The plaintiff appeals to the Court from the decision of a Costs Assessment Review Panel (Review Panel) as to a matter of law pursuant to section 384 Legal Profession Act 2004.
[2]
Background
The plaintiff commenced proceedings in the Supreme Court of New South Wales against the defendants, seeking injunctive relief on the basis that the defendants had engaged in unauthorised use of its intellectual property and confidential information.
On 8 July 2016, following a 12 day hearing, McDougall J gave judgment dismissing the proceedings. On 12 September 2016, the plaintiff was ordered to pay the defendants' costs on the ordinary basis up to 1 December 2015 and thereafter on an indemnity basis.
On 10 April 2017 the defendants filed an Application for Assessment of Ordered Costs, which included the Bill of Costs to be assessed.
On 2 May 2017 the Costs Assessor wrote to the parties making directions for the conduct of the assessment and requiring the parties to provide certain information. The defendants were asked to provide, inter alia, 'a copy of any fee agreement or fee disclosure with the Costs Applicant' and 'a copy of any fee agreement or fee disclosure with Counsel'.
On 22 May 2017 the defendants' solicitor provided to the Costs Assessor under cover of a letter of that date:
1. a Costs Disclosure Notice and Retainer Agreement dated 28 May 2015 addressed to Mr Keith Child the first defendant;
2. a Costs Disclosure Notice and Retainer Agreement dated 31 March 2016 addressed to each of the five defendants.
Europa International Pty Ltd v Child and Ors [2018] NSWDC 225 | Case summary | Zoe
The 22 May 2017 letter claimed privilege over the costs agreements.
On 30 May 2017 the plaintiff provided a Notice of Objection to the Application for Assessment to the Costs Assessor. The notice of objection was 54 pages in length and included submissions by way of objection to general and specific claims made in the Bill of Costs. Under the heading 'GST component of the claim', the plaintiff contended at [23]-28] of the notice of objection that the defendants could not make a claim for the GST component of the costs if one of the corporate defendants had paid the costs and claimed an input tax credit for that amount. The plaintiff contended that the defendants had wrongly claimed privilege over the costs agreements, citing Cook v Pasminco Ltd [2000] FCA 1819, and that it was incumbent on the Costs Assessor where there was an issue in relation to the indemnity principle to make available the document or the relevant order so that the plaintiff could make submissions, citing CSR Ltd v Eddy [2008] NSWCA 83. The plaintiff requested the Cost Assessor to determine which of the defendants paid the costs, whether the claim for GST was correctly included and to allow time for the plaintiff to make submissions on this issue.
On 19 June 2017 the defendants served a Response to the Notice of Objections. On the GST argument the defendants conceded that all of the costs were paid by the companies on behalf of the defendants and that it was appropriate for the Cost Assessor to apportion the claims for GST accordingly.
On 8 December 2017 the Costs Assessor issued Certificates of Determination and Reasons. Under the heading 'Indemnity Principle' the Costs Assessor stated:
15.1 I accept that there has been no breach of the indemnity principle and in this regard rely on the letter from [the defendants' solicitor] dated 22 May 2017 to the effect that:
We further advise that the Bill of Costs issued to our client is that Bill of Costs filed in Court and served on the [plaintiff] on 10 April 2017.
On 14 December 2017 the Manager, Cost Assessment, sent the Certificates to the parties.
On 12 January 2018 the plaintiff filed an Application for Review of Determination of a Costs Assessor. Ground 7 of the grounds of review provided:
The costs assessor has failed to adequately consider the question of whether there has been a breach of the indemnity principle. Paragraph 15.1 of the Reasons refers to a letter from the [defendants'] solicitor dated 22 May 2017 and cites an excerpt. The excerpt relied on falls short of establishing that the [defendants] have paid, or are under an obligation to pay all of the items and amounts particularised in the Bill of Costs subject of the Determination of Costs.
On 28 March 2018 the Review Panel issued Certificates of Determination and Reasons. In relation to Ground seven the review panel stated:
The Assessor dealt with this issue in paragraph 15 of his reasons.
He noted the letter from the [defendants'] solicitors confirming that the bill of costs in the subject application is the same bill of costs as was rendered to the client.
In the Review Panel's determination the Assessor was entitled to rely on this statement.
The Review Panel agrees with the reasons of the Assessor and accordingly this ground is not made out.
During the course of the proceedings in this appeal, the defendants did not seek to maintain the claim for privilege over the costs agreements and they were provided to the plaintiff's solicitor.
[3]
The Nature of the Appeal
Section 384 Legal Profession Act 2004 provides:
(1) A party to an application for costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the District Court, appeal to the Court against the decision.
(2) After deciding the question the subject to appeal, the District Court may, unless it affirms the costs assessor's decision:
(a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or
(b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application.
(3) On a redetermination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received that the original proceedings, may be given.
An appeal under section 384 is as to a matter of law only. An appeal under section 385 Legal Profession Act 2004 can refer to fresh evidence, but that appeal does not lie without leave of the Supreme Court, being the Court that made the costs order; see also McCausland v Surfing Hardware International Holdings Pty Ltd [2010] NSWDC 222 at [47]-[48].
[4]
The Grounds of Appeal
The Summons filed set out the following grounds of appeal:
1. There was a manifest error of law in the Determination in that it failed to apply, or it incorrectly applied the indemnity principle to the Bill of Costs the subject of the Determination of Costs.
2. There was an error of law in the Determination in its finding that the indemnity principle has not been breached, and such finding misapplied or misunderstood the law.
3. The Determination failed to take relevant considerations into account, in particular it failed to take into account the relevant consideration of whether the [defendants] paid, or were under an obligation to pay all of the items and amounts particularised in the Bill of Costs subject to the Determination of Costs.
4. There was insufficient evidence to support the Review Panel findings in relation to Ground 7 of the Determination.
Grounds 1-3 were repetitive in that they each alleged a misapplication of the indemnity principle, which would constitute an error of law. Ground 4 did not constitute an error of law. It was suggested in argument that Ground 4 was intended to imply that there was no evidence that could support the Review Panel's findings, but that is clearly not what it said.
[5]
The relevant law
The indemnity principle provides that costs are awarded by way of indemnification. A party who does not have a liability to their solicitors to pay costs cannot recover costs against an unsuccessful party to the litigation: Marsh v Baxter (No 2) [2016] WASCA 51 at [31].
The indemnity principle is applied flexibly taking into account the requirements of justice, bearing in mind that an unsuccessful party will usually be ordered to pay costs as a guard and protection against unjust litigation costs: London Scottish Benefit Society v Chorley (1884) 13 QBD 872, Wentworth v Rogers [2006] NSWCA 145 at [50] and [54] and Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 206 at [13].
The indemnity principle does not require that an invoice has been issued or that costs have been paid, but that there is a liability to pay them: eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284 at [15]. Liability to pay arises from the provision of services under a contract of retainer: CSR Ltd v Eddy at [50].
Courts generally accept the existence of a contract of retainer when a solicitor has performed work on behalf of a person with their knowledge and assent in circumstances consistent with the solicitor/client relationship: Shaw v Yarranova Pty Ltd [2011] VSCA 55 at [19], Hudgson v Endrust (Australia) Pty Ltd (1986) 11 FCR 152 at 154 and Bolton v Strange [2001] WASCA 34 at [6]-[7].
The presumption that the solicitor on the record represents the nominated party is a strong one: Halliday v Sacs Group Pty Ltd (1993) 67 ALJR 678 per Mason CJ.
[6]
Consideration
The plaintiff contended that there were 3 elements to the indemnity principle. First, if the costs are conditional, the necessary condition must be satisfied. Second, it had to be demonstrated that the defendants were liable to pay costs to their solicitor. Third, that those costs were not capped by agreement between the defendants and their solicitor.
The Costs Assessor relied on the defendants' solicitor's representation in the letter of 22 May 2017 that the Bill of Costs filed in Court had been issued to the defendants.
The plaintiff's primary argument was that the reasons in paragraph 15.1 of the Costs Assessor's reasons were insufficient to establish that the defendants were liable to pay each and every item set out in the Bill of Costs and thereby constituted a misapplication of the indemnity principle.
The notice of objection raised the indemnity principle as relevant only to the payment of GST; in other words was the plaintiff liable to pay GST if the corporate defendants had paid the costs and claimed an input tax credit (the GST argument)? The notice of objection did not put in issue that the defendants were not liable to their solicitor to pay costs at all, or to some capped amount. The plaintiff did not have access to the costs agreements because the defendants had claimed privilege over them. The plaintiff asked the Costs Assessor to deal with the indemnity principle only to the extent that it was relevant to the GST argument. In the reply to the objections, the defendants conceded the GST argument and thereafter it was not necessary for the Costs Assessor to decide the point at all, including to rule on the plaintiff's application to provide the costs agreements. The plaintiff did not take additional steps to obtain access to the costs agreements, before the appeal to this Court.
The plaintiff should be held to the arguments it made before the Costs Assessor: Coulton v Holcombe (1986) 162 CLR 1. The Costs Assessor's reasons on the indemnity principle were limited, because it was not in issue. The Costs Assessor was entitled to provide succinct reasons on that point, and he did so: Soulemezis v Dudley (Holdings) Pty Ltd (1987)10 NSWLR 247 at 281 per McHugh JA.
The Costs Assessor was entitled to accept the representation of the defendants' solicitor that he had rendered the Bill of Costs to the defendants, and to infer from that statement that the defendants were liable to pay that amount.
The Costs Assessor had other evidence available to him, including the costs agreements from which he could have drawn inferences to the same effect, but he was not required to do so because satisfaction of the indemnity principle was not in issue.
Further, the Costs Assessor was entitled to rely on the existence of an implied retainer between the defendants and their solicitor. The plaintiff did not call the retainer into question before the Costs Assessor or the Review Panel or seek to establish a limit to the retainer.
The plaintiff's secondary argument on the appeal was to the effect that the matter should be remitted to the Costs Assessor, so that other factual issues arising from the costs agreements could be assessed.
The underlying arguments are that the first costs agreement involves a lack of disclosure to all but one of the defendants and that the letter comprising the second costs agreement is a contemporaneous representation that the costs owing to the defendants' solicitor as at 31 March 2016 are considerably less than those set out in the Bill of Costs up to that period.
The underlying arguments were not before the Costs Assessor or the Review Panel because the plaintiff was unaware of the content of the costs agreements, which have only recently been made available to it. For the reasons given, I am not satisfied that there has been an error of law by the Costs Assessor or the Review Panel to justify a remitter to the Costs Assessor. I am also of the view that the plaintiff should be held to the way in which it presented its case before the Costs Assessor and the Review Panel, which did not involve those arguments, which involve new questions of fact: Coulton.
[7]
Orders
The orders I make are as follows:
1. The appeal is dismissed with costs.
[8]
Amendments
20 November 2019 - Catchwords added
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Decision last updated: 20 November 2019