Pinehurst Nominees Pty Ltd v Coeur De Lion Investments Pty Ltd [2015] QSC 122

[1] On 20 February 2014, Jackson J gave judgment for the plaintiff (Pinehurst) against the defendant (CDLI) in the sum of $718,983 and ordered CDLI to pay Pinehurst's costs on the standard basis.

[2] Mr Pike, who was the appointed costs assessor, considered the costs statement and CDLI's objections and issued his certificate of assessment on 16 November 2014. He also provided the parties with a brief document entitled "Reasons for Assessment". In response to correspondence from CDLI, Mr Pike then issued a "Supplementary Reasons to Original Reasons" on or about 23 December 2014.

[3] CDLI now seeks orders pursuant to r 742 of the Uniform Civil Procedure Rules ('UCPR') to:

• (a) Vary the costs assessor's certificate; and
• (b) Alternatively, or in addition to an order varying the certificate, refer specific items in the costs statement back to the costs assessor for reconsideration with appropriate directions.

[4] In the trial, Pinehurst had sued CDLI seeking specific performance, or in the alternative damages, for breach of a lease of a golf locker and associated golfing rights at the Palmer Coolum Resort[1]. The lease was repudiated by CDLI on 5 January 2012 when it wrote to Pinehurst refusing to accept any further golf bookings and, on 19 January 2012, when it refused to recognise that the plaintiff had any rights at all. Jackson J found that this amounted to "an absolute repudiation of the lease, for no articulated or justifiable reason".[2]

[5] The size of the counterclaim made by CDLI and its conduct of the case was the subject of submissions made to me. Jackson J said the following with respect to that matter:[3]

"Originally, the sum of the alleged loss in the counter-claim was $7,194,150. ...

By the time of the version of the counter-claim filed on 26 December 2013, the amount of the counter-claim had been reduced to $1,326,926.88. ...

The counter-claim was abandoned without prior notice on the first day of the trial. No explanation was given for having made it or why it was withdrawn."

[6] It is also relevant that, in addition to the abandonment of the counterclaim, CDLI also abandoned all of its defences - save for mitigation and arguments on quantum - during the course of the trial. As Jackson J observed:[4] "CDLI has defended the proceeding up until the trial on bases which have shifted." Over three pages of his Honour's reasons he lists the defences which were abandoned at trial. His Honour noted that the allegations which founded those defences were abandoned and that no explanation was given for ever having made the allegations.

(1) A party dissatisfied with a decision included in a costs assessor's certificate of assessment may apply to the court to review the decision.

(6) Subject to subrule (5), on the review, the court may do any of the following -

(a) exercise all the powers of the costs assessor in relation to the assessment;

(b) set aside or vary the decision of the costs assessor;

(c) set aside or vary an order made under rule 740(1);

(d) refer any item to the costs assessor for reconsideration, with or without directions;

(e) make any other order or give any other direction the court considers appropriate.

[8] The ambit of this rule was considered by Jones J in Nashvying Pty Ltd v Giacomi[5] where his Honour said:

"[4] The discretion conferred by the sub-rule is a wide one. But it is to be exercised with a consciousness that it is effectively an appeal against the exercise by the cost assessor of a discretion. In general, the Court will interfere only where the discretion appears not to have been exercised at all or to have been exercised in a manner which is manifestly wrong."

[9] In Australian Coal & Shale Employees' Federation v The Commonwealth[6] Kitto J reviewed a number of authorities concerning the review of decisions of taxing officers. He concluded his analysis by adopting the summary of the law on this matter which was made by Jordan CJ (with the concurrence of the other members of the court) in Schweppes' Ltd v Archer[7] where Jordan CJ said:

"In appeals as to costs, the principles to be applied are these. The Court will always review a decision of a Taxing Officer where it is contended that he has proceeded upon a wrong principle, for the purpose of determining the principle which should be applied; and an error in principle may occur both in determining whether an item should be allowed and in determining how much should be allowed. Where no principle is involved, and the question is, whether the Taxing Officer has correctly exercised a discretion which he possesses and is purporting to exercise, the Court is reluctant to interfere. It has undoubted jurisdiction to review the Taxing Officer's decision even where an exercise of discretion only is involved, and will do so freely on a proper case, using its own knowledge of the circumstances ... but it will in general interfere only where the discretion appears not to have been exercised at all, or to have been exercised in a manner which is manifestly wrong; and where the question is one of amount only, will do so only in an extreme case."[8] (citations omitted)

[10] On an application such as this, the applicant carries the onus. In Australian Coal & Shale Employees' Federation v The Commonwealth, Kitto J adopted the following expression of principle[9]:

"A very wide discretion must necessarily be left to the taxing officer, which must be exercised by him after a careful consideration of the particular circumstances of each case; and where, after properly considering the matter, the master has arrived at a decision, it lies upon those who impeach his decision to satisfy the Court that he is wrong."[10] (emphasis added)

[11] A costs assessor is directed, by r 721 of the UCPR, to consider the following:

"(a) any other fees and allowances payable to the solicitor or counsel for other items in the same proceeding;

(f) the person who is to pay the costs, or the fund or estate out of which the costs are to be paid;

(g) the general conduct and cost of the proceeding;

(h) any other relevant circumstances."[11]

[12] In an echo of its conduct at the trial, CDLI's application identified 19 separate grounds for objecting to the certificate but, when the matter came on for hearing, these grounds were reduced to six which, in turn, referred to a much lower number of items. In a further echo of its conduct at the trial, CDLI did not inform Pinehurst of this change in its approach until the commencement of the submissions in this application.

[13] Mr Travis, who appeared for CDLI, produced a useful schedule ("objections schedule") which identified the various objections and the ground or grounds upon which objection was made. Unfortunately, not all the items to which objection was taken were subject to the degree of critical analysis that one might expect. For example, objection was taken to item 2354 which was an amount of $5. A similar objection was taken to item 1923 but here, the amount in dispute had leapt alarmingly to $5.25. In fact, of the 80 separate objections, 23 concerned amounts of less than $50.

[14] After some discussion, Mr Travis obtained instructions not to pursue an objection which had been taken on the basis that the costs assessor had misunderstood the effect of r 693. That meant that a large number of the smaller items were no longer being pursued.

[15] The application proceeded on the basis that the parties argued the five remaining grounds of objection without the need for close scrutiny of each item. Some items were said to fall under more than one head of objection. The grounds are:

• (a) There was no reasonable need for two counsel.
• (b) There had been an unnecessary duplication of costs caused by change of counsel.
• (c) The costs assessor had not given adequate reasons.
• (d) The costs assessor had applied the wrong standard.
• (e) The costs assessor was clearly wrong.

[16] The questions to which a costs assessor must direct his or her mind when considering the question of whether or not the fees for two counsel should be allowed are conveniently set out in the reasons of Barwick CJ in Stanley v Phillips[12]. The Chief Justice considered the matter over some pages of his reasons and concluded as follows:

"The important matter is to recognize that the question is not whether one member of the Bar will present the case better than another. The question for the taxing master is whether the case by reason of any of its features, the volume of material to be handled, the number or character of the witnesses to be examined, the nature or extent of the cross-examination required, the anticipated length of the case, the complexity of its issues of fact or of law, the extent of the preparatory research of fact or of law to be undertaken, the involvement of charges of fraud, or other serious imputations of personal reputation or integrity, the complexity of the required presentation and so on, make it reasonably necessary or proper that the services of two counsel be engaged in order that the court may do justice between the parties." [13]

[17] CDLI bases its objection to the allowance of the fees of two counsel primarily on the contention that the case was not a complex or difficult one. Reference is made to some of the submissions advanced on behalf of Pinehurst, in particular, submissions to the effect that "There are few, if any factual issues in dispute in this matter". In addition reference was made to submissions made in opening and closing addresses where it was said, by Senior Counsel for Pinehurst that the "main contest between the parties is a simple one".

[18] It is important to recognise that there can be occasions when it is appropriate for counsel to submit that an issue is a simple one for determination. This can occur when the fog of war between the parties has led to a situation where a judge might find it difficult to see through the miasma of conflicting, but essentially, irrelevant contentions. Ordinarily, counsel will then outline why the case is said to be simple.

[19] In allowing two counsel, one of the matters the costs assessor referred to was the size of the counterclaim. Pinehurst submitted that the costs assessor misdirected himself because he erred with respect to the amount of the counterclaim. In his initial reasons he said that the counterclaim was for $7,000,000 and, in his supplementary reasons, he said that the counterclaim was for $10,000,000. The costs assessor clearly erred in relying upon the figure of either $10,000,000 or $7,000,000 as a justification for the engagement of two counsel. The original counterclaim was for an amount of about $7,000,000 but, by the time of the trial, this had dropped to about $1,300,000. By itself, that amount would not ordinarily justify the retention of two counsel.

[20] There are, though, reasons which do justify the retention of two counsel. They include:

• (a) The extensive volume of material which was generated and had to be considered in the preparation of the matter.
• (b) The need to prepare for the cross-examination of numerous witnesses who, as it turned out, were not called. This was the subject of adverse comment by Jackson J. For example, the following appears in his Honour's reasons:

"On 20 December 2013, CDLI and Coolum Country Club Proprietary Limited, by their directors respectively, made resolutions amending or adopting new rules of the voluntary association identified as the Coolum Country Club. The timing of the amendments and the absence of any other evidence about them leads to the plain inference which I draw that they were made for the purposes of defeating Pinehurst's rights and in the face, specifically, of Pinehurst's claim. No other evidence was offered as to why the amendments were made. There was a spirited, at times slightly frustrating, dispute between the parties in the course of the trial as to whether the documents recording the relevant resolutions should be admitted into evidence in the absence of a witness to prove them. And it was frankly admitted by counsel for CDLI that the insistence on proof without calling such a witness was strategic, I infer, that was so the witness would not be cross-examined about the circumstances when and the reasons why the resolution was adopted."[14]

(c) While counsel for Pinehurst may have submitted that the matter was a simple one, it was not a simple one until the many defences advanced by CDLI were abandoned. This abandonment took place at the beginning and through the course of the trial.

(d) The existence of the many defences, later to be abandoned, necessarily involved significant preparation and complex pleadings.

(e) There was an imputation of improper purpose made by CDLI's in-house lawyer. While that was not pursued in the litigation, it nevertheless formed the basis of the defendant's termination of the lease.

[21] In the light of those matters set out above, I regard it as reasonable for two counsel to have been engaged by Pinehurst.

[22] Pinehurst had intended to brief a particular senior counsel (QC1). He was unavailable and another senior counsel (QC2) was briefed. QC2 performed preparatory work for the trial including settling pleadings and conferring with junior counsel. When QC1 became available he was briefed. CDLI says that there was work which was performed which was later duplicated. This was a broad assertion made without detailed reference to the statement of costs. Nevertheless, it can be seen that some fees were incurred which might have later also been incurred by the replacement senior counsel. CDLI attacked a number of items under this heading.

[23] Upon a review of the material it appears that item 2039, for example, which was described as "reading material and research" performed by QC2 may have been duplicated by QC1 but CDLI did not establish this.

[24] Items 2040 and 2041, while they relate to conferences with junior counsel also concern a particular advice on strategy and settling documents. I am not in a position to apportion any of that amount one way or the other and would not, therefore, disturb the costs assessor's decision on those items.

[25] Item 2087 concerned an advice about procedure and was appropriate to be allowed.

[26] Items 2250-2252 are three separate charges by the QC2. Two of them concern matters relating to the pleadings or the necessary settling of other documents and should be allowed. The amount for consultations and reading material of $3,300 might be a duplication but CDLI did not establish that it was.

[27] Item 2444 concerned a response to a request for particulars of the Amended Reply. CDLI did not demonstrate that this was a duplicated cost.

[28] Item 2500 concerned aspects of the pleadings and other interlocutory issues. CDLI did not demonstrate that this was a duplicated cost.

[29] Rule 738 of the UCPR provides that a party may make a written request to a costs assessor for reasons for any decision included in the costs assessor's certificate. That occurred in this case. Rule 738(2) requires the costs assessor to give written reasons for the decision.

[30] In Titan v Babic,[15] Finn J considered the requirements for reasons in a similar situation.

"The obligation to give adequate reasons is an important one to uphold if public confidence - but more importantly the confidence of litigants - is to be maintained in our courts and their processes. The decisions of appellate courts in this country leave no room for doubt on this score in relation to the decisions of judges: see e.g. Apps v Pilet; Sun Alliance Insurance Ltd v Massoud; Bennett and Bennett.

The general criteria now being applied to judicial reasons are, in my view, appropriate for the Court to apply to its own officers where reasons are required to be given as a prelude to the exercise of a review of the decision of such an officer: cf Sun Alliance Insurance Ltd v Massoud, above, at 18 on those criteria. The effectiveness of the review process itself depends on the sufficiency of the reasons given.

As Megarry V-C observed in Re Gibson's Settlement Trusts, Mellors v Gibson:

'The duty to give reasons is plainly most important. The reasons are needed initially to enable the unsuccessful party to decide whether to carry matters further. If he does bring the taxation before a judge for review, the reasons are needed to enable the parties to know the propositions they have to attack or defend, and also to enable the judge to understand why the taxing officer did what he did....[t]he duty of the taxing officer is to make a full statement of all his reasons, and this duty may well entail stating specifically whether or not a matter complained of was taken into account'." [16] (citations omitted)

[31] The extent of the reasons necessary is a function of the nature of the work being done. The assessor is not in the same position as, say, a judge who is required to set out, in some detail, the reasoning behind the making of findings.

[32] A number of matters suggest that an assessor will satisfy the requirements of r 738 by providing abbreviated reasons.

[33] First, there is the requirement, in r 738(2)(a) that the reasons be provided within 21 days of the request for them.

[34] Secondly, the style of the reasons will respond to the form of the objections and the request for reasons. Objections are frequently expressed in quite abrupt terms. There is nothing inappropriate in that. Such a request will, usually, be delivered by an experienced practitioner who can express the gist of the objection in a few words. An assessor is an expert who, likewise, can provide a truncated response which can be readily understood be another practitioner.

[35] In Attorney-General of NSW v Kennedy Miller Television Pty Ltd[17] the New South Wales Court of Appeal held that a costs assessor was required to give reasons[18] because an appeal could be brought from an assessment. Priestley JA dealt with the practical problem of reasons frustrating the quick disposition of costs assessments by adopting these comments of the primary judge:

"It does not seem to me that what I have proposed would be particularly onerous or that it would materially increase the cost of the process. It may be preferable for assessors to anticipate the possibility of a request for reasons when processing the bill. In the ordinary course the assessor would need to note against any item reduced the amount of the reduction or the reduced amount in order to tally up the result. It would be easy enough to record the reason for the reduction in each instance at the same time. In each case, the reason must be readily to mind. Otherwise the item would not have been reduced. In most cases a word or two would suffice. A code would be devised for recurring reasons. I doubt that this would add much to the cost of the assessment. It would in my view be a reasonable incident of the assessment and chargeable as part of the assessment. If a request for reasons were made at a later time, little extra work would be required to produce the reasons in suitable form."[19] (emphasis added)

[36] These statements are consistent with the proposition that a costs assessor may express reasons quite briefly.

[37] In this case, CDLI had made 469 separate objections to various items. Its Notice of Objection commenced with a general ground for objection (referred to as General Objection 1) which provided:

"It is submitted that the plaintiff would appear to be registered for GST and can claim an input tax credit for these legal expenses. Consequently, the outlays should be reduced by the GST component."

[38] In order to determine whether or not the reasons given were adequate, it is necessary to refer to the item, the objection, the answer of the costs assessor and his reasons.

[39] Item 298 is a claim for $128.80. It concerned a telephone attendance on the client with respect to an application which was to take place, giving advice on that, and as to security for costs. The telephone conversation was 28 minutes. This was objected to on the basis that it was not self-explanatory as the item does not support a claim of 28 minutes. In his reasons the costs assessor said that he considered it necessary for the solicitors to obtain their client's instructions in relation to this matter. No ground was advanced for why that was an insufficient reason.

[40] Item 354 is an amount of $184. It refers to an attendance on the client, conferring with him and receiving instructions. It took 40 minutes. The objection was that the item was excessive. Instead of 40 minutes, CDLI says it should have taken 15 minutes. The costs assessor reasoned that it related to a pre-hearing conference prior to an application. It is reasonably clear that the costs assessor regarded the period of 40 minutes as appropriate, given the nature of the conference necessary.

[41] Items 359-361. The objection made by CDLI is difficult to understand. In its objection it proposes a reduction of $660. That amount was reduced by the costs assessor. There was a general complaint about the item being excessive, but there was no reduction proposed for that alleged excess. In other items in the objection, the entire amount of a particular bill was proposed to be removed. CDLI did not show why this reason was inadequate.

[42] Item 490 is an amount of $17.75. No reason is given by the costs assessor for allowing this amount.

[43] Item 598 is an amount of $72, representing a telephone attendance on junior counsel for 15 minutes. In this matter the costs assessor answered the objection by saying that the telephone call required a degree of legal skill and knowledge and was longer than a short telephone call. That is a sufficient reason to answer the objection.

[44] Item 1168 was reduced to account for GST, which accommodated the general objection made by the defendant. No reason was given for not making any change to the level of counsel's fees.

[58] Under this heading, CDLI attacks the reasons for allowing a number of items. The basis for the criticism is that in each of the items set out in the objections schedule under this heading the costs assessor has, in disallowing objections, referred to the costs as being "reasonable" or "not unreasonable" or "deemed to be reasonable" or "quite reasonable" or incurred in relation to a "normal legal procedure".

[59] Elsewhere in his reasons, the costs assessor has used a term such as "necessary" or "proper" to characterise costs items to which the defendant had objected.

[60] In both his original reasons and his supplementary reasons, the costs assessor refers to r 702 of the UCPR and the prescription that standard costs are those which are "necessary or proper for the attainment of justice or for enforcing or defending its rights". In his supplementary reasons, the costs assessor goes on to say: "Costs are 'proper' if they are reasonably incurred during the course of the litigation."

[61] The test which is to be applied in determining whether or not a particular item of costs should be allowed on the standard basis is whether or not the expenditure was "necessary or proper". The correct approach was explained by Asprey J in WA Gilbey Ltd v Continental Liqueurs Pty Ltd:[20]

"[A] taxing officer in a party and party taxation should allow a successful litigant, in whose favour an order for costs has been made, a just and reasonable amount in respect of each item claimed in such litigant's bill of costs where such item was, in fact, incurred on behalf of the litigant by his solicitor in respect of some step or matter in the litigation which either (i) was necessarily taken or performed for the attainment of justice or the maintaining or defending of the litigant's rights in the circumstances of the particular case, or, (ii) although not necessarily taken or performed for such purposes, would reasonably have been taken or performed for any of those purposes by a solicitor acting at the time when it was taken or performed without extravagance in conformity with the then situation of the case and not in conflict with the statutes and rules, the practice of the court, and the usages of the legal profession appertaining to such a case."

[62] In Hennessey Glass & Aluminium Pty Ltd v Watpac Australia Pty Ltd[21] McGill DCJ referred to Gilbey and went on to say:

"[24] ... The words 'or proper' connote a wider ambit of charge than the word 'necessary': Francis v Francis and Dickerson, where it was said that the approach was to be that appropriate for a client whose resources were adequate, neither 'barely adequate' nor 'super-abundant'. Costs are 'necessary' if the litigation could not have been carried on reasonably without them. Costs are 'proper' if it was reasonable for a client with a competent solicitor to have incurred those costs in carrying on the litigation." (citations omitted)

[63] In circumstances where the costs assessor has, in each set of reasons, referred to r 702 and, in the supplementary reasons, to costs being "proper" if they are reasonably incurred, it is open to draw the inference that the reference to "reasonable" and similar expressions in his reasons were references to reasonableness so far as costs are "proper". In other words, the costs assessor applied the appropriate test.

[64] CDLI identifies three items in which it says the costs assessor was clearly wrong in allowing the items. In the objections schedule there are three items under this heading. I have been relieved of consideration of item 490 (an amount of $17.75) as that is not being pursued.

[65] The first matter relates to items 282-292 in an amount of $237.45. This concerned an affidavit of service and associated costs in relation to an interlocutory application. CDLI says it was unnecessary because it had made an appearance and, on the date of the affidavit, it had filed a notice of appearance. The submission made was that this was overly cautious and not the sort of charge that should be recovered on the standard basis. Mr Gerber accepted that if the notice of appointment was received before the affidavit of service was prepared then it was probably unnecessary. The costs assessor took the view that it was necessary to prepare the affidavit of service. CDLI could not establish that the notice of appearance was received or file before the swearing of the affidavit of service. In that case, it has not discharged the onus.

[66] The next item is 1425-1434, an amount of $1,153.10. This concerns the preparation and delivery of an index of documents which CDLI says it did not request and which was not used at trial. Both parties had been ordered to consult and agree upon a trial bundle. The mere fact that the bundle was not used does not necessarily lead to a disallowance of the costs of preparation. An assessment requires a consideration of the circumstances which existed at the time. At this point the costs assessor said: "Taking the circumstances of the matter into account I concluded that it was necessary and prudent for the solicitors to take these steps." CDLI has not demonstrated why it was not prudent in the circumstances at the time to take these steps.

[67] CDLI has succeeded on a limited number of items on the basis of inadequate reasons. There are insufficient submissions before me which would allow me to exercise the power under r 742(6)(a) and decide these objections myself. The appropriate course is to refer items 490, 1168, 1754, 2039-41, 2171, 2444, 2844 and 3222 - being the items for which no reasons were given or for which I have held the reasons to be inadequate - to the costs assessor with the direction that, within 21 days of being served with this order, he provide the reasons for his decision on those items.

[68] I will hear the parties on costs.

[1] The Resort was formerly known as the Hyatt Regency Coolum Resort.

[2] [2014] QSC 25, 6th page (unfortunately, each page of the reasons, which were given ex tempore, is asdasdnumbered "20").

[5] [2009] QSC 31.

[6] [1953] HCA 25; (1953) 94 CLR 621.

[7] [1934] NSWStRp 17; (1934) 34 SR (NSW) 178.

[10] Hill v Peel (1870) LR 5 CP 172 at 180 per Bovill CJ and Brett J.

[12] [1966] HCA 24; (1966) 115 CLR 470.

[15] [1995] FCA 813.

[17] (1998) 43 NSWLR 729.

[18] There was no requirement to that effect in the relevant court rules.

[20] [1964] NSWR 527 at 534.

[21] [2007] QDC 57.