McDonald v Price

Submissions on the appeal 6Mr Benson of counsel who appeared for the Plaintiff accepted that leave was necessary because the order with which the Plaintiff was dissatisfied was an order as to costs - s 40(2)(c) Local Court Act 2007. The Plaintiff submitted that the issue was one of general importance for the public and practitioners because it involved the status of a Practice Note in relation to the assessment of costs in the Local Court. 7The Practice Note is Practice Note 1 of 2000 which was reissued on 9 November 2009. It relevantly provides: As a joint initiative between the Local Court and the Law Society of NSW, guidelines for the calculation of legal profession costs in Local Court civil litigation have been prepared. The Local Court has the power to determine costs under s 366 of the Legal Profession Act 2004, and in short and straightforward cases it is both just and efficient to finalise the question of costs before the Local Court. Assessment under the Costs Assessment Scheme remains an available option for deciding costs in long and more complex cases. Legal costs always remain at the discretion of the Court , and the guideline figures set out below do not diminish that discretion. The guidelines ensure that both parties are aware of the manner in which the Court will determine costs where necessary. This will assist the parties to reach agreement on costs, without the Court's intervention. Local Court Costs Procedure:

1. On the hearing day, practitioners for each party should have a summary of the fair and reasonable costs that will be sought if their client is successful. Evidence of time spent, such as copies of time ledger printouts, file notes and memoranda should be available.
2. At the end of the hearing, the Court will encourage the parties to negotiate an agreement on costs. The application of the costs guidelines will assist the parties to reach agreement. If necessary, the Court will adjourn the question of costs for that purpose. If agreement is reached after the hearing day, consent orders can be filed without a further appearance in Court.
3. Costs will be allowed by reference to time reasonably spent on the case, however the Court will not engage in taxing exercise (whereby individual items on a bill of costs are either allowed or disallowed). There is no requirement to distinguish between time spent on the hearing and on interlocutory matters, unless costs in the interlocutory matter have been separately determined. The legal practitioner seeking costs bears the onus of establishing what time was spent on the case, and that the time spent was reasonable in all the circumstances.
4. On request, the Court will determine any application for indemnity costs before asking the parties to negotiate an agreement on costs.
5. If the parties are unable to reach an agreement on costs, and a party is opposed to the Court determining costs, the question of reasonable costs will be referred for assessment under the Costs Assessment Scheme. (emphasis added) 8The Plaintiff drew particular attention to what appears in paragraph 5 of the Practice Note suggesting that in cases where parties were unable to reach an agreement on costs and a party was opposed to the court determining the costs (as was the case here), it was mandatory for the issue of costs to be referred for assessment under the Court Assessment Scheme. 9The Defendant argued that the amount in issue was so small that leave should not be granted, and relied in that regard on Kelly v Norris [2004] NSWCA 260, but submitted that nothing in the Practice Note was of significance because of the overriding provision in s 98 Civil Procedure Act 2005 together with the fact that the Practice Note expressly says that costs always remain at the discretion of the Court. 10In reply, the Plaintiff submitted that Kelly v Norris was distinguishable if one had regard to the facts in that case, particularly the amount of the costs in issue compared with the verdict. The Plaintiff did not dispute that the principles in Kelly v Norris applied and accepted that there was a higher burden on an applicant where leave is necessary.

Should leave be granted? 11It is true that there are some distinguishing factual features in Kelly v Norris . The issue concerned the disallowance of costs of $4,190 and an order that the solicitor pay some of those costs in a total bill for $1.5 million that had been taxed back to $850,000. The costs related to a personal injuries claim where the trial judge had awarded damages of $31,824,041.31, reduced on appeal to $7,672,010.33. 12By majority, the Court of Appeal refused leave to appeal. Bryson JA (with whom Hodgson JA agreed) said: [45] The merits of the proposed challenges are relevant to the grant of leave to appeal. In my view the challenge on appeal to each of the orders is reasonably arguable, although not with uniform strength; the judgment of Santow JA shows why this is so. However where leave to appeal against a costs order is sought more has to be shown than that the orders under appeal are reasonably open to reconsideration; see Wentworth v. Rogers (No. 3) (1986) 6 NSWLR 642 at 644 (Kirby P) and 651 (Priestley JA). When the amount involved in a proposed appeal is small, it is not usually regarded as sufficient that the orders under appeal are arguably wrong; see Dunn v. Ross Lamb Motors [1978] 1 NSWLR 26 at 28. That case has been followed several times but does not expound any principle upon which leave may be granted or refused in small appeals. The enunciation of general principles is inherently difficult, and in view of the discretionary nature of the power to grant leave, may not be possible. Among the relevant considerations is the principle of proportionality described in these terms by Lord Hoffmann in Piglowska v. Piglowski [1999] 1 WLR 1360 at 1373: ... there is the principle of proportionality between the amount at stake and the legal resources of the parties and the community which it is appropriate to spend on resolving the dispute. In a case such as the present, the legal system provides for the possibility of three successive appeals from the decision at first instance. The first is as of right and the second and third are subject to screening processes which themselves may involve more than one stage. If one includes applications for leave, the facts of this case, by the time it reached the Court of Appeal, had been considered by five differently constituted tribunals. This cannot be right. To allow successive appeals in the hope of producing an answer which accords with perfect justice is to kill the parties with kindness. [46] The full force of Lord Hoffmann's observations does not bear on the present application as there have not been successive appeals, but the small amount involved directs attention to the proportionality between the amount at stake and the resources of the parties and of the community which it is appropriate to use and spend on resolving the dispute. In my opinion the public interest is not well served if a discretionary decision allows or requires litigants to go to appeal on a sum as small as $4,190. The community cannot afford to provide the resources to entertain such appeals, and if it is the perception of litigants that they can afford to do so they must be mistaken. In illustration of this, the prescribed filing fee on the Summons was $656 and the filing fee on a Notice of Appeal if leave to appeal is granted will be $1,380. 13Santow JA, who would have granted leave to appeal, said: [15] Where the appeal threshold is at such variance with the amount in issue ($100,000 under s 101(2)(r) as against $4,190) and where the subject matter of the appeal involves an exercise of discretion in a matter of practice and procedure where constraints on appellate intervention need no rehearsal, those factors weighed heavily against the grant of leave. This is unless there be some real issue of general principle or public importance involved in the case; compare Carolan v AMF Bowling Pty Ltd t/as Bennetts Green Bowl (Court of Appeal, 16 November 1995, unreported) BC9501771, per Kirby P. Moreover, as Sheller JA observed in that case, In order to be granted leave to appeal the applicant must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at". Moreover, there is the consideration emphasised by Cole JA in that case that "it will be an exceptional case in which an appeal to this Court is likely to receive leave whether the sum involved is less than [the] limit ... it should be recognised that where such small claims are involved there must be an early finality and determination of litigation, otherwise the costs which will be involved are likely to swamp the money sum involved in the dispute. 14In the present case, the Plaintiff was claiming costs in the amount of $26,540.45, so that on one view the amount in issue on the appeal was about $20,000. The Plaintiff accepted, however, that even if the issue of costs had been referred to assessment it is likely that the costs would have been assessed at something less than $26,000. Nevertheless, what was said in Kelly v Norris points clearly to the fact that it will be necessary for an appellant to show that there is some other significant matter for leave to be granted involving an order for costs because such an order involves the exercise of discretion in a matter of practice and procedure where there are more constraints on appellate intervention: see also Ashi Pty Limited trading as LJ Hooker Commercial Liverpool v Karasco Investments Pty Ltd [2009] NSWSC 780 at [36]-[37]. 15The question is, therefore, whether, as the Plaintiff submits, the status of the Practice Note with regard to costs is a matter of such importance to justify the grant of leave. 16In my opinion, it is difficult to see what the issue of importance is. It can be accepted that paragraph 5 is rather unfortunately worded, but it must be read in the context of the whole Practice Note. In Halpin & Ors v Lumley General Insurance Ltd [2009] NSWCA 372 Basten JA said at [14]: The power to issue practice notes is stated to be "[s]ubject to rules of court": s 15(1). As a matter of principle, a practice note is subservient to the Civil Procedure Act and cannot be inconsistent with it. 17It is clear that s 98 is the overriding governing provision with regard to costs in the Local Court. Whilst the Practice Note does not expressly refer to s 98 it does say in the Preamble that legal costs always remain at the discretion of the Court. It then goes on to refer in a number of places to what is set out in the Practice Note as "guidelines". In Smoker v Pharmacy Restructuring Authority (1994) 125 ALR 577 Wilcox J said (at 579): Generally speaking, the function of "guidelines" is to provide information and to point the way to a particular conclusion, without dictating that conclusion. Generally speaking, a residual discretion remains. 18Section 15 Civil Procedure Act 2005 makes it clear that Practice Notes issued by a Court are subject to the Rules of the Court. In addition, it is a well known principle that a power provided by the Rules cannot exceed the power given in an Act under which those Rules are made, and if the Rule and the Act are irreconcilable then the Rule must give way to the Statute -see Pearce & Geddes , Statutory Interpretation in Australia , 5th ed, Sydney, Butterworths (2001) at 3.38 and the cases cited therein. 19Although it may have been preferable if paragraph 5 had said: The question of reasonable costs will ordinarily be referred for assessment practitioners, and for that matter members of the public, must be taken to know about the matters I have discussed above in relation to s 98 and the subservience of Practice Notes to the Act. They would see also that the Practice Note contained "guidelines" and they would not need to be familiar with the judgment of Wilcox J in Smoker to understand what a guideline is in normal parlance. If they thought paragraph 5 was mandatory they would be speedily informed otherwise by a Magistrate at the appropriate time. 20There is no issue of public importance arising from the Plaintiff's suggestion that there is a doubt about the status of the Practice Note. What is contained in the guidelines of the Practice Note is subservient to s 98 and the Act generally - that subservience is made clear by the Preamble to the Practice Note. The fact that the Plaintiff may be able to show that the order under the appeal is arguably wrong will not be sufficient: Kelly v Norris at [15] and [45]; Ashi at [34]-[35]. 21Leave to appeal should be refused.

Is error shown? 22In case I am wrong in deciding that leave to appeal should be refused I will consider whether it is shown that the Magistrate erred in making the order. 23The Plaintiff identified what he said were 2 errors on the Magistrate's part. The first was a failure to follow what was alleged to be the mandatory requirements of paragraph 5 of the Practice Note. In this regard the Plaintiff challenged the submission put forward by the Defendant that the Practice Note is not subservient to the Act. In so doing he sought to distinguish what Basten JA said in Halpin by drawing attention to what Palmer J said in Carey v Robson & Anor; Nicholls v Robson & Anor (No 2) [2009] NSWSC 1199 at [32]: The Court has now issued a Practice Note as to the conduct of family provision cases (SC Eq 7). It applies to claims both under the Family Provision Act 1982 and under its replacement, Chapter 3 Succession Act 2006 (NSW). The Practice Note, in conjunction with other Practice Notes relating to proceedings in the Equity Division generally, is intended to further the overriding purpose of the Civil Procedure Act 2005 (NSW), which is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings: s 56(1) CPA. 24The second error was said to be that the Magistrate assessed the costs by reference to the costs for Small Claims Division matters under $20,000 in circumstances where the Plaintiff had commenced proceedings in the General Division of the Court claiming $60,000. It was submitted that the ultimate verdict of a little over $6000 was not to the point.

(a) Failure to follow the Practice Note 25I have already discussed above the status of the Practice Note, particularly with regard to s 98 of the Act. If there was any doubt about the matter I must have due regard to what Basten JA said in Halpin v Lumley . 26There is nothing inconsistent with this in what Palmer J said in Carey v Robson. The fact that a Practice Note is intended to further the overriding purpose of the Act does not mean that the Practice Note is not subservient to the Act and Rules. 27Had the Magistrate considered herself bound to refer the costs dispute for assessment she would have fallen into error because she would have wrongly regarded her discretion as being limited by the guidelines in the Practice Note. 28There was no error in this regard by the Magistrate.

(b) Having regard to the Small Claims Division Scale 29Once it is accepted that the Magistrate had the discretion provided by s 98 an error of the House v The King type must be shown. Although it was not clearly articulated, it can be taken that the Plaintiff was complaining that the Magistrate had taken into account an irrelevant consideration by having regard to the scale for default judgments for unliquidated claims in the Small Claims Division. 30It is apparent that the Magistrate had regard to the principle of proportionality enshrined in s 60 of the Act. She noted that the judgment of $6000 was clearly grossly disproportionate to the costs claimed, and that "it was a very simple matter in Court in hearing the evidence from the Plaintiff from (sic) the Defendant". 31It seems to me clear, from the way the Magistrate expressed herself, that the costs scale for default judgments in the Small Claims Division was only the starting point for the Magistrate. The final costs figure awarded exceeded the scale, and that was no doubt because the matter was a defended one, albeit the main issue appears to have been the extent of the Plaintiff's psychological condition and causation thereof. 32The ultimate amount awarded represented about 25% of the verdict. The precise figure, and the appropriate proportion, was entirely within the discretion of the Magistrate. They were not matters that were open to be argued on an appeal. The real complaint of the Plaintiff is the starting point, being the Small Claims Division scale. 33In my opinion, it was not inappropriate for the Magistrate to have regard to the Small Claims Division scale as a starting point. Contrary to the Plaintiff's submission, the Magistrate did not need a statutory warrant for having regard to that scale. But if she did, s 60 of the Act may have provided it.

Conclusion 34The Plaintiff has not shown a basis for a grant of leave to appeal. But even if he had, I do not consider that any error of a House v The King type has been shown. 35Accordingly, I make the following orders: (1) Leave to appeal refused. (2) The Summons is otherwise dismissed. (3) The Plaintiff is to pay the Defendant's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 February 2011