Han v Stephen Paul Firth trading as Firth The Compensation Lawyers

District Court of NSW|2014-07-11

ion Lawyers Representation: Plaintiff: Ms M Castle Defendant: Mr R Goodridge Plaintiff: Teddington Legal Defendant: Firth The Compensation Lawyers File Number(s): 2013/350156 Publication restriction: None

Judgment 1This is an appeal brought under ss 384 and 385 Legal Profession Act 2004 (NSW) ("the Act") from a decision of the Costs Review Panel ("Review Panel"), issued on 3 October 2013. 2The plaintiff framed the orders in the Summons as follows: (1)Leave to appeal under s 385 of the Act. (2)The Certificates of Determination of Costs by Review Panel comprising Review Panellists Stephen John Lancken and John McIntyre dated 3 October 2013 be set aside. (3)This Honourable Court substitute the solicitor/client costs that it deems to be fair and reasonable. (4)In the alternative the matter be remitted to a Review Panel to determine the fair and reasonable solicitor/clients in accordance with this Honourable Court's directions. (5)The Defendant to pay the Plaintiff's costs of these proceedings. 3The application for the court to substitute the solicitor/client costs was not pursued at the hearing. 4The plaintiff suffered injuries when, as a pedestrian, he was struck by a car in May 2009. He retained the defendant to act for him in May 2010 and signed a costs agreement on 5 June 2010 for a fixed lump sum of $95,000 plus GST, payable if the case was successfully finalised on or before the first day of hearing, mediation or arbitration. If the agreement was terminated (clause 14), charges by the hour were set out for the personal injury specialist with conduct of the proceedings and his staff. 5Proceedings were commenced and, an informal settlement conference on 20 July 2011 having failed, the matter was set down for pre-trial conference on 21 July 2011. A status conference was held on 21 December 2011 and the proceedings listed for hearing for 3 days commencing 2 May 2012. 6The defendant's retainer was then terminated on 1 February 2012. The matter settled in March 2012 and a consent judgment was filed in court on 23 March 2012. The terms of settlement provided for payment to the plaintiff of $400,000 inclusive of costs. Mr Goodridge informs me, from the bar table, over the objections of his opponent, that the allowance for costs was $65,000. Ms Castle informs me that the settlement was not "plus costs". 7The defendant provided an itemised bill of costs for $107,977 being the lump sum costs of $95,000 plus GST and $3,477 for disbursements. The defendant's account set out a narrative of costs in the form of individual items but, unusually, did not specify individual amounts for those items. The plaintiff, however, in the Notice of Objection, specified individual amounts and asserted that the work for which the plaintiff was obliged to pay totalled $31,09.44. These objections included objections to work carried out after termination of the retainer and other items set out in detail below. 8The specific objections raised before the Costs Assessor are of relevance to the history of the appeal, and are as follows: (a)Failure to comply with s 309(1)(c) of the Act for an estimate of the total legal costs, or alternatively a range of estimates of the total legal costs. The lump sum agreement was for $95,000 up to the first day of hearing and thereafter on an hourly basis. (b)Failure to comply with s 309(1)(f)(i) of the Act. Clause 9 of the costs agreement stated that the plaintiff could expect to recover "between 40% to 70% of your legal costs from the opposition if you are successful". It was submitted that this statement was meaningless in the absence of an estimate of the applicant's total legal costs, as is noted in paragraph (a) above, was not given. Additionally, a range of "40% to 70%" was asserted to be meaningless. (c)Failure to comply with s 309(1)(f)(ii) of the Act, in that all was said about the costs likely to be incurred if the plaintiff lost the case was that those costs would "probably not be much if any less than the figure given for our charges" which, it was submitted, was not plain language as required by s 315 of the Act. (d)The costs agreement was not fair or reasonable by reason of the failure to make these disclosures, by reason of the provision of a lump sum, and because the applicant was "an inexperienced litigant whose first language was not English". (e)In addition, submissions were made that the hourly rates were excessive, the time claimed was unreasonable, the "file reviews" were unreasonable, the photocopying charges were unreasonable and the charges grossly excessive. 9In one of several indications of the extraordinary bitterness with which this costs assessment was conducted, the plaintiff's objections concluded with a request for a reference of the solicitor for the plaintiff to the Legal Services Commission under s 393 ("Referral for disciplinary action"), referring to Legal Services Commissioner v Nikolaidis (No 3) [2005] NSWADT 200 at [151] and Nikolaidis v Legal Services Commissioner [2007] NSWCA 130 at [90] and [166]. 10At the hearing, both counsel pointed to decisions of other judges in this court where the narrow interpretation of "matter of law" had resulted in an appeal under s 384 based on failure to give reasons was refused, relying upon Obieta v Consumer Trader and Tenancy Tribunal [2009] NSWCA 220 and Dayeian v Davidson [2010] NSWCA 321: Bobb v Wombat Securities Pty Ltd (District Court of New South Wales, Elkaim SC DCJ, 29 August 2013; John Kay v Zurich Australia Ltd, Norton SC DCJ, 16 May 2014). In written submissions following the hearing, counsel for the defendant submitted that reasons of comity required me to make the same ruling, and to refuse to permit the plaintiff leave to bring the appeal under s 385 (an alternative which was not referred to in either of those decisions). As the decision of the NSW Court of Appeal in Bobb v Wombat Securities Pty Ltd (handed down on 13 August 2014: [2014] NSWCA 261) would be the latest word on this longstanding dispute, I deferred the handing down of my decision to enable the parties to make further submissions, which I received on 16 August 2014. 11Although that appeal was ultimately determined on other grounds, Basten JA has helpfully dealt, albeit obiter, with this issue by noting, at [32], that an appellant in the District Court is "not precluded from challenging the inadequacy of the reasons of the review panel, as involving a failure to comply with its obligations under s 380 of the Act". In other words, the use of the word "matter" rather than "issue" does not prevent a party bringing an appeal under s 384. However, in the event that I have erred in my interpretation of either s 384 or Basten JA's obiter remarks, I have set out the basis upon which I would grant leave under s 385 for the bringing of this appeal as a mixed question of fact and law.

The Costs Assessor's findings 12This is an appeal from the Review Panel, so I have been careful to regard the Costs Assessor's findings as relevant to the history of the proceedings only. 13At paragraphs 5.8 to 5.24, the Costs Assessor set out his reasons for accepting the plaintiff's submission that the costs agreement should be set aside as to the rates, including the hourly rates, of charge for the work of the solicitors. The Costs Assessor set out, in substitution for the amounts charged, amounts he considered to be fair and reasonable for those costs in accordance with s 363 of the Act. The Costs Assessor was satisfied (at paragraph 5.25) that the disclosure was unclear on the basis of its calculation of costs, noting the need for there to be clear and unambiguous terms for disclosures in costs agreements, "the more so where there is a "conditional" costs agreement (as here) involved" (Exhibit A, p 144). The Costs Assessor did, however, determine that while adjustments should be made to the hourly rate, the failure to give an ongoing estimate was irrelevant given the late termination of the retainer (at paragraph 5.28) and did not consider that the plaintiff's lack of language skills and cultural background were a relevant factor (at paragraph 5.29). Nor did the Costs Assessor accept that the disclosure of the costs if the plaintiff failed was a basis for complaint (at paragraph 5.30). 14Having noted these matters, the Costs Assessor found that the claim for costs of $95,000 plus GST, whether as a "lump sum" or on any other basis was not a fair and reasonable sum for costs. He was of the view that $70,000 was fairer (at paragraph 5.37). He refused the request to refer the costs agreement to the Office of the Legal Services Commissioner (at paragraphs 5.34 and 5.35) and set out a summary of fair and reasonable costs and disbursements at paragraph 5.39. This was as follows: (a)Costs plus GST: $77,000. (b)Disbursements plus GST: $3,477. (c)Subtotal: $80,477. (d)Less credit allowed: $3,463. (e)Total: $77,014. 15The plaintiff sought a review determination from the Review Panel. The plaintiff specifically raised the following: (a)The plaintiff disputed the manner by which the Costs Assessor determined the fair and reasonable amounts for the sum set out above, and in particular the global sum which was arrived at. The plaintiff pointed out that if the hourly rates applied by the Costs Assessor had been added up in accordance with what was charged, those hourly rates would only have arrived at a total of $45,998.66 for professional costs. This sum, plus GST, added up to $50,598.53 inclusive of GST. (b)Ground 4 of the application for review appears to challenge the global approach taken by the Costs Assessor. (c)The plaintiff specifically did not challenge the Costs Assessor's determination to set aside the costs agreement, or the hourly rates, found by the Costs Assessor to be reasonable. These were: (i)$400 plus GST for the defendant's hourly rate; (ii)$350 plus GST for Ms Liu's hourly rate; and (iii)$120 plus GST for the paralegal's hourly rate. 16The plaintiff's acceptance of the $350 rate for Ms Liu is important because, for reasons that were not explained in the Review Panel's determination, she was charged at the rate of $400 per hour rather than $350 per hour for the whole of the work she did, rather than for the small amount of work performed after she had achieved the milestone of being a solicitor for five years, which occurred just before termination of the retainer. This substantially increased the amount payable by the plaintiff as she did most of the work.

The Review Panel's determination 17The Review Panel's determination may be summarised as follows: (a)Paragraphs 1 - 20 consist of a statement of general principles followed by a note (paragraph 21) agreeing that the issue was whether paragraph 14 of the Costs Agreement, which provided the method of charging should the retainer be terminated, was the issue; (b)Paragraph 23 contains the statement that the costs agreement should not be set aside as the parties were free to contract how they wish for a lump sum agreement, and agreeing with the costs assessor that the language/ethnicity issue did not warrant it being set aside. Paragraph 37 notes that this means that the second "ground" of review need not be determined; (c)Paragraphs 24 - 25 set out the findings that the hourly rates were reasonable but that "some work" carried out was unreasonable, and that the Review Panel agreed with the costs assessor's "conclusions". Paragraph. (d)Paragraphs 26 - 32 set out that a global approach should be taken and that "overall" 10% of the charges are not fair and reasonable. The Review Panel rejects the submission that a lower rate than the fee agreement rate should be charged, and applies the hourly rates of the fee agreement to the costs and to photocopying. (e)In paragraph 33 the Review Panel agrees with the Costs Assessor that the practitioner should pay the costs (see also paragraph 42). (f)The Review Panel then summarises its findings (at paragraphs 38 - 39 and sets out the sums. This includes allowing "Ms Lui [sic] at $450.00 per hour" instead of $350, which was the charge out rate in the costs agreement for a solicitor less than five years. It also contains a disbursements sum agreed to be wrong, namely $4,800.

Grounds of appeal 18The grounds of appeal pleaded in the Amended Summons are as follows: (1)The Review Panel erred in its decision, contrary to the findings of the Costs Assessor John McGruther in his decision dated 13 May 2013, that the costs agreement between the Plaintiff and the Defendant should not be set aside. (2)Alternatively, the Review Panel erred in its decision to assess the quantum of fair and reasonable costs by a global 10% reduction to professional costs as it failed to apply the Costs Agreement, as required by s 361 of the Legal Profession Act.ParticularsParagraphs 2 and 14 of the Costs Agreement (3)The Review Panel erred in determining the assessment by making a global reduction as in doing so it failed to adequately apply s 363(1) of the Legal Profession Act. (4)The Review Panel erred in failing to comply with the requirement to give adequate reasons pursuant to s 380 of the Legal Profession Act, Regulation 134 of the Legal Profession Regulation 2005 and at common law. (5)The Review Panel erred in deciding, contrary to the findings of the Costs Assessor John McGruther in his decision dated 13 May 2013, that the hourly rates set out in the costs agreement were fair and reasonable. (6)The Review Panel erred in deciding that it was not "possible or necessary" to assess the Defendant's itemised bill on an item by item basis in circumstances where the Review Panel had the necessary information to enable them to do so. (7)The Review Panel erred in deciding to allow an hourly rate of $450.00 for professional costs for work carried out by Ms Liu as opposed to $350 per hour, when at the relevant time of performing the work (apart from 10 entries) she was a solicitor with less than 5 years experience having been admitted as a solicitor of the Supreme Court on 6 October 2006. (8)The Review Panel erred in allowing more for disbursements than was claimed in the bill of costs the subject of assessment.ParticularsParagraph 40 Review Panel Reasons

A preliminary issue: is leave necessary under s 385? 19Leave to appeal is sought in relation to ground 4 of the appeal. Put in simple terms, the reason for leave to appeal being required is because failure to give adequate reasons is asserted to be not a "matter of law" for the purposes of s 384, but a mixed issue of fact and law under s 385. The defendant has, by notice of motion filed on 23 December 2013, sought the summary dismissal of this alternative claim (see order 1), but this application, as well as the relief sought in order 2 of the notice of motion, has been dealt with as part of the plaintiff's appeal. 20The potential overlap between ss 384 and 385 where grounds of appeal may be related is one of the complexities of costs appeals, as Ms Castle notes in her written submissions (at paragraphs 9 - 17). The problem is the definition of a s 384 appeal as arising only in relation to a "decision as to a matter of law". The ground of appeal asserted to require leave is the ground relating to adequacy of reasons, on the basis that "matter of law" is narrower than "issue of law". 21In Bobb v Wombat Securities Pty Ltd (District Court of NSW, 29 August 2013, unreported), Elkaim SC DCJ considered an appeal under s 384 where the ground of appeal arose from the Review Panel's failure to give reasons for agreeing with the assessor's apparent conclusions, which the plaintiff submitted amounted to a failure to give reasons. Elkaim SC DCJ referred to the definition of "matter of law" by Basten JA in Obieta v Consumer Trader and Tenancy Tribunal [2009] NSWCA 220 at [33] as being narrower in import, and held that Frumar v The Owners of Strata Plan 36957 (2006) 67 NSWLR 321 did not state that failure to give reasons was necessarily a decision as to a matter of law. Elkaim SC DCJ dismissed the appeal. 22The position since that decision was handed down has since been clarified in Wende v Horwath (NSW) Pty Limited [2014] NSWCA 170 and Bobb v Wombat Securities (No 2) [2014] NSWCA 261). In Wende v Horwath (NSW) Pty Limited [2013] NSWDC 10; Wende v Horwath (NSW) Pty Limited [2014] NSWCA 170 at [173] - [180], the plaintiff similarly raised a ground of appeal under s 384 on the basis that the Review Panel's failure to give reasons for its agreement with the assessor amounted to a failure to give reasons. Neither the trial judge nor the Court of Appeal considered whether the appeal was properly brought under s 384 on such an issue. While this may have been because the matter was not raised in specific terms, Frumar v The Owners of Strata Plan 36957 was cited with approval and discussed. 23Any doubt about this issue now appears to be resolved by the helpful remarks of Basten JA in Bobb v Wombat Securities Pty Ltd (No 2) [2014] NSWCA 261 at [32], where his Honour noted that a party was not precluded by the language of s 384 from bringing an appeal to challenge the inadequacy of reasons of the Review panel contrary to its s 380 obligations, by which I infer that his Honour considered that adequacy of such reasons fell within s 384. That is certainly the basis of the plaintiff's complaint here, as Ms Castle's written submissions (at [49] - [59]) make clear, pointing out that the panel fell into error, inter alia, because it did not comply with its obligations under s 380 and r 134 of the Act. 24Both these decisions are in conformity with the series of cases carefully noted and discussed in Dal Pont, Law of Costs (3rd ed., 2013, LexisNexis) at p. 650 fn 422 - 424. Professor Dal Pont, discussing "matter of law", noting that "procedural unfairness" may not be a matter of law (the issue raised by Basten JA in Obieta v Consumer Trader and Tenancy Tribunal, supra) did not extent this to the conclusion that failure to give reasons cannot be a "matter of law": [5.21], [18.58] (citing Randall v Willoughby Council (2009) 9 DCLR (NSW) 31) and [18.67]; see also Nassour v Malouf [2011] NSWSC 356, Bobb v Wombat Securities [2013] NSWSC 757. 25The longstanding argument about the use of the word "matter" rather than "issue" has generated an unfortunate level of complexity in what was intended, by the legislature, to be a streamlined and simple process for dealing with appeals. Basten JA makes this point at [24], where his Honour notes the need not to adopt "too narrow a construction" of s 384, and that Dayeian v Davidson, the authority relied on at first instance in both the judgment at first instance in Bobb v Wombat Securities Pty Ltd and in John Kay v Zurich Australia Ltd is a decision which must be viewed with "care": "24. On the other hand, there are reasons of both policy and authority for not adopting too narrow a constructions of the appeal conferring provisions, As a matter of policy, it may be doubted whether the amendments to the legislative scheme which removed the appellate jurisdiction conferred by s 384 to the District Court from the Supreme Court were intended to crate a fine jurisdictional dilemma for an applicant as to whether there was a decision as to a matter of law which would attract the jurisdiction of the District court or merely legal error in the decision-making process which would require an applicant to invoke the judicial review jurisdiction of the Supreme Court. 25. Secondly, as a matter of authority, there is the decision of the High Court in Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390. Although the language of s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) there in question was not identical to the language of s 384, nevertheless the reasoning of the court is relevant...Either decision, if erroneous, could properly be described as a decision as to a matter of law. Further, care must be taken in adopting the reasoning in Dayeian v Davidson, a decision pre-dating Kostas in the High Court." 26His Honour's remarks were, nevertheless, obiter: "26. Having noted the issue as to the scope of s 384, it may be put to one side as a matter which it is not necessary to resolve. That is because grounds 4 and 5 can be disposed of on a different basis." 27The alternative to an application under s 384 is an application for leave to appeal under s 385. In his written submissions, counsel for the defendant did not contend that the appeal should have been brought under s 385, although submitting that the Summons is incompetent for other reasons (see the affidavit of Andrew McQuilkin, Exhibit 1, Annexure MM, following which an amended summons was in fact filed), discussed in more detail below. The defendant's argument appears to be that failure under s 384 means that no alternative claim can be brought under s 385, because this was not permitted in either Bobb v Wombat Securities or in John Kay v Zurich Australia Ltd, and reasons of comity compel me to take the same course. 28The basis upon which leave was not granted under s 385 in John Kay v Zurich Australia Ltd was that the appeal involved the construction of a particular clause in a mediation agreement and notice of discontinuance, and as such did not warrant a grant of leave by the court (at [50]). There does not seem to have been an application to conduct the s 384 argument alternatively under s 385. The appeal in Bobb v Wombat Securities was brought under s 384 only (at page 1), and an alternative application for leave to appeal under s 385 does not appear to have been raised (I note also that an application for judicial review to the Supreme Court was dismissed, according to page 1 of the same judgment). Consequently, issues of comity on this point would not arise. 29The defendant's second objection to the granting of leave is that the ground is unmeritorious. As is set out in more detail below, the Review Panel did not deal with the specific objections raised by the plaintiff but applied a discount of 10% globally to the costs, without explaining how that 10% was calculated. Such a departure from the principles set out in s 380 and reg 134 of the Act warrants the granting of leave. 30Accordingly, if I have erred in holding that the grounds of appeal fall within s 384, I would grant leave under s 385 and hear those grounds of the appeal requiring such leave under that provision.

Appeal Ground 1 31The basis upon which the plaintiff sought to have the costs agreement set aside before the Costs Assessor were: (a)A claim that the defendant failed to make disclosures required under Div 3 of the Act (see paragraphs 6 - 12 of the notice of objection); (b)The costs agreement was neither fair nor reasonable having regard to the amount to be charged for the work concerned ($95,000 for work up to the first day of hearing); and (c)The applicant was an inexperienced litigant whose first language is not English. 32The Costs Assessor found, and the Review Panel agreed, that the language barrier is not an issue. The real questions were whether there were failures to make disclosures and whether $95,000 up to the first day of hearing for a personal injury matter where the only issue of significance was contributory negligence was excessive and unreasonable. 33Neither party addressed me as to the adequacy of disclosures made. The Review Panel found, and I agree, that this was a standard "no win, no fee" agreement, and I do not consider the Review Panel's findings on this issue amount to an error of law. The finding that $95,000 for work up to the first day of hearing was or was not excessive and/or unreasonable would not, in my view, be a finding of law, but the kind of finding that a Costs Assessor or Review Panel Member would make taking into account the skill and expertise necessary for the performance of such a task. I accept the contentions of the defendant that the Review Panel's finding that the lump sum costs agreement ought not to be set aside is substantially based on these findings of fact (see paragraphs 23 and 24 of the Review Panel's reasons for determination). This ground of appeal is not made out.

Appeal Ground 2 34The principal ground which was relied upon by the plaintiff was that, in the alternative to ground 1, the Review Panel erred in not applying the costs agreement as required to do so by the Act. The relevant paragraphs of the costs agreement are paragraphs 2 and 14. 35Section 361 of the Act provides: "361 Assessment of costs by reference to costs agreement (1) A costs assessor must assess the amount of any disputed costs that are subject to a costs agreement by reference to the provisions of the costs agreement if: (a) a relevant provision of the costs agreement specifies the amount, or a rate or other means for calculating the amount, of the costs, and (b) the agreement has not been set aside under section 328 (Setting aside costs agreements), unless the assessor is satisfied: (c) that the agreement does not comply in a material respect with any applicable disclosure requirements of Division 3 (Costs disclosure), or (d) that Division 5 (Costs agreements) precludes the law practice concerned from recovering the amount of the costs, or (e) that the parties otherwise agree. (2) The costs assessor is not required to initiate an examination of the matters referred to in subsection (1) (c) and (d)." 36Accordingly, the Review Panel must assess the amount of disputed costs "by reference" to the costs provisions, which the Review Panel did, at [25] - [26] (set out further below). 37The function of the Review Panel is set out in s 375 as follows: "375 General functions of panel in relation to review application (1) A panel constituted under this Subdivision may review the determination of the costs assessor and may: (a) affirm the costs assessor's determination, or (b) set aside the costs assessor's determination and substitute such determination in relation to the costs assessment as, in their opinion, should have been made by the costs assessor who made the determination that is the subject of the review. (2) For the purposes of subsection (1), the panel has, in relation to the application for assessment, all the functions of a costs assessor under this Part and is to determine the application, subject to this Subdivision and the regulations, in the manner that a costs assessor would be required to determine an application for costs assessment. (3) However, the assessment is to be conducted on the evidence that was received by the costs assessor who made the determination that is the subject of the assessment and, unless the panel determines otherwise, the panel is not: (a) to receive submissions from the parties to the assessment, or (b) to receive any fresh evidence or evidence in addition to or in substitution for the evidence received by the costs assessor. (3A) A panel reviewing the determination of a costs assessor may determine that the amount of fair and reasonable costs is the amount agreed to by the parties to the review if during the course of the review the parties notify the panel that they have agreed on the amount of those costs. (4) If the costs assessors who constitute the panel are unable to agree on a determination in relation to an application, the panel is to affirm the determination of the costs assessor who made the determination that is the subject of the review." 38The two stage process to be undertaken by the Review Panel was explained by Malpass AJ in Honest Remark Pty Ltd v Allstate Explorations NL [2008] NSWSC 439 at [8]-[13] as follows: "[8] Subsection (1) enables a panel to review the determination of a costs assessor. In so doing, it may either affirm the determination or set it aside. If it takes the second of the two options, it may substitute its determination (being a determination which, in the opinion of the panel, was one that should have been made by the costs assessor). [9] Subsection (2) thereof confers upon the panel, in relation to the application for assessment, all the functions of a costs assessor (given under Pt 3 of the Act). It also requires the panel to determine the application (subject to Subdiv 5 of that Part and Regulations) in the manner that a costs assessor would be required to determine it. [10] Subsection (3) provides that the assessment process is to be conducted on the evidence that was received by the costs assessor. It is not to receive submissions from the parties or any, inter alia, fresh evidence unless it determines otherwise. [11] For present purposes, the provisions of subs (3A) and (4) have no significance. I will later make a brief reference to them. [12] This structure reveals an intention that the first task for the panel is to conduct the review. Subject to any relevant statutory provision, rule or regulation, this is generally done by way of having a "second look" at the determination of the costs assessor. Such a process will see the panel having regard to the material that was before the costs assessor and the reasons for the determination. [13] After the review has been undertaken, the panel then has the two options set forth in (a) and (b) of subs (1)." 39In Randall Pty Ltd v Willoughby City Council [2009] NSWDC 118, the costs assessor made a general global reduction of about $25,000 with which the Review Panel merely concurred. Johnstone DCJ held that the Review Panel failed to apply its mind to the question of which professional costs were fair and reasonable and which costs were not. Johnstone DCJ said at [23]-[25]: "[23] I had thought that the extent of the obligation to give reasons in costs assessment matters had been authoritatively settled by the court of Appeal in Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278 at [43]-[45]. It is to be noted that decision related to the former legislation, but nothing turns on that, and also related to reasons of a Review Panel that had in fact set aside the determination of the Costs Assessor, but nor does anything turn on that distinction. The balancing act in considering the sufficiency of a statement of reasons "involves the adoption of, at the least, a minimum standard which places the parties in a position to understand why the decision was made sufficiently to allow them to exercise any right of appeal". For the sake of completeness, I set those paragraphs out in full: 43. The extent of the obligation ... is informed by the general law concerning the duty of judicial officers to give reasons for their decisions discussed in cases such as Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Mifsud v Campbell (1991) 21 NSWLR 725 and Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430. The extent of a judicial officer's duty depends on the circumstances. Whether or not a costs assessor and a panel are acting administratively or judicially, which was left open in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd, the extent of their duties must take into account the different nature of their task and their roles as legal practitioners bringing to bear their experience and judgment in evaluation of what work was reasonable and what is a fair and reasonable amount of costs; but it is also moulded by the basis for the obligation to give reasons in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd, thereafter taken up by the legislature. 44. The reasons must be such that a party dissatisfied with the costs assessor's or panel's determination "should have a real and not largely illusory right of appeal". These words in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd at 735 were qualified by "in regard to questions of law at least", but in my respectful opinion they apply equally to questions of fact: questions of whether the time engaged or an hourly rate are reasonable can be very important, and although subject to leave s 208M permitted an appeal on those questions. The filter for an appeal as to fact is the court's decision as to leave, not the cost assessor's or panel's expression of reasons, and whether leave should be granted can only be decided if it is known why the determination was made. 45. The delay and expense of an excessively onerous obligation to provide reasons is material, particularly when assessment of costs by costs assessors was intended to provide a faster, easier and cheaper system. In my opinion, however, the observations of Meagher JA in Beale v Government Insurance Office of New South Wales at 444 are applicable; that the balancing act in considering the sufficiency of a statement of reasons "involves the adoption of, at the least, a minimum standard which places the parties in a position to understand why the decision was made sufficiently to allow them to exercise any right of appeal. [24] Particularly relevant in the present appeal are statements in the lead judgment of Giles JA in Frumar at [59]-[63] where the reasons of the Costs Assessor were criticised for their failure to identify what work, by reference to items, was disallowed: 59. ... it can not be seen what work the costs assessor thought was or was not reasonable work to be carried out, including by way of coordination work and reporting work, or its relationship to the work in the items in the bill of costs. 60. The panel's reasons do not make good these difficulties in the costs assessor's reasons. They add to them. The panel endorsed the costs assessor's reasons as setting out the basis for his determination, and his approach of assessing the bill of costs "as a whole" (under Ground 5), but in conducting its own assessment arrived at a relatively precise amount of $63,833 in lieu of the round figure. It can not be seen what work in the items in the bill of costs the panel thought was unreasonably carried out, or what work it thought was reasonable work to be carried out independently of the itemisation in the bill of costs and its relationship to the work in the items in the bill of costs. Maybe it accepted that the hourly rates were reasonable and applied them, but it did not say so: at least on the surface, in making its own assessment the panel could have applied different hourly rates." [25] These principles were applied by White J in Cassegrain v CTK Engineering ; Cassegrain v Cassegrain [2008] NSWSC 457: see generally [85]-[92], but in particular at [92]: Where the costing of such work is made by reference to adjustments to items in a bill of costs, it is essential for the assessor or the panel to quantify the adjustments made in respect of costs that are disputed. That does not necessarily entail a line-by-line taxation of a bill. But it does require specification of what are disputed costs, for example, by reference to costs of a certain kind, and an explanation of what costs were allowed, or what was the amount of reduction from claimed costs, in respect of costs of that kind. In my view, the costs assessor's reasons and the panel's reasons for allowing solicitors' profit costs in the sum of $119,859.95 are inadequate." 40His Honour concluded at [33]: "[33] In my view, the failure of the Costs Assessor to refer to certain categories of items that were the subject of objections does not render the plaintiff's right of appeal illusory, because it may be assumed, logically, that all such items were allowed. I am more concerned as to the global reduction by reference to categories of items that were not differentiated either by way of amount, category by category, or by reference to particular items. That failure did, in my view, render the plaintiff's rights of appeal illusory, because it would not be possible to demonstrate to the appellate court, with sufficient precision, what costs were allowed and what costs were disallowed. Accordingly, the reasons do not reach the minimum standard contemplated in Frumar." 41In the present case, once the Review Panel accepted the hourly rates as reasonable, they had the benefit of an itemised bill of costs, which meant that, unlike the Review Panel in Randall Pty Ltd v Willoughby City Council, supra, they had all the necessary information to conduct the assessment by reference to the provisions of the costs agreement, including the correct amount for Ms Liu who, as I have set out before, was charged at the rate of $450 per hour. By failing to carry out that exercise, the Review Panel did not arrive at a determination made in accordance with the costs agreement in the manner so helpfully described by Johnstone DCJ in Randall Pty Ltd v Willoughby City Council, supra. 42While Professor Dal Pont warns (supra, at [18.67]) that the "global" approach to costs (especially "global reductions") are "unlikely to meet the minimum standard contemplated in Frumar", this is not to say that such orders cannot be made. The question is whether the relevant findings are clear and expose some degree of reasoning, however slender, taking into account the Court of Appeal's more recent explanation in Wende v Horwath (NSW) Pty Ltd [2014] NSWCA 170 that the Review Panel need not set out reasons in detail where they are largely concurring with the findings of the costs assessor. 43What were the findings that were made? The Review Panel's findings are brief: "25. The Client also complains about the reasonableness of some of the work performed or the time spent on some work. See paragraphs 15 to 20 of the Application for Assessment of Costs. For the reasons articulated by the Costs Assessor, the Panel agrees that some of the charges of the Practitioner related to work [sic] are not reasonably performed or the times spent were not fair and reasonable (see paragraph 5.31 of his reasons). The Panel agrees with the conclusions in this paragraph of the Costs Assessor. 26. Like the Assessor, the Panel does not think that it is possible or necessary on an item by item basis to assess minute by minute or dollar by dollar how much the bill should be reduced because of these issues. On consideration of the bill overall, the Panel is of the view that 10% of the charges made are not fair and reasonable by reason of the objections referred to, that is the method of charging or the time claimed to be spent. The Panel applies a 10% reduction to the costs calculated in accordance with the fee agreement for this reason." 44In other words, what the Review Panel did was to find that the costs agreement ought not to be set aside, refer to the costs agreement as required by s 361 and state that having regard to duplication of work a global reduction of 10% should be permitted under s 361 and 328(1A)(a) as opposed to the "lump sum" of $70,000 considered appropriate by the assessor. No explanation is given for arriving at this different figure. 45This ground of appeal is addressed to that last step, and is narrower than ground 4 (failure to give reasons), in that it is specifically addressed to the Review Panel taking a global approach to professional costs by simply applying this 10% reduction, a step that the defendant says the Review Panel "was entitled to do" (written submissions, paragraph 22). 46There is no doubt that a global approach is acceptable in appropriate cases. (The most recent decision on global costs is Wende v Horwath (NSW) Pty Limited, supra, but as those global costs were set aside because they related to three different proceedings, that case is of limited assistance on this issue.) Nor is there any doubt that, in accordance with the general principles set out in Wende v Horwath, supra, the Review Panel was entitled to state, where it agreed with the costs assessor, that it did so, without necessarily setting out why. 47In the present case, however, the Review Panel has used a different method to arrive at a different result, without explaining why, and in circumstances where they have not only failed to refer to the complaints of the plaintiff but they have clearly included, in their decision, an assessment of the work of the solicitor who performed most of the work, on the wrong basis that she had more than five years experience. As is set out under Ground 7 below, this an error of the Review Panel (the assessor had correctly identified the rate for Ms Liu) which is not simply correctable by identifying the correct amount for Ms Liu, as the belief that she had that level of experience could have been a factor in arriving at the 10% deduction (although it must be said that, as the Review Panel's reasons for arriving at the 10% figure are not exposed, whether this was such a factor is unknown). 48The long history of requirement of reasons, set out in the decisions discussed by Johnstone DCJ in the extract from his judgment set out above, does not permit the fresh assessment, even at Review Panel level, of an amount in one sentence, without reasons for the changed amount being exposed, however briefly. This ground of appeal is made out.

Appeal Ground 3 49This ground was remodelled by Ms Castle, in oral argument and subsequent submissions, to assert the Review Panel's error was to have regard to, and analyse, the sheer number of individual issues raised by the plaintiff in relation to "unreasonable" costs, which were substantial. There were four main objections as follows: (a)"Time claimed unreasonable": these items consist of 15.65 hours of Mr Firth's time, 25.5 hours of Hong Liu's time and 7.5 hours of the paralegal's time, which Ms Castle has added up in her supplementary submissions as being $19,250 plus GST; (b)"File reviews unreasonable": Ms Castle has estimated these at $4,757.50; (c)Section 85A objection: Ms Castle has estimated these at $4,218.50; and (d)Costs after termination: These are the 40 items (out of 375) for work carried out after the costs agreement was termination and add up to $3,047 plus GST. 50The total of the four main objections set out above are $33,502.70, which is an indication of the substantial nature of these objections. 51Applying the principles set out by the long list of cases set out by Johnstone DCJ in Randall Pty Ltd v Willoughby City Council, supra, and by Professor Dal Pont, supra, at [18.67], the Review Panel should not have awarded an unexplained "10% off" to cover duplication of work where the duplication was asserted to amount to work of this extent. There is no mention to the complaints of unreasonable time taken to carry out work and for file review, or for the costs charged after termination. In particular, the Review Panel's "decision" to apply the hourly rate of $450 to all of Ms Liu's work, if it was a factual finding they made, did not arise from applying the hourly rates in the bill. 52Section 363(1)(c) of the Act refers to "disputed costs". The Review Panel's failure to refer to, or quantify, the "disputed costs" is clear from an examination of the reasons of the Review Panel. 53For the same reasons as those set out in Ground 3, this ground of appeal is made out.

Appeal Ground 4 - Failure to give adequate reasons 54Section 380 of the Act provides: "380 Reasons for determination (1) The panel must ensure that a certificate issued under section 378 (Certificate as to determination of panel) or 379 (Recovery of costs of review) that sets out the determination of the panel is accompanied by: (a) a statement of the reasons for the panel's determination, and (b) such supplementary information as may be required by the regulations. (2) The statement of reasons must be given in accordance with the regulations." 55Regulation 134 Legal Profession Regulation 2005 (NSW) provides: "134 Statement of reasons-section 380 of the Act (1) A statement of reasons for a panel's determination that is required by section 380 of the Act to accompany a certificate issued under section 378 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 and the panel declines to deal with an application for review of a bill of costs-the basis for doing so, (g) if the determination deals with any matter of the kind referred to in section 328 (1) or (4) of the Act (relating to the setting aside of a costs agreement), a statement as to the panel's reasons for its decision on that matter. (2) A statement of reasons to which this clause applies may be accompanied by such further information as the panel concerned considers necessary to clarify the review of a costs assessor's determination." 56As the summary of the Review Panel's reasons above shows, the failure to consider individual items or groups of items in the bill, or to explain the basis upon which individual disputed costs were assessed, or how the 10% global reduction was arrived at, results in the plaintiff not knowing which of his submissions succeeded or failed, or why. 57Ms Castle draws my attention to the decision of Basten JA in Campbelltown City Council v Vegan (2006) 67 NSWLR 372 at [121]-[122] as follows: "[121] Where it is necessary for the panel to make findings of primary fact, in order to reach a particular conclusion as to the existence, nature and extent of any physical impairment, it may be expected that the findings of material facts will be set out in its reasons. Where facts are in dispute, it may be necessary to refer to evidence or other material on which findings are based, but the extent to which this is necessary will vary from case to case. More importantly, where more than one conclusion is open, it will be necessary for the panel to give some explanation of its preference for one conclusion over another. That aspect may have particular significance in circumstances where the medical members of a panel have made their own assessment of the applicant's condition and have come to a different conclusion from that reached by other medical practitioners, as set out in reports provided to the panel. [122] On the other hand, to fulfil a minimum legal standard, the reasons need not be extensive or provide detailed explanation of the criteria applied by medical specialists in reaching a professional judgment: see Soulemezis at 273-4 per Mahoney JA and 281-2 per McHugh JA. At least, that will be so where the medical science is not controversial: if it is, a more expansive explanation may be required." 58The high water mark of requirement for the giving of reasons is set out in Frumar v Owners of Strata Plan 36957 (2006) 67 NSWLR 321 at [60]-[63] and I will not repeat what I have set out above, or the helpful explanation of these principles set out by both Professor Dal Pont or Johnstone DCJ in Randall Pty Ltd v Willoughby City Council, supra. 59The inadequacy of the reasons of the Review Panel arising in part from its failure to comply with its obligations under s 380 and r 134, its failure to explain, beyond a generalised reference to the experience of the defendant, its reasons for the 10% global reduction, its errors in relation to Ms Liu's fees, and the agreed error in calculating disbursements. I have set out above my reasons for finding in the plaintiff's favour in relation to all but the last ground (which is conceded by the defendant to be an error). The failure to provide reasons is fundamental to all those errors, and this ground is therefore made out. 60This ground is made out.

Appeal Ground 5 61This ground overlaps with ground 7, and is dealt with below.

Appeal Ground 6 62As set out above, while I am not prepared to set aside the costs agreement, I am of the view that the unexplained "10% off" approach of the Review Panel is an appropriate way for the costs to be assessed. Whether the Review Panel, in a fresh determination, provides a percentage figure for which it exposes its reasons, or whether it prefers an item-by-item approach, is an issue for the Review Panel. The problem is the adequacy of the Review Panel's explanation, not the method that they adopted.

Appeal Grounds 5 and 7 - Ms Liu's charge rate 63Ms Liu's date of admission (6 October 2006) was provided to the costs assessor (Exhibit A, p. 19) and thus to the Review Panel. Under the costs agreement the time cost charging was $350 for a solicitor with less than five years' experience. Ms Liu clearly had less than five years experience when the costs agreement was signed on 5 June 2010 (Exhibit A, p. 6). She is identified by name as the solicitor "primarily responsible for your case" (Exhibit A, p. 3) on the basis that "from time to time she will receive help from various members of the firm as our policy is to work together as a team" (Exhibit A, p. 3). No barrister would be briefed because Firths "specialise in the field of compensation" and "ourselves take responsibility for the work" (Exhibit A, p. 5). A barrister would only be briefed "if your case is to be heard in court" (Exhibit A, p. 5). It is common ground that despite having the proceedings set down for hearing, on 21 December 2011, for a 3-day fixture commencing 2 May 2012, no barrister was ever briefed. 64Ms Liu became a solicitor with five years' experience on 6 October 2011. Was she entitled to charge at the higher rate, in accordance with the costs agreement, for work done all the time, after five years elapsed, or never? The plaintiff contended that, if the costs agreement were set aside, she should only be permitted to charge $300 an hour; the costs assessor set aside the costs agreement but permitted a charge of $350 an hour; the Review Panel set aside the costs assessor's rejection of the costs agreement but permitted Ms Liu to charge $450 an hour, which is inconsistent with the terms. So hotly contested was this issue that Mr Goodridge objected to the tender of the Law Society's records to establish Ms Liu's date of admission, even though this date was clearly stated in the plaintiff's submissions to the costs assessor. 65The defendant argues firstly that charging Ms Liu at a higher rate than her experience is not an error of law. The problem with that argument is that, as no explanation is given for this, the very failure to give such an explanation (in circumstances where she was correctly charged for by the costs assessor, and the plaintiff specifically did not cavil with that finding) is itself an error of law in that there is a failure to give reasons. 66The defendant next submits that Ms Liu's experience was not raised before the Review Panel and that the plaintiff is precluded from doing so now. That is clearly not the case; the correct charge-out rate was applied by the costs assessor, on the basis of her years of experience, and that finding was specifically not challenged in the grounds of review put before the Review Panel. It would have been impossible for the Costs Assessor to have assessed Ms Liu's fees as he did unless he had that information. 67An unqualified person, no matter how experienced, may not engage in legal practice: Defteros v Scott [2014] VSCA 205. Ms Liu's experience as an unqualified person cannot be backdated in the fashion adopted by the Review Panel. If the Review Panel did so, it did so in error. 68The submission is also made that it was open to the plaintiff to make an application under s 375(3)(a) for the Review Panel to consider fresh evidence and submissions on this ground (written submissions, paragraph 30) and that, as no such application was made, it is too late for the plaintiff to complain now. However, the plaintiff had no warning that the Review Panel was going to come to this conclusion, in circumstances where no such error was made by the costs assessor, the plaintiff had specifically accepted the charge out rate the costs assessor chose, and the defendant had not put anything to the contrary. 69In practical terms, however, I suspect that the Review Panel simply made an error in calculation of this figure by not noticing the costs assessor had taken into account that Ms Liu was only entitled to charge this rate from a certain date, and that otherwise her fees had to be charged at the lower rate, just as they are acknowledged to have done in relation to the disbursements the subject of appeal ground 8. 70The combined weight of these errors tells against the Review Panel having given this assessment the careful consideration it required. The errors in both cases involved not insubstantial sums of money. 71 I am satisfied that the Review Panel erred in failing to give reasons for permitting the whole of Ms Liu's fees, as opposed to only part thereof, to be charged at the rate in the costs agreement for a solicitor of more than five years' standing. Alternatively, if it is a mathematical error, the Review Panel may adjust under the slip rule (s 371).

Appeal Ground 8 72The defendant agrees that the disbursements were calculated in error. The total of disbursements claimed should be $3,477 and not $4,800; the error occurred because the Review Panel double counted the photocopying. The defendant submits that this is not amenable to a s 384 appeal and offers to have this error corrected under s 371. 73Given the orders that I have made in relation to the redetermination of the appeal by the Review Panel, the error in this disbursement (and, if it was an error, the error in relation to Ms Liu's fees in Ground 7) are matters which can be corrected in the course of that redetermination.

Whether any error of law established justifies the setting aside of the determination 74The onus is borne by the plaintiff in establishing that the error in question is material to the determination: Honest Remark Pty Ltd v Allstate Explorations NL, supra, at [24]. 75The objections raised by the plaintiff amounted to a substantial sum. In addition, the double counting of photocopying (which is conceded) amounts to a discrepancy of $1,337 and the obvious error in relation to Ms Liu's fees amounts to $7,553. 76The plaintiff was a person who was injured in circumstances resulting in a substantial award of compensation. Ms Castle submits, and I agree, where such persons have been awarded damages for personal injury inclusive of costs, those damages should be preserved as much as possible in order to compensate for the injuries and loss of income suffered. 77I have also considered the costs indemnity principle raised by the defendant. It is correct to say that a party cannot recover more from the opposing party than he owes for his own legal costs. This principle has no application here, in part because this is a solicitor and client assessment, and in part because it is a settlement inclusive of costs where there I accept Ms Castle's submission that there is no question of recovery from the opposing party. 78Is the sole issue, when considering this question, whether the errors are material to the outcome, or is there a public interest factor to take into account? I raised this issue during oral submissions and have received submissions from the defendant. I have read those submissions. They certainly help to explain some of the animosity in these proceedings, but in my view public interest in legal costs issues in personal injury cases is not a relevant factor to take into account, and I have not given it any weight whatsoever. 79I have, however, taken into account a ground that Mr Goodridge did not raise, namely that the defendant has been partly successful in this appeal, in that I am satisfied that the Review Panel's finding that the costs agreement should not be set aside was correct. The amount of costs in question, and the issues of law involved, are significant. I am satisfied that the errors in relation to calculation of the costs were material to the outcome and in addition that the errors of law were of a substantial and serious nature, coupled with substantial mathematical errors. Concluding remarks 80Each of the parties has had some success, in that the matter will be referred to the Review Panel for a fresh determination as to quantum, but on the basis that the Review Panel correctly refused to set aside the costs agreement. The plaintiff was additionally successful in relation to the argument as to whether leave to appeal under s 385 is required. 81I have reserved the issue of costs with liberty to apply in 14 days. If that liberty is not exercised, no order for costs will be entered.

Orders (1)The plaintiff's appeal under s 384 Legal Profession Act 2004 (NSW) allowed in relation to Grounds 2 - 8 (2)The plaintiff's appeal under Ground 1 of the Summons is dismissed. (3)The Certificates of Determination of Costs by Review Panel comprising Review Panellists Stephen John Lancken and John McIntyre dated 3 October 2013 are set aside in part, and the proceedings remitted to the Review Panel for further determination of the quantum of costs only. (4)The defendant's notice of motion filed 23 December 2013 dismissed. (5)Costs reserved with liberty to apply in 14 days; if no application for costs is made, an order that each party pay its own costs will be entered. (6)Exhibits retained for 28 days.

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: 03 September 2014

Legal Profession Act 2004(NSW)

Consumer, Trader and Tenancy Tribunal Act 2001(NSW)

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