Jacups v The Law Society of New South Wales

Supreme Court of NSW|2023-05-30|Before: Rothman J, Chen J

Solicitors: The People's Solicitors (Plaintiff / Respondent) K&L Gates (First / Second Defendant) DLA Piper (Third Defendant / Applicant) File Number(s): 2018/393781

JUDGMENT

HIS HONOUR: Before the Court is a Motion without formal notice, leave for which was arguably granted by the Registrar on the filing of an Affidavit in support, for the Court to order lump sum costs arising from costs orders previously issued. It is necessary to set out the factual background.

Factual History

The plaintiff, Graham Jacups, commenced proceedings against a solicitor, Mr Douglas Knaggs, on 21 December 2018. At the time the proceedings were commenced, Mr Knaggs was deceased.
Mr Jacups alleged that Mr Knaggs acted for him in Family Court proceedings numbered SYC 2360 of 1996 (hereinafter "the Family Court Proceedings") from approximately March 2023. The plaintiff claimed that Mr Knaggs did not perform his services with due care and skill. The claim is, inter alia, a contract claim, but alleges a failure to exercise reasonable care and skill and, as a consequence, is at least arguably governed by the terms of the Civil Liability Act 2002 (NSW).
The Family Court Proceedings related to a separation between the plaintiff and his former defacto partner. At some stage, the plaintiff instructed Mr Knaggs to forward payments to the solicitor for the former defacto partner, to pay amounts that were owing under the orders of the Family Court and prevent the former defacto partner from gaining ownership of some real property as a consequence of default. It is alleged that Mr Knaggs then used those funds to pay amounts owing on the Child Support Register instead. The payment of the amounts owing on the Child Support Register led to the forced sale of the real property to satisfy the Family Court orders. The plaintiff alleges that this was a breach of trust and/or breach of the contract for legal services and/or agreement.

Procedural History

As already stated, the plaintiff commenced the current proceedings on 21 December 2018. At one stage, an application was made by the plaintiff to join the Law Society Fidelity Fund. The plaintiff challenged the decision of the Law Society Fidelity Fund (hereinafter the "Fidelity Fund Proceeding"). The Fidelity Fund proceeding was not at any stage joined with, or subject to an order to be heard together with, the contract proceedings in this Court against Mr Knaggs. The Fidelity Fund Proceeding has been heard and judgment is reserved.
On 16 September 2019, the plaintiff filed a Notice of Motion seeking leave to join Lawcover Pty Ltd, Lawcover Insurance Pty Ltd and The Law Society of New South Wales (hereinafter "the Law Society") to these proceedings against Mr Knaggs. The Motion, notice of which was filed on 16 September 2019, will hereinafter be referred to as the "First Motion".
The First Motion was listed to be heard on 11 February 2020. The plaintiff terminated the retainer for his barrister, applied for an adjournment and, after it was denied, left the court room.
On 27 April 2022, the plaintiff filed a second Motion (hereinafter "the Second Motion"), which again sought to join the Law Society to the proceedings. On 29 August 2022, the Common Law Registrar issued judgment dismissing the Second Motion and awarded costs to the Law Society ("the First Costs Order").
On 3 October 2022, a further Notice of Motion seeking the same relief was filed (hereinafter "the Third Motion"). The Third Motion was listed before the Court, Chen J, on 3 February 2023.
The plaintiff sought an adjournment on that date, but the matter proceeded, and the Court dismissed the Third Motion with costs ("the Second Costs Order"). At a directions hearing, the Law Society
informed the Registrar that it sought lump sum costs, and the Registrar directed that an Affidavit supporting the same be filed by a particular date, which has occurred. The matter before me is the Motion, albeit without a formal Notice, for an order for lump sum costs arising from the First Costs Order and the Second Costs Order.

Summary of Evidence and Submissions

The Law Society relies on the Affidavit of James Robert Morse of 24 March 2023. Mr Morse is the solicitor for the Law Society and the Affidavit provides a chronology of the proceedings, the most salient aspects of which have been summarised above.
Mr Morse testifies that he has been a solicitor since August 2007, is an accredited specialist in commercial litigation, and has significant experience in costs assessments and costs disputes. Mr Morse sets out the rate charged for his costs, which was $731 plus GST per hour, and the rate for his assisting solicitor in the matter, Ms Puglisi, which rate is $425 plus GST per hour.
Over and above the foregoing, counsel was briefed in the matter and counsel's charge out rate is the subject of evidence in the foregoing Affidavit. Counsel charged between $420 and $475 plus GST per hour or $4,200 plus GST per day at the relevant time.
The Affidavit also sets out that the total costs incurred by the Law Society in connection with these proceedings was over $27,800 plus GST in connection with the Second Motion, which is made up of $7,800 plus GST in respect of counsel's fees and a further $20,000 for solicitors' fees. Mr Morse is a partner in DLA Piper Australia and the solicitors' fees are those billed to DLA Piper. Presumably those fees include any disbursements.
A further $35,900, plus GST was incurred in connection with the Third Motion reflecting over $29,000 plus GST in respect of solicitors' fees, and over $6,900 plus GST in respect of counsel's fees.
The Affidavit of Mr Morse calculates an amount that ought to be paid by way of lump sum between $47,530 to $51,450, based upon a calculation of that which, in the experience of Mr Morse, would be ordered on costs. That calculation is based upon an allowance of between 70% and 75% of solicitors' and counsel's fees and between 90% and 100% of disbursements. Notwithstanding the foregoing calculation, the Law Society seeks a lump sum payment of $37,500 which it submits is an entirely reasonable sum in the circumstances.
The plaintiff, who is the respondent to the motion, being Mr Jacups, relies upon the Affidavit of Peter Vogel of 19 May 2023. Mr Vogel is the plaintiff's current solicitor. The Affidavit annexes various transcripts of proceedings in this matter and does not otherwise depose to any facts.

The Plaintiff's Submissions

Written submissions were filed by each of the parties. The plaintiff submits that there is insufficient evidence of the costs that the Law Society seeks to recoup. The plaintiff submits that a bare statement of the total costs and disbursements is not sufficient for the Court to be confident that the amount claimed is appropriate. [1]
Over and above the foregoing, the plaintiff submits that, even if there were sufficient evidence of the costs, a lump sum costs order would not be justified for a number of reasons. Essentially those reasons are: 1. The plaintiff sought to join these proceedings with the Fidelity Fund Proceeding at a directions hearing on 7 December 2021 and the Law Society opposed that course on the basis that the Law Society was not a party to this proceeding at the time; 2. The plaintiff submits that the judgment is now outstanding in the Fidelity Fund Proceeding and the judgment in that matter may bear on the costs dispute now before the Court in which the same parties are involved; 3. The plaintiff also submits that the Law Society's costs were occasioned by its own excessive conduct. Its costs are disproportionate to the issues in this case and it did not engage in mediation or agree to join this and the other Fidelity Fund Proceedings: 4. The costs of the First Motion, which were reserved, the plaintiff submits, would not be dealt with under this application and, as a consequence, the application would not have the effect of providing finality and preventing ongoing disputes.
The plaintiff submits that the application is vexatious and that he should be entitled to contest the reasonableness of the costs claimed in the normal way.
In the course of oral submissions, the plaintiff raised two bases upon which the Court ought not, or could not, issue the orders sought. First, it is said that because a Notice of Motion was not filed in accordance with the Uniform Civil Procedure Rules 2005 (NSW) (hereinafter "UCPR"), r 18.2, which, it is said, requires a Notice of Motion before any such order can be made, the Court could not entertain the application. Secondly, the Court does not have jurisdiction to make the order, because the Law Society is not a "party" to the proceedings and, therefore, is not a person entitled to such an order pursuant to the terms of s 98(4) of the Civil Procedure Act 2005 (NSW).

Submissions of the Law Society

It is unnecessary to deal extensively with the submissions-in-chief of the Law Society. It is sufficient to deal with some aspects of them. As to the criticism levelled against it in relation to the opposition for the joinder of these proceedings with the proceedings against the Fidelity Fund Proceedings, the Law Society submitted that it was inappropriate for those proceedings to be joined and/or inappropriate for the Law Society to agree to joinder.
The basis upon which the inappropriateness of the agreement of the Law Society was based were: that the Law Society was not a party to the Fidelity Fund Proceedings; the proceedings were at different stages of readiness; and, the proceedings involved different causes of action and different issues. Further, the plaintiff had not formally applied for joinder and, it is submitted, the plaintiff's criticism in this regard is therefore without merit.
The Law Society also submits that the criticism levelled against it for failing to agree to mediate is unwarranted in circumstances where the Law Society has no liability to the plaintiff. The absence of liability is reflected in the multiple opportunities that the plaintiff has had to join the Law Society, all of which have failed. The Law Society cannot, it is submitted, be criticised for failing to mediate a claim to which it has never been joined.
The Law Society's submission also dealt with the costs of the Fidelity Fund Proceedings and noted that the costs in those proceedings are separate and distinct to the costs in these proceedings, which are the subject of the current application. The Law Society submits that on that basis, the costs in the Fidelity Fund Proceedings are not a relevant consideration to the exercise of the discretion to grant a gross sum costs order, as is sought. As for the costs on the First Motion, which were previously reserved, they would be finalised by this application, if it were successful, which is intended to deal with all of the costs to which the Law Society is entitled.

Consideration

As earlier stated, on 11 April 2023 Registrar Jones made orders after being informed by the Law Society that it sought a gross sum costs order. The issue was to be dealt with by the Duty Judge and the learned Registrar ordered that the Law Society file and serve any further evidence in support of the application for a gross sum costs order by 3 May 2023.
The learned Registrar also ordered that the plaintiff file and serve all evidence in reply by 19 May 2023, and granted the parties liberty to restore. The matter was then listed before the Duty Judge.
Reliance on strict compliance with UCPR rule 18.2 is, in my view, misplaced. First, by operation of s 14 of the Civil Procedure Act, the Court, including a Registrar thereof, may dispense with any requirement of the rules of court if satisfied that it is appropriate so to do in the circumstances. The UCPR are defined as rules of court. [2]
The effect of the order of the Registrar was that the application made orally before the Registrar would be dealt with by the filing of Affidavits and, supplementary thereto, written submissions. Such an order implicitly dispenses with the need for a Notice of Motion, particularly in circumstances where notice of the Motion for which the Law Society was applying had been given in court well before the date upon which the matter was to be heard.
Secondly, UCPR r 18.1 prescribes that an interlocutory order be made by Motion unless the rules otherwise provide. The terms of r 18.2(1) must be construed in a manner that gives effect to the purpose of the legislature, resolves any disharmony in the document and otherwise accords with the overriding purpose of the Civil Procedure Act.
The overriding purpose of the Civil Procedure Act is to facilitate the just, quick and cheap resolution of issues between the parties. The provisions of r 18.2(2) disclose that the terms of r 18.2(1) are not intended to be mandatory, if that be a term capable of being used in relation to rules that are capable of dispensation
The provisions of UCPR r 18.2 allow an applicant to move a court, without Notice of Motion being filed, in circumstances where, relevantly, the preparation, filing or service of the notice would cause undue delay or other prejudice, or the court dispenses with the requirement. At least implicitly, given that notice was provided in court orally, the Registrar dispensed with the requirement to file a notice by ordering that the matter proceed by way of Affidavit evidence and written submissions.
In part, the provisions of UCPR Pt 18 are intended to provide parties with a reasonable opportunity to prepare and to present the case the party seeks to present in answer to any application for orders that may affect that party. In that purpose, the rule requires procedural fairness, which, in turn, requires that each party be given a reasonable opportunity to prepare and to present its case. [3]
It is not suggested by the plaintiff/respondent that the absence of a Notice of Motion has caused any prejudice or lack of opportunity, reasonable or otherwise, to prepare and to present the case he desires. In those circumstances, even if the Registrar's orders did not implicitly dispense with the requirement to file a Notice of Motion, the Court, as presently constituted, would, nunc pro tunc issue such dispensation.
This plaintiff's second submission which the Court described as "technical", as earlier noted, was that the provisions of s 98(4) of the Civil Procedure Act do not permit the Court to make an order for gross sum costs, because the Law Society is not a "party" to the proceedings. In my view, this submission is untenable. There are a number of reasons for that description, but two will suffice.
Most obviously, s 98(4) of the Civil Procedure Act refers to a costs order made under s 98(1) of the Civil Procedure Act. Before the Court, both the Registrar and Chen J, were Motions by the plaintiff to join the Law Society. As a consequence, the costs orders made by the Registrar and Chen J were made against the plaintiff and in favour of the Law Society who was a party to the Motions.
As a "party" to the Motions, the Law Society is expressly entitled to seek the benefit of an order under s 98(4) of the Civil Procedure Act. To hold otherwise would be inconsistent with the previously stated overriding purpose of the Act, would unduly limit the power and discretion of the Court and fly in the face of the express words of s 98(4) of the Civil Procedure Act. Further, in my view, the term "party" in s 98(4) of the Civil Procedure Act refers to a "party" to the original costs order under s 98(1).
The second reason is slightly more esoteric, but needs to be stated. The Court was established by Royal Charter of Justice in 1824, with all the powers of the Courts of Westminster and Chancery. The Supreme Court is a superior court of record with general and equitable jurisdiction and, well before the Judicature Acts, the judges of the Court would exercise powers in both equity and common law. As Gaudron J noted, [4] in agreeing with Mason CJ and Deane J: "[205] It is contrary to long-established principle and wholly inappropriate that the grant of power to a court (including the conferral of jurisdiction) should be construed as subject to a limitation not appearing in the words of that grant. Save for a qualification which I shall later mention, a grant of power should be construed in accordance with ordinary principles and, thus, the words used should be given their full meaning unless there is something to indicate to the contrary. Powers conferred on a court are powers which must be exercised judicially and in accordance with legal principle. This consideration leads to the qualification to which I earlier referred. The necessity for the power to be exercised judicially tends in favour of the most liberal construction, for it denies the validity of considerations which might limit a grant of power to some different body, including, for example, that the power might be exercised arbitrarily or capriciously or to work oppression or abuse." (References omitted.)
In the foregoing extracted judgment, Gaudron J was part of the majority in which the joint judgment of Mason CJ and Deane J, together with the judgment of Dawson J traced the history of the costs power in courts, particularly originally courts of equity which were adopted at a later time by common law courts. [5] The provisions of ss 22 and 23 of the Supreme Court Act 1970 (NSW) continue the jurisdiction of the court and provide the court with all of the jurisdiction "necessary for the administration of justice in New South Wales".
In the sense used in s 23, "necessary" must be understood as identifying a jurisdiction to make orders which are "reasonably required or legally ancillary" to the administration of justice, and does not have the meaning of "essential"; but is "subjected to the touchstone of reasonableness". [6] The provisions of s 98 of the Civil Procedure Act apply to all courts exercising civil jurisdiction in New South Wales. It is not intended to limit the jurisdiction and powers that may otherwise exist in this Court.
It is necessary to turn to the substance of the proceedings and the orders sought. The principles that apply to the ordering of lump sum costs were summarised by Giles JA in Harrison v Schipp. [7] His Honour described the power as one that "should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available". [8] Such an order should only be made where it would be fair to both parties and the estimate of costs must be logical, fair and reasonable. [9]
The Court has indicated, on a number of occasions, that the provisions of s 98(4) of the Civil Procedure Act confer a discretion on the Court which is not confined and which may be exercised whenever the circumstances warrant it. [10]
Circumstances which have been held to warrant the making of a lump sum costs order include where the costs assessment is likely to be lengthy and expensive and otherwise out of proportion to the modest amount of costs being assessed. Other circumstances include where the assessment of costs would be protracted and expensive and, in particular, if it appears that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from an assessment.
As already noted, the plaintiff relies upon the judgment of the Court of Appeal in Colquhoun [11] and submits that the order should not be made when there is insufficient evidence of the costs incurred or the basis of the costs incurred. In that case, the costs incurred were evidenced by an assertion in an Affidavit of a solicitor for the applicant. The Court determined that such a basis was insufficient to determine an amount that was appropriate, as it did not cover the timing of the amounts incurred, the rates of various fee earners or the amount likely recoverable on assessment.
However, in this case, the Affidavit of Mr Morse, to which reference has already been made, addresses each of those factors. It provides a breakdown of the amount incurred and the rate per hour of each of the persons performing work in relation to the Second and Third Motions separately. The Affidavit also sets out separately the hourly rates of solicitors and counsel and the basis upon which the amount sought would be recoverable on an assessment. It seems to me that significantly more detail has been given than was the subject of comment in Colquhoun, supra.
The assessment that the Court is required to undertake is one that needs to have reference to the pleadings and the complexity of the issues raised on the pleadings; the interlocutory processes involved and to which the costs relate; and the preparation for final hearing and the final hearing, in this case irrelevantly. The Court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment. [12]
The Court of Appeal [13] has, in some cases, undertaken an assessment of the different components of the costs, including the rates and hours billed per lawyer, in the context of the litigation as a whole. Further, the Court held [14] that ordinarily a discount is applied when calculating a gross sum costs order to reflect the fact that, on assessment, parties usually fail to recover the entirety of their party-party costs. In some respects, the Law Society has already undertaken the task of applying a discount and the $37,500 that is sought in the gross sum costs order is a discounted amount from a total cost of $63,700 and represents less than 60% of the total costs incurred.
The Court accepts that the hourly charge out rates indicated in the Affidavit and referred to above are reasonable. Similarly, the Court accepts that the daily fee for counsel is a reasonable fee. The information before the Court is not sufficient to determine whether, for example, for each of the interlocutory hearings, counsel charged a daily fee or on an hourly basis. Each interlocutory hearing was short.
During the course of the proceedings, the Court remarked that a total amount incurred of $63,700, intuitively, seemed a significant amount for two short interlocutory hearings. I am prepared, readily, to concede that I am out of touch with modern litigation costs. I accept that the hourly rates are, even on an intuitive basis, reasonable.
These are two interlocutory hearings of short duration involving whether the Law Society has a liability and should be joined as a party to the proceedings. It seems to me that, including preparation, a reasonable sum to allow, after discount, is $15,000 per hearing, including preparation. I accept that the plaintiff is unlikely to be able to meet the liability of the costs order that he is obliged to pay and the assessment of costs would be protracted and expensive, given the nature of the interlocutory hearings that have been finalised and, in that respect, finalised the involvement of the Law Society in those proceedings.
For all of the foregoing reasons and applying the foregoing principles, I would allow an amount of $30,000 as a lump sum order.
The Court makes the following orders: 1. Pursuant to the terms of s 98(4) of the Civil Procedure Act 2005 (NSW), the plaintiff shall pay to The Law Society of New South Wales an amount of $30,000 as the specified gross sum, in lieu of assessed costs, in relation to the costs orders previously issued by the Court, being the orders of Registrar Jones on 30 August 2022 and Chen J on 3 February 2023. 2. Costs of this Motion are included in the foregoing order.

Endnotes

Colquhoun v District Court of NSW (No 2) [2015] NSWCA 54 at [5]-[7].
Civil Procedure Act 2005 (NSW), s 10.
Sullivan v Department of Transport (1978) 20 ALR 323 at 343; [1978] FCA 48.
Knight v F.P.Special Assets Ltd (1992) 174 CLR 178 at 205; [1992] HCA 28.
Ibid, at CLR 185, 186, 187, 188, 189 and 193-197.
Pelechowski v The Registrar, Court of Appeal (1999) 198 CLR 435 at 452 (Gaudron, Gummow and Callanan JJ); [1999] HCA 19 at [51].
Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213.
Ibid, at [22].
Ibid.
Hamod v State of NSW [2011] NSWCA 375; Constantinidis v Prentice (No 2) [2023] NSWSC 160.
Colquhoun v District Court of NSW (No 2) [2015] NSWCA 54.
Harrison v Schipp, supra, at 743.
Zepinic v Chateau Constructions Aust Ltd (No 2) [2014] NSWCA 99.
In the matter of Aquaqueen International Pty Ltd [2015] NSWSC 500. 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: 06 June 2023

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