Frumar v The Owners of Strata Plan 36956

CATCHWORDS : Appeal - Costs Review Panel - cross claim, solicitor's hourly rates, disbursements

LEGISLATION CITED : Legal Profession Act 1987 (NSW) - s 208L Legal Profession Regulations 2002 (NSW)

Cachia v Colaco [2004] NSWSC 1043 CASES CITED : Kells v Muligan & Anor [2002] NSWSC 769 Madden v NSW IMC [1999] NSWSC 196

Geoffrey Craig Frumer (Plaintiff) PARTIES : The Owners of Strata Plan 36957 (Defendant)

Mr G Sirtes COUNSEL : (Plaintiff) Mr R Gambi (Defendant)

Mr G C Frumar (Plaintiff) SOLICITORS : Ebsworth & Ebsworth (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

14177/2005 - FRUMAR v THE OWNERS OF STRATA PLAN 36956

JUDGMENT (Appeal - Costs Review Panel; cross claim, solicitor's hourly rates, disbursements) 1 HER HONOUR: By summons filed 9 September 2005 the plaintiff seeks firstly, an order pursuant to s 208L of the Legal Profession Act 1987 (NSW) (the Act) that the determination of the Cost Review Panel dated 31 August 2005 be set aside; secondly, that the matter be remitted back to the Cost Review Panel to be redetermined according to law; thirdly, in the alternative to the second order, an order that the Court make such determination as, in the Court's opinion, should have been made by the Cost Review Panel; fourthly, in the alternative to the above orders, an order that leave be granted to the plaintiff to appeal against the determination of the Cost Review Panel dated 31 August 2005 pursuant to s 208M of the Act; fifthly, pursuant to any leave being granted pursuant to the fourth order, an order that the determination of the Cost Review Panel dated 31 August 2005 be set aside, and that the Court make such determination as, in the Court's opinion, should have been made by the Cost Review Panel. 2 The plaintiff is Geoffrey Craig Frumar. The defendant is the Owners of Strata Plan 36957. The plaintiff relied on his two affidavits namely those sworn 15 November 2005 and 2 February 2006. The defendant relied upon the affidavit of Elizabeth Jane Patrick sworn 20 December 2005. For convenience, I shall refer to the parties as the plaintiff and the defendant.

The District Court proceedings which gave rise to the costs order 3 On 30 September 1999, proceedings were instituted by the plaintiff in the District Court of New South Wales against the company 'Yawz Pty Limited' trading as 'City Eastern Security' which was contracted by the defendant to provide security services to the Building in which the plaintiff conducts his legal practice for the occurrence of and damages resulting from a theft which took place at the plaintiff's office. The theft allegedly occurred sometime between 24 December 1996 and 6 January 1997 when the plaintiff, a solicitor in sole practice, was away on annual leave. The trial took 9 days and submissions a further 4 days - a lengthy trial. 4 On 3 December 2002 Coorey J found that the defendants both owed the plaintiff a duty of care and both had breached that duty by failing to notify the plaintiff of the security breaches and Yawz's decision not to respond to alarm activations during business hours or to conduct regular patrols over the Christmas break. However, the plaintiff's case failed on the issue of causation, which his Honour noted, "depends on the credibility of the plaintiff". His Honour entered judgment in favour of both defendants and ordered that the plaintiff was to pay the defendants costs. 5 On 19 May 2004 Yawz Pty Limited and the Owners of Strata Plan 36957 rendered a bill of costs pursuant to orders of the District Court made 3 December 2002 and 15 April 2003 and the order of the Court of Appeal made 12 May 2003. The bill of cost was for the sum of $156,594.69. 6 On 25 November 2004 the Costs Assessor determined the bill of costs by assessing a fair and reasonable amount of costs to be paid to the defendant in the sum of $127,521.49 rather than the amount of $156,594.69.

The costs review panel's decision 7 On 22 December 2004 the plaintiff applied for an application for review of costs assessment. On 31 August 2005 the Costs Review Panel constituted by Costs Assessors Peter Johnstone and Richard Winston Gulley made the following determination: 1. The Determination of Costs of Costs Assessor Stephen Lancken in accordance with Certificate issued on 25 November 2004 is set aside. 2. The amount of $122,802.67 is determined as a fair and reasonable amount of costs to be paid to the Review Respondent by the Review Applicant and is substituted for the amount determined by the Costs Assessor. 3. The costs of the Review Panel for which a separate certificate has issued are to be paid by the Review Applicant.

The appeal 8 The grounds of appeal are firstly, that the Review Assessors erred in law in failing to issue a statement of reasons compliant with Regulation 68(1) of the Legal Profession Regulation 2002 (the Regulations); secondly, the Review Assessors erred in law in failing to hold that the plaintiff was not responsible to pay the defendant's costs of cross claims issues by the defendant in District Court proceedings No 2360/1999; thirdly, the Review Assessors erred in law in failing to give any, or any adequate, reasons in their "Reasons for Determination"; and fourthly, the Review Assessors erred in law in failing to consider whether or not it was reasonable to carry out the work to which the costs relate pursuant to s 208F(1)(a) of the Act. 9 An appeal may be made this Court in relation to "a matter of law". The Court may remit the decision for redetermination or make its own determination - see s 208L of the Act. 10 The answer to whether or not there were adequate reasons given lies in the Act and the Regulations. 11 Section 208KG(1) of the Act requires that the panel "must ensure" that the certificate setting out its determination issued under s 208KF is accompanied by: "(a) a statement of the reasons for the panel's determination, and

(b) such supplementary information, in relation to the determination, as may be required by the regulations." 12 Further, 208KG (2) provides: "The statement of reasons must be given in accordance with the regulations." 13 Regulation 68 of the Regulations provides: "(1) A statement of reasons for a costs review panel's determination that is required by section 208KG of the Act to accompany a certificate issued under section 208KF of the Act must be accompanied by the following information: (a) the total amount of costs for providing legal services determined to be fair and reasonable,

(b) the total amount of disbursements determined to be fair and reasonable, (c) each disbursement varied by the determination,

(d) in respect of any disputed costs, an explanation of: (i) the basis on which the costs were assessed, and (ii) how the submissions made by the parties were dealt with,

(e) a statement of any determination as to the person by whom and the extent to which either the fee paid or payable for the application for review or the costs of the costs assessor, or both, are to be paid, (f) if the determination relates to costs other than party/party costs: (i) if the panel declines to assess a bill of costs under section 208C of the Act, the basis for doing so,

(ii) if the panel determines that a term of a costs agreement is unjust, the basis for doing so, (iii) a statement of any determination under section 208E of the Act that interest is not payable on the amount of costs (or any part of the amount) assessed, or, if payable, of the rate of interest payable . (2) A statement of reasons to which this clause applies may be accompanied by such further information as the costs review panel concerned considers is necessary to clarify the review of a costs assessor's determination." 14 As Burchett AJ in Cachia v Colaco [2004] NSWSC 1043 [5] stated: "It will be seen at once that reg 68 distinguishes, in expressing the obligation of the panel in relation to the reasons it gives, between "disbursements" and "costs". In respect of disbursements, as well as stating "the total amount of disbursements determined to be fair and reasonable", the panel is required in terms only to set out "each disbursement varied by the determination". But, as regards costs, the panel's determination must be accompanied by information complying with para (1)(d), that is to say: in respect of any disputed costs, an explanation of: (i) the basis on which the costs were assessed, and how the submissions made by the parties were dealt with." 15 Further Master Malpass stated in Madden v NSW IMC [1999] NSWSC 196 at [16] and [17]: "Since the decision of Attorney-General of NSW & Anor v Kennedy Miller Television Pty Ltd (1997-1998) 43 NSWLR 729, there is binding authority that a costs assessor should provide reasons. The Court has been referred to authorities containing dicta concerning the matter of what will discharge an obligation to give reasons (including Kennedy Miller and Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247). It must be borne in mind that the Court is dealing with a decision made by a costs assessor and not a judicial officer. Many of the cases concern the discharge of the duty owed by a judicial officer. In the cases, observations have been made as to what is required of a decision maker. It has been said that lengthy or elaborate reasons are not required; in most cases, a word or two may suffice and it is necessary that the essential ground upon which the decision rests should be articulated. Whilst there is a plethora of dicta, it may be that ultimately the question has to be dealt with on a case by case basis.

A costs assessor is bound to issue a certificate. He is not required to deliver a determination in the nature of a judgment. There is no prescribed format for the disclosure of the reasoning process. It has been done in conjunction with the prescribed form of the Certificate. The Costs Assessor may deal with it in correspondence. In some instances, the reasoning process may be discernible from a combination of sources." 16 Before both the Costs Assessor and the Review Panel, the plaintiff made lengthy and convoluted submissions. 17 I shall start with the cross claim issue which raised on appeal. The first and second defendants filed consent orders that dismissed the cross claim between themselves on the basis that they would each pay their own costs of the cross claim.

18 In March 2001 the plaintiff filed an amended statement of claim joining the Owners Corporation (the cross defendant) as a second defendant in the proceedings. When the bill of costs was drawn up it was done so on the basis that claims were made for some work carried out in relation to the cross claim where the work was also associated with preparation of the defence. The Costs Assessor reasoned that the order for costs was a general order that the respondent pay the applicant's costs of the proceedings and this [order] included work done on the cross claim. The Review Panel was satisfied that the Costs Assessor took the orders into account and specifically addressed the submission of the review applicant in relation the costs relating to the cross claim. The bill of costs was drawn to only include costs where the work done was an overlap between the defence and cross claim. The cross defendant became the second defendant well prior to the hearing. In these circumstances the reasons of the Panel are adequate. There is no error of law under s 208L of the Act.

19 The plaintiff did not provide written submissions in relation to its grounds of appeal as ordered by the Court. In oral submissions the plaintiff's counsel drew attention to two areas where he says, the Review Panel's reasons were inadequate namely disbursements and solicitors' hourly rates. 20 In relation to disbursements, the Costs Assessor stated that he made the following adjustments: Item Amount Reason

571 to 575 $44.00 Travel costs within the city are an overhead of the solicitor 576 $12.00 No explanation is given of why the courier was necessary GST on items 586 to 718 $5,933.22 See above GST on Pattison Hardman $676.33 636 $9,000.00 This is excessive when other preparation is considered and is not included in the bills provided 669 to 701 $482.40 See above re travel Total deductions from Disbursements claim $16,147.95

21 The solicitor at [11] in his document entitled "Grounds for making the application [sic] for review" said: "Notwithstanding Objections raised by the Applicant as to the relevance, appropriateness, excessiveness, fairness and reasonableness of many items of both professional costs and disbursements, most of which appear to have been disregarded or rejected by the Costs Assessor without reference, reason or justification, in respect of one of several Objections relating to Counsel's fees being Item 636, although the Applicant drew to the Costs Assessor's attention the discrepancy of $7,000 between Counsel's fee note of 9 September 2002 in the sum of $2,000 which had been produced and the Respondent's Bill of Costs seeking recovery for this Item in the sum of $9,000, the Costs Assessor determined this disbursement to be excessive and 'not included in the Bills provided' whereas comparison with the actual fee note would have revealed the error and falsity of this finding. Alternatively, perhaps the Costs Assessor intended that his finding of an excessive sum should have been applied to another Objection of the Applicant relating to Items 627-631 inclusive of the Respondent's Bill of Costs in respect of which the Applicant submitted that, at Counsel's hourly rate of $250, his fees of $4,500 for preparing submission between 27 March 2002, the 8th day of the trial, and 29 April 2002, the 9th day of the trial, over the course of 5 separate days constituted 18 hours and did appear to be excessive, unfair and unreasonable." 22 In response, the Review Panel stated: "Notwithstanding the language used by the Costs Assessor in his reasons it is clear to the Review Panel that the total sum of $9,000.00 was disallowed as being excessive preparation. As to the balance of the ground for review the Review Panel does not propose to speculate on what was in the mind of the Costs Assessor. In relation to disbursements however, the Review Panel was of the mind that 7.5% of assessed costs is a fair and reasonable amount to allow to the cost consultant engaged by the Review Respondent. Accordingly Item 717 is reduced by $2,649.20." 23 The Review Panel set out each disbursement varied by the determination - see Cachia. 24 At the outset the Review Panel stated at [3.3] "Section 208KC(2) of the Act provides the Review Panel with all of the functions of an assessor and requires the Review Panel to review an application in thew same manner as an Assessor would be required to determine an application for assessment,"

and at [3.5], quoting Master Malpass in Kells v Mulligan & Anor [2002] NSWSC 769, "the function of the panel is to conduct a review (as opposed to entertaining an appeal)" 25 At [5.1] the Review Panel stated: "Having carefully considered all the relevant matters the Review Panel is of the view that the fair and reasonable costs of the Review Respondent is the sum of $122,802.67." This amount includes the total amount of disbursements. 26 This statement will suffice. 27 The plaintiff's counsel also submitted that the plaintiff, a solicitor, could not work out how the Review Panel assessed the professional costs because, that if one examined the bill, the partner whose charge out rate was allowed did not carry out the majority of the work. 28 In relation to hourly rates the Costs Assessor said: "This is a matter where I think that the best method of assessment is to assess an overall fee for professional costs. I assess that fee as $65,000.00 or about 215 hours at the partners hourly rate." 29 The Review Panel said: "The Review Panel accepts that the Costs Assessor refers to his assessment of the professional costs at $65,000.00 or about two hundred and fifteen hours (215) of the partners' hourly rates. Having regard to this ground the Review Panel conduced its own assessment and finds that in all the circumstances a fair and reasonable amount of costs would be the sum of $63,833.00." 30 The Review Panel was to explain the basis upon which the professional costs were assessed. It did so. It is my view that the Review Panel provided adequate reasons. 31 None of the issues raised, namely firstly, the assessment of disbursements, or secondly, the calculation of professional fees and thirdly, the cross claim costs merit leave being granted under s 208M of the Act. 32 Leave to appeal is refused. The appeal is dismissed. The decision of the Costs Review Panel dated 31 August 2005 is affirmed. The summons is dismissed. 33 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(3) The decision of the Costs Review Panel dated 31 August 2005 is affirmed.

(5) The plaintiff is to pay the defendant's costs as agreed or assessed. **********

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