
Other than conduct which I have considered above and dismissed (the alleged failure to consider submissions, and the estimate of the Referee's fees), there was no conduct giving rise to the alleged apprehended bias. Rather, Mr Newell and Mr Muriniti submitted it to be a bias arising from an "association", namely Ms Ashe's association with Lawcover.
Submissions were also made about the failure of Ms Ashe to disclose her supposed association with Lawcover. Generally, matters may warrant disclosure because they might offend the reasonable observer test. By disclosure, a possible apprehension of bias may be waived by a party if no objection is taken. But this is not the case here. There is no assertion of any waiver. So either Ms Ashe's association with Lawcover gave rise to a reasonable apprehension of bias, and would thus form a basis for termination of the Reference; or it did not give rise to a reasonable apprehension of bias, and thus formed no basis for termination, so it need not have been disclosed.
Mr Newell accepted that no application was made to Ms Ashe that she disqualify herself because of that relationship. As a result, there was no ventilation of the issue of the relationship with the Referee. The limited evidence of Ms Ashe's connection with Lawcover was as follows: "As to my involvement with LawCover, apart from attending Law Cover seminars on Risk Avoidance I do not regard myself as having any relevant current connexion with LawCover. I am of course recognised by some of their presenters as being a senior practitioner and from my quasi-judicial work at the Supreme Court. I do not personally know any of the Board Members of LawCover. I have met Janice Purvis, Rosemary Workman and Malcolm Health. I do not know Elissa Baxter. At some time after I purchased the business of Royse Legal Costs Consultants (1995) after the untimely death of Joanna Somervaille, I continued her work with LawCover presenting some Risk Management Modules. I also reviewed some of the costs records of their Panel Lawyers to improve their time-recording. Having been a legal costs consultant for more than 25 years I am likely to have been involved in matters involving LawCover or the Law Society. However, I have not regularly been engaged by panel lawyers to conduct legal costs consulting work for LawCover or for the Law Society in the manner in which Mr Muriniti asserts that my professional involvement with these essential entities for the NSW Legal Profession has been for a 'commercial advantage'." [75]
Ms Ashe's curriculum vitae provides: "11. Ms Ashe also presents lectures on costs to solicitors as part of in-house continuing legal education seminars. These lectures have a special emphasis on practise management issues. She has presented for the NSW State Legal Conference, College of Law for CLE Costs Updates, LawCover, various regional Law Societies including the City of Sydney Law Society and in-house at many law firms and for government lawyers. In February 2015 and 2016 she was a speaker at the LIV National Costs Conference." [76]
Mr Newell's submissions do not identify with precision how this "antecedent commercial and professional association" was inconsistent with the conduct by Ms Ashe of an impartial reference.
A prior professional relationship between a judge and a former client is not sufficient in itself to disqualify the judge from sitting in proceedings to which the former client is a party. [77] There was no submission as to why the same rule would not apply to a referee.
I do not regard the circumstance that Ms Ashe has spoken at or attended Lawcover conferences or may have been engaged irregularly in matters involving Lawcover as giving rise to a reasonable apprehension of bias. In my view, these matters are insufficient to possibly cause a fair-minded lay observer, acting reasonably, to apprehend that Ms Ashe might not bring an impartial mind to the Reference. The circumstances that Lawcover is not a party to the proceedings, and that any discernible interest that it has is contrary to that of De Costi and appears to be similar to that of Mr Muriniti, tend to militate against the reasonableness of any such apprehension. As indicated earlier, no reasoned analysis of why such an apprehension should arise was developed.

F. Conclusion

Pursuant to r 20.22 of the Uniform Civil Procedure Rules 2005, the Court may set aside an order of referral. That may occur when there is actual or apprehended bias. [78] The relevant test of apprehended bias is whether an informed observer [79] would regard there being a reasonable risk that the referee is unable to deal impartially with the matter. As I have found, that is not present in this case.
Accordingly, the application for removal of the Referee is refused.
Costs would ordinarily follow the event and be payable by Mr Newell and Mr Muriniti.

G. Directions

It may be appropriate to make some further directions in respect of the fees of the Referee, the date for the Referee's report and other matters. The parties should inform my associate of mutually convenient dates for the matter to be re-listed for any proposed directions. Those dates should be provided within seven days.

H. Orders

The orders of the Court are: 1. The application for removal of the Referee is dismissed. 2. Costs of the application be payable by Mr Newell and Mr Muriniti. 3. The parties provide to my associate within seven days: 1. any further proposed directions to the Referee; and 2. three mutually convenient dates for the directions hearing.

Endnotes

Newell; Muriniti v De Costi [2018] NSWCA 49 at [241].
At [242].
At [236].
E Finnane, HN Newton and C Wood (Law Book Co, Sydney, 2008).
Affidavit of Leonardo Muriniti, 24/9/19, Annexure "S", CB 1/105-106 (Court Book, volume 1/pp 105-106).
Affidavit of Leonardo Muriniti, 24/9/19, Annexure "O", CB 1/109.
Exhibit R1 at "I", CB 2/68 at [2].
Exhibit R1 at "I", CB 2/69 at [11].
Affidavit of Robert Newell, 19/8/19 at [6], CB 1/6.
Affidavit of Robert Newell, 19/8/19 at [7]-[8], CB 1/6-7.
Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/110-112.
Exhibit R1, Annexure "J", CB 2/76.
Exhibit R1, Annexure "L", CB 2/85-86.
Affidavit of Leonardo Muriniti, 15/8/19 at [21] and Exhibit R1 at "K" at CB 2/80 but cf Exhibit R1 at "L" at CB 2/83.
Exhibit R1 at "K", CB 2/80-81.
Exhibit R1 at "L", CB 2/83.
Exhibit R1 at "M", CB 2/102.
Exhibit R1 at "O", CB 2/126.
Exhibit R1 at "W", CB 2/217.
Exhibit R1 at "X", CB 2/228 at [15].
Affidavit of Robert Newell, 19/8/19, Annexure "A", CB 1/10-13.
Affidavit of Robert Newell, 19/8/19, Annexure "C", CB 1/15.
Affidavit of Robert Newell, 19/8/19, Annexure "D", CB 1/17-19.
[2014] NSWCA 64 at [31].
[2014] NSWCA 170 at [59]-[62].
At [64].
District Court Act 1973, s 4.
See the "ejusdem generis" rule.
Wende at [64].
See Marshall at [24] and [31].
Exhibit R1, CB 2/68 at [2(c)].
Affidavit of Robert Newell, 19/8/19, CB 1/6 at [4].
See Affidavit of Robert Newell, 19/8/19, CB 1/6 at [5]-[6].
At [7].
Cf Affidavit of Robert Newell, 19/8/19, CB 1/7 at [8]-[9].
Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/111.
Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/111.
Ibid.
Ibid.
Exhibit R1 at "J", CB 2/76 at [11].
Exhibit R1 at "K", CB 2/81 at [9].
Ibid.
Sent on 1/7/19, Exhibit R1 at "K" at CB 2/81 at [9].
Robert Newell's submissions, 2/3/20 at [7]-[9], respondents' "Grounds of Termination of Alyson Ashe" ("GTAA"), undated at [10(a)-(d), (f) and (g)].
Robert Newell's submissions, 2/3/20 at [15] and [22], GTAA at [10(h)].
GTAA at [10(e)].
Robert Newell's submissions, 2/3/20 at [16], GTAA at [10(i), (j)].
Robert Newell's submissions, 2/3/20 at [17]-[19].
See GTAA at [10d].
Cf Robert Newell, 19/8/19 at [6], CB 1/6.
Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/110-112 especially at 111.1-111.6.
Ibid at CB 1/111.5.
Ibid at CB 1/111.2.
Affidavit of Robert Newell, 19/8/19 at [7], CB 1/6.
Exhibit R1 at "X", CB 2/228 at [15].
Affidavit of Juliana Ng Liah Nah, 2/10/19, Annexure "A", CB 1/256.
GTAA at [11].
GTAA at [14].
GTAA at [14(b)-(d)].
Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/112.
Report to the Court of Referee Alyson Wendy Ashe, 5/8/19, Exhibit R1 at "X" at CB 2/221, 2/229 at [23].
Exhibit R1 at "X" at CB 2/229 at [22].
Exhibit R1 at "M" at CB 2/102 and "AA" at CB 2/265.
Robert Newell affidavit, 10/10/19, Annexure "J", CB 1/200.
Affidavit of Robert Newell, 10/10/19, [22]-[24], CB 1/155.
Orders of 20/3/19 and 20/8/19.
See Robert Newell affidavit, 18/9/19, Annexure "RDN 5" at CB 1/45 (letter 11/9/19). Leonardo Muriniti affidavit, 24/9/19, Annexure "D" at CB 1/74-1/75 (letter 2/9/19) especially at [5].
See GTAA at [12].
See Exhibit R1 at "I" at CB 2/69 at [11].
See e.g. GTAA at [9].
See GTAA at [13].
CNY17 v Minister for Immigration and Border Protection [2019] HCA 50 at [56], [132].
CNY17 at [57].
CNY17 at [57].
Leonardo Muriniti affidavit, 24/9/19, Annexure X, CB 1/122.
Exhibit R1 at "X", CB 2/240.
British American Tobacco Australia Ltd v Peter Gordon & Anor [2007] NSWSC 109 at [76], [85]; Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 65 FCR 215 at 222; Ritchie's Uniform Civil Procedure NSW at [51.53.70].
Najjar v Haines (1991) 25 NSWLR 224.
S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 May 2020

Legal Profession Act 2004(NSW)

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