Kennett v Muc t/a GH Healey & Co

The relevant statutory scheme and applicable legal principles 33Section 353(1) permits those entitled to receive costs pursuant to a costs order to apply to the Manager for their assessment. Section 354(1)(a) relevantly provides that an application for a costs assessment must be made in accordance with the regulations, if any. 34Clause 124(1) of the Legal Profession Regulations 2005 (the Regulations) contains the requirement laid down for the purposes of section 354(1)(a) that an application for assessment be made in the approved form. 35Clause 125(1) sets out a procedure which applies to applications for assessment which are made, as here, by persons to whom costs are payable. It relevantly provides that the person proposing to make the application is to complete the application and send it to the respondent to the application advising that person that any objection must be lodged with the applicant 21 days after the person receives the notice. The applicant is then to lodge any objection received before lodging the application. If no objection is received, the applicant is to certify that no objection was received by the applicant before the application was lodged. The applicant is obliged to forward any objection received after the application has been lodged to the costs assessor to whom the application for assessment has been referred, together with the applicant's response to such objection, if any. 36Section 357(1) is a mandatory provision that provides that the Manager is to refer each application for costs assessment to a costs assessor to be dealt with under the Division. Section 358(1) confers power on the costs assessor to require production of documents and the provision of information from the parties to the assessment. Section 359(1) requires a costs assessor to provide a reasonable opportunity to the parties to the assessment for the provision of written submissions. 37Section 364 sets out the matters to be considered by the costs assessor in assessing legal costs payable as a result of an order made by a court or tribunal. The matters that must be taken into account are whether it was reasonable to carry out the work to which the costs relate, whether or not the work was carried out in a reasonable manner and what is a fair and reasonable amount for the costs for the work concerned. This provision is to be contrasted with section 363 that deals with assessment of legal costs as between client and solicitor and which lists additional matters which may be taken into account, including whether a lawyer has complied with relevant legislation or legal profession rules. 38Section 367(1) sets out how a costs assessor is to determine an application for assessment of costs payable as a result of an order: namely, by making a determination of the fair and reasonable amount of those costs. The obligation to make a determination is provided for by s 367A. Once the determination is made, the costs assessor is obliged to issue a certificate under s 368. Section 370 requires reasons to be given. 39Section 373 provides that any party to a costs assessment who is dissatisfied with a determination may, within 30 days after the s 368 certificate has issued or within such further time as the Manager may allow, apply for a review of the determination. An application for review must ensure that notice of the application for review is given to the other parties to the assessment not less than 7 days before the application is made. 40 The application for review is then referred to a panel that comprises two costs assessors: s 374. Section 375 provides that the review panel has the same functions of the costs assessor to make a determination. The panel then reviews the determination on the basis of the evidence and submissions that were before the costs assessor, unless the panel determines otherwise. 41The Manager's power to extend the time for making an application for review of a determination by a costs assessor is contained in s 373(1) of the Act, which provides that such an application is to be made within 30 days after the certificate setting out the determination has been forwarded to the parties "or within such further time as the [Manager] may allow". 42Section 384 provides that a party to an application for costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law may appeal to the District Court against the decision. The District Court may make such determination as ought to have been made or remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application. 43The following can be distilled from the statutory scheme summarised above. By reason of the language of s 357(1) the Manager has no discretion whether to refer an application to a costs assessor. A costs assessor is authorised only to assess and determine a fair and reasonable amount of costs for the work concerned. A costs assessor has no power to determine any wider issue or dispute between the parties or any matter extraneous to the fairness and reasonableness of the amount of costs for the work concerned. 44Were the word "objection", as it appears in cl 125, accorded its ordinary English meaning it would have the effect that any expression of disgruntlement that passed between the respondent and the applicant after service of the draft application would have to be forwarded to the Manager and in turn to the costs assessor even in circumstances where, as here, it could not be taken into account by the costs assessor since it does not address any matter germane to the costs assessment. 45In my view, the context in which the word "objection" appears in cl 125(1) is sufficient to indicate that its ordinary English meaning ought be confined. The word "objection" in cl 125 of the Regulations means an objection that is rationally capable of bearing on the fairness and reasonableness of particular items of costs covered by the costs order. The word "objection" in this context does not include general objection to making payment based on, for example other amounts owing between the parties, extraneous to the work said to have been done which is covered by the costs order. 46An objection that is made before the application is lodged with the Manager does not have any greater or lesser weight or effect than either one which is made after the Manager has referred the costs assessment to a costs assessor or one which is submitted in response to an invitation from the costs assessor. 47The review conducted by the panel is a review on the merits. The panel will usually determine the review on the basis of the material which was before the costs assessor. 48The appeal to the District Court arises only on a matter of law. The District Court does not engage in merits review of the application. 49The Manager's decision whether to extend time to apply for review of a costs assessment is an administrative one, which is subject to judicial review: Khan & anor v Jenni Mattila & Co Lawyers [2011] NSWSC 71 at [39] per Garling J. 50This Court has power under s 69 of the Supreme Court Act 1970 to engage in judicial review of administrative decisions made under NSW legislation. In engaging in such judicial review, the Court is concerned with the legality as opposed to the merits of the decision. Whether the Court grants relief under s 69 is a discretionary matter. The existence of other avenues of relief for which Parliament has provided is a relevant matter in the exercise of the discretion.

The Invalidity Case: the alleged invalidity of the costs assessment 51In order to decide whether the plaintiff succeeds on its invalidity case, four questions arise, the short answers to which follow: (1)Did the Application comply with the Act and the Regulations? Yes. (2)Did the Assessment comply with the Act and the Regulations? Yes. (3)Does any non-compliance make the Determination invalid? Not applicable, but, in any event, no. (4)Was there a denial of natural justice that preceded the Determination? No. (5) If so, ought the declaratory relief claimed be granted? Not applicable, but in any event the declaratory relief ought be refused because the plaintiff failed to avail himself of the alternative avenues of relief provided for by the Act.

Did the Application comply with the Act and the Regulations? 52The plaintiff submitted that the letter of 20 July 2011 constituted an "objection" within the meaning of cl 125 of the Regulations and that since it was not attached to the Application, the Application did not comply with cl 125. 53The letter of 20 July 2011 does not raise any matters concerning any of the items in the 526 items of the bill attached to the draft application sent on 23 June 2011. All it does is make allegations concerning the plaintiff's claims against his Solicitors. Those claims, even if they were made out, do not bear in any way upon the application for assessment of the Solicitors' costs. Accordingly, the letter is not an "objection" within the terms of that clause because it contains no objection to the fairness or reasonableness of part or all of the costs to be assessed. 54The plaintiff sought to construe the following passages from the Manager's letter of 18 October 2011 as an admission that there had been non-compliance with clause 125: 3. Whilst it is possible that there is some irregularity in the application by not stating there was any objection to the application, that irregularity is relatively minor and cured as the objection was provided to Mr Webley on 4 October 2011. I do not consider the application to be invalidly made. . . . Any dissatisfaction with this outcome may ground a review application. 55I do not consider that these matters, fairly read, would amount to admissions. In any event, the question whether the letter of 20 July 2011 is an objection within the meaning of cl 125 is to be determined by this Court and not by the Manager's view, even if one had been expressed. 56In my view, the application form was filled in correctly when it stated that no objection had been received. The letter of 20 July 2011 was not an "objection" that should have been annexed to the application when it was lodged. It is therefore not necessary to consider the effect of s 80 of the Interpretation Act since the form was completed in the specified manner.

If the Application does not comply, does the non-compliance make the Determination invalid? 57This question does not need to be answered. However, in deference to the parties' submissions, I should indicate that I do not consider that Parliament intended that failure to comply with the stipulated requirement would invalidate the costs application or the consequential assessment. The matter is to be determined by reference to the principles enunciated in Project Blue Sky Inc v Australian Broadcasting Authority (Project Blue Sky) [1998] HCA 28; (1998) 194 CLR 355 at [91] - [100] per McHugh, Gummow, Kirby and Hayne JJ, and Tasker v Fullwood [1978] 1 NSWLR 20 at 23E-25B per Hope, Glass and Samuels JJA. 58First, the requirement to attach an objection to the application is a purely procedural one, the evident purpose of which is to do no more than ensure, for reasons of efficiency, that the area of dispute between the parties to the assessment is as well delineated before the application for assessment is lodged as it can be. Nothing precludes an objection being made at a later time. Indeed, cl 125(1)(f) expressly contemplates that an objection might come in after the application has been lodged. 59Secondly, any adverse consequences of an objection not being attached to an application for assessment are easily overcome. In any event s 359 of the Act requires the costs assessor to give the parties a reasonable opportunity to make written submissions. Any objection that had been omitted from an application for assessment could conveniently be submitted as part of that process. The receipt of any objection does not qualify the obligation of the Manager to refer the application to a costs assessor for assessment. Therefore the timing of receipt of an objection is irrelevant, as long as it is received before the deadline set by the costs assessor for submissions. 60Furthermore significant inconvenience would be likely to arise if a failure to attach an objection in compliance with cl 125 invalidated the costs assessor's final determination. Much time and cost would be taken if that were to occur. The waste would be entirely disproportionate to the likely consequences of the failure to attach the objection to the application, given that an objection could be made in written submissions in any event. This is a powerful factor that weighs against invalidity: Project Blue Sky, at [97] per McHugh, Gummow, Kirby and Hayne JJ. 61Mr Darke, who appeared for the Solicitors, fairly drew my attention to Brierley v Reeves [2001] NSWCA 189; (2001) 51 NSWLR 689 in which the Court of Appeal held at [40] that if an application for a costs assessment was not made in accordance with the then s 203 of the Legal Profession Act 1987, within the prescribed time, the proper officer of the Supreme Court, the Manager's statutory predecessor, had no jurisdiction in relation to the application. I accept Mr Darke's submission that Brierly is distinguishable since it concerned differently worded legislation and since the relevant failure was the failure to make an application for waiver within a specified time limit as distinct from a failure to attach a document.

Did the Assessment comply with the Act and the Regulations 62The plaintiff submitted that the Costs Assessor failed to have regard to non-compliance by the Solicitors with the requirements of cl 125 of the Regulations and that this matter was relevant to the assessment of costs. 63I understood the plaintiff's submission to be as follows: (1)the Solicitors were professionally obliged to comply with the law and to comply with professional obligations of frankness; (2)by certifying on the Application that no objection had been received, they failed to comply with the law and their professional obligations since the letter of 20 July 2011 amounted to an objection; (3)whether lawyers have complied with the relevant legislation or legal profession rules is a matter to be taken into account under s 363(2) of the Act; (4)the Costs Assessor did not take into account the Solicitors' conduct referred to above; (5)accordingly, the Assessment should be set aside. 64I reject this submission. The plaintiff has not identified any professional or legal obligation of which the Solicitors were in breach, save that alleged to arise from cl 125 in respect of which I have found no non-compliance. Section 363 does not apply in the instant case because it applies to costs assessments between solicitors and their own clients, rather than costs payable pursuant to a court order. In any event the conduct of a legal practitioner is not a mandatory relevant consideration, since it is referred to in s 363(2), rather than s 363(1). Accordingly a failure to take it into account is not an error of law: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 (Peko-Wallsend) at 39 - 41 per Mason J.

Whether there was a denial of natural justice 65The plaintiff submitted that, although the Costs Assessor had stipulated a deadline for submissions of 20 October 2011, he was required to give the parties a final chance to make submissions before making the Assessment and to fail to do so was a denial of natural justice. I reject this submission. Natural justice requires that parties be given an opportunity to be heard, not that they be given several opportunities to be heard. I do not consider the plaintiff to have been denied natural justice.

The availability of relief from this Court 66Even had I otherwise considered the Application and Assessment to be invalid, I would not have been disposed make a declaration to that effect or to stay the operation of the Certificate. As set out above, the Act provides a distinct mechanism for appeals to the District Court from a decision or determination of a costs assessor of which the plaintiff has not availed himself. The plaintiff could have appealed to the District Court pursuant to s 384 either against the Costs Assessor's decision that the non-attachment of the letter of 20 July 2011 was not a basis on which to delay the assessment or against the Determination itself. In those circumstances, this Court should not lightly reward the circumvention of such provisions: see, in this context, Gorczynski v Leichhardt Council [2007] NSWSC 202 at [16] - [25] per Hidden J and Currabubula v State Bank of NSW [2000] NSWSC 232 at [54] - [69] per Einstein J.

The judicial review case: the Refusal 67The factors to be taken into account by the Manager in deciding whether to grant an extension of time for the review application are to be determined from the subject-matter, scope and purpose of legislation: Peko-Wallsend at 39 - 40 per Mason J. 68Although the plaintiff originally submitted that the merits of the application were not relevant, he ultimately agreed, correctly in my view, that they were. Accordingly, the plaintiff accepted that the merits of the application, the delay, the explanation for the delay and prejudice were relevant considerations that were taken into account. The plaintiff has been unable to identify any irrelevant consideration that was taken into account.

Mandatory relevant consideration: interests of justice 69The plaintiff submitted that the interests of justice were a mandatory relevant consideration and that the Manager failed to take them into account. It is apparent from the Reasons that the Manager had regard to what is "just and fair in the circumstances". Even if one were to accept that the interests of justice were a mandatory relevant consideration, I consider that they were taken into account. Although the Manager did not use the expression "interests of justice" I consider his reference to what is just and fair to encompass the same matters.

Mandatory relevant consideration: the conduct of the Solicitors' solicitors 70The plaintiff submitted that the conduct of the Solicitors was relevant under s 363 and that accordingly it ought to have been considered by the Manager in deciding whether to extend time for the Review Application. For reasons already given I do not consider that there was any breach by the Solicitors or that s 363 applies to assessments of costs pursuant to court orders. In any event I do not consider that, even if it were a consideration relevant to the decision whether to extend time for the Review Application, it could conceivably be regarded as a mandatory relevant consideration. I reject the submission.

Whether the decision was manifestly unreasonable 71The plaintiff submitted, in substance, that the delay sought to be excused was so small and the time required for an extension so short that to fail to grant an extension was manifestly unreasonable and therefore this Court should set aside the Refusal. 72It is apparent from the Reasons that the Manager had regard to the delay, the explanation for the delay, the merits of the out-of-time Review Application, whether there was any prejudice and what is "just and fair in the circumstances". The Manager noted that the delay was approximately one week. He considered that the explanation for delay was insufficient but "not so much as to weigh against extending time". He did not consider there to be any direct prejudice to the parties. The Manager considered the decisive factor to be the merits of the application. 73The Manager dealt with the complaints made by the plaintiff about the Assessment in the following terms: "The jurisdiction of a party/party assessment is the cost order made by the Court or Tribunal that is set out in the application under s 353 of the Legal Profession Act 2004. It may be that there are competing costs orders or other orders related to the costs order, but an assessor is bound to determine the costs orders put forward by the applicant. A costs assessor does not have jurisdiction to go behind the costs order to sort out any other competing issues between the parties, the task is straightforward, to assess the fair and reasonable costs the subject of the order or orders in the application before him or her. The general objection that the costs assessment cannot proceed because there are competing orders or other orders relating to the same proceedings between the parties that might form some sort of offset of debts between the parties is not a relevant consideration for a costs assessor. It may be if competing applications are filed at the same time, which commonly occurs, an assessor will conduct an assessment of each and may produce complementary determinations and certificates. Otherwise, it is not for an assessor to determine what balance of monies is to be owed between parties in relation to orders not the subject of the assessment, nor decline to continue to assess the application if other orders are outstanding. All of such matters are a question of enforcement, which is beyond the scope or jurisdiction of a costs assessor." 74The Manager concluded in the Reasons: "The merits are questionable as they simply put in issue the validity of the assessment process and the basis of questioning the process is simply incorrect." 75I consider the Manager's view to be plainly correct. The matters on which the plaintiff relied or sought to rely, that is, his asserted claims against the Solicitors, were not rationally capable of bearing on the costs assessment. The so-called "objection" was not relevantly an objection for the purposes of cl 125 of the Regulations and could not, whenever it was received, have been taken into account by the Costs Assessor. 76Furthermore, if an extension had been granted, the panel would have proceeded on the basis of the material that was before the Costs Assessor. Since the Costs Assessor did not have before him any evidence as to why the costs claimed by the Solicitors were not fair and reasonable, it is difficult to see how the review panel could rationally have come to a different view.

Orders 77For the foregoing reasons, I make the following orders: (1)Dismiss the plaintiff's claims for relief in prayers 1-5 of the summons. (2)Order the plaintiff to pay the costs of the proceedings in so far as they relate to the claims for relief in prayers 1-5 of the summons. (3)Stand over the plaintiff's claim for relief under prayer 6 of the summons to a date before the Registrar.

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: 26 February 2013