Plaintiff v Defendant

Supreme Court of Victoria|2009-11-27|Before: J. FORREST J

ACCIDENT COMPENSATION - Judgment in favour of worker - Awards of costs - Section 134AB(30) and (31) of Accident Compensation Act - Entitlement of solicitor to recover costs from a worker - Considerations in making an order under s 134AB(30).

For the Plaintiff's Solicitors, Clarke, Toop & Taylor

2 The solicitors for Mr Acir, Clarke, Toop & Taylor ("the solicitors"), have applied to the Court for an order that he pay their solicitor/client costs capped at $75,000. Section 134AB(30) of the Accident Compensation Act ("the Act") provides that such an order is necessary for the payment of costs.

3 This application raises the issue of how the Court should deal with such an application; whether it is sufficient to merely order that the solicitor be entitled to such costs or whether it is necessary that a specific amount be stipulated in the order.

4 I have concluded that the order sought by the solicitors should be granted. More specifically, I have concluded that a Court may make an order for payment by the worker for costs incurred by the solicitor on the worker's behalf, without identifying the precise amount of costs so ordered.

5 The order sought by the solicitors is that "they be entitled to an award of costs for non-recoverable solicitor/client costs not exceeding $75,000 inclusive of GST".

"A person who represents or acts on behalf of a worker is not entitled-

(a) to recover any costs from that worker in respect of any proceedings under this section; or

(b) to claim a lien in respect of those costs; or

(c) to deduct those costs from any sum awarded as damages-

unless an award of costs has been made by the court in respect of those costs or those costs are payable in accordance with this section by the worker.

(31) The court, on the application of-

(a) the worker; or

(b) the person representing or acting on behalf of the worker-

may determine the amount of costs to be awarded to the person representing or acting on behalf of the worker."

7 The clear purpose of s 134AB(30) is to impose a degree of Court supervision of the costs which may be paid personally by the worker, unless such costs are covered by the provisions of the Act.

8 It is necessary to mention several other aspects of the Act that impact on the recovery of costs by a worker or his solicitor. Section 134AB(29) provides that the applicable scale of costs on a taxation is reduced by 20%.[1] In other words, a worker can only recover 80% of an order of party/party costs, notwithstanding the fact that, as in this case, the action has been litigated successfully.

9 Mr Acir's claim was brought pursuant to s 135BA(2), which excludes the code of costs orders set out in s 134AB(28). Therefore, the appropriate order as to costs is to be determined by the application of the Court's power to award costs: s 24 of the Supreme Court Act and r 63.03 Supreme Court (General Civil Procedure) Rules 2005.

10 Mr Acir filed an affidavit deposing that he has been advised of the following matters by his solicitors:

(a) party/party legal costs are recoverable from his employer up to a scaled rate of 80% and, thereafter, his solicitors would require him to pay solicitor/client costs;

(b) his entitlement to seek a bill of costs in a taxable form which can be taxed by the Taxing Master;

(d) the option to obtain independent legal or costing advice concerning his solicitor/client costs.

I should add that Mr Acir also has a separate entitlement pursuant to s 134AB(31) to seek a Court order as to the amount of costs.

11 After the hearing of this application on 18 November 2009, Mr Taylor, Mr Acir's solicitor, filed two affidavits which deposed to the following matters:

(a) Mr Acir had entered into a written fees agreement stipulating that the solicitors were entitled to recover from him their costs incurred in the prosecution of the proceeding over and above any party/party costs recovered from Frosster.

(b) An experienced costs consultant, Ms Fiona Mullen employed by the solicitors, had assessed the file and was of the opinion that solicitor/client costs would lie between approximately $78,000 and $88,000 inclusive of GST in addition to payment by Frosster of 80% of Mr Acir's party/party costs.

12 The solicitors submitted that sub-s (30) permits the Court to make an order that the solicitors be paid solicitor/client costs not recoverable from the worker. It was said, "It is the practice of the Court to enable representatives an entitlement to solicitor/client costs with the proviso that the worker is also afforded advice and explained his right as to review of such costs".

13 It was further submitted that sub-s (31) is discretionary and merely facilitates sub-s (30) if a worker or the solicitor wish the Court to determine the amount of costs.

14 Although the solicitors characterised their claim as one for solicitor/client costs, it is not, strictly speaking, an application for such costs.[2] Rather, it is a claim for the total amount of costs recoverable from the worker, pursuant to the terms of the solicitor's retainer less any amount recovered on a party/party basis. However, I shall, for the sake of consistency with previous decisions, refer to the application as being one for solicitor/client costs.

15 The entitlement of the solicitors to recover costs from Mr Acir or to deduct those costs from the judgement sum is only triggered if: (a) an award of costs has been made by the Court in respect of those costs, or (b) the costs are payable in accordance with s 134AB by the worker.

16 Initially, I was of the view that an "award of costs", as described in sub-s 30, required the Court to specify a particular amount for costs. I thought that this was the necessary purpose of sub-s 30 when viewed in the context of sub-s 31, which gives the Court the discretion to determine the amount of costs to be awarded to the solicitor.

17 However, I am persuaded by the submissions on behalf of the solicitors that the expression "award of costs" used in sub-s 30 does not require a Court to specify the amount of costs. Rather, it is wide enough to permit the Court to make an order in favour of the solicitor as it sees fit, including an order for solicitor/client costs.

18 There are several reasons for my conclusion that a Court does not need to fix the amount of costs in making an award.

19 First, the dictionary definition of "award" permits either interpretation I have described.[3] The Oxford English Dictionary 2nd Edition defines "award" as "a decision after examination, a judicial sentence, especially that of an arbitrator or umpire; the document embodying it" and alternatively, "that which is awarded or assigned as payment of penalty et cetera by the terms of the judge's sentence or arbitrator's decision".

20 Second, there are several Court of Appeal decisions which consider the provisions of the Act providing for an "award of costs" where the order the subject of the appeal is for the payment of costs on a particular scale. For instance, in Civic Workers Plus Pty Ltd v Hill,[4] the Court of Appeal was required to consider the application of a specific costs provision relating to no fault benefits: s 50(2A) of the Act. That section, which has some similarity to s 134AB(28), prohibited the Court from making an award of costs otherwise than in conformity with the terms of the section. It was not suggested that an order for the payment of costs on a particular scale did not constitute an award of costs. That provision was again reviewed by the Court of Appeal in Footscray City College v Ruzicka[5] where again, sub silentio, the Court treated an order for the payment of costs on the relevant scale as falling within the rubric of "an award of costs".

21 Third, I accept the solicitors' argument that s 134AB(31) is simply facilitative of sub-s 30. It provides an avenue by which either the worker or the solicitor may seek the fixing of the amount of costs pursuant to sub-s 30. However, it does not, by its terms, exclude an order for costs generally nor, contrary to my initial impression, does it contextually lead to the conclusion that it is the only way in which an award of costs can be implemented pursuant to sub-s 30. As Gillard J put it in Qualma v Toll Transport Pty Ltd,[6] speaking of equivalent provisions(s 135A(13C) and (13D) of the Act:

"Whether or not it is necessary for an application to be made under ss 13D depends upon whether or not the worker or the solicitor wishes to bring an application to determine the amount of costs to be awarded. It does not appear to me to be necessary to bring such an application whether ss 13C does or does not apply."

22 Fourth, there is the custom of dealing with applications of this kind. Orders of this type have been made by judges of this Court; e.g. Loveday v Lloyds Tree Care Pty Ltd.[7] I was also informed by counsel that Associate Justices of this Court and County Court judges have made such orders.

23 It follows that a Court, in making an award of costs can, I think, make an order that a worker pay costs in a specific amount or on a particular basis (e.g. solicitor/client) or on such other terms as it sees fit.

24 If a provision of s 134AB requires a worker to pay costs, no order of the Court is necessary for the payment of solicitor/client costs as the section is enlivened by that obligation. An example of this is s 134AB(28)(d), which requires a worker to bear his or her own costs where the judgment or settlement is less than 90% of the statutory offer. In Qualma v Toll Transport Pty Ltd,[8] Gillard J held that a comparable section (s 135A(13C)(d)) entitled a solicitor to its solicitor/client costs as the worker was obliged to bear his own costs and therefore the necessary requirement for payment of the worker's costs had been established.

25 In this case, however, s 134AB(28) has, as I have said, no application by reason of s 134BA(2). Therefore, the issue is confined to whether, pursuant to s 134AB(30), an order should be made and, if so, on what terms.

26 In determining an application by a solicitor to recover costs from a worker under s 134AB(30), the following principles apply:

(a) A solicitor cannot recover solicitor/client costs from a client in proceedings under s 134AB (whether a claim for damages or a serious injury application) absent compliance with the provisions of s 134AB(30). In practice, this means, unless there is an interlocutory order, no entitlement to such costs arises until judgment or settlement.

(b) That entitlement is only enlivened by an order of the Court or where the section mandates that the worker's costs are payable in accordance with s 134AB.

(c) A Court may make an order for costs on a solicitor/client basis under sub-s 30. In doing so, it has a general discretion as to the form of the order. It may order costs on a solicitor/client basis, or fix costs payable up to a certain level, or attach any other condition it sees fit. It is not limited to fixing the amount of such costs.

(d) In considering whether to make an order for solicitor/client costs (and, if so, in what form), a Court may, without limiting its general discretion, take the following matters into account:[9]

• The retainer between the worker and solicitor and the consequential entitlement of the solicitor to costs "due and payable" by the worker to the solicitor.

• The purpose of sub-s (30) is to ensure Court supervision of any bills of costs rendered by the solicitor to a worker.

• The limit of 80% of party/party costs set by s 134AB(29) and imposed on the recovery of costs from the defendant.

• The extent to which the Court considers that non-recoverable costs have been expended by the solicitor on behalf of the worker to achieve the result obtained.

• The satisfaction of the Court that the worker understands his or her right to have the Court fix the amount of costs (either by way of taxation or by order pursuant to sub-s 31) and that the worker has a general understanding of his or her rights in relation to the avenues of redress or review of the costs sought by the solicitor.

• The manner in which the claim has been conducted, and in particular whether the solicitor has exposed the worker to adverse cost consequences which could have been avoided by careful and responsible preparation of the claim.

• A reliable estimate of the solicitor/client costs has been put forward providing the Court with some guidance as to the basis for the estimated amount of solicitor/client costs.

• Whether, in the circumstances of the case, it is desirable that the Court fix the amount of costs (by either setting a ceiling or approving the amount) as opposed to making an order for solicitor/client costs generally.

• Whether, in the circumstances of the case, it is appropriate to refer the estimation of such costs to an experienced officer of the Court, such as (in this Court) the Taxing Master.

27 In Qualma, Gillard J regarded the retainer of the solicitor by the worker as the predominant consideration, as it carried with it an obligation on the part of the worker to meet the costs incurred by the solicitor on his behalf.[10] In Loveday, Hedigan J considered the risks to the solicitor in taking on the case on a no win, no fee basis and the necessary incurring of non-recoverable costs allied with advice given to the worker concerning such costs, sufficient to justify an order for solicitor/client costs.

28 Mr Acir was present in Court with an interpreter when this matter was first raised. His affidavit, again sworn through an interpreter, deposes as to his understanding of his rights explained to him by his solicitor. I was able to observe Mr Acir give evidence and I have no doubt that he is of sufficient intellect to be able to comprehend the advice given to him by the solicitors.

29 The hearing of this case occupied ten sitting days and the reasons for judgment ran to 79 pages. Those reasons demonstrate that complex issues of fact and law were raised. I have no doubt that the solicitors expended considerable time, expense and energy in prosecuting Mr Acir's claim, a proportion of which would not be recoverable on a party/party basis. At the very least, the solicitors are entitled to be paid by the worker the 20% party/party costs precluded by sub-s (29).

30 Without the participation of the solicitors on a no win, no fee basis, the prosecution of Mr Acir's claim would have been particularly difficult, if not impossible. Subject to my subsequent observations, I am satisfied there is no reason not to give effect to the retainer of the solicitors to recover their solicitor/client costs from Mr Acir.

31 I had originally thought that the most appropriate way for a Court to be satisfied of a fair and reasonable assessment of solicitor/client costs was to enlist the assistance of the Associate Judge who acts as the Taxing Master. In those circumstances I would have ordered the solicitor to prepare an estimate of those costs with a suitable brief explanation for his Honour's consideration. Consequent upon approval, the order would have been made.

32 However, on 18 November, during the course of the hearing, Mr Jewell SC on behalf of the solicitors explained that an experienced costs consultant had examined the file and estimated solicitor/client costs in the sum of $78,000 - $88,000, if not more..[11] Given the length of the case, its complexity and the statutory deprivation of the entitlement to party/party costs, I am satisfied that the ceiling of $75,000 inclusive of GST is appropriate and the order sought by the solicitors should be made.

33 I have drafted the order a little differently to that sought by the solicitors, but, I hope, to the same effect. The following orders will be made:

(1) The plaintiff's solicitors, Clarke, Toop & Taylor be entitled to recover from the plaintiff, Cemal Acir, any costs incurred by the solicitors on his behalf, subject to the following conditions:

(a) that the calculation of such costs take into account payment by the defendant's solicitors of costs pursuant to the orders of the Court and the application of the Accident Compensation Act; and

(b) that such costs not exceed the amount of $75,000 inclusive of Goods and services Tax.

[1] The purpose behind s 134AB(29) is not at all clear. It is surprising that a worker's damages can, in practice, be reduced by a provision such as s 134AB(29). Either the worker or the solicitor will have to bear the financial burden of the non-recoverable 20%. If the solicitor has an entitlement under s 134AB(30) to recover solicitor/client costs - consistent with the retainer by the worker - then it is the injured worker who bears the brunt of those costs. For some inexplicable reason, the negligent employer receives a 20% discount on party/party costs which is met by the successful injured worker, probably out of his or her damages.

[2] Bailey & Arthur, Civil Procedure Victoria, Butterworths 2000 [5612.15].

[9] See Loveday v Lloyds Tree Care Pty Ltd [2000] VSC 204, Qualma v Toll Transport Pty Ltd [2004] VSC 81.

[10] Although Gillard J was concerned with fixing the amount under sub-s (31), I suggest that his Honour's observations were equally applicable to consideration as to whether the order should be made under sub-s (30).

[11] This estimate is inclusive of GST and was subsequently deposed to in Mr Taylor's second affidavit which exhibited the estimate of costs made by the costs consultant.

Court (General Civil Procedure) Rules 2005

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