O'Connor v Fitti

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11911 of 1999 CLIVE PATRICK O'CONNOR T/AS THOMSON RICH O'CONNOR v BERNARDINO FITTI JUDGMENT 1 The plaintiff is a solicitor. In 1992, he was retained to act by the defendant. The parties entered into a costs agreement which is constituted by a letter dated 25 May 1992. Thereafter, the plaintiff provided legal services which related to proceedings which were commenced in the Federal Court. 2 A number of Bills of Costs have been given to the defendant. Certain of them were paid without dispute. The present proceedings concern seven Bills of Costs which were rendered during the period between 25 February 1993 and 20 May 1994. 3 On 17 December 1996, the plaintiff made application to this Court for an assessment of the costs and disbursements claimed in the seven bills. The application was referred to a Costs Assessor (Mr McNally). A final determination of the assessment did not take place until 23 July 1999. 4 A preliminary determination had been made in relation to the Costs Agreement itself. A voluminous notice of objection was made. It provoked a voluminous reply. The Costs Assessor exercised powers pursuant to s 207 of the Legal Profession Act 1987 (the Act). The plaintiff responded to this action. There were submissions made by the parties. The Costs Assessor received Statutory Declarations. 5 The assessment presented the Costs Assessor with an onerous and burdensome task. He was left to grapple with a formidable body of material. It was an unenviable assignment. 6 There were objections to the profit costs claimed by the plaintiff in a sum totalling $152,631.69. The determination saw the profit costs being reduced by $148,418.12 (only $90,335.38 was allowed). The claim for disbursements was also reduced. There was a claim for interest on unpaid costs. The Costs Assessor did not allow any interest. 7 These proceedings were commenced by Summons. The plaintiff seeks relief pursuant to both sections 208L and 208M. 8 The hearing took place on 7 and 8 June 2000. It was an unusually lengthy affair. It was also an unenviable assignment. 9 A number of affidavits have been read. This process involved the court in dealing with numerous objections. A mountain of documentary material has been tendered. There has been very lengthy argument. 10 It is part of the plaintiff's case that the Costs Assessor has made a number of errors of law. After certain of these matters had been ventilated in argument, it became apparent that the plaintiff was entitled to relief and that it was inevitable that there would be a remitting of the matter for re-determination. In an endeavour to avoid the parties incurring the further expensive costs involved in a re-determination they were exhorted to explore the prospects of resolution by compromise. Although some attempt was made, no compromise was reached. 11 These proceedings can be disposed of without becoming too deeply enmeshed in the details of the dispute and without dealing with all of the many matters canvassed during the hearing. It suffices to briefly deal with just the few matters which are decisive in the determination of these proceedings. 12 There is a primary question which goes to the construction of the Costs Agreement. 13 Clause 1 of the Costs Agreement provides inter alia that "All work carried out will be charged at $225 per hour". The parties were at issue on the question of the proper construction of the agreement. In addition, the defendant challenged its validity. 14 On 4 August 1997, the Costs Assessor made a decision as to the proper construction of the agreement. The decision made and the reasons for the decision are as follows:- "A 'The agreement dated the 25th May, 1992 made between Clive Patrick O' Connor and Berardino Fitti shall apply to this proceeding in respect of the actual work done or legal services provided by the said Clive Patrick O' Connor and which required his skill and expertise. B All other work done or legal services provided shall be assessed on the basis of a fair and reasonable amount.' My reasons were: 1. As at the 25th May, 1992 you were a sole practitioner practising under the name of 'Thomson Rich O' Connor'. 2. I consider the hourly rate of $225.00 was applicable for work actually done by you which required your skill and expertise. 3. If it was intended the hourly rate of $225.00 was to apply to work done by your employees without regard to the qualifications or experience of those persons or the degree of difficulty of the work, the client should have been informed in writing and also advised the hourly rate would be computed by six minute units." 15 Neither party had contended for this construction. However, it did see the agreement as not being struck down as invalid. The defendant has not sought to disturb this preliminary determination. 16 In my view, this construction was erroneous. Legal services were in fact provided by both the plaintiff and employed solicitors. The plaintiff contends that it was intended to impose a charge for professional services at the rate of $225 per hour. It seems to me that this was what was had in mind. Accordingly, I conclude that it was intended that this charge be applicable to all legal services provided by legally qualified staff (not merely legal services provided by the plaintiff). Business efficacy supports this construction. One possible construction is that it was intended to apply to the work performed by all staff (including staff members who are not legally qualified). However, it seems to me, that this was not intended by the parties. 17 This decision has a significant impact on the assessment at large. It of itself would justify the remitting of the matter for re-determination. 18 There have been numerous instances in which the Costs Assessor has disallowed items which were not the subject of any dispute raised by the objections. There are numerous instances of items being reduced by an amount which exceeds what was put in dispute by the objections. Schedules have been prepared which demonstrate the detail of these complaints. 19 The Act draws a distinction between applications for assessment of costs in relation to "a bill of costs" (which is defined in s 173) and applications for assessment of costs that result from an order (made by a court or a tribunal). In Turner v Pride (1999) NSWSC 850, I drew attention to this distinction. In the present case, the court is dealing with an application in relation to "a bill of costs" (I wish to stress that the observations made in this judgment are restricted to such applications). Accordingly, the assessment process applicable in this case is to be found in Subdivision 2 (sections 208A-208E). 20 In Turner , I also adverted to the question of s 208A (2) imposing a limitation on what may be disallowed in cases where there is an application relating to "a bill of costs" (as opposed to applications that result from an order). 21 For present purposes, the relevant provisions of s 208A are as follows:- "Assessment of bills generally (1) When considering an application relating to a bill of costs, the costs assessor must consider: (a) whether or not it was reasonable to carry out the work to which the costs relate, and (b) whether or not the work was carried out in a reasonable manner, and (c) the fairness and reasonableness of the amount of the costs in relation to that work.

(2) A costs assessor is to determine the application by confirming the bill of costs or, if the assessor is satisfied that the disputed costs are unfair or unreasonable, by substituting for the amount of the costs an amount that, in his or her opinion, is a fair and reasonable amount." 22 It seems to me that subsection (2) prescribes the function of a costs assessor where he is dealing with an application relating to a bill of costs. If he does not determine the application by confirming the bill of costs, his task is to look at the disputed costs and satisfy himself whether or not they are unfair or unreasonable (the expression "unfair or unreasonable" would seem to be a shorthand reference to what is enumerated in subsection (1) ); and if satisfied that disputed costs are unfair or unreasonable he is required to substitute an amount that, in his or her opinion, is a fair and reasonable amount. 23 Like many of the provisions in this Act, the problem of its proper construction is not easy. Presumably it was intended that if he was satisfied that nothing should be allowed for an item it is open to him to allow nothing in those circumstances. 24 There may be cases where issue will arise as to what falls within the category of "disputed costs". It may be a question which turns on the circumstances of the particular case before the Costs Assessor and has to be dealt with on a case by case basis. As I have said, the expression is not defined. However, that is not a difficulty in this case. In my view, in this case, the disputed costs are those which are the subject of objection in the notice of objection. This may be the position in many cases. 25 Accordingly, I am satisfied that there has been further error or law. This error will also have significant impact on the assessment at large. 26 Another question that was ventilated was the matter of the claim for interest. Clause 7 of the Costs Agreement is a provision which provides for the accrual of interest on unpaid costs and disbursements. The parties were at issue on this question. Again, it was decided on a basis that was not in issue between the parties. The Costs Assessor disallowed the claim on the basis that there was a non-compliance with paragraph 22A (1) of the Legal Profession Regulation 1994. 27 It is common ground that clause 22A of the Legal Profession Regulation 1994 has no application to the bills in this case. The coming into operation of this provision post dates all of the seven bills. It is part of the new regime that came into effect from 1 July 1994. 28 The defendant has relied on the provisions of s 208E of the Act. This is another matter which will have to go back to the Costs Assessor for the purposes of considering all relevant matters (including the making of a determination pursuant to s 208E). 29 There were other matters agitated by the plaintiff (including contentions as to denial of natural justice). For present purposes, it is unnecessary to deal with any of these matters. Certain of the denial of natural justice contentions were alternatives to matters that have already been dealt with (such as the disputed costs question). 30 The plaintiff takes the view that the re-determination should be dealt with by another Costs Assessor. He advances a case of reasonable apprehension of bias. Some considerable time has been devoted to the issue. In my view, it is unnecessary to express any opinion on this question and I do not consider that I should do so. 31 Subsection (2) of s 208L is in the following terms:- "After deciding the question the subject of the appeal, the Supreme Court may, unless it affirms the costs assessor's decision: (a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or (b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application." 32 The powers of the court are set forth in subsection (2). This is not a case in which it is appropriate to proceed under (a) of subsection (2). The court is left to exercise the powers conferred by (b) of subsection (2). Throughout this subsection the words "the costs assessor" appear (inter alia in relation to the remitting of the decision and the re-determination of the application). It seems to me that these words can only be intended to refer to the Costs Assessor who has made the assessment in the application. This may be contrasted with the language employed in subsection (1) (which enables the bringing of the appeal). It uses the words "a costs assessor". Accordingly, the court is not at liberty to remit the matter to another cost assessor. 33 The plaintiff is not left without relief. It remains open to him to take other action if he wishes to pursue this matter. It has to be said that if the application was ultimately handled by another costs assessor the parties may face the position where the process starts afresh. This may further increase the costs burden that lies ahead unless the parties are able to reach some commercial resolution. 34 As am I satisfied that the plaintiff is entitled to relief, I do not affirm the Costs Assessor's decision. I remit the matter to the Costs Assessor and order him to re-determine the application. The defendant is to pay the plaintiff's costs of the Summons. The Exhibits may be returned. 35 The defendant seeks an order under the Suitors Fund Act 1951 (SFA). I have expressed concern as to a lack of power to make such an order. As a consequence, written submissions have been made. 36 The submissions rely on a provision (clause 45) in Schedule 8 to the Act. The clause is headed "Superseded references to taxation of costs". It provides that a reference in inter alia any Act to "the taxation of costs" is taken to be a reference to the assessment of costs under Part 11. 37 Save as to the use of the words "taxing officer" in s 6 (1B), the SFA does not contain any reference to "taxation of costs" or the like. Section 6 (1B) extends the operation of the SFA to a taxing officer of the court. When acting as such a "taxing officer" the SFA deems him to be exercising the jurisdiction of this Court at first instance. 38 There is a distinction between a taxing officer (who was a court officer) and a costs assessor (who is not). Section 121 of the Supreme Court Act 1970 enabled a taxing officer to exercise powers of the court and he or she constituted the court for the purpose of the exercise of those powers. An application for assessment is not a proceeding in this Court. The language of the Act distinguishes between a costs assessor on the one hand and a court or tribunal on the other. 39 Section 6 of the SFA identifies situations in which an indemnity certificate may be granted. The situations involve an appeal from a court (in the case of a taxation officer he is deemed to be exercising the jurisdiction of a court of first instance). A limited variety of relief is contemplated. 40 The expressions "taxation of costs" and "assessment of costs" are referable to a process, not to the officer or functionary who carries out the process. 41 There is perhaps another problem. Concern has been expressed as to whether or not a master has power to grant an indemnity certificate. It may be that it can be said to fall within the incidental power. However, for present purposes, I need not further pursue that matter. 42 Unfortunately, whilst the defendant has my sympathy, I am not satisfied that the SFA deals with his situation. In the circumstances, the application for an indemnity certificate is not granted. **********

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