McCausland v Surfing Hardware International Holdings Pty Limited

Civil Procedure Act 2005 LEGISLATION CITED: Legal Profession Act 1987 Legal Profession Act 2004 Uniform Civil Procedure Rules (UCPR) 2005

East West Airlines Limited v Turner [2010] NSWCA 53 Fox v Percy [2003] HCA 22 Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278 CASES CITED: Johnson v Madden [2000] NSWSC 463 Madden v New South Wales IMC [1999] NSWSC196 Randall Pty Limited v Willoughby City Council 2009 NSWDC 118 VEAL v The Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 72 Wentworth v Rogers [2006] NSWCA 145

William and Yvonne McCausland (Plaintiffs) PARTIES: Surfing Hardware International Holdings Pty Limited and others (Defendants)

COUNSEL: Mr T Alexis SC and Ms M Castle (Plaintiffs) Mr R C Gration (Defendants)

SOLICITORS: Dunstan Legal (Plaintiffs) Harmers Workplace Lawyers (Defendants)

The plaintiffs have appealed to the District Court from a review panel in respect of an assessment of party/party costs.

A number of preliminary issues have arisen concerning the jurisdiction of the District Court and whether it may receive further evidence on the hearing of the appeal.

On 27 November 2007, the Full Bench of the Industrial Court of New South Wales ordered the plaintiffs to pay the defendants' costs in proceedings before that Court (the "party/party costs"). Those proceedings concerned an issue as to whether Harmers Workplace Lawyers should be restrained from acting for the defendants in unfair contract proceedings in that Court, that firm having previously been consulted by the plaintiffs, in the course of which it received confidential information.

In those proceedings a second firm of solicitors acted for the defendants pending resolution of the conflict of interest issue. It is the plaintiff's contention that Harmers agreed or undertook to bear the defendants' costs of the conflict litigation the subject of the costs orders, with the result that the defendants have no liability to their solicitors for those costs. In these circumstances, it is contended that the indemnity principle does not apply. That is, the plaintiffs should not be required to pay any party/party costs in respect of the conflict proceedings.

With a view to enforcing the orders for costs in their favour, the defendants made an application under the Legal Profession Act 2004 (the LPA) for an assessment of the party/party costs. The costs assessor assessed the costs and issued a certificate of determination in favour of the defendants for party/party costs of $222,355.45.

The plaintiff objected to the defendants' costs, submitting to the costs assessor that the indemnity principle had been breached. The costs assessor determined the question in favour of the defendants. He said at [63] of his reasons: "...in response to a request made by the costs respondents' solicitors, I obtained information from the costs applicants' solicitors, HWL, and Watson Mangioni Lawyers, in relation to whether or not any of the claims made in the costs applicants' bill of costs involved any breaches of the indemnity principle. The information obtained was confidential but not privileged, in accordance with the decision of the Full Court of the High Court in VEAL v The Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 72; (2005) 225 CLR 88 (6 December 2005). I provided the costs respondents with material and the substance of pertinent information. I gave the costs respondents an opportunity of making submissions to me on the indemnity principle. They did not do so.

In my opinion, on the information obtained by me from HWL and Watson Mangioni Lawyers, the bill of costs accompanying the application in this matter does not involve any claims made in breach of the indemnity principle."

The plaintiffs made an application for a review of the determination of the costs assessor. The grounds of the Application for Review stated: "1. The Costs Assessor made an error of law in failing to provide the review applicant with a copy of the retainer documents as sought in the application for assessment.

2. The Costs Assessor erred by failing to require the costs applicants themselves to personally reply to his notice requesting further information, and by allowing the costs applicants' former solicitor to answer for them when the question in issue was the costs applicants' understanding of their legal liability to pay the solicitors' legal fees.

3. As a result of his failure to compel the Costs Applicants to produce documents and reply personally to his notice, and his inability to cross-examine the costs applicants on the question of their understanding of their legal liability to pay the solicitor's legal fees, the Costs Assessor was unable to properly test the liability of the costs applicants for the solicitors' legal costs and the determination, therefore, lacks validity on those issues."

The review panel reviewed the cost assessor's determination and issued a Certificate accordingly, dated 17 July 2009. In so doing, it decided, amongst other matters, that there had been no breach of the indemnity principles.

The appeal to this Court relates to the review by the review panel, in particular, its decision that there was no breach of the indemnity principle.

Appeals in respect of costs assessments and reviews are governed by ss 384 and 385 of the Legal Profession Act 2004 (LPA). Appeals lie from the determinations of costs assessors and review panels. Section 382 provides that in relation to a decision or determination of a panel, ss 384 and 385 apply as if references to a costs assessor were references to a panel. Changing the references in those sections from "costs assessor" to "panel", the sections provide: " 384. Appeal against decision of costs assessor as to matter of law

(1) A party to an application for a costs assessment who is dissatisfied with the decision of a panel as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the District Court, appeal to the Court against the decision.

(2) After deciding the question the subject of the appeal, the District Court may, unless it affirms the panel's decision:

(a) make such determination in relation to the application as, in its opinion, should have been made by the panel, or,

(b) remit its decision on the question to the panel and order the costs panel to re-determine the application.

(3) On a re-determination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.

385. Appeal against decision of costs assessor by leave

(1) A party to an application for a costs assessment relating to a bill may, in accordance with the rules of the District Court, seek leave of the Court to appeal to the Court against the determination of the application made by a panel.

(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 panel.

(3) The District Court or court or tribunal may, in accordance with its rules, grant leave to appeal, and may hear and determine the appeal.

(4) An appeal is to be by way of a new hearing and fresh evidence, or, evidence in addition to and substitution for the evidence received at the original proceedings, may be given.

(5) After deciding the questions the subject of the appeal, the District Court or court or tribunal may, unless it affirms the panel's decision, make such determination in relation to the application as, in its opinion, should have been made by the panel."

In short, s 384(1) provides for appeals as of right from a decision of a panel as to a matter of law arising in the proceedings to determine the application. Section 385 provides for other appeals by leave from a determination made by a panel. An appeal under s 385, if leave is given, is by way of a new hearing, and fresh evidence or evidence in addition to or in substitution for the evidence received at the original proceedings may be given.

Summons commencing the appeal to the District Court

The summons in the District Court was filed on 12 May 2010 and is headed: "SUMMONS COMMENCING AN APPEAL (PART 50) SUMMONS SEEKING LEAVE TO APPEAL (PART 50)."

The Summons sets out eight grounds of appeal: "1. The Review Panel erred in law in failing to give adequate reasons for its decision.

The Review Panel erred in law in failing to perform its statutory function.

The Review Panel erred in law in failing to afford procedural fairness to the plaintiffs.

The Review Panel erred in its decision that there was no breach of the indemnity principle.

The Review Panel erred in its decision that the letter of engagement and costs agreements were confidential.

Alternatively, the Review Panel erred in its decision that those documents which it considered confidential should not be provided to the plaintiffs.

The Review Panel erred in its decision not to provide the plaintiffs with a copy of the letters of engagement and costs agreements.

The Review Panel erred in determining that its function was merely to review the Costs Assessor's determination and reasons rather than to conduct an assessment of the costs, the subject of the application."

13. On 26 August 2010 the List Judge listed the appeal for hearing before me on preliminary issues. The matter came before me by way of case management on 3 September 2010, on which occasion the parameters of the issues for preliminary determination were discussed and finalised. The issues for preliminary determination in advance of any hearing of the appeal proper were:

(a) Whether an application can be made for leave to appeal pursuant to s 385(3) to the District Court (as opposed to the Industrial Court that made the costs orders).

(b) Whether fresh evidence or further evidence may be led in an appeal under s 384(1) in respect of a decision of a panel as to a matter of law arising in the proceedings.

(c) Whether any of the grounds 1 to 8 in the Summons fall within s 384(1) so as to provide the plaintiffs with a right of appeal or an appeal as of right, under that subsection, to the District Court.

Applications for leave to appeal under s 385 of the LPA

14. I deal firstly with the question of whether the plaintiffs may apply for leave to appeal to the District Court under s 385 of the LPA.

15. The plaintiffs contend that they may apply for leave to appeal to the District Court in respect of grounds of appeal not falling within s 384(1), under s 385(3). The defendants contend that the plaintiffs may only apply for leave to appeal in respect of grounds not falling within s 384(1) to the Industrial Court of New South Wales, under s 385(2).

"...s 385(3) expressly provides the District Court or the court or tribunal with jurisdiction to grant leave to appeal and hear and determine the appeal. There is nothing expressed in s 385 to limit the reference to the District Court in (3) to the jurisdiction of the District Court conferred by subsection (1). The power conferred by (3) is independent of that conferred by subsections (1) and (2). Indeed there is no warrant to so narrowly construe subsection (3) when s 384 expressly refers to the 'District Court' as well. [24]

"Subdivision 6 of the 2004 Act should be seen therefore as providing two complementary avenues of appeal: one in respect of a decision as to a matter of law under s 384; the other in respect of a determination with leave, under s 385. The statutory scheme expressly provides the plaintiff with a choice as to the appropriate Court - if the appeal involves a decision as to a matter of law (and therefore must be brought in the District Court under s 384), then the District Court would be the appropriate Court to also deal with any question of leave under s 385. The dictates of justice provided for in the Civil Procedure Act 2005 require the proper construction of s 385(3) to avoid the potential for a multiplicity of costly appeal proceedings in different courts. If an appeal is brought under both s 384 and s 385 (for leave) in the District Court, which is common if there are both legal and factual grounds of appeal, it is logical that the District Court, the only Court with power to determine the first issue, also has power to grant leave in order that it also determine the second issue. A contrary construction is illogical and conceives a cumbersome and costly result: surely the legislature did not intend two appeals in separate courts arising out of the same costs assessment. An interpretation consistent with the dictates of justice should be preferred." [25]

The defendant's submissions are: "Section 382(2) of the LPA, provides that subject to the appeal rights in Subdivision 6 'No appeal or other review lies in respect of the determination'. Accordingly any right of the plaintiffs to appeal against the decision of the review panel must be found exclusively in Subdivision 6. [6]

Appeals as of right under s 384 are required to be brought in the District Court and are limited to 'a decision of a costs assessor as to a matter of law arising in the proceedings': s 384(1). [7]

An appeal on grounds other than a matter of law arising in the proceedings is available under s385, but leave is required. [8]

A party wishing to appeal against a costs assessment relating to a solicitor/client bill may 'in accordance with the rules of the District Court, seek leave of the Court to appeal to the Court': s 385(1). [9]

However, a party wishing to appeal against a cost 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 that Court or Tribunal seek leave of the Court or Tribunal to appeal to the Court or Tribunal': s 385(2). [10]

Subsections 385(1) and (2) are mutually exclusive - a costs assessment must be either in respect of a solicitor/client bill or a costs order made by a Court or Tribunal; it cannot be in respect of both. [11]

Section 385(3) does not in its terms grant a party any right to seek leave to appeal. It is merely a procedural section that directs the District Court, Court or Tribunal, as to how that body should deal with the application that has been made under s 385(1) or s 385(2). [12].

The plaintiffs submit that s 385(3) should not be construed narrowly and should be read as granting power independent of that conferred by subsections (1) and (2). However, such a construction would lead to a logical impossibility: until a dissatisfied party has first filed an application for leave to appeal, there is nothing the District Court is able to consider or determine. However, the party dissatisfied with a costs order made by a Court or Tribunal is directed by s 385(2) to seek leave from the Court or Tribunal that made the order, except where the substantive proceedings themselves were litigated in the District Court. This means that there would never validly be an application for leave before the District Court, for its consideration under s 385(3) in the first place. [13]

The proper construction of s 385(3) is therefore the straightforward and obvious reading of the subsection in conjunction with the previous two subsections: it is a procedural subsection directing the relevant body how to deal with applications for leave to appeal that have been filed under subsections (1) or (2)." [14]

This issue arose as long ago as 1999 in a decision of the Supreme Court by Master Malpass, as he then was, in Madden v New South Wales IMC [1999] NSWSC196. In 1999 the Supreme Court had the relevant appellate jurisdiction in respect of costs assessment appeals. That jurisdiction has since been transferred to the District Court, which is why I am determining these questions in the present appeal. In Madden, his Honour was dealing with s 208L and s 208M of the 1987 Legal Profession Act. I am dealing with s 384 and s 385 of the 2004 Legal Profession Act, but the sections directly correspond respectively. His Honour was dealing with costs payable as a result of an order for costs made by the District Court. He said, at [20]: "The defendant contends that this court (the Supreme Court) does not have jurisdiction to entertain the application for leave in this case. It is said that by virtue of subsection (2) (of the equivalent of s 385), the District Court only has the jurisdiction. There may well be considerable force in that argument, however the point was not fully argued and it is unnecessary to further pursue it..."

I know of no case where the issue has been directly decided.

The issue was referred to in the decision of the Court of Appeal in Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278. That was also an appeal concerning an order for costs made by the District Court, and the Court of Appeal. His Honour Giles JA said at [17]: "In his appeal the claimant claimed orders in reliance on s 208L (s 384), in the alternative leave and orders in reliance on s 208M (s385)... S 208M(1) was not available to the claimant. He fell within s 208M(2) as a party to the opponent's application flowing from orders for costs made in the District Court and the Court of Appeal. He could appeal by leave to the District Court as to the costs payable as a result of the order in the District Court, and by leave to the Supreme Court as to the costs payable as a result of the order in the Court of Appeal."

The issue was again referred to by the Court of Appeal in Wentworth v Rogers, this particular decision being at [2006] NSWCA 145. His Honour Basten JA said at [191]: "If the costs assessor did not have power to make findings in relation to such contractual matters and purported to do so his or her decision might be set aside as demonstrating legal error. In that case it would be futile to remit the matter to the assessor: the dispute must be resolved elsewhere. On the other hand, it may be asked whether, if the costs assessor correctly refused to determine the contractual questions, leave could be granted under s 208M (s 385) and those issues could be raised in the relevant court or tribunal." (emphasis added).

His Honour went on to say at [193]: "It would undoubtedly be desirable if a costs assessor had power to refer a question of law to the Supreme Court for determination being the kind of power sometimes conferred on tribunals. On the other hand it may have been thought sufficient that the costs assessor would have an implied power not to continue with the assessment of the application so as to allow the parties to have the contractual issue determined in the Court in which the proceedings arose ." (emphasis added).

I expressed my view on the issue in Randall Pty Limited v Willoughby City Council 2009 NSWDC 118 at [30]: "In the case of party/party costs there is a further complication in that leave to appeal on grounds other than matters of law arising in the proceedings may only be sought from the Court which made the order for costs: See Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278. This means that a dissatisfied party may be put to an election whether to appeal to the District Court under s 384 or to another court under s 385..."

I see no reason to change the view I expressed in Randall. I believe the intention of the legislature is quite clear: If a party to a costs assessment in respect of party/party costs payable as a result of a court order wishes to appeal from a costs assessor or a review panel in respect of a discrete decision as to a matter of law there lies an appeal as of right under s 384. In all other situations leave is required and the application is required to be brought pursuant to s 385. The application for leave must be made to the court or tribunal that made the costs order and the appeal, if leave is granted, is to be heard in that other court or tribunal.

I do not agree that s 385(3) is to be read as somehow conferring complementary jurisdiction on the District Court in respect of party/party costs disputes. The reference to the District Court in the subsection is limited to disputes concerning a bill, that is, disputes between client and practitioner or practitioner and practitioner where the liability for costs is contractual and not pursuant to a court order: see s 385(1).

For those reasons the present appeal is incompetent insofar as any grounds relied upon do not relate to a decision on a matter of law arising in the proceedings.

Any application for leave to appeal under s 385 by these plaintiffs is required to be made to the Industrial Court of New South Wales in accordance with its rules.

Whether further evidence may be led in an appeal under S 384(1)

I come now to the second preliminary issue for determination, namely whether fresh evidence or further evidence may be led in an appeal brought pursuant to s 384(1) in respect of a decision of a review panel or costs assessor as to a matter of law arising in the proceedings.

The plaintiffs contend that the District Court has a discretion to receive further evidence on the hearing of an appeal as of right under s 384(1). The defendants contend to the contrary.

Conventional wisdom was to the effect that this question has been previously decided.

The point was first considered in Madden v NSW IMC to which I have already referred above in another context. In Madden the Court rejected an affidavit containing material not placed before the costs assessor and decided that such new material should not be received in the appeal. In giving his reasons for rejecting the affidavit the Master said at [24]: "S 208L (s 384) does not contemplate the receiving of fresh evidence on the hearing of an appeal. (Subsection (3) contemplates the receiving of inter alia fresh evidence on a re-determination). The appeal is restricted to a matter of law arising in the proceedings to determine the question."

Master Malpass, as he then was, returned to this issue a year later, somewhat more expressly, in Johnson v Madden [2000] NSWSC 463. In that decision he said at [2] - ]3]: "As is so often the case there was misconception as to the nature of the hearing involving the seeking of relief pursuant to s 208L(1) (s 384(1)), and s 208M(1) (s 385(1)). It appears to have been contemplated by the parties that they could be heard on fresh evidence (rather than the material placed before the costs assessor) together with cross-examination. This misconception once again led to a significant waste of court time. Usually (as was the position in this case) the rectification process sees a "scissors and paste" exercise which produces an unsatisfactory result. The court tends to find inter alia that it is left with at least some material which was not given to the costs assessor.

It needs to be appreciated that the remedies provided by s 208L(1) and s 208M(1) are of an appellate nature ( not by way of a new hearing ). The sections allow fresh evidence only where there has been either a remitting of an application back to the costs assessor for redetermination or the granting of leave to appeal." (emphasis added).

The Court of Appeal dealt with the issue in its decision in Wentworth v Rogers [2006] NSWCA 145. In that decision his Honour Basten JA said at [190] - [193]:

"Assuming that the costs assessor has power to decide whether or not there is an agreement not to charge or to charge at a reduced rate any decision that the assessor might make is open to reconsideration by leave pursuant to s 208M. If there is disputed evidence which in substance the costs assessor does not have power to deal with in the manner usually considered procedurally fair with respect to contractual disputes and absent countervailing considerations it would seem generally desirable that leave would be given to allow those matters to be agitated in a relevant court or tribunal. In some cases there might be a right of appeal with respect to such a finding where an error of law can be identified. However, it is more likely, as in the present case, that the real challenge is thought to be made in relation to findings of fact because the evidence was not complete. Perhaps because there had been no cross-examination of any witnesses who might have been required to give oral evidence in a court proceeding.

If the costs assessor did not have power to make findings in relation to such contractual matters and purported to do so his or her decision might be set aside as demonstrating legal error. In that case it would be futile to remit the matter to the costs assessor. The dispute must be resolved elsewhere. On the other hand it may be asked whether, if the costs assessor correctly refused to determine the contractual questions, leave could be granted under s 208M and those issues could be raised in the relevant court or tribunal.

The appropriate resolution of these uncertainties may be found in the principle that administrative officers and bodies which have no power to make binding determinations of law are nevertheless required, for the purposes of exercising their powers, to consider matters of law...

It would undoubtedly be desirable if a costs assessor had power to refer a question of law to the Supreme Court for determination, being the kind of power sometimes conferred on tribunals. On the other hand it may have been thought sufficient that the costs assessor would have an implied power not to continue with the assessment of the application so as to allow the parties to have the contractual issue determined in the Court in which the proceedings arose. At least where that court is a court with appropriate jurisdiction that approach would have much to commend it. In any event it is not necessary to resolve the precise extent of the assessor's power for the present purposes.

The existence of a dispute of this kind, in line with the lack of relevant procedural mechanisms for allowing a hearing and determination in an appropriate manner, would, absent other considerations, generally mandate a grant of leave pursuant to s 208M of the 1987 Act (s 385 of the 2004 Act)".

The defendants submit that I am bound by these decisions. The plaintiffs submit that I am not bound by these decisions or alternatively that they are to be distinguished from the present case.

The plaintiffs submit that the present case differs from those decisions in two respects in particular. They say firstly that the present case involves further evidence that was incapable of being adduced in the cost assessment process due to the limitations attendant upon it being a paper driven process not amenable to the investigatory opportunities available in proceedings in this court, such as subpoenas, discovery, examination of witnesses, cross-examination and the like.

Secondly, the plaintiffs submit that the reference in s 384(1) to the rules of the District Court involves a reference to r 50.16(3) of the UCPR, which empowers the District Court to receive further evidence in an appeal.

It is accepted by both sides that the reference to the rules of the District Court in s 384(1) is a reference to the UCPR. Rule 50.16 provides:

" 50.16 Conduct of appeal (1) If the decision under appeal has been given after a hearing, the appeal is to be by way of rehearing. (2) The higher court has the powers and duties of the Court, body or other person from whom the appeal is brought, including powers and duties concerning: (a) amendment, and (b) the drawing of inferences and the making of findings of fact, and (c) the assessment of damages and other money sums. (3) The higher court may receive further evidence. (4) Despite subrule (3), where the appeal is from a judgment after a trial or hearing on the merits, the higher court may not receive further evidence except on special grounds. (5) Subrule (4) does not apply to evidence concerning matters occurring after the trial or hearing. (6) The higher court may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made."

Following oral submissions on Wednesday 22 September 2010 counsel for the defendants located and forwarded to my associate by email the decision in Johnson v Madden to which I have referred. Senior counsel for the plaintiffs responded to that in an email of his own to my associate dated 23 September 2010, in which he submitted: "Further to the email from Richard Gration earlier today and the reference to Johnson v Madden [2000] NSWSC 463 said to be authority "directly on point" would you kindly bring to his Honour's attention the following brief submission in reply:

1. Like the earlier decision of Master Malpass in Madden v NSW IMC [1999] NSWSC 196 this case does not deal with the incorporation of the "rules of...court" in a s 384(1) appeal, by that sub-section. It is clear that the Master does not consider the application of the rules on the appeal and the significance of s 384(2) commencing with the words " After deciding the question subject of the appeal ..."

Thus the observation made by the Master at [3] - " ...the sections allow fresh evidence only where there has been either a remitting of the application back to the costs assessor for re-determination or the granting of leave to appeal " - which is, relevantly, a reference to the earlier equivalent to s 384(3) needs to be read and understood in that limited context. This observation did not decide the case (see the conclusion at [15]) is obiter and is therefore not an authority on point at all.

2. Importantly, because the Court was dealing with both a s 208L(1) and a s 208M(1) appeal, the judgment does not make clear whether "the fresh evidence" ( not further evidence) referred to at [2] and [3] was sought to be relied upon under either or both sections. There is no finding by the Master that the Court did not have a discretion to receive fresh evidence or further evidence on the s 208L appeal. As the Master says at [15], the summons was dismissed because the applicant 'failed to demonstrate an arguable case for relief' under either section."

The plaintiff's submission is that there is no legislative intention evinced in s 384(1) to proscribe the UCPR. The application they make is to tender not so much fresh evidence but further evidence in accordance with r 50.16(3). It is further evidence because it was not available before the costs assessor due to the absence of forensic procedures to enable it to be discovered and brought before the costs assessor.

It is helpful to understand the nature of the further evidence the plaintiff's would seek to tender on the hearing of the appeal proper. It is detailed in the written submissions as follows: "The plaintiffs wish to rely upon further evidence on the hearing of the appeal to establish that the defendants did not have any contractual liability to HWL/Watson Mangioni for the costs of the conflict litigation - and that HWL had agreed to pay those costs in their entirety. Of course the conflict litigation was all about whether HWL should continue to act for the defendants in the substantive proceedings before the Industrial Relations Commission. This evidence has only come to light and recently become available to the plaintiffs on subpoena issued in the course of the appeal proceedings. [18]

...Costs assessments are carried out on the papers without any witnesses being able to be cross-examined. The parties (as opposed to the costs assessor) do not have the power to compel the production of relevant evidence, a factor which if there was a 'hearing' in the traditional sense would tend against the Court too readily granting leave to educe further evidence in the exercise of the discretion provided for in the rule...[20]

...The proposed evidence was not produced to the costs assessor despite meeting the description of the material he called for in his s 358 notices. The proposed evidence of which the plaintiffs are presently aware is:

(a) likely to be believed - it emanates from the files of HWL and large consists of file notes and emails created by the solicitors acting at the time; and

(b) will be directly relevant to establishing that the defendants had no contractual liability to HWL/Watson Mangioni for the costs of the conflict litigation.

The plaintiffs were diligent in trying to effect production of this material through the costs assessor issuing the Section 358 notices. The plaintiffs themselves had no ability to obtain the material but brought the issue to the attention of the costs assessor in thorough detail on repeated occasions prompting the costs assessor to issue the notices. Despite the fact that the material now produced on subpoena answered the description of the material sought by the costs assessor it was not produced to the cost assessor...[21] The plaintiffs submit that in the circumstances the Court should allow them to adduce the further evidence. There is also a related issue of whether the defendants have properly complied with subpoenae and this will need to be dealt with in due course." [22]

The defendants opposed the introduction of any further evidence on the hearing of this appeal, whether it is fresh, old or otherwise. Their principal submission is that the UCPR r 50.16 has no application to an appeal under s 384(1) of the LPA.

The defendants say that the plaintiff's submissions involve a misconstruction of s 384(1), which governs the making of an appeal. The reference, in the section, to the rules of the District Court is a reference to those rules that regulate the making or bringing of the appeal such as for example r 50.3 which prescribes the time limit for an appeal. S 384(1) is silent in relation to the conduct of the appeal and that is left to be dealt with by subsections (2) and (3). Accordingly r 50.16, which is concerned with the conduct of the appeal, is not picked up by the reference to the rules in (1).

The defendants point to the note to r 50.1 which reads: "The provisions of this part like the other provisions of these rules are subject to any other Act that makes provisions to the contrary".

Notes do not form part of the UCPR; but s 4(5) of the Civil Procedure Act 2005 makes it clear that the Act and the UCPR do not limit the operation of any other Act with respect to the conduct of civil proceedings. Similarly s 5(2) of that Act provides that nothing in the UCPR extends the jurisdiction of any court except to the extent that the Act expressly provides.

The defendants submit that subsections (2) and (3) of s 384 read together are contrary to r 50.16(3) which cannot therefore have any operation in the present context.

They also submit that r 50.16 is a "generic" rule. It covers a wide range of appeal from various courts and tribunals and must be read in the context of the provision enabling the appeal.

Rule 50.16 is a new rule introduced by the UCPR. Appeals to the Supreme Court were previously governed by s 75A of the Supreme Court Act 1970. Rule 50.16(1) makes it clear that its purpose is to regulate the conduct of appeals from decisions given after a hearing, in which case the appeal is to be by way of rehearing. Costs assessments by their very nature do not involve a hearing (as the plaintiff's own submissions make clear at [20]). More importantly, appeals under s 384(1) do not involve a rehearing. Any rehearing is by way of determination or re-determination under s 384(2) and (3) after the question the subject of s 384(1) has been decided and only if the decision of the panel is not affirmed.

In my view appeals under s 384(1) are strict appeals, where the duty of the Court is to determine whether error has been shown in the decision being appealed and it is not the Court's task "to decide where the truth lies as between competing versions of evidence or whether some further evidence may have lead to a different conclusion": see Fox v Percy [2003] HCA 22 at [32]; see also East West Airlines Limited v Turner [2010] NSWCA 53 at [76].

The proper construction of s 384(1) requires a consideration of the totality of the provisions of ss 384 and 385. In my view, these provisions as a whole create a scheme for appeals in respect of costs assessments and reviews. Section 384(1) provides for a narrow, limited avenue of appeal as of right as to a matter of law decided in the proceedings. It is not concerned with the facts except to the extent that the decision is based on the facts found. It is not the purpose of an appeal under s 384(1) to ascertain whether the facts were wrongly decided, incorrect, inadequate or incomplete. The Court is not concerned with absent facts, undisclosed facts or undiscovered facts. It is not contemplated that the facts upon which the matter of law was decided will be reviewed, complemented, varied or added to. The appeal is concerned with the decision as to the matter of law. If a party wishes to introduce fresh evidence or further evidence the sections provide alternative avenues of appeal: Firstly, leave may be sought from the Court or tribunal which made the costs orders in the case of party/party costs, under s 385(2); or in the case of practitioner/client costs, from the District Court under s 385(1). If on the other hand the party is able to persuade the District Court in an appeal under s 384(1) on the material before the review panel, and the District Court does not affirm the decision of the review panel on the matter of law, two options emerge under s 384(2): the Court can determine the application itself or it may remit the decision on the question of law to the review panel to re-determine the application. But there is in my view a further twist. The Court may not receive further evidence under s 384(3) if it decides to determine the matter itself. If it decides to determine the application itself it must do so on the evidence that was before review panel. It is only the review panel that can receive further or additional evidence under s 384(3) on a re-determination. This twist arises from use of the word determination in s 384(2) and the word re-determination in s 384(3).

I do not agree that the reference in s 384(1) to the rules of the District Court (i.e. the UCPR) changes the nature of the appeal contemplated by that subsection. Insertion of the words referring to the rules is to guide the prospective appellant as to the procedure and process for making the appeal. They do not change the limited of nature of the appeal or somehow enlarge the scope of the appeal. Rule 50.16 does not relate to the making of the appeal. It relates to the conduct of the appeal, once made.

For these reasons I decide that the only evidence admissible in the present appeal is the material that was before the review panel.

Counsel for the plaintiffs indicated that after I decided the two preliminary issues dealt with above they wished to "take stock" of their position in considering any next steps.

For that reason having regard to the conclusions I have reached I do not propose to decide now the third preliminary matter, that is which of grounds 1 to 8 in the Summons involve a decision on a matter of law arising in the proceedings. The defendants have conceded some of those grounds qualify, in particular the critical ground No 4. In respect of other grounds that may qualify the defendants raise a limitation point. As I understand the plaintiff's position, it is conceded on their behalf that without further evidence the appeal on the question of breach of the indemnity principle will fail.

I will therefore allow the plaintiffs time to consider whether they now wish to proceed with the balance of the substantive appeal in this Court or whether they wish to take some other course of action.

I will therefore stand the proceedings over for further directions on Friday, 19 November 2010. I am in Parramatta or on vacation in the meantime so I will grant leave to the parties to apply before that date, but to the List Judge.

Costs of the preliminary questions are reserved. I will retain the papers for the time being.

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