Keybridge Capital Limited v Bell Potter Securities Limited

Supreme Court of NSW|2024-04-11|Before: Lonergan J, Rees J

JUDGMENT

By summons filed 28 February 2024, the plaintiff, ("Keybridge"), appeals from an assessment of costs by a Review Panel ("the Panel") issued on 29 January 2024.
The appeal is brought pursuant to s 89(1)(b) of the Legal Profession Uniform Law Application Act 2014 (NSW) ("the Application Act") and is in the nature of a rehearing: (s 89(4)). This means that this Court's powers are exercisable only where the appellant - here, Keybridge - can demonstrate that having regard to all the evidence now before the Court, the decision that is the subject of the appeal is the result of some legal, factual or discretionary error.
The appeal is brought as of right because the grounds raise a dispute as to the entire amount of the costs assessment, which was more than $100,000.00.
Keybridge asserts that the costs were not proportionate, and the Panel failed to give any, (or any proper), consideration to proportionality in the assessment it made. The appeal grounds as set out in the summons are: "7. The Review Panel erred in that the costs determined to be payable were not a fair and reasonable amount of costs for the work concerned in that they were not proportionately and reasonably incurred or proportionate and reasonable in amount by reference to the scope of the dispute subject of the proceedings in which the costs were ordered to be paid; and 8. The Review Panel erred in that it failed to give any or any proper consideration to the proportionality between the costs sought on a party/party basis and: a. the length of the hearing resulting in the party/party costs order; b. the complexity of the issues in dispute; c. the scope and volume of evidence admitted in the proceeding; and d. the number of witnesses called in the proceeding."

The underlying proceedings

The case concerned an allegation of breach of warranty of authority. The issues for determination were succinctly outlined in the opening paragraphs of the judgment in August 2022 of Rees J: Keybridge Capital Ltd v Bell Potter Securities Ltd [2022] NSWSC 1022: [1] Keybridge Capital Ltd sues stockbroking firm, Bell Potter Securities Ltd, for damages for breach of warranty of authority. Bell Potter is said to have represented itself to be the agent of Roy Mironi and authorised as such to purchase all shares held by Keybridge in Molopo Energy Ltd, when it held no such authority. Bell Potter is said to have thereby induced Keybridge to sell its shares at 25 cents a share, causing loss of some $10 million. [2] More particularly, in a one minute telephone call on 27 April 2015, Bell Potter's senior equities advisor, Bradley Shallard is said to have told Keybridge's managing director, Nicholas Bolton, "I have a firm bid from our client at 25 cents for all your Molopo shares." Keybridge says that "firm" has a special trade meaning; a "firm bid" is a bid capable of becoming immediately binding upon acceptance. Half an hour later, Mr Bolton rang back and, in a four minute conversation, said he was "happy to match". Keybridge contends that a contract was thereby formed; Bell Potter induced Keybridge to contract with Bell Potter as the agent of Mr Mironi. The case turns on whether "firm" has the special trade meaning asserted and whether a contract came into existence…".
The proceedings were commenced in the Supreme Court Common Law Division in April 2021, and claimed a loss of over $10 million framed in breach of warranty of authority as against Bell Potter and against a named person, Mr Mironi, for breach of contract, although it appears Keybridge never served Mr Mironi and took no steps to pursue that part of the case. The proceedings were commenced at the very end of the limitation period. Bell Potter, in submissions to the Assessor, stated that there was no warning or pre-commencement discussions. This had the effect that all of Bell Potter's preparation was in response to a litigated position. This is relevant to the party/party costs context of the bill of costs ("the Bill").
At the request of Bell Potter, the proceedings were transferred to the Equity Division Commercial List. A Response was filed on 5 August 2021, including comprehensive and detailed responses to Keybridge's contentions. There were some preliminary skirmishes regarding discovery of documents and amendments to the statement of claim. The matter was listed for a three-day hearing which proceeded on 2, 3 and 4 May 2022. Detailed written submissions and chronologies were filed by each party in late April 2022.
Both the parties were represented by senior and junior counsel at trial. On 2 May 2022, counsel for Keybridge provided a short oral opening and then called Mr Bolton. Mr Bolton was extensively cross-examined for the rest of the day, some 54 pages of transcript. There were, evidently, credibility issues to explore.
On 3 May 2022, Mr Heffernan, Keybridge's expert on what comprises a "firm bid" in industry parlance, was called and cross-examined. Bell Potter then called Mr Shallard. He was cross-examined for a period corresponding to 24 pages of transcript.
On 4 May 2022 oral submissions proceeded. Judgment was reserved.
On 1 August 2022 Rees J gave a verdict in favour of Bell Potter and ordered that Keybridge pay Bell Potter's costs of the proceedings. Her Honour concluded that Keybridge had not established that there was a concluded agreement for sale of shares reached by the series of conversations in April 2015, and in any event, Keybridge had failed to establish that it had suffered any loss. The judgment was 50 pages in length, and analysed in detail the reliability or otherwise of respective recollections of conversations that had occurred in 2015 which formed the basis of the dispute and which were not evidenced by any contemporaneous written record.
It is worth observing that although the facts were of narrow compass, the implications of the allegations made by Keybridge - which failed - were serious. Bell Potter was said to have caused $10 million worth of loss. It would be foolhardy in the extreme for Bell Potter to take a relaxed attitude to defending such a claim, or to have placed the complexities of the claim in the hands of only a junior solicitor. As demonstrated by the outcome, the best form of defence was in carefully structured attack.

Applicable law and the "Guidelines"

As the proceedings that formed the basis of the costs assessment were commenced after 1 July 2015, the applicable law is the Legal Profession Uniform Law 2015 (NSW) ("the Uniform Law") and the Application Act, and the regulations made under those Acts.
The statutory task imposed on costs assessors in New South Wales requires reference to both the Uniform Law and the Application Act. The criteria for costs assessment of ordered costs, (formerly known as party/party costs), is provided for in s 76 of the Application Act: 76 Criteria for costs assessments of ordered costs (1) In conducting an assessment of ordered costs, the costs assessor must determine what is a fair and reasonable amount of costs for the work concerned. (2) In considering what is a fair and reasonable amount of costs for the work concerned, the costs assessor may have regard to the factors in section 172(1) and (2) of the Legal Profession Uniform Law (NSW) (as if that section also applies to ordered costs and so applies with any necessary modifications).
Section 172 of the Uniform Law provides: 172 Legal costs must be fair and reasonable (1) A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are - (a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount. (2) In considering whether legal costs satisfy subsection (1), regard must be had to whether the legal costs reasonably reflect - (a) the level of skill, experience, specialisation and seniority of the lawyers concerned; and (b) the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and (c) the labour and responsibility involved; and (d) the circumstances in acting on the matter, including (for example) any or all of the following - (i) the urgency of the matter; (ii) the time spent on the matter; (iii) the time when business was transacted in the matter; (iv) the place where business was transacted in the matter; (v) the number and importance of any documents involved; and (e) the quality of the work done; and (f) the retainer and the instructions (express or implied) given in the matter. (3) In considering whether legal costs are fair and reasonable, regard must also be had to whether the legal costs conform to any applicable requirements of this Part, the Uniform Rules and any fixed costs legislative provisions.
It is common ground that the costs assessment regime prior to the 2015 legislation contained no reference to "proportionality". "Proportionality" is not defined in the Application Act or the Uniform Law.
Section 89 of the Application Act provides for appeals against a decision of a Review Panel: 89 Appeal on matters of law and fact (1) A party to a costs assessment that has been the subject of a review under this Part may appeal against a decision of the review panel concerned to - (a) the District Court, in accordance with the rules of the District Court, but only with the leave of the Court if the amount of costs in dispute is less than $25,000, or (b) the Supreme Court, in accordance with the rules of the Supreme Court, but only with the leave of the Court if the amount of costs in dispute is less than $100,000. (2) The District Court or the Supreme Court (as the case requires) has all the functions of the review panel. (3) The Supreme Court may, on the hearing of an appeal or application for leave to appeal under this section, remit the matter to the District Court for determination by that Court in accordance with any decision of the Supreme Court and may make such other order in relation to the appeal as the Supreme Court thinks fit. (3A) The Supreme Court may, before the conclusion of any appeal or application for leave to appeal under this section in the District Court, order that the proceedings be removed into the Supreme Court. (4) An appeal is to be by way of a rehearing, and fresh evidence or evidence in addition to or in substitution for the evidence before the review panel or costs assessor may, with the leave of the Court, be given on the appeal.
The effect of bringing this appeal under s 89 of the Application Act is that it proceeds by way of rehearing. No additional evidence was tendered, but the Costs Guidelines dated 2016 and October 2023 were tendered as documents that were referred to in the submissions to the Assessor and the Panel and the Panel's decision.
What "rehearing" means in this context has been the subject of comment by Basten JA in Gazecki v McCabes Lawyers Pty Ltd (2020) 102 NSWLR 98; [2020] NSWCA 98 ("Gazecki") relevantly at [42] and [43]: "[42] … the court is not given specific powers, but rather is said to have "all the functions of the review panel." The effect of this provision is by no means clear. The functions of the review panel are set out in s 85 of the Application Act, and involve reviewing "the determination of a costs assessor": s 85(1). For that purpose, the review panel has "all the functions of a costs assessor … and is to determine the application … in the manner that a costs assessor would be required to determine an application for costs assessment": s 85(2). The review panel is not bound by the rules of evidence and may inform itself on any matter in the manner it thinks fit: s 85(3). There is a degree of awkwardness in conferring on a court required to determine an appeal against a decision of a review panel all the functions of the review panel, which involve review of the decision of a costs assessor. That language may affect what is meant in s 89(4) by an appeal "by way of a rehearing". [43] No submissions were made in this Court on the scope and operation of s 89; accordingly, it is both unnecessary and inappropriate for the Court to resolve these questions in this case. What is clear, however, is that courts exercising jurisdiction under this provision must pay close attention to the terms of the statutory power and should not adopt statements from earlier cases dealing with different powers, unless persuaded that they remain applicable. Although the distinction between appeals on matters of law and appeals from the final determination of a costs assessment have been removed, it may, nevertheless, be appropriate to adopt different standards of scrutiny with respect to each. Thus, questions of law are inherently liable to review according to a correctness standard; a lower standard of scrutiny may well be applicable to an assessment of what costs are fair and reasonable in the circumstances of the particular case. Particularly is that so where a specific body of costs assessors, appointed solely for that function, reach evaluative judgments. Furthermore, costs assessors are expected to ensure consistency of approach, being a standard which cannot readily be applied by a reviewing court with limited experience of such matters." (Emphasis added).

Costs Assessment Rules Committee guidelines

The Costs Assessment Rules Committee published guidelines in March 2016 and again in October 2023 to provide guidance to assessors in the assessment of costs payable between parties under an order by a court.
The guidelines state that they are not a substitution for s 76 of the Application Act and s 172 of the Uniform Law, but are to assist in promoting consistency and predictability. They are not binding on assessors.
The guidelines provide an indication of the range of hourly and daily rates appropriate for legal service providers performing professional work. The ranges provided in the 2016 guidelines are: Service provider Range $ Senior partner/partner/specialist (10+ years) (hourly) 450 - 750 Senior associate (5 years plus) (hourly) 300 - 500 Employed solicitor / junior associate (1-4 years) (hourly) 200 - 400 Senior counsel, where the assessor considers that it is fair and reasonable to have briefed senior counsel (daily) 5,000 - 8,000 Senior counsel (hourly) 500 - 950 Junior counsel (daily) 2,000 - 5,000 Junior counsel (hourly) 200 - 500 Paralegals (hourly) 120 - 250 Clerks/secretaries (hourly) 75 - 150

The 2023 guidelines provided as follows (noting that all the work done on behalf of Bell Potter was completed in 2021 and 2022): Service provider Range $ Senior partner/partner/specialist (10+ years) (hourly) 540 - 900 Senior associate (5 years plus) (hourly) 360 - 600 Employed solicitor / junior associate (1-4 years) (hourly) 240 - 480 Senior counsel, where the assessor considers that it is fair and reasonable to have briefed senior counsel (daily) 6,000 - 10,000 Senior counsel (hourly) 600 - 1,000 Junior counsel (daily) 2,400 - 5,600

The main (but not only) focus of complaint by Keybridge was on the heavy involvement of the senior solicitor, Mr Giles and his rates (18 to 19 years post-admission experience) and senior counsel's early involvement and hourly and daily rates.

The bill of costs and assessment process

On 23 January 2023, Bell Potter applied under s 74 of the Application Act for its costs of the proceedings to be assessed. The Bill prepared and submitted for assessment was in the sum of $537,800.39 including disbursements.
Keybridge filed a long and detailed Notice of Objections on 20 March 2023 which included general objections and over 570 specific objections to the Bill. Those objections placed in dispute over $353,000.00 of the claimed costs. The Notice was prepared by a costs assessor, Mr Walter. The following submissions were made specifically about proportionality: "4.10 Moreover, it is submitted that notwithstanding that the proceeding had relatively substantial weight comprising a claim for damages for breach of warranty of authority in an amount of some $10,316,000.00, in considering what is a fair and reasonable amount of legal costs, the Assessor should have regard to the matters mentioned in s.76 of the LPULAA having to all the circumstances of this litigation including that: a. the litigation in so far as involved the cost applicant required the application of general principles of breach of warranty of authority, formation of contract and the relevance of post contractual conduct, was not complex, novel or difficult; b. the parties' disclosure was limited, and significantly, there were no file notes of the conversations between Messrs Bolton and Shallard on or about 22 April 2015 when the alleged contract was formed; c. the plaintiff/costs respondent led evidence at trial from its employee Mr Bolton who represented the costs respondent on the "sale and purchase of Molopo shares" in April 2015, and an expert, namely Michael Heffernan. d. the defendant/costs applicant led evidence at trial from its employee Mr Shallard who had represented the costs applicant on the "Molopo share sale and purchase" in April 2015 e. the hearing occupied 2 days of Court time on 2 and 3 May 2022, the third day being reserved to oral submissions of the parties; f. the plaintiff's Statement of Claim having been served on 18 May 2021, senior and junior counsel were both engaged in the costs applicant's case on 25 May 2021 and were retained throughout the conduct of the proceeding, including at trial; g. the level of expertise required of the costs applicant's legal practitioners was demonstrably not extraordinary having regard to the evidence adduced at trial, and that there was no division of work between the costs applicant's 2 counsel on hearing; h. the litigation was neither technically demanding nor complex. Indeed it is apparent from a consideration of the Court documents prepared and filed by the parties, that the pleadings and related documents were neither long nor complex; i. the costs applicant's solicitors prepared no complex pleadings or other technically difficult Court documents, all of the costs applicant's Court documents, including the Court Book, having been prepared and/or settled by counsel; and, j. the costs applicant's counsel provided the intellectual input to running the costs applicant's case apparently to the exclusion of the costs applicant's solicitors who overwhelmingly relied on counsel at every step of the litigation including to "settle" correspondence."
Specific complaint was also made about the hourly rates charged by the senior solicitor with conduct of the proceedings and the rates charged by senior counsel not being proportionate to the degree of difficulty of the subject matter and being allegedly "significantly more" than the rates in the "Guidelines" (which was a reference to guidelines published in 2016, some five years prior to any work being performed by Bell Potter in the proceedings).
Bell Potter filed a Response on 30 March 2023 which included reference to proportionality and asserting at [25] that "not only was the potential quantum proportionate to the costs incurred but further that the manner in which the costs respondent conducted the matter was such that the costs incurred were increased and proportionate to the work required to properly defend a substantial claim". It also stated, appropriately, that "it is proper to have regard to market rates in NSW considered reasonable for a complex commercial matter".
Keybridge's costs assessor, Mr Walter, provided a response to Bell Potter's response on 21 April 2023 which was defensive, unnecessary and largely argumentative and repetitive of matters already raised.

The Reasons of the Costs Assessor

On 18 September 2023, the Assessor issued reasons for her Determination of Costs payable by Keybridge in the sum of $413,564.65. She had disallowed over $80,000.00 of the professional costs claimed, and over $43,000.00 of the claimed disbursements. This included a reduction by 10% of senior counsel's fees. The Assessor also awarded interest on unpaid costs covering the period 1 August 2022 to 18 September 2023 in the sum of $39,692.58, noting that an offer to settle costs was made by Bell Potter, but Keybridge chose not to respond. With the costs of the assessment, the assessor fees and the filing fee, this brought the total figure to just over $497,000.00.
In her reasons, the Assessor set out her basis of assessment at 6.1 to 6.7, which included a clear statement of the requirement for proportionality in determining what is a fair and reasonable amount of costs for the work done, that is, that the costs must be both proportionately and reasonably incurred, and proportionate and reasonable in amount. She also noted that a consideration of proportionality is not confined to the value of the subject matter. The requirements of s 172(2) of the Uniform Law were also set out. An analysis of the appropriateness of the hourly rates charged was set out at length, and the general objections were dealt with in turn.
In respect of hourly rates charged by Bell Potter's senior solicitor and senior counsel, the Assessor made the following remarks: "6.11 Express objection was made to the hourly rates of the legal practitioners involved in the matter on the basis that they were not fair and reasonable. All rates were objected to and the Costs Respondent proposed that the following hourly rates exclusive of GST were more properly reflective of market rates in Sydney: Partner/special counsel $450 to $550 Junior lawyer $200 to $300 Paralegal/clerk/secretarial $75 to $200. 6.12 Mr. Benjamin Mark Giles was admitted 5 December 2003. His rate was at $750 per hour and then from 30 August 2021, costs claimed at $775.00 per hour; from 1 October 2022, costs were claimed at $850 per hour. These hourly rates are on the high side of the Sydney legal market but they are within the fair and reasonable range. While I am not bound by them, I note the CARC Guidelines for Costs payable between parties under Court orders (the Guidelines) provide that generally time of a Senior partner/partner/specialist (10+ years) (hourly) is fair and reasonable if it is within the range of $540 - 900 per hour. … 6.15 As such, I have made no adjustment to the hourly rates applied by the Costs Applicant's lawyers or paralegal. 6.16 In respect to Senior Counsel's rate his hourly rate was $1,050.00 per hour and $10,500 per day exclusive GST, the Costs Respondent submitted that such rates were unreasonably excessive and not reflective of market rates. In fact, the Senior Counsel's rate was initially $950 per hour and $9,500 per day exclusive GST but increased as at 7 December 2021. The Costs Respondent submitted that the rates of senior counsel should be reduced to $750 per hour and $7,500 per day. The Guidelines as recently amended provide that an hourly rate of 600 - 1,000 ex GST and day rate of $6,000 - $10,000 per day will ordinarily be appropriate for Senior Counsel in ordinary cases. 6.17 I accept that $1,050 and $10,500 exceeds the high side of that range. I am also concerned that while there is some complexity involved in the proceedings, I am not convinced that the matter was overly complicated; there was not significant evidence to be dealt with and the hearing time was relatively short. Overall, taking in to account all of the circumstances, in my view, a rate of $950 per hour and $9,500 per day is fair and reasonable for this matter. Adjustments to rate have been made in the Table of Adjustments below."
At the hearing before me, emphasis was placed by Ms Castle, counsel for Keybridge, on paragraph 6.21 of the Assessor's reasons under the heading "General Objections", which addressed the complaint made by Keybridge that the total of the costs and disbursements was "manifestly and unreasonably excessive": "6.21 Fourth, the Costs Respondent submitted the claim for $348,467.90 plus disbursements in the amount of $189,232.49 for a total claim of $537,800 39 is manifestly and unreasonably excessive. As a general statement, the total costs claimed were on the high side of what I would expect for a three-day hearing in the Supreme Court even if one considers that the plaintiff's claim exceeded $10 million dollars. While I accept there was some complexity with the issues in the proceedings, the real issues were relatively confined; the evidence was similarly not extensive or long. However, I have not relied on general impressions nor made any general discount and instead have embarked on a review of the detailed objections to the Bill of Costs prepared by the Costs Respondent presumably at significant cost. While a costs assessment is not intended to be an itemised taxation, I have responded to the manner in which the Notice of Objections have been prepared and to a degree embarked in a consideration of the detail and each time claim given the work and time which has been invested by the parties and in light of the detail in the Bill of Costs." (Emphasis added).
Ms Castle submitted that the wording of that paragraph evidenced that the Assessor did not make an assessment of proportionality because she stated that she had "not relied on general impressions nor made any general discount and instead had embarked on a review of the detailed objections to the Bill". I will return to this assertion later in the judgment but pause here to note that singling out one sentence for individual scrutiny, removed from its context in 27 pages of reasons and assessment, rarely provides a whole or fair answer to the question as to whether there has been proper consideration of proportionality. It also highlights a focus in the argument posed by Keybridge which is misconceived as it is not reflective of the structure and requirements of the NSW provisions, in particular s 172(1) and (2).
The Assessor then proceeded to a table of adjustments, providing reasons for the deductions she determined should be made. These reasons included "should have been delegated to paralegal or secretary", "two lawyers not required", "this aspect should have been known by lawyer on the record" and "deduct made given time already allowed for this affidavit". Those considerations and the reasons for the deductions, reflect inbuilt assessments of what is proportional.
On 6 October 2023, the judgment for costs was entered.
On 31 October 2023, Keybridge filed an Application for Review of the Determination identifying 20 grounds of review. Two grounds addressed the question of proportionality, but with specific focus on the hourly rate charged by the senior solicitor and by senior counsel, not on any articulated wider concept of proportionality: "4. The costs assessor should have proceeded with the assessment by concluding that the claimed hourly rates of charge for the personnel of the review respondent's solicitors were unfair, unreasonable, excessive and disproportionate having regard to the following: (a) the criteria for allowances on the assessment; (b) the confined legal issues in dispute in accordance with the assessor's determination at [6.21] of the Reasons; (c) the limited evidence; (d) the skill and level of seniority of the review respondent's solicitors; (e) the review applicant's detailed objections to the costs; (f) the Costs Assessment Rules Committee Guideline dated 16 March 2016 (2016 Guideline); and (g) particularly, the table of hourly rates at pages 2 and 3 of the 2016 Guideline. … 8. The costs assessor should have proceeded with the assessment by concluding that the claimed hourly rates of charge for senior counsel were unfair, unreasonable, excessive and disproportionate having regard to the following: (a) criteria for allowances on the assessment; (b) the confined legal issues in dispute; (c) the limited evidence and cross-examination of the review applicant's only two witnesses; (d) the review applicant's detailed objections to the costs and to the 2016 Guideline; and (e) particularly, the table of hourly rates for senior counsel at page 2 of the 2016 Guideline." (Emphasis added).
I interpolate here that Keybridge's senior counsel's charge rates were $850.00 per hour and $8,500.00 per day, not such a significant difference to Bell Potter's senior counsel, which were, on assessment, reduced by 10% by the Assessor to $950.00 per hour and $9,500.00 per day.
Bell Potter filed its Submissions in Response on 17 November 2023 with particular focus on the hourly rates charged and the relevance of the 2023 guideline for rates being a closer approximation to a commercial reality than the 2016 guideline rates, given that all the work in the proceedings was done in 2021 and 2022, five and six years respectively after the 2016 guidelines and only one and two years before the 2023 guidelines.
Keybridge filed its Submissions in Support of its Application for Review on 1 December 2023 with focus on the hourly rates issue, as well as the use of 6-minute time costing units, fees charged for research, delegation to and supervision of junior staff, the preparation of the court book, and fees for two counsel. There is no specific submission about proportionality in its wider sense. (I note here again that Keybridge also retained two counsel for the hearing).

Reasons of the Review Panel

The Panel, comprising Michael Dyson and Christopher Wall, issued its determination on 29 January 2024. Relying upon Wende v Horwath (NSW) Pty Limited (2014) 86 NSWLR 674; [2014] NSWCA 170 at [157] to [163], the Panel stated that it is not required to make a new assessment as if the original assessment had never been made. The starting point will be the original determination and where a party makes particular objections, the Panel is entitled to proceed on the basis that that person is, in all other respects, content with the original assessment. The Panel stated: "In such a case, the Panel will adequately perform its function by dealing with the expressed grounds of objection and giving each of them separate and distinct consideration".
There was no submission made by Ms Castle that there was anything wrong with this approach, rather, that the Panel effectively perpetuated the asserted errors in approach of the initial assessor in failing to reduce the Bill in some general "stepping back" to consider, separately, proportionality.
The Panel proceeded to deal with the question of the lawyers' hourly charge-out rates. On the issue of the rates published in the guidelines, the Panel noted that irrespective of the dates of the guidelines, the Panel is required to consider s 76 of the Application Act, and so what is a fair and reasonable amount of costs for the work concerned, and in considering what is a fair and reasonable amount of costs for the work concerned, have regard to the factors in s 172(1) and (2). Relevantly the Panel concluded: "8.7 Irrespective of the dates of the CARC Guidelines (16 March 2016 and 24 October2023) the Guidelines note that they are "intended to provide guidance for costs assessors, in order to promote consistency and predictability. They are not binding on assessors. They are intended as guidance as to what will usually be appropriate in ordinary cases and recognise that there will be unusual circumstances and extraordinary cases which will fall outside them. Having examined the material and the judgment the panel is of the view that this matter is not "extraordinary". Whilst there were some factual complications in relation to the matter and a number of phone calls concerning which evidence was given, the legal principles when one considers the judgment were not of extreme complexity although they were moderately complex. However the amount in issue in the transaction was considerable be in excess of $10,000,000.00. 8.8 The panel notes that counsel was involved in these proceedings from an early stage. 8.9 The panel noted that the solicitor's costs allowed by the assessor were $267,333.90 after deductions of $80,834.00. 8.10 The panel does not accept of the submission of the Review Applicant that the costs were unfair, unreasonable, excessive and disproportionate. The costs assessor took into account the detailed objections to the costs made by the Review Applicant and whilst the response from the Review Respondent in that regard namely that the guidelines of 24 October 2023 reflect the movement in the market for legal services over the past 7 years since the previous guidelines were issued in 2016 and whilst the Review Respondent provides no evidence to support that position the panel from its own knowledge, is aware that market rates have moved. The panel considers that the rates charged are fair and reasonable. Items 1-4 of the grounds for making the determination for review are not made out."
This, Bell Potter submitted, is express consideration of proportionality by the Panel and so the main complaint of Keybridge about the Panel's approach falls away.
The remainder of the Panel's determination deals individually with the other specific grounds in an appropriate fashion and dismisses them all with focussed and succinct reasons.

Submissions of Keybridge - Lip service only was paid to the concept of proportionality

Ms Castle submitted that an essential part of the application of s 76 requires a costs assessor to take into account proportionality because it is part of determining whether costs are fair and reasonable, and because it is the basis upon which legal costs can be charged by law practices to their clients. Given that Keybridge is entitled to have an assessment conducted and determined according to law, there must be, on the part of the Assessor and Panel, a review that gives content to the notion of proportionality. Referring to it as a concept, as both the Assessor and the Panel did, is not the same as applying it and giving effect to it in the determination.
Ms Castle argued that the costs incurred lacked proportionality considering that they were almost twice the amount of costs incurred by Keybridge who was the moving party, particularly given that Bell Potter did not have to produce any evidence regarding damages whereas Keybridge did. There was only one lay witness for each party. The issues were straightforward, and the facts comprised only a small number of interactions.
Ms Castle submitted that Skalkos v T & S Recoveries Pty Ltd (2004) 65 NSWLR 151; [2004] NSWCA 281 demonstrated that costs could be "fair and reasonable", yet far exceed the value of the verdict but that the relevant consideration, as noted by Ipp JA, was whether those costs "bear a reasonable relationship" to the value and importance of the subject matter in issue.
Reliance was placed by Ms Castle on English decisions that arose out of amendments made in 2000 to English costs provisions that introduced the concept of proportionality. Ms Castle sought to argue, by analogy, that the amendments to English law reflected recognition that costs could be assessed as fair and reasonable, yet still be disproportionate.
Ms Castle relied upon the observations of Lord Wolfe CJ in Home Office v Lownds [2002] EWCA Civ 365 at [2]: "[2] Proportionality played no part in the taxation of costs under the Rules of the Supreme Court. The only test was that of reasonableness. The problem with that test, standing on its own, was that it institutionalised, as reasonable, the level of costs which were generally charged by the profession at the time when the professional services were rendered. If a rate of charges was commonly adopted it was taken to be reasonable and so allowed on taxation even though the result was far from reasonable."
Ms Castle submitted that this concern articulated by Lord Wolfe in Lownds was further examined and the rationale for proportionality expanded upon by Dight J in May v Wavell Group Plc [2016] 6 WLUK 399 ("May") at [28] to [32]: "[28] The recasting of the costs rules in the CPR as from 1 April 2013 was part of the implementation of the review of civil litigation costs by Sir Rupert Jackson. The terms of that review were to consider the costs of civil litigation and to make recommendations in order to promote access to justice at proportionate cost. [29] Chapter 3 of the final report is devoted entirely to the subject of proportionate costs. The test set out at CPR 44.3(5) comes from this chapter and so too does the method of considering proportionality at the end of the detailed assessment rather than at its beginning (thereby reversing the decision in Lownds v Home Office [2002] EWCA Civ 365). [30] Under the heading "proportionality of costs", Sir Rupert Jackson said: "5.5 ... Proportionality of costs is not simply a matter of comparing the sum in issue with the amount of costs incurred, important though that comparison is. It is also necessary to evaluate any non-monetary remedies sought and any rights which are in issue, in order to compare the overall value of what is at stake in the action with the costs of resolution. 5.6 The comparison exercise set out in the previous paragraph produces a strong indication of whether the costs of a party are proportionate. Before coming to a final conclusion, however, it is also necessary to look at the complexity of the litigation. There can be complex low value claims where the costs of litigation (if conducted properly) are bound to exceed the sum at stake. Equally, there can be high value, but straightforward, commercial claims where the costs are excessive, despite representing only a small proportion of the damages. It is also relevant to consider conduct and any wider factors, such as reputational issues or public importance." [31] At paragraph 5.10, Sir Rupert states that disproportionate costs do not become proportionate because they were necessary to bring or defend the claim. He refers to the cost benefit analysis undertaken by the Legal Aid Agency and states that any self-funding litigant would do the same. No doubt such a litigant would consider the costs involved, but if an act were seen to be necessary to be successful in the litigation, it does not seem to me to be obvious that a litigant would discount that necessary step simply on the ground that it might subsequently be found to be disproportionate. [32] In my view this is the crux of the challenging concept of proportionality. Achieving justice at proportionate cost would, to many people, mean allowing for the recovery of at least the minimum costs involved in bringing the case to a successful hearing. In Kazakhstan Kagazy plc v Zhunus [2015] EWHC 404 (Comm). Leggatt J said: "The touchstone is not the amount of costs which it was in a party's best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party's own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party's conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party's own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.""
Ms Castle submitted that these considerations underscore the need to give practical application to the introduction of proportionality to the NSW legislation. However the costs regime analysed in May was concerned with a different set of costs rules to the NSW regime.
I interpolate that those English rules are different to s 172. They include an additional requirement, (r 44.3(2)), which under the heading "Basis for Assessment" provides: "costs which are disproportionate in amount may be disallowed or reduced, even if they were reasonably and necessarily incurred". There is no parallel provision in the NSW regime.
Also significantly different to the NSW provisions is r 44.3(5) of the English rules, (considered and applied in May), which specifically provides for when costs incurred can be considered to be "proportionate": (5) Costs incurred are proportionate if they bear a reasonable relationship to - (a) the sums in issue in the proceedings; (b) the value of any non-monetary relief in issue in the proceedings; (c) the complexity of the litigation; (d) any additional work generated by the conduct of the paying party; (e) any wider factors involved in the proceedings, such as reputation or public importance; (f) any additional work undertaken or expense incurred due to the vulnerability of a party, or any witness.
Those factors, other than (c), and arguably (e), are markedly different to those mandatory considerations listed in s 172(2).
Ms Castle acknowledged that since the introduction of "proportionality" in the Uniform Law, there has been little by way of detailed examination of the concept. Ms Castle referred to Andrew John Francis v Powercor Australia Limited [2020] VSC 405 where Nichols J made the following observations in the context of approving costs as a component of a representative action: "[7] This proceeding has been managed with another proceeding, Lenehan v Powercor Australia Ltd (S CI 2018 1290), in which I delivered judgment for costs on 2 March 2020 (Lenehan Costs Judgment). In that judgment I set out the following principles, that are also applicable to this case: … 11. The proportionality measure looks to the relationship between the costs incurred and the value and importance of the subject matter in issue. The requirement for proportionality as it concerns legal costs generally is expressed ins 172 of the Legal Profession Uniform Law (Vic) (the Uniform Law) and in s 24 of the Civil Procedure Act 2010 (Vic). It is a forward looking assessment which compares the cost of the work with the benefit that could reasonably be expected from the work, at the time at which the work was performed. … 18. What is reasonable and proportionate will vary from case to case. Factors commonly considered in this assessment include: (a) the reasonableness of the terms of the fee agreements and whether the costs actually charged have been calculated in accordance with those agreements; (b) whether any significant portion of the fees charged have been inappropriately or unnecessarily incurred; (c) whether the work in a particular area or in relation to a particular issue was undertaken efficiently and appropriately; (d) whether the work was undertaken by a person of an appropriate level of seniority and whether the charge out rates were appropriate having regard to the seniority of the practitioners and the nature of the work undertaken; (e) whether the tasks and associated charges were appropriate having regard to the nature of the work and the time taken to complete the work. 19. Considerations of this kind might be characterised as broadly reflecting the requirements of s 172 of the Uniform Law which applies to costs generally."
As observed by Ms Ng, counsel for Bell Potter, this is a very different context to an inter-partes costs order. Very different considerations apply in the context in which Nichols J was examining costs.

Submissions of Bell Potter - Proportionality was part of the obvious application of s 172 to the task of assessment undertaken

Ms Ng submitted that there was no error by the Assessor or by the Panel in the approach they took when regard is had to s 172(2). Proportionality was continuously applied in the Assessor's approach to her table of adjustments.
Proper focus on the relevant provisions is essential to avoid erroneously drawing from the English rules, (and decisions about these rules), some kind of parallel requirements when there is none.
Reliance by Ms Castle on the comments of Nichols J, in the context of approving a costs component in a class action, is misplaced and wrong.
The fact that Keybridge's costs were less is not a consideration set out in s 172. There may be a variety of (irrelevant) reasons why Keybridge's costs were less. It is not a relevant or appropriate measure to use as a basis for impugning Bell Potter's costs as not proportionate. Bell Potter's affidavit of Mr Shallard was lengthy and had to address a multi-pronged attack. Credibility of Keybridge's main witness Mr Potter was significantly in issue. This required substantive focus and preparation.
The Panel approached its task in a unexceptional way, addressing each complaint and upholding the decision of the Assessor. There was no error.

Decision

The issue for determination is whether proportionality was properly considered and applied in the assessment made by the Panel, following as it did on the assessment approach taken by the Assessor.
The approach taken by Ms Castle for Keybridge has a fatal flaw. It removes s 172(1) from its statutory context and imposes a requirement that an unwritten additional step be taken in the costs assessment process.
When read in context, subsection (2) of s 172 sets out the mandatory considerations that inform proportionality and the way it is to be applied. That explains the focus in the costs appellant's submissions to the Assessor and the Panel, (and in the Assessor's and the Panel's reasons), on the hourly rate of the senior solicitor and senior counsel and their use of skill, experience, specialisation and seniority: (s 172(2)(a)); the labour and responsibility involved: (s 172(c)); the urgency and time spent, and the location of the work: (Sydney based commercial matter in the Supreme Court of NSW Commercial List, (s 172(2)(d)), and the quality of the work done, (s 172(2)(e)).
When regard is had to s 172(2), it is clear why the Assessor and the Panel took the approach that they did, with an emphasis on the level of skill, experience, specialisation and seniority of the lawyers concerned. The Panel was responsive to the main focus of attack of Keybridge's submissions - i.e, that the Assessor should not have allowed the hourly rates it did for the lead solicitor and senior counsel.
Also, as stated by Basten JA in Gazecki, care needs to be taken in transposing statements from other cases dealing with different powers and regimes. The English system that is so heavily relied upon to form the basis of Ms Castle's assertion that proportionality had not been implemented by the Assessor and Panel has completely different provisions to NSW as to how proportionality must be taken into account and given effect. Rule 44.3(2) in the English rules could be viewed as requiring a separate "stepping back", as it provides, separately to the other rules, that costs that are disproportionate in amount may be disallowed or reduced, even if they are reasonably and necessarily incurred. There is no parallel provision in NSW.
The subject litigation was a commercially significant claim brought without notice, six years after the events, alleging that Bell Potter warranted certain matters to Keybridge that were incorrect or untrue. Relying on that, it was alleged that Keybridge suffered a major loss and was entitled to $10 million in damages.
This was a serious allegation with significant potential financial impact for Bell Potter. It required focussed, forensically astute investigation and defence. It required careful, tactical preparation with appropriately senior legal expertise that left no issue unconsidered or unprepared. Section 172(2)(a), (b), (c) and (e) direct mandatory and specific focus to these qualitative attributes of the work done.
The retainer of properly experienced senior counsel early in the proceedings was a proportionate and appropriate, indeed, necessary step to take. The successful application by Bell Potter for removal to the Commercial List, with its structured case management requirements, was another important step that would bring focus and critical analysis to the issues, crystallising sooner rather than later, the real issues for determination. The statement of claim filed by Keybridge had the flavour of a "scatter-gun" approach, pleading a whole additional cause of action in contract against another named defendant that was ultimately not pressed at trial. It is a fair submission, that clearly was accepted by the Assessor and the Panel, that a lot of the work that had to be done was caused by the way in which Keybridge approached the litigation.
It is both unsurprising and correct that the approach taken by the Panel (and the Assessor before that) focused on s 172(2) matters. Once they were assessed and determined in an unexceptionable way, that effected the application of the requirement of proportionality. The question of whether the costs are proportionate is judged by the extent to which the costs reasonably reflect in particular those matters set out in (a) to (f) of s 172(2).
I do not accept, as Ms Castle submitted, that the NSW provisions require something additional after detailed, focussed assessment with an eye to those s 172(2) factors, in the nature of some kind of separate "standing back" and discounting or reducing the total sum on some inchoate basis, to demonstrate that proportionality has been applied.
The question of proportionality was inbuilt in the approach of the Panel, (and the Assessor) in their emphasis on the s 172(2) mandatory factors. The approach taken by the Panel to the role and application of the guidelines underscored a consistency of approach. I am satisfied that both proper consideration and application was given to the role of proportionality and there was no error.

Orders

I make the following orders: 1. Summons dismissed. 2. The plaintiff to pay the defendant's costs.

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: 08 August 2024

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