Li v Andriano

Background 4On 12 August 2005, the plaintiff, as a passenger, was involved in a motor vehicle accident and suffered serious personal injuries. The plaintiff retained one of the defendants to act for him in proceedings in relation to that accident. Liability was admitted but contributory negligence remained in issue. The matter settled in January 2009.

The current pleading 5The plaintiff claims damages in relation to a contract for legal services where Mr Andriano would act for him in relation to the motor vehicle accident. The plaintiff claims that the defendants breached the contract to provide legal services to him, by charging him an excessive sum for the legal services provided and breached the contract to provide legal services by failing to comply with the Legal Profession Act 2004 (NSW); did not comply with the Legal Profession Act; breached its fiduciary duty to him; breached the Fair Trading Act 1987 (NSW); and further, or in the alternative, seeks relief pursuant to the Contracts Review Act 1980 (NSW). 6The 2ASC also pleads that the bill of costs is not a genuine bill but a sham created to try to justify the costs and disbursements and does not accurately reflect the work actually done by the defendants; grossly overstated the value of the legal work; includes false claims for work which was not carried out; includes false claims for the time spent on particular work; and includes claims, made upon the basis that the actual work had been carried out by Mr Andriano, when the work was carried out by others. Further, it is alleged that the defendants received an advance payment of $500,000 from the negligent driver's insurer on the plaintiff's behalf but did not properly account for it. 7The bill of costs rendered to the plaintiff by the defendants is for costs and disbursements in the sum of $1,922,170.80. The identity of the solicitor who entered into the costs agreement is in dispute. The plaintiff says that it is either Mr Andriano personally [the first defendant] or a Mr Andriano as agent for Fairfield/Liverpool Legal Pty Ltd [the second defendant].

The Court appointed expert 8On 21 May 2013, Harrison J ordered the appointment of a single expert pursuant to r 31.46 of the Uniform Civil Procedure Rules 2005 (NSW). On 12 June 2013, his Honour made orders in accordance with agreed short minutes of order, which also annexed the documents and assumptions to be put to the expert. 9Mr Rosier has been appointed as the expert. He has been asked to report on two questions. They are:

1. On the assumption that the costs agreement is valid and enforceable, what are the costs and disbursements the defendants would have been entitled to recover from the plaintiff on a solicitor/client assessment?
2. On the assumption that the costs agreement is invalid, what are the costs and disbursements the defendants would have been entitled to recover from the plaintiff on a solicitor/client assessment? 10Mr Rosier has been given 39 folders of documents that are referred to in the bill of costs that relate to the bill. He estimates his fees to prepare the report to be between $7,700 and $9,450. 11The plaintiff has already obtained an expert costs assessor's opinion, from Ms Whelan. When Ms Whelan made her initial assessment, in relation to the bill of costs, it was thought that those 39 folders had been destroyed. Once the solicitors' files had been recovered, Ms Whelan provided a supplementary report. It is her opinion that the reasonable solicitor/client costs and disbursements of the defendants would be between $1,025,663 and $1,070,963. The solicitor acting for the defendants is of the view that the likely costs of the defendants obtaining an expert report in response to Ms Whelan's report is between $28,000 and $35,000. 12The plaintiff seeks to have this order appointing the Court expert varied or postponed for a number of reasons. Senior counsel for the plaintiff submitted that firstly, the legal validity of the costs assessment is in dispute; secondly, the overcharging in the bill of costs amounts to fraud; thirdly, the bill of costs is a sham as it sets out to justify the excessive charges; fourthly, a claim of an interim payment of $500,000 has not been properly brought to account and that issue is one that can only be determined by the Court; and finally, the submissions made to the costs assessor by the parties are widely divergent. Overall, senior counsel for the plaintiff submitted that at this stage the matters in dispute are more appropriately dealt with by a judge at trial in the first instance. Once the judge has decided these issues, the bill of costs may then be referred to a court appointed costs assessor for determination. The defendants submitted that the status quo should remain. 13Section 56 of the Civil Procedure Act 2005 (NSW) relevantly reads: "56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. ..." 14I agree that there are limitations as to the issues that can be determined by a costs assessor. In Muriniti v Lyons [2004] NSWSC 135, Dunford J at [56]-[57] set out some of those issues. They read: "[56] Having regard to the status and powers of Costs Assessors and the ordinary meaning of the word 'assessor', I am satisfied that the powers of Costs Assessors are limited to determining the value of the work done or services rendered in circumstances where there is no dispute that costs are payable and the only issue is as to the amount. It is no part of their function to determine whether or when such costs are payable. The matters set out in s 208A which they must, and in s 208B which they may, take into account are all matters relevant to putting a value on the work done or services rendered and the fairness or justice of the amount claimed; but are not matters which relate to the terms of a costs agreement (particularly if oral) and whether any conditions precedent to payment have been fulfilled. The determination of such questions requires the reception of sworn evidence, which can be tested by cross-examination, and an assessment of such evidence. Costs Assessors do not have the power to deal with such matters. [57] For similar reasons it has been held that a Costs Assessor has no power to hear a cross-claim by a client against a solicitor based on negligence, nor to award damages: Ryan v Hansen, supra per Kirby J; or to make an assessment when no costs are presently due and payable: Lace v Younan [1999] NSWSC 1072 per Master Harrison (no bill of costs rendered); Baker v Kearney [2002] NSWSC 746 per Master Malpass (judgment in District Court that applicant for assessment not entitled to costs). I am therefore satisfied that on being notified of the dispute as to the plaintiff's liability to pay the costs, the Costs Assessor should have declined to make a determination or issued a certificate unless and until such issue was resolved." 15The claims brought against the defendants are serious and include fraud. 16I agree that the costs assessor in these proceedings cannot determine whether the interim payment has been properly brought to account. However, it is not in dispute that legal work was undertaken by the defendants and some amount is owed by the plaintiff to the defendants for the work that was properly undertaken. 17Mr Rosier, the costs assessor, has sought submissions from the parties. He asked that "the plaintiff provide him with any objections, submissions or other material which the plaintiff wishes to make as to why the costs claimed in the bill of costs and the disbursements claimed are not fair and reasonable costs for the work which it was reasonable to have performed and which was performed in a reasonable manner." Similarly, he asked that the defendants provide him "with any reply to the plaintiff's submissions which they wish to make, together with any submissions or other material upon which the defendants wish to rely in support of their claim that the costs and disbursements claimed are fair and reasonable costs for work which it was reasonable to have performed and which was performed in a reasonable manner." 18Mr Rosier has received submissions from both parties (see Ex B). While some of the material contained in both parties' submissions is directed to issues that are not ones for determination by the costs assessor, both parties have directed their attention to the items raised in the bill of costs and the reasons why they should or should not be allowed. 19Mr Rosier has been asked to prepare his report on two bases. The first that the costs agreement is valid and the second that the costs agreement is invalid where the costs are to be assessed on a fair and reasonable basis. One of the main issues to be determined is what work was fair and reasonable. If the costs assessor undertakes the assessments on these two alternate bases, some of the costs will be agreed upon and some will remain in dispute. In other words, the issues in dispute will be refined prior to trial. Some of the areas of dispute concerning the work done will be filtered out by the process of the costs assessor, not the Court, examining the 39 folders of material in order to determine what was fair and reasonable. The costs assessor will be in a position to disallow claims in the bill of costs such as overcharging, any amount claimed for work that was not actually performed and any unnecessary work performed. At trial the areas of cross examination will be more focussed. 20In my view, the use of an independent court expert will allow the real issues to be determined and shorten the time taken at trial. 21Costs follow the event. The plaintiff is to pay the defendants' costs of the notice of motion filed 21 March 2014.

The Court orders that: (1) The plaintiff is to file and serve the second amended statement of claim without underlining by 4.00 pm on 7 July 2014. (2) The defendants are to serve any request for particulars by 21 July 2014. (3) The plaintiff is to serve answers to particulars by 4 August 2014. (4) The matter is listed for further directions before the registrar at 9.00 am on Thursday, 7 August 2014. Liberty to vacate. (5) The plaintiff is to pay the costs of the notice of motion filed 21 March 2014 and those costs are to include the costs thrown away by the amendments to the statement of claim. (6) The plaintiff is to forward a copy of this judgment to the costs assessor.

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: 01 July 2014