Preston v M D Nikolaidis & Co

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

4001/93 JOHN PRESTON & ANOR v MITROFANIS D NIKOLAIDIS T/AS M D NIKOLAIDIS & CO & ANOR JUDGMENT 1 HIS HONOUR: This is an application which has been brought in an extremely old file. The file is number 4001 of 1993. It started life as an application brought by the former client of a firm of solicitors for orders for the delivery of bills of costs in relation to some 20 matters, for a reference to taxation concerning those 20 nominated matters, for delivery up of documents of the client relating to four specified matters, and for the taking of accounts concerning the 20 matters, and concerning a payment of $50,000 which had been made to the firm of solicitors. 2 The court did not deal with the substance of that application because, before the court had held a final hearing, bills of costs were actually delivered by the solicitors to the client, and the client dropped his other claims. There had been various interlocutory proceedings before that state of affairs was arrived at, however. In December of 1993 Hulme J made an order that the solicitors pay certain costs of the client, relating to interlocutory matters in the proceedings. Those costs were referred to taxation, and ultimately Mr Hattersley, a cost assessor, issued a certificate on 31 May 1996 quantifying those costs in the sum of $13,458. 3 On the very day Mr Hattersley issued his cost certificate the solicitors had filed a notice of motion seeking orders that the proceedings in which Hulme J had ordered costs to be paid to the client, be consolidated with the proceedings concerning the solicitor/client costs alleged to be payable by the client to the solicitor. Because that notice of motion was taken out on the same day as Mr Hattersley issued his certificate, it was too late to be of any effect. However, a modified application was made by the solicitors, which resulted in Young J making an order on 25 July 1996 which stayed the enforcement of the order for taxation of the bill of costs which Mr Hattersley had taxed. Young J granted liberty to apply to lift that stay "should the ongoing process break down". 4 The proceedings since then have been drawn out and complex. An issue arose as to what the terms of the retainer of the solicitors were. Clearly, it would be necessary to know what the terms of the solicitors' retainer were before any quantification of any amount which might be owing to the solicitors for work which they had performed for the clients could be undertaken. The question of the terms of that retainer, together with the question of the amount, if any, owing by the clients to the solicitor was referred to Mr Hattersley, by a reference under Part 72 of the Supreme Court Rules. 5 For reasons which it is not necessary to go into, Mr Hattersley ultimately did not report on the question of retainer. The question of what the retainer was then continued in the court. 6 As a result of interlocutory proceedings since Hulme J's costs order, there have been some more costs orders made which go both ways - that is, in relation to some applications the clients have been ordered to pay the costs of the solicitors, and in relation to other applications the solicitors have been ordered to pay the costs of the clients. There has been no quantification of those costs orders. It is not possible, on the evidence before me, for me to have even an approximate feel for the relative magnitudes of the costs which one side has been ordered to pay the other. 7 There are also some costs which have been reserved. The matter, which by this stage included the question about what were the terms of the solicitors' retainer, was set down to be heard by Gzell J in April of 2002. In March of 2002 an affidavit was filed, sworn by a former secretary of one of the solicitors, which alleged that a letter of retainer dated 11 April 1984, which had been found by Mr Hattersley in one of the files that came before him in the course of the taxation exercise was a forgery. The solicitor denies that the letter is a forgery. However, the late emergence of that issue caused Gzell J to vacate the hearing which had been fixed before him. Because the question of what order should be made concerning the costs of the vacation of that hearing could be affected by the question of whether the letter of retainer was really a forgery, or not, his Honour reserved the question of who should bear the costs occasioned by that adjournment. 8 As well, over the time since Hulme J's costs order there have been appearances in court when no order for costs was made - the costs of those appearances will be part of the general costs of the action. 9 The matter was set down for hearing once more, for a hearing to start before me today. The order setting it down was made towards the end of last year. Prior to that time Mr Nikolaidis, the solicitor involved, had been charged by the police with criminal charges alleging that the letter of retainer was forgery. 10 On the basis of those charges having been laid, application was made to me on 21 November 2002 for vacation of the hearing date, and a stay of the civil proceedings pending completion of the criminal proceedings. I granted that application and gave certain directions. 11 At the time of that application the clients foreshadowed that they wished to make an application in relation to some costs. It is that application which is before me today. The orders which are sought are, firstly, that the stay on enforcement of the costs certificate ordered by Young J in July of 1996 be lifted, that the solicitors be ordered to pay the amount owing pursuant to that cost certificate plus interest at the relevant Supreme Court rates as from 1 August 1996 within 28 days, and that the defendants be ordered to pay, within 28 days, the costs thrown away by the vacation of the 2003 hearing. So far as the last mentioned order is concerned the only costs which are sought are the court's fee for application of the hearing date, in the sum of $1092. 12 So far as the costs of vacation of the hearing date are concerned, the application for vacation of the date was an application which was made by the defendant. It was consented to by the plaintiff. The matter would not have been set down at all if the stay had been applied for after the solicitor was charged, but before the Registrar allocated a hearing date. In the circumstances, it is appropriate that the solicitors, that is to say the defendants, should pay the cost thrown away by reason of the vacation of the hearing date. I propose to so order. 13 The question of whether there should be orders for payment of any costs at this stage is a considerably more difficult one. The usual principle on which the court operates is that, except for proceedings in the Commercial List or the Technology and Construction List, interlocutory costs orders are not payable until the conclusion of the matter, unless the court otherwise orders: SCR Pt 52A, Rule 9. 14 As well, there is a well established principle whereby interlocutory costs orders are able to be set off one against the other - see Wentworth v Wentworth (Supreme Court of New South Wales, Young J, 12 December 1994, unreported); Reid v Cupper [1915] 2 KB 147; Re A Debtor [1951] Ch 612. The amount in Mr Hattersley's costs certificate might, under that principle, be discharged by being set off against amounts which the clients owe to the solicitors, under other costs orders, rather than by being actually paid. 15 Counsel for the plaintiffs say that the court ought, in the present case, depart from the principle expressed in Part 52, Rule 9A. The reasons given are; (a) the cost certificate was issued almost 7 years ago; (b) if the court declines to order the defendants to pay interest on the principal sum in the cost certificate until such time there is a judgment on the certificate the effluxion of time, while ever the stay is in place causes ongoing prejudice to the plaintiffs by virtue of there being doubt as to whether they have any entitlement to interest on the principal sum owing under the cost certificate prior to judgment being entered; (c) in view of the stay of the proceedings, there is now no definite time for determination of the proceedings and calculation of any setoff; and (d) the continuing delay had not be caused by the plaintiffs in any relevant sense. The stay has been granted to protect the interests of the second defendant while he faces criminal charges relating to the letter dated 11 April 1994. 16 All of the facts which the plaintiff relies upon, as the basis of this submission are correct. So far as the second of them goes, the usual procedure, when a cost certificate is issued is for that certificate to be entered as a judgment in a court (the precise court will depend upon how the jurisdictional limit of the court compares with the amount of costs ordered to be paid) and for interest to then run on that judgment in accordance with the rules of that court. In the present case, the effect of Young J having granted the stay at the time when the costs certificate had issued, but before it could be enrolled as a judgment in any court, was that that usual procedure was not able to be gone through. 17 It is also well established that it is possible for there to be setoff between the costs which are payable in any action, and the amount of damages which is recoverable in that action - see for instance Watson Limited v Calcaria Pty Ltd (1985) 78 FLR 417 at 430 ff. At present, the question of whether the solicitors are entitled to be paid anything by the clients, by reason of the bills of costs which were eventually delivered, is quite undecided. If the solicitors are entitled to be paid by the clients, the amount the clients owe the solicitors on that account could be set off against any net amount which the solicitors owe to the clients under interlocutory costs orders. 18 The question of whether the clients owe the solicitors money for work the solicitors performed is a separate question to the question of whether the letter of retainer is a forgery. It is possible that the letter of retainer might be a forgery, but that the clients still owe the solicitors money. In saying this, of course, I am not expressing any view whatever about whether or not the letter of retainer is, is or not, a forgery. I am purely considering hypothetical situations. 19 The clients assert in the points of claim which they have filed in this court that if the letter of retainer is a forgery, that so taints the proceedings for recovery of any costs by the solicitors that the solicitors should recover nothing. Whether that allegation on the part of the clients is one which is correct in law (assuming a factual basis for it were to be made out) is likewise a matter for further argument. 20 While there have been very long delays in this matter, it cannot be said that they are all the fault of one side rather than the other. For example, the plaintiffs took a long time to put on points of claim when they had been directed to do so. 21 In all these circumstances, it seems to me that I ought not make any order for the payment of any amount of costs forthwith. If I were to do that it would be taking some items in a complex account and giving effect to those items in the account at a time when the balance of the account was not enforced, whatever that balance might be. It would be depriving the solicitors of any rights of set off they might have concerning that amount. The remarks I made in Hellen & Fordyce v Alex G Grivas [2002] NSWSC 1019 at [25] apply here: "In the present case there is not established, by the evidence, any reason for departing from the prima facie position which the rule sets out. There is no suggestion that the defendant might abscond, or is in a precarious financial position, nor indeed any other reason for departing from the usual position. The reason in favour of the prima facie position, namely that it is wasteful to have the costs of interlocutory applications taxed separately, and paid separately rather than dealing with all matters of costs at the one time, applies here. I decline to make an order altering the prima facie position under Part 52A Rule 9." 22 It has been a matter of some concern to me that interest has not been, possibly, running on the amount of the costs which have been certified by Mr Hattersley. Ordinarily, when litigation is over in a comparatively short space of time, and when there are costs orders flowing both ways in the litigation, no substantial injustice is done as a result of the failure of a costs order to bear interest from the time it is ordered to be paid until the time it is actually paid, or embodied in a court judgment. 23 The plaintiffs submit that s76 of the Supreme Court Act and, as I understand the submission, the inherent jurisdiction of the court, would enable the court to order interest on the costs which were certified by Mr Hattersley. Equity's broad approach to the awarding of interest (as to which see Murdocca v Murdocca (No. 2) [2002] NSWSC 505 at [6]-[15]) would support the existence of such a power. 24 In my view, the appropriate thing to do is to reserve to the plaintiffs liberty to make application that interest should run on the costs which were certified by Mr Hattersley. It is when the outcome of the action is known, and when the quantum of all costs orders made is known, that it will be possible to tell whether the plaintiff has indeed suffered an injustice through not being paid at an earlier date the amount of costs which Mr Hattersley has certified. 25 The orders of the court are:

I order the defendants to pay the costs thrown away by reason of the vacating of the hearing date fixed for 17-21 February 2003.

I note that those costs are quantified in the sum of $1092.

I reserve to the plaintiffs the right to make application that interest should run on the amount of the costs referred to in a certificate of determination of costs dated 31 May 1996 by Mr Hattersley, costs assessor, such application to be made after judgment in the principal proceedings.

The plaintiffs' application is otherwise dismissed.

I order the plaintiffs to pay the costs of the defendants of today's application. 26 I decline the application by the defendants to have these costs assessed forthwith. The reasons which I have already given apply to that application. **********

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