Employers Mutual Limited v Heise

Supreme Court of NSW|2022-10-13|Before: Adamson J

Solicitors: HWL Ebsworth Lawyers (Plaintiff) Cardillo Gray Partners (Defendant) File Number(s): 2021/273126 Decision under appeal Court or tribunal: Local Court Date of Decision: 30 August 2021 Before: Lacy LCM File Number(s): 2020/200346

Introduction

On 19 April 2022, I made orders and published reasons in this matter: Employers Mutual Limited v Heise [2022] NSWSC 465 (the principal judgment). The effect of the principal judgment was to set aside the conviction ordered in respect of the plaintiff (EML) in the Local Court in a private prosecution brought against it by the defendant (Ms Heise). Of present relevance, I ordered Ms Heise to pay EML's costs of the proceedings in this Court and granted liberty to EML to seek an order that Ms Heise pay its costs of the proceedings in the Local Court.

The matters in issue

The parties have filed extensive written submissions and affidavit evidence with a view to the costs orders being quantified. It is not necessary to recite them in detail.
It is sufficient to note the parties' respective positions in the following table. EML Ms Heise EML's costs of the appeal $52,146.38 (discounted by 25% from $69,528) $48,669.60 EML's costs in the Local Court $130,353 (discounted by 25% from $173,804) $73,077.86 Ms Heise's costs of motions Nil ($107,597.13) Net position Ms Heise is liable to pay EML $182,499.38 Ms Heise is liable to pay EML $14,150.33

Whether an order for costs ought be made in favour of Ms Heise for notices of motion in the Local Court

It is convenient first to address Ms Heise's submission that, because EML was unsuccessful in the notices of motion filed on 15 March 2019 and 31 July 2020, she is entitled to her costs of those notices of motion.
EML submitted that such costs were not recoverable as a matter of principle for three reasons: 1. There is no juridical basis to make an order for costs in respect of interlocutory proceedings in criminal proceedings in the Local Court in favour of a party who was unsuccessful; 2. The indemnity principle applies with the effect that, as Ms Heise has no obligation to pay her lawyers, EML has no obligation to pay her; and 3. The costs agreement between Ms Heise and her solicitors was unlawful.
It is convenient to address these matters in turn.

Alleged lack of juridical basis for costs order sought

No source of power in the Local Court Act 1970 (NSW), whether express or implied, has been identified which would justify the Local Court making an order for costs in favour of Ms Heise in respect of discrete aspects of the proceedings in which she alleges that she was successful. The Local Court would have had power, had it correctly dismissed the charge against EML, to order Ms Heise to pay EML's costs in an amount which the Magistrate considered to be "just and reasonable": s 213 of the Criminal Procedure Act 1986 (NSW) but there was otherwise no power to order costs. Nor is there any basis for an implication that this Court has power to order EML to pay Ms Heise's costs of the notices of motion.

Alleged breach of the indemnity principle

The indemnity principle provides that the costs to be paid by an unsuccessful litigant cannot exceed the amount that the receiving party (the successful litigant) is liable to pay his, her or its solicitors: Wentworth v Rogers (2006) 66 NSWLR 474; [2006] NSWCA 145 at [46]-[48] (Santow JA) and [102] (Basten JA). Thus, if Ms Heise has no obligation to pay her legal representatives, EML will have no obligation to pay her. The agreement between Ms Heise and her lawyers was conditional on the success of her private prosecution against EML. Thus, she has no liability to pay her lawyers and, thus, there would be no basis for EML to be ordered to pay Ms Heise any amount for her lawyers' fees.

Alleged illegality of the costs agreement

Further, and in any event, conditional costs agreements are prohibited in criminal proceedings: s 181(7)(a) of the Legal Profession Uniform Law 2014 (NSW).

Conclusion

For the reasons given above, I refuse Ms Heise's application for an order that EML pay any of her costs of the proceedings in the Local Court.

EML's costs of the appeal in this Court

EML has adduced evidence of its costs in this Court by tendering a bill of costs (which totals $69,528.50) and submitting that this amount ought be discounted by 25% by analogy with the principles involved in specifying costs in a gross sum pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW). This gives rise to a discounted sum of $52,146.38. I note from the table set out above that there is little dispute between the parties as to the appropriate sum.
In these circumstances, and in order to reflect the broad-brush nature of the exercise, I order that the amount of the costs which Ms Heise is liable to pay EML for the proceedings in this Court is $50,000, being an amount which I consider to be just and reasonable.

EML's costs in the Local Court

As set out in the table above, there is a significant difference between the parties as to the appropriate figure for the costs of the proceedings in the Local Court.
The substantial difference arises from the following contentions made on behalf of Ms Heise: 1. EML should only have its costs from 13 November 2020, being the date on which it entered a plea of not guilty; 2. Although EML was entitled to be represented by senior counsel (Mr Chen SC) in the Local Court, it was not entitled to have two counsel; and 3. Particular items in the bill of costs were unreasonable.
It is convenient to address these matters in turn.

Whether EML is entitled to its costs for the period before entering its plea of not guilty

The criminal proceedings in the Local Court were relatively protracted and complicated, as was the background to them. The following short summary is sufficient for present purposes (and is adapted from [3]-[16] of the principal judgment).
Ms Heise was a police officer in the NSW Police Force. As a result of a motor vehicle accident on 12 May 2009, she suffered psychological injuries. On 11 April 2017, she made a claim for compensation.
Ms Heise's claim remained undetermined. Accordingly, on about 24 July 2018, she filed an application to resolve a dispute in the Workers Compensation Commission (the Commission).
On 26 September 2018, Ms Heise filed a court attendance notice in the Local Court at Newcastle (the CAN). In the CAN, she identified herself as the prosecutor and described herself as a "Common Informer". The offence charged was that EML had failed, without reasonable excuse, to determine the claim within the time period specified in s 281 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) and was therefore guilty of an offence under s 283(1) of that Act.
On 20 November 2018, EML filed a summons in this Court challenging the claimant's standing to bring such proceedings as a private prosecutor. The amended summons was dismissed on 28 November 2018: Employers Mutual Limited v Heise [2018] NSWSC 1842 (McCallum J).
Ms Heise's dispute was determined by consent in the Commission and she was paid a lump sum on 27 December 2018.
By notice of motion filed in the Local Court on 15 March 2019, EML applied for a permanent stay of the prosecution, in part on the basis that Ms Heise had given EML no notice of her intention to file the CAN. The notice of motion was dismissed by Maiden LCM on 25 March 2020. I note that EML has not claimed any costs of this notice of motion.
By further notice of motion filed on 31 July 2019, EML moved to have the criminal proceedings dismissed on the basis of the argument which succeeded in this Court (that, as EML was neither an insurer nor a person who determined the claim, it was not capable of committing an offence against s 283(1) of the Workplace Injury Management and Workers Compensation Act). The notice of motion was heard on 13 October 2020 and stood over to 4 December 2020 for decision.
On 13 November 2020, EML entered a plea of not guilty to the charge.
On 2 December 2020, the notice of motion filed on 31 July 2019 was dismissed by Stone LCM who considered that EML's argument was the principal issue in the criminal proceedings and ought be determined at a final hearing.
The hearing of the charge took place on 28 April 2021. On 16 June 2021, the Court below delivered reasons for its finding that EML was guilty of the offence charged. The Court below stood the matter over to 30 August 2021 for sentence.
On 30 August 2021, the Court below ordered the conviction of EML for the offence charged. I quashed the conviction by order made in the principal judgment and ordered that the charge be dismissed on 25 May 2022 as part of the cost judgment.
The procedural steps taken in the Local Court and this Court with respect to the criminal proceedings were all taken with a view to having the proceedings stayed or dismissed. It would have been open to the Local Court to dismiss the proceedings summarily following EML's dismissal application since EML was not a person capable of committing the offence.
In the principal judgment, I found that the proceedings were, from the outset, fatally flawed. In these circumstances, I am not persuaded that there is any reason why EML ought not have its costs of these interlocutory steps included in the costs of the proceedings.

Whether EML was entitled to have junior counsel as well as senior counsel

Because Ms Heise objects to EML briefing junior counsel (but not senior counsel), I understand her to accept that the criminal proceedings warranted senior counsel. EML is a licensed insurer. A criminal conviction had the potential to affect its reputation in a material way, the significance of which could not be measured by the quantum of any fine imposed. Thus, I accept that it was entitled to brief senior counsel.
Once this is accepted, it is difficult to resist the prudence of briefing junior counsel to assist senior counsel. A significant benefit of two counsel is that the senior counsel is not pre-occupied with matters that can be delegated to junior counsel (and performed at a lower cost), but is available to apply his (in this case) experience and higher ability to assist the Court and advance the interests of the client: see the discussion in Lew Footwear Holdings Pty Ltd v Madden International Ltd (No 3) (2014) 50 VR 1; [2014] VSC 595 at [11]-[14] (Elliott J). Junior counsel also plays an important role at a hearing, not merely in passing documents and suggestions to senior counsel but also in being a careful listener and observer so that senior counsel has the benefit of a helpful guide throughout the hearing.
In the circumstances of the present case, I am satisfied that the importance of the matter to EML warranted its being represented by a senior and junior counsel.

Other challenges made to EML's bill of costs

Those acting on behalf of Ms Heise have taken exception to several items in the bill of costs prepared on behalf of EML. Having reviewed each of those matters, I am not persuaded that it is necessary to address them individually since EML accepts that the amount in the bill of costs (which totals $173,804) should be discounted by 25% to arrive at the figure of $130,353.
The figure of 25% is an orthodox figure to apply to a bill of costs to come to a figure appropriate for fixing costs in a gross sum under s 98(4) of the Civil Procedure Act. I accept that there is an analogy between the task I am to perform in the present case and fixing costs in a gross sum: see the summary in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21] (Giles JA) and Hamod v State of New South Wales [2011] NSWCA 375 at [813]-[820] (Beazley JA, Giles and Whealy JJA agreeing).
As the short narrative of the proceedings set out above demonstrates, the hearing required several days of Court appearances over a number of years. The documents tendered before me at the hearing of the summons were voluminous and would have required considerable analysis by EML's legal representatives. Although there was a complete, and relatively fundamental, answer to the charge (as I found in the principal judgment), EML was required to spend a substantial amount in costs to protect its interests in defending itself from a misconceived prosecution. I note that the Court below, following its (erroneous) finding that Ms Heise had proved the charge, ordered EML to pay Ms Heise's costs in the sum of $170,942.80 (she having claimed $177,721.29).
On balance, I consider that there should be a further reduction in the fees from 25% to 30%, which brings the discounted figure to $121,662.80, which I propose to round down to $120,000. I do so without making a judgment about whether the fees claimed are other than reasonable, but to take account of the broad-brush nature of this process, which tends to result in a rounding down of figures.

Orders

For the reasons given above, I make the following orders: 1. Determine that the amount of the costs to be paid by the defendant (the prosecutor in the Local Court) to the plaintiff (the defendant in the Local Court) in respect of the proceedings in the Local Court pursuant to order (2) made on 25 May 2022 is $120,000, such sum to be paid within 28 days. 2. Determine that the amount of the costs to be paid by the defendant (in this Court) to the plaintiff (in this Court) pursuant to order (5) made on 19 April 2022 is $50,000, such sum to be paid within 28 days. 3. Refuse the application made by the defendant (in this Court, the prosecutor in the Court below) for a costs order in her favour.

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: 13 October 2022

Local Court Act 1970(NSW)

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