Scope Data Systems Pty Ltd v Aitken

CATCHWORDS: COSTS - appeal from three costs assessor's awards - summons filed almost a year after 28-day appeal period expired - application for leave to appeal out of time dismissed

Civil Procedure Act 2005 (NSW), ss 56-62, 59 and 60 Evidence Act 1995 (NSW), s 140(2) LEGISLATION CITED: Legal Profession Act 1987 (NSW), ss 208L or 208M Legal Profession Act 2004 (NSW), ss 348 and 385 Supreme Court Rules 1970 (NSW), Pt 51A r 3(1) Uniform Civil Procedure Rules 2005 (NSW), Pt 50, rr 50.2(1) and 50.3(1)(a)

AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Brierley v Reeves t/as Kaplan Reeves & Co [2000] NSWSC 305 Currabubula & Paola v State Bank NSW [2000] NSWSC 232 Doyle v Hall Chadwick [2007] NSWCA 159 Gallo v Dawson (1990) 93 ALR 479 CASES CITED: Jess v Scott (1986) 12 FCR 187 Lemoto v Able Technical Pty Ltd [2005] NSWCA 153 Morris v Public Transport Commission of NSW (unreported, Court of Appeal, 28 May 1984) Moulieux v Girvan NSW Pty Ltd (unreported, Court of Appeal, 20 September 1991) Muriniti v Lyons [2004] NSWSC 135 State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; [1997] HCA 1

TEXTS CITED: Ritchie's Uniform Civil Procedure NSW

First Plaintiff: Scope Data Systems Pty Ltd PARTIES: Second Plaintiff: Peter Gorczynski Defendants: Andrew Napier Aitken, Peter Douglas McLachlan and Andrew Bruce Thorpe trading as Aitken McLachlan Thorpe Lawyers

COUNSEL: Plaintiffs: Mr Niall Connolly (solicitor) Defendants: Mr J Knackstredt

SOLICITORS: Plaintiffs: Niall Connolly Lawyers Defendants: Macpherson + Kelley Lawyers

[1] HER HONOUR: The plaintiffs, by an Amended Summons dated 9 October 2007 (in place of an earlier summons filed in September 2007), seek to set aside determinations of cost assessor John Sharpe in assessments numbers 2005/1780, 2005/1766 and 2005/1919. Orders are also sought to set aside certain consequential orders. Each of the assessments, the subject of these orders, relates to fees for legal work undertaken by the defendants (hereafter referred to as "AMT") on behalf of the plaintiffs in relation to extended litigation in which they and other lawyers acted for the plaintiffs, for which the plaintiffs did not pay when invoiced.

[2] The grounds of appeal that are set out in the Summons are ten in number. I shall first briefly describe them: (a) Grounds A2, A3 and A4 relate to an alleged error in determining that the second plaintiff was party to the retainer with AMT. In the course of submissions Mr Connolly, for the plaintiffs, has agreed that grounds A2 and 3 are essentially factual issues. Where there is a factual issue a plaintiff requires leave to appeal, quite independent to the application for leave to appeal out of time which is the subject of this application and about which I shall set out more further. Ground 4 can be called the "Hall Chadwick" ground ( Doyle v Hall Chadwick [2007] NSWCA 159). (b) Ground 5 is characterised by the defendants as containing "serious allegations".

(c) Grounds 6, 8 and 9, relate to failure to give proper reasons.

(e) Ground 10 relates to asserted mathematical errors and is in my view a ground which raises issues of fact requiring leave.

[3] As is set out in more detail below, the first issue for determination is whether the plaintiffs should be granted leave to appeal out of time.

[4] The chronology of events in relation to the preliminary issue of the failure to bring these appeals within time is of considerable importance. AMT filed its costs assessments, which are set out at tabs 2B and 2C of exhibit CAF, on 3 and 4 November 2005. The costs assessment was filed on 1 December 2005. The costs assessor wrote to the parties on 9 January 2006. There was an exchange of correspondence which then was interrupted by the filing of a notice of motion to prevent the cost assessment from continuing. That notice of motion was dismissed on the understanding that a summons would shortly be filed. The costs assessor, having waited for the summons to be filed, then wrote on 18 July 2006 as follows: "Since it is apparent that this application for assessment is to proceed and to enable completion of the assessment the costs respondent is directed to supply to me its file in relation to this matter within seven days from today." (Tab 46 from the Court copy of Exhibit CAF).

[5] The plaintiffs did indeed write on 21 July 2006, drawing attention at some length to Muriniti v Lyons [2004] NSWSC 135 and to Brierley v Reeves t/as Kaplan Reeves & Co [2000] NSWSC 305, but nevertheless that was where matters remained, so on 25 July 2006 the assessments were issued. On 3 August 2006 the plaintiffs were informed that the costs assessor had proceeded because of the absence of an application (see Tab 53 of Exhibit CAF). On 12 December 2006 judgments were filed by AMT in the Local Court according to paragraph 101 of the affidavit of Mr Gorczynski of 2 April 2009. The appeal period, as I understand it, in relation to 2005/91919 and 919766, are on 31 August 2006 and in relation to 91780 on 13 September 2006. This is set out in paragraph 13 of the written submissions of the defendants. The dates are not challenged by the plaintiffs.

[6] In August 2007, almost a year after these proceedings had achieved finality (by reason of the twenty-eight day period having long expired), a bankruptcy notice was issued by AMT; I refer to paragraph 17 of the affidavit of Mr Gorczynski of 24 March 2010.

[7] On 27 August 2007, the Summons in these proceedings was filed. That Summons did not amount to an appeal under ss 208L or 208M Legal Profession Act 1987 (NSW) or to ss 348 and 385 Legal Profession Act 2004 (NSW). What the plaintiffs sought was relief of a different nature. It was the Amended Summons filed on 9 October 2007 which joined the second plaintiff, which contains the grounds of appeal which are before me today. That is a delay of a substantial nature, namely one year, and my task is to determine whether leave to commence proceedings out of time should be granted in the face of that delay.

[8] Each of the parties referred me to the discussion of the extension of time in relation to matters of this kind by Einstein J in Currabubula & Paola v State Bank NSW [2000] NSWSC 232 ("Currabubula"), where at [85]-[88] his Honour considered the question of whether an extension of time was necessary. What his Honour found was that Currabubula's appeal was in fact within the time dictated by Pt 51A r 3(1) Supreme Court Rules 1970 (NSW) (see [86] of his Honour's judgment). Einstein J went to say: "[87] In the event that Currabubula is out of time in the lodgment of its appeal it is necessary for Currabubula to seek to enliven the Court's discretion to extend that time. The principles upon which a party can seek an extension to appeal have been fully considered in recent authorities and can be shortly stated. An extension of time in which to appeal is not granted automatically or as of right: the Rules of Court governing time steps for pursuing an appeal are to be complied with. However, those Rules of Court are not to be used to effect an injustice: the object of the power of the Court to extend time is to do justice as between the parties. The Court will extend time where not to do so would work an injustice. Relevant considerations in exercising the discretion include the history of the proceedings, the conduct of the parties, the nature of the litigation, the consequences to the parties of the grant or refusal of the extension of time, the prospects of the appeal's success and any prejudice caused to the respondent by extending the time. The trend of recent authorities is towards a growing liberality in granting extensions of time in which an appeal can be lodged: Moulieux v Girvan NSW Pty Ltd (unreported, Court of Appeal, 20 September 1991), Gallo v Dawson (1990) 93 ALR 479 at 480-481, Jess v Scott (1986) 12 FCR 187 at 194-195, Morris v Public Transport Commission of NSW (unreported, Court of Appeal, 28 May 1984)."

[9] Einstein J went on to note that were "it necessary" to extend time he considered it was appropriate to do so, and it is interesting to note the reasons why his Honour made these remarks because of course they are a good example of the circumstances in which a court might well do so. His Honour noted firstly, assuming there was a delay, the delay of Currabubula in prosecuting the appeal had been "very minimal".

[10] There were three other matters that were relevant: (a) The second issue of importance was that the case that Currabubula had argued on appeal was in what Einstein J called "a strong one". (b) Thirdly, there would be a very real adverse effect upon Currabubula that would be caused by refusing the extension of time.

(c) Fourthly, and again this is significant, there was the absence of any significant prejudice suffered by the bank as a result of the delay in Currabubula's conduct of the appeal.

[11] I have been greatly assisted by this careful and helpful analysis of the relevant principles which are, of course of particular relevance, bearing in mind the similarity of the subject matter here. However, in addition to Einstein J's analysis in Currabubula, there are two further important factors. The first of these is the introduction of important concepts of case management in ss 56-62 Civil Procedure Act 2005 (NSW).

[12] Section 56(1)-(2) provides as follows: "(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule."

[13] To this important provision, which governs all aspects of the administration of justice in New South Wales, is added the need to follow the "dictates of justice" (s 58). I particularly note, where there has been procedural default or delay, the cases discussed at Ritchie's Uniform Civil Procedure NSW at [58.20], [58.25] and [58.30], where there is repeated reference to what the learned authors of the practice referred to the "desirability of avoiding delay".

[14] Section 59 refers to the need for elimination of delay in specific terms. Section 60 talks about the proportionality of costs, an important feature in applications of this nature having regard to increasing concerns at appellant level in cases such as Lemoto v Able Technical Pty Ltd [2005] NSWCA 153, concerning what McColl JA referred to as "satellite litigation", namely litigation where the issue is the legal costs rather than the substantive matter between parties. While her Honour's comments were in the context of an action, or costs against a solicitor personally, in relation to the bringing of litigation which was asserted to be hopeless, nevertheless her Honour's description of the dangers inherent in costs litigation could arguably apply to costs generally.

[15] There have been many decisions in this court in which there has been a complaint of delay. For many years, it was traditional to refer to delays, amendments, and the like, in the condign terms explained by the High Court in State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; [1997] HCA 1. This brings me to the second gloss which must be placed upon what Einstein J has said in Currabubula, namely the statements by the High Court in AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27. What was of concern to the High Court was a situation not dissimilar to the present, namely a substantial and largely unexplained delay. I note in particular the very strong concerns expressed by Heydon J at [152]-[155], and to his Honour's conclusion at [156], where he expresses concerns that there is something chronically wrong with the modern state of litigation, a fear which his Honour hopes, although with some pessimism, will not become a reality. Essentially, however, what is explained in AON Risk Services Australia Ltd v Australian National University is the requirement, where there has been substantial delay, for there to be a strong and persuasive, or at least an adequate explanation, in a timely fashion.

[16] The difficulty with the explanation provided by the plaintiffs is, firstly, that it is very late. Although orders were made in these proceedings for written submissions when Garling DCJ set this matter down for hearing on 16 December, the plaintiffs in their written submissions did not include any submissions on the issue of whether leave should be granted to bring the proceedings out of time. They have done so essentially in a reply to the defendants' submission, although in fact the timetable imposed by Judge Garling did not give them the right of reply at all. That does not mean they cannot file a reply, but it is an indication of how belated the explanation is.

[17] There is an explanation in an affidavit of Mr Gorczynski, sworn yesterday, and I will set this out in full. Mr Gorczynski, in his affidavit of 24 March, sets out how on 4 April 2006 a notice of motion was filed and dismissed (paragraphs 10 and 11). He then goes on to say that the first plaintiff is a small privately owned company of which he is the principal shareholder and founder, and is also operating another business. In addition to operating these two businesses, he had to spend a lot of time assisting lawyers with ongoing proceedings; he has listed these nine proceedings, which include costs assessments which relate not only to the costs sought by the lawyers in these proceedings but apparently to other lawyers who were retained at other times. In addition, he was attempting to recover some costs owed to him after he was successful in a Land and Environment Court matter.

[18] As a result of being involved in all this litigation, he tells the court that he was "unable to commit any more of Scope's funds or my own funds and my time" to deal with this dispute. The impact on his health was such that he felt physically ill whenever he received letters from lawyers for the first plaintiff and was "increasingly unable to cope with the stress". In the end he resolved to deal with AMT and the assessor as best he could when he and the first plaintiff were able to do so. He goes on to say that following the assessments he did not hear again from AMT until the bankruptcy notice was served and that he immediately contacted the lawyers currently acting for Scope who said they were unable to act and he had to appear without legal representation.

[19] On 29 October 2007, in addition to the Summons which was filed in August and substantially amended on 9 October 2007, a statement of claim was lodged in the Supreme Court seeking damages for negligence.

[20] Sections 384 and 385 of the 2004 Act require a party to satisfy with an assessment to appeal or seek leave to appeal as the case may be in accordance with the relevant rules which are set out in Pt 50 of the Uniform Civil Procedure Rules 2005 (NSW). The practical effect of rule 50.3(1)(a) and rule 50.2(1) is that the relevant date is twenty-eight days. It does not appear to be in dispute that the relevant times for lodging any such appeal are as set out in the defendants' written submissions at paragraph 13, or that the delay is a delay for the period set out by the defendants' written submissions at paragraphs 14 and 15. Although I am prepared to interpret some of the submissions of the plaintiffs as being that I should regard 27 August as being the better date, the fact remains that the Summons in these proceedings was filed only after the bankruptcy notice was issued in circumstances where the delay is explained by Mr Gorczynski in the general terms of being busy and stressed. He does not say, for example, that there were representations made, or promises, or that there were discussions or negotiations going on about paying some lesser sum or by instalments. He says that there was no contact at all and, at a time when it became clear that no appeal had been lodged and a year had passed, bankruptcy proceedings were commenced. He then filed this Summons, which I note has taken more than two years to come to court, and commenced proceedings for professional negligence.

[21] There are three significant differences between this litigation and Currabubula. The first is the very extended time period of the delay. In Currabubula there was effectively no delay, in that the notice was found to have been filed within time. In the present case, the delay is a delay of a year. The second is the absence of explanation. Reading between the lines of Currabubula, and taking into account the very small period of delay involved, it does appear that some form of explanation was before the court, but even if it was not, it is clear from what the High Court says in AON Risk Services Australia Ltd v Australian National University at [97], [98] and [103] that an explanation for the delay should be called for, as the importance of the factor of delay will require its explanation.

[22] The next and most critical difference is this. Einstein J noted he would have granted an extension because there was the absence of any significant prejudice suffered by the bank as a result of the delay in conduct of the appeal. In the present case it is submitted that the prejudice is very substantial.

[23] During the period between the expiry of the appeal period and the filing of the Summons, the defendants commenced bankruptcy proceedings. I have been told a figure from the bar table about the cost of these proceedings, which figure I propose to disregard. The important thing is that there was a decision made to commence and prosecute bankruptcy proceedings and there is a significant prejudice caused to the defendants in that it may well be that some or all of those costs would be thrown away. For example, if I were to embark upon the hearing of this matter, bearing in mind that although it is a half day matter and it is now getting on to 3 o'clock and I have cleared my calendar for tomorrow to try and hear it in time, these are proceedings that clearly were given an estimate of time that did not allow for this application and for the other matters that I see in the written submissions. I see that there is an application to lead fresh evidence; there are ten grounds of appeal; and it has already taken the better part of a day just to get to the issue of the granting of leave to commence out of time. It may be that there are difficult issues of law that require me to reserve, and it is likely that one or both parties will be dissatisfied with my decision and will seek to appeal.

[24] While all of this is occurring of course, there is a limit to the amount of time that parties can keep matters on foot in the bankruptcy court. They appear to have done so for two years, but the irrecoverable costs that are thrown up in proceedings of this nature, by which I mean costs of a solicitor and client nature that may not be recoverable against the other party, grow exponentially with this kind of delay, and this is exactly the sort of additional costs that the provisions of the Legal Profession Act were designed to prevent from occurring.

[25] A factor that has been agitated in favour of the plaintiffs is that the plaintiffs have very strong prospects of success. I have set out at the beginning of this judgment the ten grounds upon which the plaintiffs claim that they will be successful in setting aside the costs assessment.

[26] The principal ground is a reliance upon the Court of Appeal decision in Doyle v Hall Chadwick and in particular the statement at [61] that "where there is a real dispute on substantial grounds as to whether any costs are payable, a costs assessor should not complete an assessment by issuing a certificate unless satisfied that the costs are payable, because the certificate can be filed so as to take effect as a judgment."

[27] However, as counsel for the defendants has pointed out, the case for the plaintiffs in bringing such an argument is in fact dependent upon the other nine grounds, it is only if those grounds are so strong as to be unarguable can an argument of the kind mounted in Doyle v Hall Chadwick be mounted.

[28] I have indicated in grounds two, three and ten appear to be factual matters for which leave would be required. I am concerned that ground five makes some serious allegations and I agree with the submissions of the defendants that matters of this nature may require establishing the burden of proof in accordance with s 140(2) Evidence Act 1995 (NSW). Grounds six, eight and nine are assertions of failure to give proper reasons, a ground not uncommonly seen in appeals. But having had regard to the long and careful analysis of the relevant issues in the cost assessors judgment which is set out at tabs 51, 52 and 54 of exhibit CAF I consider that there would be some real difficulties in making out these grounds.

[29] In short, there is no stand-out legal issue of the kind that would put the court on notice that there are issues in favour of the plaintiffs of the kind that would make a court reluctant to visit the injustice upon a party of not having the issues in a summons for appeal being heard in the proper way, namely in full and at a contested hearing. I am fortified in this regard by the history of the matter before this court, where I note there has been a degree of delay of an unfortunate kind, bearing in mind that the kind of fine detail that is a feature of applications of this sort is just sort of fine detail that three or four or five years down the track parties simply cease to be able to remember.

[30] Delays in, for example, a personal injury matter, or one where a witness is describing events that were seen and heard are one thing, but delays where there is a long chain of correspondence and there are disputes about the chronology of events, where one of the parties is a firm of lawyers with many other matters, is less easy to recall. I also note this is a firm which has since been wound up, where this remains an outstanding matter, and there is an interest in finality, not only for the benefit of the parties to the litigation, but for the benefits of all those concerned in the finalisation of the affairs of the partnership are factors.

[31] The circumstances in which a court will not permit a party to go ahead with an appeal require in my view proof of an exceptional nature. I am satisfied that the defendants can point to substantial and serious prejudice by reason of the commencement of the bankruptcy proceedings on the understanding that there was no appeal to be lodged, and by reason of the difficulties caused by the winding up of the partnership of the law firm, and I am satisfied that they will as time goes on have the additional burden of these events further dimming in their memories, this being the forensic prejudice of the kind that the High Court in State of Queensland v JL Holdings Pty Ltd referred to. I am also satisfied that the plaintiffs have some real problems in relation to most, if not all of the grounds of appeal. AsI have indicated, I have taken into account the other matters in the checklist set out by Einstein J in Currabubula at [87] including the nature of litigation and the conduct of the parties. Each of the six bases set out by Einstein J at [18] as relevant considerations for the exercise of discretion has been answered by me in favour of the defendants.

[32] Taking all of the above into account, the order I propose to make is to refuse to grant an extension of time to the plaintiffs, that extension being from 31 August and 13 September 2006 to 27 August 2007. I will now hear from the parties on costs.

[33] HER HONOUR: Yes Mr Connolly, why should you not you pay the costs?

[35] HER HONOUR: The next order I will make is the plaintiffs are to pay the defendants' costs. Exhibits remain with the file for twenty-eight days.

[Application for costs on an indemnity basis made.]

Orders (1) Plaintiffs' application for adjournment of the proceedings dismissed. (2) Plaintiffs pay defendants' costs of the application. (3) Plaintiffs' application for an extension of time to commence proceedings dismissed. (4) Plaintiffs pay defendants' costs of these proceedings, which are dismissed. (5) Exhibits remain with the file for 28 days. (6) Defendants' submissions in support of their application for indemnity costs to be served in 7 days. (7) Plaintiffs' submissions in reply in 7 days. (8) Judgment on the application for indemnity costs to be emailed to the parties by Gibson DCJ.

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