Dyktynski v BHP Titanium Minerals

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

13487 of 2001 Samuel Scott Dyktynski v BHP Titanium Minerals Pty Ltd

JUDGMENT 1 Master: The plaintiff brings these proceedings by way of appeal pursuant to s 208L of the Legal Practitioners Act 1987 (the Act). The grounds of appeal may be found in an Amended Summons. 2 Section 208L affords a narrow avenue of appeal. It is restricted to an error of law. The plaintiff bears the onus of demonstrating a basis for the disturbing of the decision that is under appeal. 3 The plaintiff brought proceedings in the Compensation Court. He recovered an award and an order for costs was made in his favour. There was a delay in payment of the costs. A dispute then arose concerning the payment of interest on the costs. Interest may be payable under s 110 of the Workplace Injury Management and Workers Compensation Act 1998 (the WIM Act). 4 An application to resolve the dispute was made by Notice of Motion in the Compensation Court. The application was unsuccessful. An appeal was then brought to the Court of Appeal. The appeal was successful. An order for costs was made in favour of the plaintiff. It was an order that related to both the costs of the Notice of Motion in the Compensation Court and the costs of the appeal. 5 An application was made for an assessment of those costs. The application was referred to a Costs Assessor (Mr Dwyer). A bill of costs was filed with the application. 6 The Costs Assessor received a Notice of Objection to the bill of costs. As to the costs and disbursements sought in respect of the Notice of Motion specific objection was made to two items only (the total of the two items was $16.80). As to the costs of appeal, a detailed submission was made inter alia concerning the application of the indemnity principle in the circumstances of this case. As part of that submission, specific reference was made to the terms of the retainer between the plaintiff and his solicitors. 7 Submissions were made in response to the objections. Accompanying those submissions was firstly a copy letter dated 10 June 1999 from the plaintiff's solicitors to the plaintiff (the letter) and secondly a copy of the conditional costs agreement made between them (the costs agreement). 8 The Costs Assessor made his determination. He determined that no costs were payable. He gave a statement of reasons. The reasons disclose that in substance he had concluded that what has been described as the indemnity principle had application in the circumstances of this case. 9 The plaintiff then sought a review by the panel. A review was conducted and it led to an affirming of the determination made by the Costs Assessor. 10 This appeal was argued on 1 November last. It was said that the numerous grounds of appeal could be reduced broadly to three areas. One area raised the question of the application of the indemnity principle. Another area concerned a submission of lack of procedural fairness. The other area was said to concern the use made by the Costs Assessor of the costs agreement. 11 There was reference to a number of decided cases and the observations made therein including what was said by me in Howard & Ors v Mechtler & Ors [2000] NSWSC 455 in paragraph 11. The paragraph reads as follows:- "It suffices to make general reference to some of the principles which emerge from the cases. Under an order for costs, the paying party is only obliged to pay such costs as the receiving party was primarily and potentially legally obliged to pay to his solicitor. There is an indemnity only in respect of the costs covered by the order. A receiving party cannot recover a sum in excess of the liability to his own solicitor. There can be co-existing obligations. The liability of the client is not excluded merely because there may be a third person to indemnify the client. It is necessary to prove that under no circumstances does the client have any liability to pay costs to his solicitors." 12 At an early stage during the submissions it became apparent that an error had been made by the Costs Assessor in dealing with the costs of the Notice of Motion. There had been but limited objection to the costs and it had not been submitted that the indemnity principle applied in relation to them. It may be that this was lost sight of or overlooked in the course of the substantial task that confronted the Costs Assessor. It was not disputed that the decision made affecting these costs would need to be set aside. 13 Counsel for the plaintiff made many submissions which were directed to demonstrating the lack of application of the indemnity principle. It suffices to briefly refer to them. There was a submission founded on s 116 of the WIM Act. It was said that there were other exceptions to the application of the principle. One of these was said to be where the plaintiff was a nominal plaintiff and reference was made to what was said in the New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50. It was also said that disbursements must be recoverable. These submissions looked to inter alia cases where a solicitor had acted for himself. In my view, none of these submissions assist the plaintiff in the circumstances of this case. I shall return to certain of the authorities in due course.

14 A notable feature of the submissions made on this question was the absence of reference to the particular circumstances of this case (including the costs agreement).

15 The claim for interest involved an amount in the order of $900. The dispute has been described as a question of important legal principle. It has been said to have been pursued both for the assistance of the plaintiff's solicitors and other legal practitioners. 16 The letter contains the following:- "We also confirm our advice that you will not be required to pay any of our legal costs no matter what the outcome of this appeal, and we further confirm our advice that if the appeal is unsuccessful and there is an order from the Court requiring you to pay any of the other side's legal costs we will attend to payment of those costs on your behalf so that you are not required to pay any amount. The reason we are standing in your shoes for any costs liability is that these appeal proceedings do not stand to benefit you in any way if successful, and are brought purely to have the Court of Appeal determine an important legal principle for the assistance of this firm and other legal practitioners. As this firm will benefit directly from a successful outcome in this appeal rather than any benefit flowing to yourself, we believe it would be unfair for you to carry any of the risk if the appeal were to be unsuccessful." 17 The view expressed in the letter as to the terms of the costs agreement is confirmed by the contents of the agreement itself (see clause 2). 18 This is clearly one of those cases in which, by reason of the costs agreement made between them, the plaintiff did not have any liability whatsoever to pay costs to his solicitors. The order made was for the payment of his costs. He did not incur any costs. Accordingly, the application had to be so assessed. 19 The decided cases appear to draw a distinction between a situation where a party has an agreement with his solicitor that he will not have to pay any costs and those situations where the party is indemnified against his liability to pay costs. 20 In McCallum v Ifield (1969) 2 NSWR 329 at 330, Taylor J said:- "It is established that if a party to an action has an agreement with his solicitor that he will not have to pay any costs then he cannot recover party and party costs against the adversary. ( Gundry v. Sainsbury , [1910] 1 K.B. 645). Equally it is clear that the fact that a party to civil proceedings is indemnified by insurance or other agreement against his liability to pay the costs does not prevent him recovering his party and party costs. (See New Pinnacle Group Silver Lead Mining v. Luhrig Coal & Ore Dressing Appliances Co . (1902), 2 S.R. (N.S.W.) 50; Adams v. London Improved Motor Coach Builders , [1921] 1 K.B. 495; [1920] All E.R. Rep. 340.)" 21 In Gundry, at 649, Cozens-Hardy MR followed what he regarded as justice, common sense and the law as laid down in Harold v Smith 5H&N 381. This was a decision which he had regarded as remaining undisturbed for fifty years and from which he was not prepared to depart. He observed that party/party costs are not a complete indemnity but they are only given in the character of an indemnity. He adopted the observation that such costs are not given as a bonus to the party who receives them which would be the case if there had been an agreement not to pay any costs. Gundry was a case in which an order for costs had been refused by reason of the agreement. 22 The submission as to denial of procedural fairness, at least in its initial formulation seemed to be founded on misconception. It was put on the basis that there had been a requirement by the Costs Assessor pursuant to s 207 of the Act to produce the costs agreement and that the plaintiff had not been given the opportunity to make submissions in relation to the application of the indemnity principle. This submission had no foundation in fact. There had been no such requirement and submissions had in fact been made in relation to the principle. It is my understanding that this argument was abandoned during oral submissions and a refinement of it was then put. There was said to be a lack of procedural fairness in the sense that there was no opportunity to deal with the matter of the interpretation of the costs agreement. In my view, this submission was also devoid of substance. The plaintiff had a reasonable opportunity to make whatever submissions it desired to put on the question of the indemnity principle and indeed it exercised that opportunity. 23 I now turn to the complaint as to the use made by the Costs Assessor of the costs agreement. This involved a number of submissions. One submission was that the Costs Assessor was prohibited from doing what he did by the provisions of s 208H of the Act. There was another submission as to his lack of power to do what he did. In my view all of the submissions made on this matter lack substance. 24 The task of the Costs Assessor is to be performed in the context of the applicable law. In my view, there are many cases in which the applicable law operates to make an assessment futile or leads to the disallowing of costs (see inter alia Baker & Anor v Kearney NSWSC 746 and Rickard Constructions v Doyle [2002] NSWSC 882). 25 Section 208H is in the following terms:- " 208H Effect of costs agreements in assessments of party/party costs

(1) A costs assessor may obtain a copy of, and may have regard to, a costs agreement.

(2) However, a costs assessor must not apply the terms of a costs agreement for the purposes of determining appropriate fair and reasonable costs when assessing costs payable as a result of an order by a court or tribunal." 26 In my view, the Costs Assessor did not apply the terms of the costs agreement for the purposes proscribed by subs (2). He looked at the costs agreement for the purposes of deciding whether or not the indemnity principle had application in this case. 27 The plaintiff is entitled to have the determination of the Costs Assessor set aside because an erroneous decision was made as to part of the application (that part which relates to costs of the Notice of Motion). Save for that part, I am not satisfied that the plaintiff has demonstrated an entitlement to relief. 28 The determination is set aside. The decision of the court on the question of the costs of the Notice of Motion in the Compensation Court is remitted back to the Costs Assessor for re-determination. Costs are reserved.

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