Supreme Court of WA|2009-04-01|Before: Mr P, Heenan J, Parker J, Hasluck J

FORBES -v- FRIGGER [2009] WASC 77 (1 April 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : FORBES -v- FRIGGER [2009] WASC 77

Procedure - Costs - Review of taxation of bill of costs by judge - Whether taxing officer made an error in principle - Indemnity and special costs orders - Application of legislation concerning allowance of costs on taxation - Meaning of term 'other work' in Item 32 of Table of Supreme Court Scale of Costs - Whether error in principle by taxing officer in failing to give proper or any effect to order for indemnity costs - Certificate of taxation to be set aside and bill to be referred to another taxing officer for taxation in accordance with reasons for decision

Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006, cl 9, cl 9(2)

Rules of the Supreme Court 1971 (WA), O 66 r 1, O 66 r 53, O 66 r 55(1)

Clay & Clay v Karlson & Kurelic, unreported; SCt of WA (Heenan J); Library No 970424; 21 August 1997

Collins v Westralian Sands Ltd (1993) 9 WAR 56

EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59

Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122(S); (2003) 28 WAR 95

Mossensons (a firm) v Coastline Associates, unreported; SCt of WA (Parker J); Library No 970166; 8 April 1997

Naidoo v Williamson [2008] WASCA 179

SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26(S2)

Stobbart v Mocnaj [1999] WASC 252

1 The defendant, Angela Frigger, has applied for an order to review the taxation of her bill of costs pursuant to O 66 r 55(1) of the Rules of the Supreme Court 1971 (WA). The application is contained in a chamber summons for review of taxation dated 26 September 2008.

2 The application arises in this way. The plaintiff, Stewart Vivyan Forbes, is a legal practitioner who played a part in certain proceedings in the District Court to which the defendant was a party. It seems that as a consequence of that association the defendant made a complaint to the Legal Practitioners Complaints Committee which offended the plaintiff. The written complaint and certain verbal exchanges led to the plaintiff commencing defamation proceedings against the defendant by writ of summons dated 23 June 2006.

3 The defendant's denial of liability was followed by various interlocutory applications and other steps in the course of the defamation proceedings. However, in the end, the plaintiff applied for and obtained leave to discontinue the subject proceedings. I understand that the matter never reached the stage of being listed for trial, although, on the defendant's side various witnesses were proofed.

4 The order for leave to discontinue the proceedings was made by Master Newnes of the Supreme Court (as he then was) on 31 May 2007. The ancillary orders included the following:

The plaintiff pay the defendant's costs of the application dated 25 May 2007 for leave to discontinue.
The plaintiff pay the defendant's costs of the defendant's chamber summons dated 1 November 2006 for leave to apply for summary judgment and to strike out the amended statement of claim and for further and better particulars of the amended statement of claim.
The plaintiff pay the defendant's costs of the plaintiff's chamber summons dated 7 November 2006 to strike out the amended defence.
The plaintiff pay one half of the defendant's costs of the action and the application on an indemnity basis and the balance of the defendant's costs of the action and the application including reserved costs on a party to party basis, to be taxed.

5 For ease of reference I will henceforth refer to the sixth order made by Master Newnes as the 'order for indemnity costs', although it is important to keep in mind that pursuant to that order the plaintiff was required to pay only one-half of the defendant's costs of the action and the application on an indemnity basis.

6 It appears from the transcript of the relevant hearing that the master was persuaded to make an order for indemnity costs for one-half of the costs only on the grounds that the plaintiff's defamation claim concerning the defendant's complaint to the Legal Practitioners Complaints Committee, being a publication protected by privilege, had no real prospects of success, with the result that the conduct of the plaintiff in advancing such a claim could be characterised as contumacious. The plaintiff's claim concerning the verbal statements allegedly made by the defendant was thought to be not of that kind. The master recognised that this apportionment, whereby the defendant was entitled to recover only one-half of her costs on an indemnity basis, might give rise to difficulties upon taxation of the costs, but he was of the view that these were not insuperable.

7 In due course the defendant, by her solicitors, prepared and delivered a bill of costs for taxation relating to the matter. It will now be useful to describe, in summary form, the provisions concerning costs and the procedure governing taxation of costs.

8 By s 37 of the Supreme Court Act 1935 (WA) the court has full discretionary power to determine by whom the costs of any proceedings are to be paid, subject to the provisions of the Act and rules of court. The general rules as to costs are set out in div 1 of O 66 of the Rules of the Supreme Court 1971. I will return to these rules later. The rules concerning taxation of costs are set out in div 2, commencing with O 66 r 32. This provides that where bills of costs are to be taxed, the bill shall be taxed, allowed and certified by the taxing officer.

9 By O 66 r 42 a bill of costs for taxation is to be prepared so as to show clearly the particulars of the items being claimed with a reference to the item in the scale to which it relates. The powers of the taxing officer are described in O 66 r 44.

10 Review of taxation is dealt with in div 3. By O 66 r 53 a party who contends that the taxing officer has 'made an error in principle in allowing or disallowing any item' may deliver an objection 'specifying in the objection by a list, in a short and concise form, the items or parts of items objected to, and the grounds and reasons for the objections'. The objector may then apply to the taxing office to review the taxation.

11 By O 66 r 54, the taxing officer shall reconsider and review his taxation and, if so required, shall state the ground and reason of his decision on the objection. The taxation officer shall not, after a certificate of taxation is signed, review his taxation or amend his certification, except to correct a clerical or manifest error.

12 By O 66 r 55, if a party is dissatisfied with the certificate of the taxing officer he may, within 14 days from the date of the certificate, apply to a judge in chambers for an order to review the taxation as to that item. By O 66 r 55(2) it is said:

The judge, if of opinion that the taxing officer has made an error in principle, may thereupon make such order to rectify the error as the judge thinks just.

13 I note in passing that an application to a judge for review shall be heard and determined by the judge upon the evidence which has been brought in before the taxing officer, and further evidence shall not be received unless the judge otherwise directs.

14 The present application comes before me as a judge of the Supreme Court pursuant to O 66 r 55. It follows that I am required to form an opinion as to whether the taxing officer in the present case has made 'an error in principle'.

15 It seems that when the defendant's bill of costs was brought before the taxing officer - in this case Registrar Powell of the Supreme Court - the registrar, having regard to the order for indemnity costs made by Master Newnes ordered that the subject bill be cast in a way which would permit a distinction to be drawn between claims recoverable as party and party costs pursuant to items 1 - 31 on the Supreme Court Costs Scale and additional costs that arguably could only be recovered pursuant to the order for indemnity costs. The additional costs were to be treated as claims under item 32 of the Costs Scale which refers to time reasonably spent by a practitioner on work requiring the skill of the practitioner but not covered by any other item. I will say more about the Costs Scale and Item 32 in due course.

16 After various exchanges and attendances the defendant eventually submitted a document dated 1 August 2008 described as the 'defendant's further amended bill of costs pursuant to the order of Registrar Powell made 13 June 2008'. This listed various items of work which were numbered sequentially and related to numbered items on the Costs Scale. The 15 items on the bill included certain significant items such as attending defendant's summons to strike out and summary judgment - $8,000 (number 5/scale item 10a) and getting up case for trial - $17,000 (number 11/scale item 16).

17 The items on the bill included also item 13 which ostensibly related to item 32 on the scale. However, it is immediately apparent from the nature of the work described and the size of the figures involved that if the defendant had in mind to claim indemnity costs pursuant to the master's order then the claim was not being advanced principally via item 13 on the bill (and thus via Item 32 on the scale). The claim under item 13 on the bill was presented in this way:

13.1 cost difference between counsel's fee charge (at $320/hr) and reduced by 50% allowance rate (at $286/hr);

13.2 letter from defendant's solicitors to defendant dd 13.12.07 re separate representation on taxation

18 In total the various items claimed on the subject bill amounted to $46,862.50 in value. This, with total disbursements of $1,435.91, gave rise to an overall claim on the bill of costs of $48,298.41.

19 I pause here to note in passing that as a consequence of the taxation process the total on the bill was taxed down to an apparently final figure of $26,686.81 (including disallowance of the claim for $726 under item 13.2 (per scale item 32) mentioned earlier) This was later reduced to $25,451.81 as a consequence of the defendant's application to the taxation officer for review pursuant to the provisions mentioned earlier.

20 The registrar's review was completed on 12 September 2008 as evidenced by the registrar's notations on the certificate showing that the final or certified figure after review was $25,451.81.

21 It follows from my summary of the review provisions that the taxing officer was required to give reasons for his decision; that is, the decision arrived at after undertaking a review in response to the defendant's objection that there had been an error in principle.

22 The registrar's reasons are set out in a ten page document signed by Registrar Powell showing that the objections to the taxation were heard on 12 September 2008, with the formal reasons for decision being delivered on 26 February 2009.

23 In the course of his reasons the registrar referred to the operative rules concerning taxation of costs and to various decided cases bearing upon circumstances in which an order for indemnity costs has been made. I will return to matters of this kind later. However, for the sake of an orderly narrative, it will be useful to begin by looking at the nature of the objection that had been raised by the defendant which was said to identify an error in principle made by the registrar.

24 The key document in that regard is the 'defendant's notice of objections to taxation of costs made 12 August 2008' dated 18 August 2008. In that document the defendant, by her solicitors, describes the history of the matter including reference to the order for indemnity costs. It was then said that in preparing a bill for taxation the defendant included all of the costs being claimed in each scale item. It was said that none of the actual costs incurred by the defendant (apart from two items specifically referred to) were costs that fell within scale item 32.

25 In other words, the defendant's stance was that the defendant included in each item on the bill (being work of the kind embraced by the designated scale item) all of the costs incurred by her on a solicitor and own client basis. The assumption was that in taxing the item the taxing officer would at that stage take account of the order for indemnity costs and arrive at an appropriate figure, notwithstanding that the figure might exceed the amount properly allowable for party and party costs. The amount representing the difference between the figure properly allowable upon a taxation of party and party costs and the figure actually allowed could be regarded as additional costs justified by the presence of an order for indemnity costs, although, in this case, having regard to the unusual nature of the order the amount representing the additional costs would then have to be reduced by 50%.

26 It was said on behalf of the defendant by way of objection that the learned registrar, in taxing the subject bill on 12 August 2008, had proceeded on the basis that the amounts claimed by the defendant within each of the scale items 1 to 31 would be taxed on a party/party basis without reference to an indemnity costs scale. The registrar held that in so far as costs were incurred by the defendant in excess of the reasonable party/party costs, then those costs should appropriately be claimed and taxed under scale item 32.

27 The effect of this was said to be (in par 8 of the defendant's notice of objection) that it was for the defendant to elect in respect of each scale item 1 to 31 whether the costs being claimed exceeded the reasonable party/party costs payable by the plaintiff and where those claims did exceed the reasonable party/party scale, to claim those costs under item 32 as being other work reasonably incurred that was not covered by any other item.

28 It was said further (at par 11) that in taxing all the scale items on a party/party basis and allowing none of the scale items on an indemnity basis, the registrar had accordingly failed to give any effect to the orders of Master Newnes directing that a portion, or where no apportionment was possible, 50%, of the costs were to be allowed on an indemnity basis.

29 It was said further (at par 12) that each of the scale items 1, 2, 4, 5, 6, 7, 8, 9, 11 and 15 ought to be reassessed on the basis contended for by the defendant and at least 50% of the difference between the party/party sum allowed, and the amount claimed therein, be allowed on the basis that Master Newnes directed that such sum be paid. The defendant contended, in effect, that all of those items were taxed on a party/party basis with no allowance for a proportion of indemnity costs to be awarded.

30 I note in passing that the defendant's stance is reflected also in a further document dated 11 September 2008 described as 'defendant's supplementary submissions responding to plaintiff's submissions filed 5 September 2008'.

31 This was the nature of the objection which the registrar was required to and did address in providing his reasons for decision on 12 September 2008.

32 In his reasons for decision the registrar commenced by saying this:

If indemnity costs in this State contain more than party party costs, that indicates that indemnity costs would be party and party costs plus additional amounts. I therefore interpret the costs order would be that the plaintiff is entitled to the whole of the costs of the action and application on a party party basis plus 50 per cent of those additional costs included in any indemnity for the action and the application.

For these reasons I ordered that the bill be cast so that claims were made under items in the Supreme Court costs scale so that the party and party costs could be determined and for the additional costs, they would be claims under item 32 of the costs scale which refers to time reasonably spent by a practitioner on work requiring the skill of the practitioner but not covered by any other item. In the determination for the 2006 Supreme Court costs scale at paragraph 9, subparagraph (2) provides:

Allowances made under item 32 of the table to this clause are only to be awarded as between practitioner and client or if costs are awarded on an indemnity basis and not between party party unless the Court otherwise orders.

The scale therefore clearly provides that indemnity costs can be claimed under item 32 where an order awards it.

However item 32(a) of the scale states that claims under this item can only be made where the work is not covered by any item in the scale. The claiming party must demonstrate that the work is not claimable under any other item.

33 The learned registrar then proceeded to a review of various decided cases bearing upon the nature of an order for indemnity costs and the issues before him. I will look at some of the cases later.

34 In the end, the registrar concluded that he had not made any error in principle and dismissed the defendant's objection to the taxation (subject to some comparatively minor correction of the figures that had the effect of reducing the overall figure in the manner mentioned earlier).

35 Having regard to the relevant rules and decided cases Registrar Powell summarised his view of the matter as follows (at 9 of the reasons for decision):

There is no distinction in Western Australia between party and party costs and solicitor and client costs payable by a third party and those reasonable and proper costs are set by scale and based on reasonable rates as determined by the Legal Costs Committee.
Any other costs that flow from an indemnity order must be based on item 32 scale and cannot be claimable under any other item of the scale. Item 32 was introduced into the Supreme Court Cost Scale by the 2004 Determination from 1 July 2004 subsequent to all cases I have referred to above.
There is no provision allowing more for costs under the items in the Scale (other than item 32) because there is an indemnity costs order.
The taxation therefore proceeds as in a party and party taxation where the reasonable and proper costs are allowed with the rider that I have only deducted costs where I considered those amounts to be an unreasonable amount and unreasonably incurred.
In the EMI case at page 71 paragraph 6 and following in relation to the burden of proof Sir Robert Megarry VC expressed the view that where there is a doubt as to whether costs are necessary and proper the receiving party received the benefit of that doubt. That of course arises due to the difference between party and party costs and solicitor and client costs as to quantum. In this jurisdiction statute and the costs scale has removed distinction and doubt. Any claim of whatever amount in a bill cannot be allowed simply because it is made. It is allowed 'unless it is driven out by the words of exclusion, namely "except in so far as they are of an unreasonable amount or have been unreasonably incurred".' (EMI case page 72 paragraph A).

36 It is against this background that the matter comes before me pursuant to a chamber summons for review of taxation by a judge dated 26 September 2008, being the application for review mentioned at the outset.

37 It follows from my review of the relevant rules, and especially O 6 r 55(1) that it is necessary, in order for relief to be afforded to the applicant, that the judge be of the opinion that the taxing officer has made 'an error in principle'. Thus, in Mossensons (a firm) v Coastline Associates, unreported; SCt of WA (Parker J); Library No 970166; 8 April 1997 Ipp J made these observations:

The point is that there must be an error in principle before a judge will carry out a review under O 66 r 55. Although it is possible for an error in principle to be made in regard to the quantum allowed in respect of a particular item, that is generally regarded as unusual. In my opinion, an error in principle on this basis could only be established if it is shown that no taxing officer, acting reasonably, could ever have taxed the particular item in the amount in question.

38 The reason for such a view is, of course that a judge will not usually be as familiar with the taxing process as a taxing officer, and therefore not nearly as competent to say what is the proper amount to be allowed. Hence, in only a very exceptional case will a judge review a taxing officer's decision as to quantum. See Clay & Clay v Karlson & Kurelic, unreported; SCt of WA (Heenan J); Library No 970424; 21 August 1997.

39 Having set out the background to the matter, let me now turn to certain statutory provisions and legal principles bearing upon the issues raised by the application.

40 It is necessary to begin by distinguishing between statutory provisions and rules bearing upon the award of costs and provisions fixing scales or rates of remuneration.

41 The Supreme Court Act 1935 (WA) allows for the making of rules of court governing civil litigation. As I indicated in earlier discussion, by s 37 of the Act the court has full discretionary power to determine by whom the costs of any proceedings are to be paid, subject to the provisions of the Act and rules of court.

42 By O 66 r 1 the costs of and incidental to all proceedings shall be in the discretion of the court but the court will generally order that the successful party to any action or matter recover his costs. By O 66 r 11 solicitors are entitled to charge and be allowed the fees set forth in any relevant scale in respect to the matters referred to in that scale and higher fees shall not be allowed in any case, except such as by this order otherwise provided for. Any relevant scale means any legal costs determination made pursuant to the Legal Practice Act 2003 (WA).

43 By O 66 r 11(3) subject to provisions permitting a solicitor to make a written agreement as to costs with his client, the fees allowed under any relevant scale shall apply both as between party and party, and solicitor and client.

44 I pause to note that by s 598 of the Legal Profession Act 2008 (WA), which took effect on 1 March 2009, the Legal Practice Act 2003 was repealed. However, for present purposes, it is sufficient to note that by the transitional provisions the Legal Practice Act will continue to apply to certain matters.

45 More particularly, s 616 of the new Act provides that pt 10 of the 2003 Act applies to a matter if the client first instructs the law practice on or after the commencement day (as in the present case). By s 617 of the new Act a legal cost determination made under the 2003 Act that was in force immediately before the commencement day continues in force on and after that day as if it were a legal cost determination made under the new Act.

46 Part 13 of the Legal Practice Act deals with costs and determination of remuneration. By s 210(2) the Legal Costs Committee may make legal costs determinations regulating remuneration in respect to contentious business before the superior court. By s 215 the taxation of bills of costs as between legal practitioner and client or party and party and any other aspect of the remuneration of legal practitioners the subject of a determination is regulated by legal costs determination in force under s 210.

47 By s 215(2) if a court is of the opinion that the amount of costs allowable in respect to the matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter the court may make various orders including order the payment of costs above those fixed by the determination or remove limits on costs fixed in the determination.

48 Prior to 1987 the power to make special orders as to removal of limits in cases of unusual complexity or importance was derived from O 66 r 12(1) of the Supreme Court Rules. However, it was determined that r 12(1) was invalid to the extent that s 215(2) of the Legal Practice Act provided for removal of limits in cases of complexity with the result that the rule in question is no longer operative. To obtain a special costs order pursuant to s 215 of the Legal Practice Act it must be shown that the amount of costs allowable is inadequate because of the unusual difficulty or the complexity or the importance of the matter: SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26(S2) at [98].

49 In 1996 the Legal Costs Committee made a determination introducing an entirely new scale applicable to costs in respect of contentious business. Before that date the remuneration allowable to the practitioner was based on the value of the subject matter but thereafter scales of costs reflected the fact that costs are in the main calculated by reference to the time reasonably spent in the provision of the services and by applying to that time a reasonable hourly rate, that rate varying according to the seniority and experience of the practitioner and the complexity of the work.

50 There have been various determinations since that time but for present purposes the operative determination is that which took effect on 1 July 2006, being the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006 (WA).

51 I note in passing that by cl 9(1) of the 2006 determination (subject to a written agreement as to costs) the costs recoverable by one party from another party or payable by a party to that party's own practitioner shall not exceed the amounts set out in the table to the clause (except as otherwise provided in Item 32 of the table).

52 By cl 9(2) of the 2006 determination allowances made under item 32 of the table are only to be awarded as between practitioner and client, or if costs are awarded on an indemnity basis and not between party and party unless the court otherwise orders.

53 Items 1 to 31 of the subject determination cover various steps taken in the course of litigation such as preparing and filing pleadings, providing discovery and so forth, getting up case for trial and counsel fees at trial.

54 Item 32 covers 'other work' being (a) time reasonably spent by a practitioner on work requiring the skill of a practitioner but not covered by any other item; or (b) time reasonably spent by a practitioner or by a clerk on work not covered by any other item or by paragraph (a).

55 I quickly remind myself, as noted above and in the registrar's reason for decision, that by cl 9(2) of the 2006 determination allowances made under item 32 are only to be awarded as between practitioner and client or 'if costs are awarded on an indemnity basis and not between party and party unless the court otherwise orders'.

56 It will be apparent from discussion to this point that there is a tension between those provisions which appear to allow to the court a broad discretionary power to award costs including a power to override costs scales in special or complex cases and certain other provisions which suggest that the costs recoverable are prescribed essentially by the operative scale and in the absence of any explicit order purporting to set aside the requirements of the scale any special benefit by way of indemnity costs is to be governed by the language used in the relevant costs determination and related scale.

57 It is therefore necessary to have a clear sense of the rationale underlying the making of an order for indemnity costs or any other order which arguably alters the normal operation of a costs scale. This will be of assistance in construing the present provisions.

58 In EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59 Sir Robert Megarry VC noted at [64] that the rules of court before him contained no express mention of costs on an indemnity basis but for many years the courts had been making such orders, particularly against contemnors, and the taxing masters have been having to do their best under such orders.

In the result, therefore, I reject Mr Cook's clear and forceful contentions on this point, and hold that the court has power in contentious proceedings to order the unsuccessful party to pay the successful party's costs on bases other than those contained in rule 28; and these include orders for costs on the solicitor and own client basis, on the solicitor and client basis, or on an indemnity basis. I do this, first, on the footing of the Court of Appeal decisions that I have mentioned. Second, the circumstances of litigation are so various that it is a matter of high importance that the judge should have a wide discretion as to the basis of costs, and not be subjected to the Procrustean bed of rule 28. Even in party and party taxations or in common fund taxations it is important for the judge to be able to order that particular items which otherwise would be included should be excluded, and vice versa, so that the taxing master will not be confined to a rigid application of the formulae set out in the rule. (70)

60 He then turned to the meaning of an order for costs on the basis of an indemnity. He excluded one possible meaning that the successful party was to have every penny of his costs reimbursed, however absurd, extravagant or unreasonable they were, and proceeded to consider an alternative meaning in these terms:

Subject to any provision in the order, I do not see why the basic rule for solicitor and own client costs which is set out in rule 29 (1) should not be applied, thereby giving to the successful party the indemnity that the court is seeking to give him. To say that on a taxation 'all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred' seems to me to be giving the litigant a complete indemnity, shorn only of anything that is seen to be unreasonable. The litigant does not have to establish that the costs were necessary or proper, or that the costs were of a reasonable amount and reasonably incurred. Provided they are costs of and incidental to the proceedings, he is entitled to recover them, subject only to the qualification that they are liable to be reduced in respect of anything that the taxing master considers to fall within the headings 'unreasonable amount' or 'unreasonably incurred'. In a word, the difference is between including only the reasonable and including everything except the unreasonable. In any taxation there must be many items or amounts that are plainly allowable, and many others which are plainly not allowable. In between, there must also be many items or amounts which do not fall clearly within either extreme. On a party and party taxation, or on a taxation on the common fund basis, many such items may fail to be allowed, on a taxation on a indemnity basis, they will all be included. (71)

61 In looking at the position in this state it is important to take account of the ruling in Collins v Westralian Sands Ltd (1993) 9 WAR 56 that there was no difference between fees to be allowed as between party and party and fees as between solicitor and client.

62 In Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122(S); (2003) 28 WAR 95 Pullin J provided an overview of the rules concerning indemnity costs. He observed that the usual costs order is one for party and party costs. An order for indemnity costs will only be made if there is some special or unusual feature in the case such as the presence of some element of improper, or at least unreasonable, conduct on the part of the parties or their legal advisers in relation to the case.

63 His Honour said further (at [11]) that even if there has been such conduct, an indemnity costs order will not be made if the costs would be covered by an order for party and party costs or by a special costs order. He said that a special costs order might be sought in relation to three aspects of the scale being, first, the items might not cover an area of work involved in conducting the litigation, second, the special costs order might be made in relation to the hourly rates provided for an item in the scale, third, the successful party might contend that the time allowed for performance of the work is inadequate.

64 His Honour observed at [24] that if a properly formulated special costs order is made, there should be little need for an indemnity costs order to try and recover costs incurred above the scale. He then said at [25], that 'if the conditions warrant an indemnity costs order, it is likely that the judge making the order will be more inclined to allow an increase in the hourly rates or an increase in the limits'. He said that an order detailing those increases should be made even where indemnity costs orders are made. He said further that a solicitor should not resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct was genuinely to be impugned by the successful party.

65 It is against this background that I come to the decided cases reviewed by Registrar Powell in the course of his reasons for decision dated 12 September 2008 in the present matter.

66 The registrar referred to various cases indicating that in the absence of a costs agreement there is a limitation on the costs that a solicitor can charge his clients. That limit is determined by the Supreme Court Scale of Costs. Any fees over and above that scale are not proper or reasonable.

67 Before proceeding to his summary of the decided cases mentioned earlier, Registrar Powell referred to these observations in Stobbart v Mocnaj [1999] WASC 252 made by Parker J:

I should not be taken, by these observations to hold that it is correct that when costs are to be taxed on an indemnity basis the bill should not be drawn to reflect the applicable scale. It may be, in a particular case, as it was here, that a taxing officer is able to make an adequate appreciation of the total that would be allowed on a taxation pursuant to the applicable scale so as to determine whether the costs sought exceeded the legal liability of the paying party pursuant to the indemnity order. But that may not always, or even often, be the case. If the bill is redrawn to reflect the applicable scale the process of taxation is facilitated, and the party in whose favour the costs are payable can be more confident that the taxation will fully reflect that party's entitlement pursuant to the indemnity order. If the bill is not drawn to reflect the applicable scale a taxing officer may well need to require that the bill be redrawn or else be forced to disallow some items in part or whole. [18]

68 Let me now return to the circumstances of the present case.

69 I can accept, as the registrar asserted in the first proposition of his summary, that there is no distinction in Western Australia between party and party costs and solicitor and client costs payable by a third party and those reasonable and proper costs are set by scale and based on reasonable rates as determined by the Legal Costs Committee. I accept also, having regard to the observations of Parker J mentioned a moment ago, that where there is an order for indemnity costs it will facilitate the taxation if the items on the bill are related to items on the scale in the usual way.

70 However, I have some difficulty with the registrar's second and third propositions in which it is said that any other costs that flow from an indemnity order must be based on Item 32 and cannot be claimable under any other item of the scale (the second proposition) and that there is no provision allowing more for costs under the items in the scale (other than Item 32) because there is an indemnity costs order.

71 This reasoning proceeds from the premise that if the amount contended for in the bill purports to exceed the amount allowed for by the scale then the excess must be characterised as unreasonable, having regard to the role of the Legal Costs Committee in making a determination that the scale items allow for reasonable remuneration. However, to my mind, reasoning of this kind contains a flaw.

72 It follows from the reasoning of Pullin J in Flotilla (and other similar cases) that an award of indemnity costs reflects a recognition that the subject case is out of the ordinary and has special or contumacious features in it which are sufficient to justify an award of extra remuneration. It appears from the reasoning of Pullin J that this can be done by adjusting the hourly rates allowed by the scale item or adjusting the estimate of time normally attributed to the scale items. It therefore seems to me that where an order for indemnity costs has been made, and the bill is presented in the conventional form favoured by Parker J, containing items that can be linked to scale items, it is open to the taxing officer to conclude, having regard to the presence of an order for indemnity costs, that the figure contended for by the claimant may be warranted, even if it exceeds the scale rate as to hours or value, without necessarily being regarded as unreasonable.

73 It is apparent that Registrar Powell held a strong view to the contrary, and was of the opinion that no such adjustments could be made. On his view of the matter, any claim for a special allowance pursuant to the order for indemnity costs had to be justified by reference to the criteria in Item 32 on the scale; that is, the claim was not appropriately covered by any of the specific scale items.

74 It is clear, because it follows from the registrar's view of the matter, that in taxing the bill the registrar fixed what was thought to be an appropriate figure in respect of each item by having regard simply to the normal considerations applicable to such an item and did not bring into play any weighting in favour of the defendant as claimant referable to the order for indemnity costs.

75 In my view, the registrar erred in dealing with the matter in that way. Having regard to the language of O 66 r 55(2), I consider that this was an error in principle. In other words, it was open to the defendant as a matter of principle to endeavour to persuade the registrar that the figure contended for in respect of a particular item (perhaps a large item such as getting up case for trial) was justified in circumstances where an order for indemnity costs had been made, although, having regard to the amount of work performed, it might not be justifiable in the usual case.

76 Let me illustrate the position in this way. In a comparatively simple defamation case in which the words complained of were mild and easily disproved, then a taxing officer might not be inclined to allow a large figure for getting up case, especially where it was apparent that in the end the outcome of the trial would turn essentially upon the construction of the words in question.

77 However, in another case, where the allegation complained of was that of fraud or sexual misconduct, and the conduct of the litigation was accompanied by contumacious and malevolent conduct sufficient to warrant the making of an order for indemnity costs in due course, it might be thought that a far larger amount for getting up was justified because of the seriousness of the matter and the recognition of that fact implicit in the making of the order for indemnity costs; that is, the defendant could not afford to leave any stone unturned.

78 To my mind, the observations made by Parker J in Stobbart are consistent with this view. Moreover, the rationale underlying an award of indemnity costs is that a party is to be indemnified against costs actually incurred, which may prove to be more expensive than in the ordinary case; that is, they are thought to be reasonable in the special circumstances of the case in hand because of the contumacious conduct that has imposed an additional or extraordinary strain upon the party entitled to the benefit of such a costs order.

79 It follows from earlier discussion that upon a review of this kind it is not part of the function of the reviewing judge to adjust the figures or to endeavour to arrive at a figure which is thought to reflect a just result. The question for the court is whether an error in principle has been made. If such an error has been made it is open to the court to provide relief in whatever manner is thought to be just.

81 I noted in earlier discussion that at the commencement of his reasons for decision the registrar observed that any amount exceeding party and party costs could be regarded as additional costs possibly recoverable pursuant to the order for indemnity costs. He said that the scale 'clearly provides that indemnity costs can be claimed under item 32 where an order awards it'.

82 It is true that item 32 refers expressly to indemnity costs with the result that the registrar was correct in noting that indemnity costs 'can be' claimed under item 32. However, that is not quite the same as saying that indemnity costs must be claimed under that item, or putting it another way, that a claim for indemnity costs can only be advanced pursuant to item 32.

83 There are a number of matters which weigh against the notion that a claim for indemnity costs must be presented in a bill of costs as a claim pursuant to item 32 on the Costs Scale.

84 First, there is nothing in the language of cl 9(2) of the determination or of item 32 itself which declares expressly that such a claim must and can only be advanced pursuant to item 32.

85 Second, the scale in its structure appears to create and define various categories of work (such as work associated with various forms of pleadings or discovery or inspection). Item 32 is directed to 'other work'; that is, the subject matter or defining characteristic of this category, as with the other categories, is a form of work rather than the amount of time devoted to a particular task. This suggests that when item 32 goes on to speak of 'time reasonably spent by a practitioner requiring the skill of a practitioner ... but not covered by any other item' it is speaking of some task or form of work not previously described or allowed for by other categories of work on the scale.

86 In other words, to my mind, item 32 does not purport to be dealing with additional time devoted to a category of work covered by an earlier item (or, putting it another way, hours over and above the hours specified in the earlier item). It is dealing with tasks or forms of work not described in or covered by the preceding categories or items of work on the Costs Scale.

87 If, as I have just concluded, item 32 is dealing with legal tasks or forms of work not specified elsewhere in earlier items on the list, the corollary is that, if some task or form of work (such as preparation of a statement of defence) is covered by an earlier item on the scale, then the claim for costs must be advanced pursuant to or by reference to that earlier item. The claim cannot be advanced pursuant to item 32 because that is confined to time reasonably spent on work 'not covered by any item'.

88 When the two points I have just made are considered in conjunction, it follows that the express reference to indemnity costs in cl 9(2) of the determination is not to be construed as a precept applying in general terms to the operation of the scale as a whole but has a more limited function. It is directed specifically to claims in respect of unusual tasks or forms of work which are not mentioned or 'covered' by earlier items on the scale and are therefore to be advanced pursuant to item 32.

89 This brings me to my third point. The discretion to order costs under s 37 of the Supreme Court Act and O 66 r 1 is very wide: Naidoo v Williamson [2008] WASCA 179 at [39] to [42]

90 It follows from the reasoning of Sir Robert Megarry in the EMI case and from other cases that there has been a well-established practice of making special orders or orders for indemnity costs which will have the effect of altering or adjusting limitations upon recovery of costs reflected in the costs scale. The presence of a discretionary power of that kind is reflected expressly in s 215(2) of the Legal Practice Act and by necessary implication in s 215(3) of that Act (which provides, in effect, that nothing in a costs determination is to be construed as limiting the power of a court to determine in any particular case the amount of costs allowed). Moreover, cl 9(2) in its terms presumes that there is a continuing power to make an order for costs on an indemnity basis.

91 It is, of course, open to the legislature or to subordinate rule making authorities to remove or reduce the effect of that practice but if it is to be done, it must be done by clear provisions.

92 It follows from the observations I have just made that, in my view, cl 9(2) cannot be regarded as a general precept applying to the costs scale as a whole or modifying the practice described by Sir Robert Megarry. In other words, having regard to the three points I have just made, cl 9(2) not only recognises the power to make an order for indemnity costs but also facilitates the exercise of that power. It cannot be construed as a clear provision dispensing with or significantly qualifying the power to make an order for indemnity costs.

93 It must then follow, for all these reasons, that a claim for indemnity costs can properly be advanced by relating the claim for remuneration pursuant to an indemnity costs order to specific categories or items of work on the operative scale of costs other than item 32.

94 Thus, if an inordinate amount of work is held to be done in preparing a statement of defence, due to the contumacious conduct of a plaintiff, it would be appropriate to make that claim by reference to item 3 (Defence) on the 2006 Costs Scale, not by reference to item 32, for item 32 is confined to a task or discrete form of work not covered by any other item.

95 Having regard to the reasoning reflected in these observations, I am of the view that the registrar erred in principle in holding (as he did at par 2 of his summary) that 'any other costs that flow from an indemnity order must be based on item 32 scale and cannot be claimable under any other item of the scale'.

96 I am of the view also that he erred in principle (at par 3 of his summary) in holding that 'there is no provision allowing more for costs under the items in the Scale (other than item 32) because there is an indemnity costs order'.

97 The correct position is that if a party advances a claim for costs referable to a category of work or item on the scale it is open to the party to rely upon the presence of an order for indemnity costs in seeking to substantiate and recover the amount claimed. In some cases this may result in the claimant recovering more than would be allowable as party and party or solicitor and client costs having regard to the figures or hourly rates prescribed by the Costs Scale. However, it will not permit recovery of extravagant or unreasonable costs such as, for example, costs which are obviously collateral or unrelated to the litigation.

98 In the present case it is clear from the approach adopted by the registrar that he was not prepared to give any weight or allow any significance to the presence of the order for indemnity costs in taxing the items on the bill to which the defendant's objection relates, namely, 1, 2, 4, 5, 6, 7, 8, 9, 11 and 15, and in that way the error in principle mentioned earlier resulted in the registrar failing to give proper or any effect to the order for indemnity costs.

99 I am therefore of the view that the proper form of relief is to set aside the existing certificate dated 12 September 2008 and order that the subject bill be referred to another taxing officer for taxation in accordance with these reasons for decision.

100 I will hear from the parties as to whether any further orders or directions should be made.

FORBES -v- FRIGGER [2009] WASC 77 (1 April 2009)

At a glance

Court

Decision date

Before

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Judgment (127 paragraphs)

FORBES -v- FRIGGER [2009] WASC 77 (1 April 2009)

Legislation Cited (3)

Cases Cited (2)