Lahoud v Lahoud

[2018] NSWSC 5

Supreme Court of NSW|2017-03-15|Before: McCallum J

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Source facts

Court

Supreme Court of NSW

Decision date

2017-03-15

Before

McCallum J

Source

Original judgment source is linked above.

Judgment (18 paragraphs)

[1]

Judgment

HER HONOUR: Mr Victor Lahoud and Mr Joseph Lahoud are brothers. For convenience and intending no disrespect, I will refer to each by his first name. This judgment determines competing applications by the two brothers for leave to appeal against a determination of the Costs Review Panel issued on 12 June 2015 in respect of the costs of proceedings heard in the Equity Division over ten years earlier, in May 2005.
The applications are governed by the Legal Profession Act 2004 (NSW). Although that Act has been repealed, it continues to apply to the costs order the subject of these applications by force of r 59 of the Legal Profession Uniform Law Application Regulation 2015 (NSW).

[2]

Circumstances in which the applications are brought

The applications have a long and unhappy history. Victor and Joseph have been engaged in litigation against each other for many years. Victor is a real estate developer. Joseph is an architect. For a time, they worked together on various projects but the relationship soured. In 1999, Joseph and a company he controlled commenced proceedings in the Industrial Relations Commission of New South Wales against Victor and two companies he controlled seeking further payment for work done on those projects.
The proceedings were listed for hearing commencing on 5 February 2001. By that date, the brothers had not been speaking to each other for some time. On the morning of the hearing, at the urging of their sisters, they agreed to attempt to resolve the matter. A settlement was reached but Victor subsequently claimed it had been achieved by trickery on Joseph's part.

[5]

Requirement for leave

Each applicant requires leave to appeal. As noted in Victor's written submissions, a party dissatisfied with the determination of a costs review panel has potentially two paths of redress. An appeal lies as of right to the District Court in respect of "a decision of a costs assessor as to a matter of law": s 384 of the Legal Profession Act 2004. Each of Victor's appeals against the two previous determinations of the costs review panel was brought under that section. However, a number of the grounds Victor now seeks to argue are not confined to decisions as to matters of law.
Further, as noted above, Victor's application includes the relief sought against the Manager, Costs Assessment which, as acknowledged in the written submissions, is "unusual" and arguably not within the scope of the statutory power conferred upon the District Court under the Legal Profession Act 2004. Accordingly, Victor has on this third occasion taken the alternative path provided for in s 385(2) of the Act of seeking leave to appeal to the court that made the costs order the subject of the impugned assessment. That section provides: 385 Appeal against decision of costs assessor by leave … (2) A party to an application for a costs assessment relating to costs payable as a result of an order made by a court or a tribunal may, in accordance with the rules of the court or tribunal, seek leave of the court or tribunal to appeal to the court or tribunal against the determination of the application made by a costs assessor.
Mr Philips, who appears for the Victor parties, submitted that the existence of those alternative paths means that a party to a costs order in any court other than the District Court is faced with "a difficult decision as to where to ventilate its grievances". He submitted that, in circumstances where the proposed grounds include factual questions, it would be contrary to the interests of justice if the Victor parties were obliged to commence two separate appeals (one in the District Court and one in the Supreme Court) in order to ventilate all of their grievances. Mr Tassell, who appears for the Joseph parties, embraced that submission, contending that the interests of justice are best served in this case by having all of the issues raised by the parties addressed in one set of proceedings. He argued on that basis that leave should be granted to both parties to allow that to occur.
The submissions seemed to overlook the possibility of accepting the determination of the third review panel. As noted by Mr Philips, it has been suggested that s 385(2) creates scope to apply for leave to appeal to this Court in respect of the merits of an assessment: Bobb v Wombat Securities Pty Ltd [2013] NSWSC 757 at [17] (Beech-Jones J). It does not follow that, whenever a party to a costs assessment application can conceive of grounds of appeal that involve matters of fact or mixed matters of fact and law, an application should be brought in this Court. The requirement for leave serves as a filter. The Act plainly contemplates the prospect of factual error for which there should be no redress. I do not accept (as the parties' submissions seemed to suggest) that the entitlement to appeal, with leave, to the court that made the relevant costs order was intended to confer an unqualified entitlement to merits review in the Supreme Court.
Mr Philips submitted that the application raises "clear errors of fact that merit the granting of leave in their own right". Certainly, it may be accepted that the question of leave might be informed by the merit of the proposed ground. However, the submission came close to ignoring the requirement for leave, which indicates the need for an applicant to establish that, within the statutory scheme of assessment of costs, the point sought to be raised is one that warrants the attention of this Court. I do not think the Act contemplates that every "clear error of fact" warrants a grant of leave. The interests of justice cannot be predetermined in that mechanistic way.
At the hearing of these applications, I accepted that it is appropriate to consider the question of leave ground by ground having regard to the merits of each individual ground as a relevant factor. However, it is of course appropriate also to have regard to matters unrelated to the merit of any particular ground, such as delay, proportionality and finality, particularly in the case of a protracted dispute such as this. Proportionality and finality are important considerations in the present case, as is the question of the appropriate use of the resources of this Court. The grounds of appeal sought to be agitated by both parties seek a measure of exactitude which is neither possible nor appropriate in any costs assessment, let alone one so mired in complexity. As explained in the decision of Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [62] (Einstein J), the assessment of party/party costs is not a science. There is some analogy here with the task of determining an appropriate sentence in criminal proceedings; there is no single "correct" amount of costs that represents what is fair and reasonable.
It is appropriate in that context to note that the third review panel conducted an extremely thorough review, with commendable patience and diligence. The documents the panel considered and the approach it took are explained at pars 4 and 5 of the reasons for decision. It determined the application "by in effect starting again allowing what in its view were fair and reasonable costs, irrespective of whether these were previously allowed, disallowed or reduced" (par 5.9 of the reasons). Significantly, the four assessments, each conducted independently, have oscillated within relatively narrow parameters: 1. the costs assessor determined that the fair amount was $899,614.10 including GST. After the deduction of GST (which I consider to be the appropriate comparison, for the reasons explained below in respect of grounds 4 and 5), the figure is $817,831.00; 2. the first review panel determined that the fair amount was $783,027.39, an improvement for Victor of just over 4% on the GST-deducted figure. If the position of the Joseph parties is accepted, the correct figure is $815,597.39, an improvement for Victor of less than 1% on the GST-deducted figure; 3. the second review panel's figure was $850,490, representing a loss for Victor, being a 4% improvement for the Joseph parties; 4. the third review panel's figure was $744,869.21, an 9% improvement for Victor on the GST-deducted figure.
In the circumstances, it would arguably have been open to refuse leave outright (without consideration of the individual grounds) on the basis of considerations of proportionality and finality. However, having regard to the manner in which the hearing was conducted, I have concluded (with some reluctance) that I should consider the merits of each individual ground. It is convenient to address the issues in the order in which they were addressed at the hearing.

[6]

Victor's grounds 4 and 5 - the costs of the review

Victor's case opened, inauspiciously, with argument as to who should have been required to pay the costs of his third application for a review. The Legal Professional Act 2004 contemplates that a party who applies for review of the determination of a costs assessor and who is successful will nonetheless be required to pay the costs of the review if the determination of the review panel is within 15% of that of the costs assessor. Section 379(3) of the Act provides: 379 Recovery of costs of review … (3) If the panel sets aside the determination of the costs assessor, and makes a determination in favour of the party who applied for review, the panel is to require the party who applied for the review to pay the costs of the review if the determination of the panel increases or decreases the total costs payable (as assessed by the costs assessor) by an amount that is less than 15 per cent (or such other percentage as may be prescribed by the regulations) of the total costs payable as assessed by the costs assessor.
There is no converse obligation to require the respondent to the application to pay the costs of the review where the measure of success is greater than 15%. The clear purpose of the section is to discourage trifling.
Grounds 4 and 5 in Victor's application take issue with the manner in which the review panel undertook that calculation, specifically, in taking the relevant starting point net of GST. Those grounds are: 4. [The Review Panel] erred by deducting GST of $81,783.00 ("the GST") from the amount of costs as assessed by the Costs Assessor for the purposes of determining whether, pursuant to s 379(3) of the Act, the Review Panel's determination had decreased the total costs payable by an amount which is less than 15% of the total costs payable as assessed by the Costs Assessor. 5. The Review Panel should not have deducted the GST for the purposes of applying s 379(3) but instead should have found that its determination decreased the total costs payable by more than 15% and that, pursuant to s 379(4) of the Act, the first and second defendants should pay the costs of the Review.
As noted above, the amount of the assessment on the face of the certificate (after deduction of the application fee) was $899,614.10 including GST. However, the Joseph parties subsequently conceded that they had no entitlement to GST (that concession was made during the first review). As GST had long been conceded by the time of the third review, the review panel took the approach that the figure allowed for GST should be excluded "for the purpose of s 379". The deduction of GST gave an amount of costs payable of $817,831. From that starting point, the 15% threshold was not met. The panel concluded (par 10.4 of the reasons for decision): "Accordingly the Review Applicants did not improve their position by 15% and they are to pay the costs of the review."
Had GST not been deducted, the result of the calculation would have been that the threshold was exceeded, but only just. As conceded by the Victor parties at T33.39, the amount of the panel's redetermination was $744,869 which is 17.2% less than the amount of $899,614 allowed by the costs assessor.
Victor contends that the approach taken by the panel was erroneous. He concedes that it would have been open to the panel to exercise its discretion under s 379(4) to order the Victor parties to pay the costs in any event but contends that the panel did not in fact exercise that discretion. Section 379(4) provides: … (4) Subject to subsections (2) and (3), the panel may require any party to the assessment that is reviewed to pay the costs of the review or may determine that the costs of the review are to be shared between the parties in any manner that the panel considers appropriate.
Mr Tassell suggested that the panel should be understood in effect to have exercised its discretion under that section. In the absence of any specific reference to s 379(4) in the panel's reasons, I am not persuaded that is what the panel did. Further, I think it must be accepted that, strictly speaking, the panel's approach did not accord with s 379(3). The "total costs payable as assessed by the costs assessor" was the higher figure.
However, the error was one of form rather than substance. It is clear from the reasons that the panel considered GST "should be excluded" for the purpose of determining who should bear the costs of the review. That made perfect sense. The need to deduct GST was conceded by the Joseph parties well before the third review and accounted for more than half of the difference between the amount assessed by the costs assessor and the amount of the redetermination by the third review panel. The success of the third review itself, conducted on Victor's application, was in the order of $72,962, an improvement of only 8% on the initial costs assessment.
Accordingly, although the conclusion reached by the review panel was not mandated by s 379(3) (as the panel evidently held), it was in my view the only reasonable outcome of the exercise of the panel's discretion under s 379(4). It was noted on behalf of the Victor parties that, had it exercised that discretion, the review panel would have had to consider the matters identified in r 136 of the Legal Profession Regulation 2005 (NSW). In my assessment, the history of the previous reviews analysed at [25] above reveals that the prospect of persuading the third review panel to any different result as to payment of the costs of the review was extremely slight. For those reasons, leave to appeal on grounds 4 and 5 should be refused.

[7]

Victor's ground 1A - the missing Baron files

Ground 1A in the further amended summons is: [The Review Panel] erred in completing its review and determination: (a) notwithstanding that the Review Respondents had, contrary to s 376(1) of the Act, failed to produce to the Review Panel the files of one of its former solicitors, Baron + Associates ("the Baron Files"), which had been made available to and considered by the Costs Assessor, despite three separate requests by the Review Panel that the Review Respondents provide the Baron Files to it: and (b) without having regard to the Baron files and therefore: (i) contrary to s 375(3) of the Act in that the Review was not conducted on the evidence which was received by the Costs Assessor; and (ii) the Panel erred in allowing the Defendants costs for Baron + Associates where those costs had been objected to by the Plaintiffs, without considering those objections by reference to the Baron Files, in that the Panel: (A) allowed the Defendants costs for Baron + Associates of $111,485.75; but (B) should have allowed all of the Plaintiffs' objections to the Costs for Baron + Associates totalling $60,346.70, being a difference in the Defendants' favour of $51,139.05.
The short point raised by that ground is that the third review panel sought but did not receive the files of one of the law firms that acted for the Joseph parties. Victor contends that those files were part of the evidence before the costs assessor and, accordingly, that the panel could not properly proceed to a determination without that material. He submits that, in the result, the panel's determination is "invalid" (written submissions par 45).
The law firm in question, Baron + Associates, acted for the Joseph parties between about October 2004 and November 2008. In the costs assessment, the Victor parties objected to aspects of those costs but did not at that time have access to the invoices issued by Baron + Associates. Those invoices were obtained as a result of the appeal from the first review. After obtaining access to the invoices, the Victor parties objected to any claim in the bill of costs that exceeded the amounts charged in the invoices (those objections invoked the indemnity principle, which is the subject of ground 1 considered below). For the purpose of determining that aspect of the review, the third review panel made three requests for production of the Baron + Associates file but it was not produced by the Joseph parties. The panel finalised the review without access to the file.
Ground 1A asserts that, in the circumstances, the review was not conducted in accordance with the requirements of s 375(3) of the Legal Profession Act 2004. That section provides: 375 General functions of panel in relation to review application … (3) However, the assessment is to be conducted on the evidence that was received by the costs assessor who made the determination that is the subject of the assessment and, unless the panel determines otherwise, the panel is not: (a) to receive submissions from the parties to the assessment, or (b) to receive any fresh evidence or evidence in addition to or in substitution for the evidence received by the costs assessor.
The submission makes two assumptions, each of which must be rejected.
First, it assumes that the Baron file was "evidence that was received by the costs assessor" within the meaning of s 375(3). Mr Tassell submitted on behalf of the Joseph parties that the evidence does not go so far as to establish that the costs assessor in fact reviewed the Baron file in carrying out his assessment. On 14 November 2008, the assessor requested that "all files and counsel's briefs" be delivered to him by DX, with the following qualification: "If the files are large (ie more than 4 binders) please advise". The files were indeed large. A letter dated 20 November 2008 from the solicitors then acting for the Joseph parties informed the assessor that the material sought was "between 55-60 archived boxes".
On 4 February 2009 the assessor attended the solicitor's offices to make a preliminary inspection of that material. His notes of the inspection are confined to a brief chronology of the relevant orders and appeals and identification of the various firms that had acted for the parties. As submitted by Mr Tassell, it is clear enough from the notes that the assessor did not uplift any material. He later made a written request for one document. His notes make no reference to any inspection of the Baron file (or indeed any of the files) or any conclusions drawn therefrom other than the identification of the relevant solicitors and some hourly rates.
On the strength of the evidence before this Court, I am not satisfied that the Baron file was "evidence that was received by the costs assessor" within the meaning of s 375(3).
The second assumption made by ground 1A relates to the proper construction of s 375(3). Victor contends that the requirement that the review "is to be conducted on the evidence that was received by the costs assessor" means that the review cannot validly be conducted without all of that evidence.
There was a measure of tension in the submissions on that issue. The suggestion appeared to be that the review panel has no authority to complete a review without first obtaining all of the evidence that was received by the costs assessor. However, it was then submitted that, having failed to obtain certain evidence, the review panel was obliged to complete the review in the manner specified (that is, by giving a blanket ruling allowing every objection to which the evidence related).
In oral submissions in reply, Mr Philips maintained that the failure to obtain the Baron files meant that the review panel was "unable to exercise its power properly" or to "properly discharge its function" (T105) but submitted nonetheless that the panel was obliged to proceed to determine the issue on the basis that "the Victor interests should be given the benefit of the doubt in relation to each of their objections" (T45). So explained, the contention ultimately appeared to be not that there is no authority to determine an appeal without first obtaining all of the evidence that was received by the costs assessor but that there is no authority to determine an objection in favour of a party who fails to produce evidence to the review panel where that evidence was received by the costs assessor.
In any event, I do not accept that s 375(3) is to be construed in the manner assumed by Victor's submissions. It cannot have been the intention of Parliament that the review panel lacks authority to determine a review if it is unable to muster all of the evidence that was received by the costs assessor. If that were the case, it would operate to the detriment of a party in Victor's position; the right of review could be defeated by the device of refusing to produce evidence.
Mr Philips relied on two decisions of this Court to support the contention that a review conducted in the absence of evidence that was before the costs assessor is invalid. The first was the decision of Harrison AsJ in David Doyle v Hall Chadwick [2011] NSWSC 895 at [18]-[19]. That decision does not purport to determine this issue. In the paragraphs cited, her honour was recording a concession by the Attorney General that, in circumstances where the review panel had failed to consider two boxes of documents that were before the costs assessor, the panel had breached s 375 of the Legal Profession Act 2004 and that "this would have the legal consequence that the review panel's determination was invalid". The appropriateness of the characterisation of the determination as "invalid" was not debated and the question of authority to decide was not considered by her Honour.
The second was the decision of Beech-Jones J in Aquaqueen International Pty Ltd v Gilles [2014] NSWSC 804 at [16]. That was an application for an order in the nature of certiorari in respect of a determination for costs in favour of a law firm named Giles Payne (wrongly named "Gilles" in the citation). The law firm consented to the relief sought. The remarks cited fall well short of determining any question of the review panel's authority to determine a review in the absence of evidence that was received by the costs assessor. His Honour said: The fact that the Court will be granting relief on the basis of the concession by Giles Payne should not be taken as a final determination on the merits of the plaintiffs' contention. It suffices for me to state that the contention, that either s 375(3) founds an obligation of the kind that is assumed by the plaintiffs' argument or that it is otherwise implicit in Subdiv 5 of Div 11 that a Review Panel must have the material provided to the assessor, appears to at least have some strength.
As noted on behalf of the Joseph parties, neither decision had occasion to determine the issue. Further, neither decision considered the provisions of s 376 of the Act, which expressly contemplates that the panel, having required the production of documents relating to an assessment by a costs assessor, may decline to deal with an application for review or may continue to deal with it on the basis of the information provided, even where a person fails to comply with a notice without reasonable excuse. That is not to say that the panel may always proceed with impunity in the absence of evidence that was received by the costs assessor. Each case will turn on its own facts. As observed by Beech-Jones J in the passage from Aquaqueen set out above, there will be cases in which there is force in the proposition that the panel must have evidence that was before the costs assessor. However, s 376 makes plain that there will be cases in which the panel can properly proceed on the basis of the information provided. In my view, that could include a case where the documents were received by the costs assessor but not produced to the panel upon request, depending on the nature and importance of the missing material.
For those reasons, to the extent that ground 1A contends that the panel lacked authority to determine the review without the Baron file, I reject it.
As explained above, it appeared to be a discrete complaint under ground 1A that the panel erred in allowing items for work done by Baron + Associates where the Victor parties objected to the item and the panel did not consider the objection by reference to the Baron file. A number of items in the invoices issued by Baron + Associates (which were before the costs assessor and the review panel) were objected to by the Victor parties on the basis that the hours claimed in the bill of costs for an item exceeded the amount charged for that item in the relevant invoice. It was submitted that the panel erred in allowing the higher claim without being able to cross-check by reference to the Baron file whether the work was done and whether it was done by the person nominated in the bill of costs.
For the reasons explained more fully below in respect of ground 1, the submission misconceives the task required, which is to make an assessment in accordance with s 364 of the Act. As noted by Mr Tassell, that task does not require a costs assessor to check the solicitor's file item by item, or even necessarily to undertake "spot checks". The task is evaluative, not scientific. The costs review panel has specialised expertise in that task. Section 385(2) does not contemplate that the Court that made the costs order should second-guess the approach adopted by qualified costs assessors.
I am not persuaded that the panel erred in proceeding to allow the Baron costs objected to by the Victor parties.
As this ground raises a question of principle concerning the panel's authority to make a determination in the absence of requested material, I propose to grant leave to appeal but to dismiss the ground for the reasons stated above.

[8]

Victor's ground 1 - the indemnity principle

Ground 1 in the further amended summons is: [The Review Panel] failed to have regard to, or alternatively failed to properly apply, the indemnity principle (which requires that the Plaintiffs be ordered to pay no more than the amount to which the First and Second Defendants/Review Respondents were actually liable to pay their solicitors), in that the Review Panel wrongly allowed for costs for items of work claimed in the Bill of Costs (totalling $23,487.70) for which no or a lesser charge was in fact made by the solicitors for the First and Second Defendants/Review Respondents in the invoices issued by them.
As noted by the Court of Appeal in Coshott v Woollahra Municipal Council [2008] NSWCA 176 at [8] (per Handley AJA, Tobias and McColl JJA agreeing), the indemnity principle "prevents a party with the benefit of an order for costs recovering more than it had paid or was liable to pay to its own solicitor for the costs of the proceedings".
In the third review, breach of the indemnity principle was raised as one of the many general objections taken by the Victor parties but that objection was abandoned. In its reasons for decision, the panel said (at par 6.2): These objections are no longer pressed, although "indemnity principle" still springs up in a number of the following objections. The Panel satisfied itself that its determination would not breach the indemnity principle.
The Victor parties submit that the manner in which the panel applied the indemnity principle involved "a misapprehension of the so-called 'global', rather than 'item-by-item' approach". They relied in that context on the example provided in the judgment of Hodgson JA in CSR v Eddy [2008] NSWCA 83 at [4] to [5]. The main judgment in that case was given by Basten JA, with whom McColl JA agreed. The example given by Hodgson JA was included in his Honour's additional remarks by way of qualification to his agreement otherwise with Basten JA's reasons. In any event, I do not think the example supports the proposition contended for by Victor in this application. Hodgson JA said: There was debate before this Court as to whether this approach applied on an item by item basis, or only to the global figure reached on assessment. We were referred to no authority on this question; but in my opinion the indemnity principle, as applied in cases such as Tarry v Pryce (No. 2) [1987] NTSC 59; (1987) 88 FLR 270, does not support an item by item process. Suppose that there were just two items in a bill being assessed for party and party costs. Suppose that, according to an agreement between the solicitor and the client, the client is liable to pay the solicitors $1,000 for one item and $2,000 for the other item, and both are assessed as no more than reasonable as between solicitor and client. Suppose further that, on assessment on a party and party basis, the fair and reasonable assessment is found to be $1,500 for each item. Then I would see no reason why a total assessment, on a party and party basis, of $3,000 would be incorrect.
The Victor parties submit that those remarks "demonstrate that the global approach is only appropriate where there is complete identity of items charged to the client with items claimed on a party/party basis". Their objections in the third review asserted that it was not possible to proceed except on an item by item basis in the present case because "the tax invoices involved relate to matters other than the relevant proceedings which gave rise to the relevant costs orders".
While the simple example provided by Hodgson JA was one in which there was identity between the items in the bill of costs and the items invoiced to the client in accordance with a costs agreement, I do not think it follows that an item by item approach must necessarily be taken in any case where that is not the position. As emphasised by Mr Tassell in his submissions, the ultimate task for the assessor is to determine a fair and reasonable amount for the work undertaken. In determining that issue, an assessor might appropriately check for correlation between items in the solicitor's invoices and the items claimed in a bill of costs but the absence of such correlation does not preclude the adoption of a global approach. Following an extremely thorough review, the panel in the present case was satisfied that its determination would not breach the indemnity principle. I do not think it is appropriate for this Court to second-guess that conclusion by reference to individual comparisons between the solicitors' invoices and the items claimed in the bill. I am not persuaded that ground 1 raises an issue that warrants a grant of leave to appeal.
For those reasons, leave to appeal on ground 1 should be refused.

[9]

Toomey Pegg & Drevikovsky and the dozenal system of time costing (Victor's ground 2 and Joseph's ground 1)

Most lawyers offer their legal services at an hourly rate. It is conventional for law firms to charge for shorter tasks by the unlikely unit of six minutes, not because that is the minimum amount of time any particular legal task is likely to take but because it is simpler for lawyers to divide by ten. Most of the law firms retained by the Joseph parties during the period the subject of the costs assessment adopted that expedient. Toomey Pegg & Drevikovsky did not. Embracing the challenge of more complex arithmetic, or perhaps to indulge the simple pleasure of watching the analogue clock, they charged in minimum units of five minutes.
The bill of costs prepared on behalf of the Joseph parties claimed all of the costs, including those relating to the services provided by Toomey Pegg & Drevikovsky, in minimum units of six minutes. In the third review, the Victor parties objected that this had led to "an exaggeration in the costs as claimed to the tune of 20%". The Joseph parties responded that the effect of pitching the claim in six-minute units rather than five-minute units was at best neutral or, more likely, favourable to the Victor parties.
The review panel concluded that the readjustment in the preparation of the bill of costs of five-minute units to six-minute units "generally favoured the Joseph parties" and made a lump adjustment of $7,500 in Victor's favour.
Ground 2 in Victor's summons relates to that finding. That ground is: "Having correctly determined that the adoption of 6 minute rather than 5 minute units with respect to the costs of Toomey Pegg & Drevikovsky favoured the Defendants and that an adjustment was appropriate, the Review Panel erred in only allowing an adjustment of $7,500 and should instead have allowed an adjustment in favour of the plaintiffs of $40,151.00."
Ground 1 in Joseph's cross-summons makes an equal and opposite complaint and seeks to reverse the adjustment of $7,500, as follows: "The Review Panel erred in law in taking into account an irrelevant consideration, namely that the Cross-Claimants' then solicitors Toomey Pegg and Drevikovsky had rendered invoices based on 5 minute units whereas in the Bill of costs the subject of the Assessment and the Review 6 minute units were applied, whereas it ought to have determined whether the amounts claimed in the Bill of Costs were payable in accordance with s 364 of the Act by reference to the amounts claimed for each item of work claimed in the Bill of Costs for the work described and consequently made no adjustment against the Cross-Claimants."
Victor sought to illustrate that the adoption of six-minute units in respect of the Toomey Pegg & Drevikovsky costs must have resulted in a difference of 20% in favour of the Joseph parties by reference to the following example. The panel allowed $350 per hour as the appropriate rate for Toomey Pegg & Drevikovsky partners. Victor submitted "on the approach adopted by the Joseph parties (ie six-minute units) this would mean that the costs of Toomey Pegg & Drevikovsky partners would be allowed at $35 per unit ($350 divided by ten) whereas on the approach which the panel correctly determined should have been adopted the costs of Toomey Pegg & Drevikovsky partners should have been allowed at only $29.17 per unit ($350 divided by twelve)".
The submission is misconceived. If the hourly rate was $350, it is a truism to say the proper allowance would be $35 for every six minutes and $29.17 for every five minutes of work actually undertaken. That says nothing about the appropriateness of the amounts claimed in the bill of costs. As submitted on behalf of the Joseph parties, the bill of costs itemised work done and allocated time to that work in six-minute units by reference to the work itemised, not by reference to Toomey Pegg & Drevikovsky's solicitor/client invoices. According to the methodology of the bill of costs, if an amount of $35 was claimed, it ought to have represented a claim for six minutes of work, not five. Victor's submission assumes the bill of costs made a claim for the cost of six minutes of work in respect of every five minutes invoiced to Joseph by Toomey Pegg & Drevikovsky. No basis is established for proceeding on that assumption.
It is apparent from the submissions of both parties that this issue was addressed in detail in submissions made to the review panel. The Victor parties provided examples and illustrations of alleged exaggeration; the Joseph parties addressed the panel at length as to the alleged selectivity of those examples. The review panel, which has the appropriate expertise to assess such competing contentions, was persuaded that there was some bias in the process in favour of the Joseph parties. However, it is clear from the review panel's conclusion that the panel rejected the premise of the present complaint (that the conversion to six-minute units produced an exaggeration of 20% across the board). I am not persuaded that there was any error in the approach taken by the review panel of seeking to address that issue, doing the best it could, with a lump sum deduction to the Joseph parties' claim.
These are factual grounds which raised no question of principle. Leave to appeal on ground 2 in the summons and ground 1 in the cross-summons should be refused.

[10]

Victor's ground 3 - the new objections

Ground 3 in the summons is: "[The Review Panel] erred by rejecting, or alternatively failing to address, certain specific objections made by the Plaintiffs (to particular items in the Bill of Costs totalling $14,364.14) solely on the basis that such objections were "new objections" which had been made for the first time before the Review Panel but had not been made before the Costs Assessor."
As already noted, the panel determined the application by "starting again", allowing what it considered to be fair and reasonable costs irrespective of whether those costs had previously been allowed, disallowed or reduced. The Joseph parties had submitted that the Victor parties should not be permitted to raise new objections other than objections based on additional documents received after the original costs assessment. The panel rejected that submission, taking the view that, as the assessment had been remitted for redetermination following an appeal to the District Court, s 384(3) of the Act allowed the Victor parties to make submissions and objections whether based on the additional documents or not.
By ground 3, the Victor parties complain that, having correctly taken that approach, the panel erroneously rejected some of the Victor parties' objections solely on the basis that the objection was a "new objection". The individual items the subject of that ground were listed in tab 59 to the affidavit of Samantha Peterson sworn 3 June 2016. Ms Peterson explained, at par 94 of that affidavit, that she identified those items "using a combination of automatic filters and manually hiding rows".
In my assessment, this ground is completely misconceived. A review of the items listed in tab 59 does not sustain the conclusion that the panel declined to engage with the objections in question for the sole reason that they were new. The panel was perfectly entitled to have regard to the fact that an objection was one that had not previously been taken in considering whether it had merit. It is apparent that, in at least one instance, the fact that an objection was being raised for the first time in the third review prompted scepticism. The first item in tab 59 is a claim for $30. Victor's objection to the claim was: "No evidence of this task having taken place. See Haywards' invoice for the period 1/12/01 to 31/2/02. Disallow. See GO#2 in the General Objections".
The panel allowed the claim, stating the following reasons: It is a telephone call with the [Victor parties'] previous solicitors. Do they deny it taking place? No previous objection.
Far from revealing a decision to reject the objection on the sole basis that it was a new objection, this example reveals the care with which the panel undertook its task. My assessment that the panel did take care to review objections on their merit and did not reject objections solely on the basis that they were "new" is reinforced by my consideration of ground 2 in Joseph's cross appeal, considered below (where a new objection with a substantial value was allowed in Victor's favour).
In the example set out above, it was relevant that the objection had not been taken before; it revealed something of the Victor parties' approach to the third review, which was zealous, to say the least. In other instances, the reasons state "this item was not objected to during the assessment. Allow" or simply "new objection". It does not follow that the panel did not consider the content of the objection or whether the item claimed was fair and reasonable. The panel was entitled to take the view that the fact that an objection had not been taken before undermined its force. The short reasons stated in the schedule in respect of individual items must be read in the context of the panel's written statement of reasons (which expressly concluded that new objections were required to be considered) and the enormity of the task undertaken, which called for brevity in dealing with individual items.
This ground raises no question of principle. It asks this Court to undertake a fourth review of items that make up less than 2% of the initial assessment in order to determine objections to those items first taken by Victor in the third review. Leave to appeal on ground 3 should be emphatically refused.

[11]

Joseph's ground 2 - disallowance of the costs of the damages inquiry

Ground 2 in the cross-summons is: "The Review Panel erred in law in disallowing claims for costs referable to the cross-claimants' claim for access to units and/or damages in the principal proceedings by holding that such costs were not recoverable under the principal costs order made by Campbell J on 10 March 2006."
This ground relates to the treatment of General Objection #10 by the Victor parties. The objection related to items included in the bill of costs relating to work undertaken prior to March 2005 to prepare the claim for damages. The value of those items was $23,376. On 14 March 2005, Palmer J made an order that "all issues other than quantification of the plaintiffs' damages (if any)" were to be determined at the hearing fixed to commence in May 2005. Following the plaintiff's success before Palmer J, the inquiry as to damages was heard separately by Ward J (as her Honour then was) in 2009. The Joseph parties were awarded 50% of their costs of that hearing. Those costs were the subject of a separate assessment; the claim did not include costs incurred preparing for the damages aspect of the claim prior to March 2005.
The panel noted that the Victor parties did not include this objection when the matter was before the costs assessor in the present assessment. They said that was "regrettable" but considered that the objection was valid, saying: "Whilst it may have been initially intended that the damages claim would be a part of the main hearing and work was done in relation to that prior to the order of 14 March 2005 the fact is that those issues were ordered to be heard separately and were so heard and determined in 2009 by Justice Ward. Her Honour awarded the Joseph parties 50% of the costs of dealing with that issue. The costs were subject to an assessment - 2001/400771. Accordingly the panel determined that the costs orders of 10 March 2006 do not include costs associated with proving the claim for damages and disallowed such costs included in the bill of costs. Those costs ought to have been, if they were not, included in Assessment 2001/400771."
I see no error in that approach. The Joseph parties submit that, on its proper construction, the costs order made by Campbell J dealt with all costs incurred to the date of the order. However, his Honour was specifically dealing with the costs of the proceedings before Palmer J, from which the matters later heard by Ward J had been carved out.
This ground raises the kind of issue which is perhaps more appropriately the subject of an application under s 385(2) of the Act, since it concerns the proper construction of the costs order the subject of the assessment. I would grant leave to appeal but reject the ground.

[16]

Claim against the manager

As noted above, the panel determined that the Victor parties should pay the costs of the review. Unsurprisingly, those costs were required to be paid prior to the release of the panel's certificates of determination. The amount paid was $46,873.75 which (as I understand the position) represented the costs of all six certificates. The Victor parties seek a refund of that sum from the Manager, Costs Assessment.
That aspect of the application was premised upon the success of the grounds of appeal and the assumption that, in that event, the Court would order the Joseph interests, not the Victor interests, to pay the costs of the review. In light of the conclusions I have reached, it is therefore not necessary to determine this issue. In case I am wrong in respect of any of the substantive grounds, it is appropriate to indicate that, even if I had allowed the appeal, I would have refused the relief sought against the Manager. As this is an issue which it is not strictly necessary to decide, my reasons can be stated briefly.
In support of the relief sought, Victor's written submissions invoked s 379(4) of the Legal Profession Act 2004 and alternatively the Court's "jurisdiction and powers" under ss 23 and 69 of the Supreme Court Act 1970 (NSW).
Section 379(4) is not a source of power to grant a refund. Section 379 addresses the panel's power to require the parties to pay or share the costs of a review. Section 379(4) provides: (4) Subject to subsections (2) and (3), the panel may require any party to the assessment that is reviewed to pay the costs of the review or may determine that the costs of the review are to be shared between the parties in any manner that the panel considers appropriate.
As noted on behalf of the Attorney General, neither the review panel nor the Manager is a "party to the assessment" within the meaning of that section. Further, s 379(7) provides that the costs of the review are to be paid to the Manager. There is simply no statutory authority in the section for the panel (in whose shoes the Court stands for this purpose) to order the Manager to refund costs paid to him or her. Any reallocation of the review costs is between the parties to the assessment and will not burden the Manager.
Dr Mantziaris, who appears for the Attorney General, provided careful written submissions to support the foregoing analysis. It is not necessary to engage with the detail of those submissions save to note the force of the argument, which I accept, that the proposition that it should fall to the Manager to bear the burden of the cost of a review following an appeal is contrary to the "user pays" character of the system, the statutory immunity conferred on the Manager and the costs assessors and the existence of an express power to refund an application fee (as opposed to the costs of review, which are remuneration-based). Those submission have persuaded me that the relief sought against the Manager is misconceived and ought not to have been granted if the appeal had otherwise succeeded.

Lahoud v Lahoud

At a glance

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Judgment (18 paragraphs)

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Legislation Cited (4)

Cases Cited (12)

Cited By (3)