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

D. Appointment of referee

1. Whether Ms Ashe was validly appointed depends on the terms of the Uniform Civil Procedure Rules 2005 and the March Orders.
2. 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."
3. By r 20.15, any person may be appointed as a referee.
4. 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.
5. 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.
6. 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.
7. 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]
8. 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.
9. 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.
10. 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".
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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?
19. 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

1. 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

1. 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.
2. 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.
3. 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.
4. 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

1. 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]
2. 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]
3. 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]
4. 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]
5. 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]
6. 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.
7. 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.
8. 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."
9. 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]
10. 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.
11. 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.
12. 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.
13. 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]
14. 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.
15. 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]
16. 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.
17. 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]
18. 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.
19. 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.
20. 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.
21. 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.

(c) The $200,000 fee

1. 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.
2. 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]
3. 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.
4. 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.
5. This proposal by Ms Ashe and the subsequent estimate is not misconduct, or a failure to act in good faith.
6. 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.
7. 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.
8. 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".
9. 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.
10. 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.
11. 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.
12. 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]
13. 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.
14. 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.
15. 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.
16. 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

1. 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]
2. 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]
3. 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.
4. 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]
5. 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.
6. 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.
7. 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.
8. 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]
9. 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.
10. 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.
11. 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]
12. 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]
13. 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.
14. 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.
15. 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

1. 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.
2. Accordingly, the application for removal of the Referee is refused.
3. Costs would ordinarily follow the event and be payable by Mr Newell and Mr Muriniti.

G. Directions

1. 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

1. 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

1. Newell; Muriniti v De Costi [2018] NSWCA 49 at [241].
2. At [242].
3. At [236].
4. E Finnane, HN Newton and C Wood (Law Book Co, Sydney, 2008).
5. Affidavit of Leonardo Muriniti, 24/9/19, Annexure "S", CB 1/105-106 (Court Book, volume 1/pp 105-106).
6. Affidavit of Leonardo Muriniti, 24/9/19, Annexure "O", CB 1/109.
7. Exhibit R1 at "I", CB 2/68 at [2].
8. Exhibit R1 at "I", CB 2/69 at [11].
9. Affidavit of Robert Newell, 19/8/19 at [6], CB 1/6.
10. Affidavit of Robert Newell, 19/8/19 at [7]-[8], CB 1/6-7.
11. Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/110-112.
12. Exhibit R1, Annexure "J", CB 2/76.
13. Exhibit R1, Annexure "L", CB 2/85-86.
14. 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.
15. Exhibit R1 at "K", CB 2/80-81.
16. Exhibit R1 at "L", CB 2/83.
17. Exhibit R1 at "M", CB 2/102.
18. Exhibit R1 at "O", CB 2/126.
19. Exhibit R1 at "W", CB 2/217.
20. Exhibit R1 at "X", CB 2/228 at [15].
21. Affidavit of Robert Newell, 19/8/19, Annexure "A", CB 1/10-13.
22. Affidavit of Robert Newell, 19/8/19, Annexure "C", CB 1/15.
23. Affidavit of Robert Newell, 19/8/19, Annexure "D", CB 1/17-19.
24. [2014] NSWCA 64 at [31].
25. [2014] NSWCA 170 at [59]-[62].
26. At [64].
27. District Court Act 1973, s 4.
28. See the "ejusdem generis" rule.
29. Wende at [64].
30. See Marshall at [24] and [31].
31. Exhibit R1, CB 2/68 at [2(c)].
32. Affidavit of Robert Newell, 19/8/19, CB 1/6 at [4].
33. See Affidavit of Robert Newell, 19/8/19, CB 1/6 at [5]-[6].
34. At [7].
35. Cf Affidavit of Robert Newell, 19/8/19, CB 1/7 at [8]-[9].
36. Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/111.
37. Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/111.
38. Ibid.
39. Ibid.
40. Exhibit R1 at "J", CB 2/76 at [11].
41. Exhibit R1 at "K", CB 2/81 at [9].
42. Ibid.
43. Sent on 1/7/19, Exhibit R1 at "K" at CB 2/81 at [9].
44. 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)].
45. Robert Newell's submissions, 2/3/20 at [15] and [22], GTAA at [10(h)].
46. GTAA at [10(e)].
47. Robert Newell's submissions, 2/3/20 at [16], GTAA at [10(i), (j)].
48. Robert Newell's submissions, 2/3/20 at [17]-[19].
49. See GTAA at [10d].
50. Cf Robert Newell, 19/8/19 at [6], CB 1/6.
51. Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/110-112 especially at 111.1-111.6.
52. Ibid at CB 1/111.5.
53. Ibid at CB 1/111.2.
54. Affidavit of Robert Newell, 19/8/19 at [7], CB 1/6.
55. Exhibit R1 at "X", CB 2/228 at [15].
56. Affidavit of Juliana Ng Liah Nah, 2/10/19, Annexure "A", CB 1/256.
57. GTAA at [11].
58. GTAA at [14].
59. GTAA at [14(b)-(d)].
60. Affidavit of Leonardo Muriniti, 24/9/19, Annexure "V", CB 1/112.
61. Report to the Court of Referee Alyson Wendy Ashe, 5/8/19, Exhibit R1 at "X" at CB 2/221, 2/229 at [23].
62. Exhibit R1 at "X" at CB 2/229 at [22].
63. Exhibit R1 at "M" at CB 2/102 and "AA" at CB 2/265.
64. Robert Newell affidavit, 10/10/19, Annexure "J", CB 1/200.
65. Affidavit of Robert Newell, 10/10/19, [22]-[24], CB 1/155.
66. Orders of 20/3/19 and 20/8/19.
67. 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].
68. See GTAA at [12].
69. See Exhibit R1 at "I" at CB 2/69 at [11].
70. See e.g. GTAA at [9].
71. See GTAA at [13].
72. CNY17 v Minister for Immigration and Border Protection [2019] HCA 50 at [56], [132].
73. CNY17 at [57].
74. CNY17 at [57].
75. Leonardo Muriniti affidavit, 24/9/19, Annexure X, CB 1/122.
76. Exhibit R1 at "X", CB 2/240.
77. 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].
78. Najjar v Haines (1991) 25 NSWLR 224.
79. 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