State of New South Wales v LW

The Costs Assessor's reasons 24 The Costs Assessor provided reasons on three dates, namely 13 June 2007, 26 July 2007 and 16 October 2007. 25 The Costs Assessor in his reasons dated 13 June 2007 relevantly stated: "The defendant submits that the bill of costs fails to take into account that the first plaintiff does not have a benefit of a costs order, indeed that there is a costs order against him. The defendant submits that in the circumstances the bill of costs fails to apportionment the costs between the three plaintiffs. The defendant submits that the second and third plaintiffs can recover no more than what is their liability to their own solicitors and that accordingly in the situation where the solicitors acted for the three plaintiffs, the costs should be apportioned on the basis that the two successful plaintiffs can recover two thirds of their costs as the first plaintiff would be liable for a third as well. The defendant cited a number of cases in relation to that submission. However as pointed out by the plaintiffs in their response, those cases refer to a situation where the plaintiffs were jointly and severally liable to their solicitors. In this case the situation is different. There were separate conditional agreements with each of the plaintiffs - the liability of each plaintiff with the solicitors was on the basis of a successful outcome. In this case the first plaintiff failed in his claim. Accordingly, he is not liable for any costs or disbursements to the solicitor. The second and third plaintiffs succeeded and they are therefore liable to pay the costs of their own solicitors as set out in the costs agreement. In addition the plaintiffs' solicitor stated that the bill of costs does not include any work carried out specifically on behalf of the first plaintiff. Therefore in my view, assuming that statement is correct, there is no requirement that the bill of costs be reduced to take account of the fact that the solicitors also acted for the unsuccessful first plaintiff.' Having said that of course, if there are instances in the bill of costs where the plaintiff's legal representatives did act exclusively for the first plaintiff, those items would need to be adjusted accordingly. By that, I don't mean that all the attendances involving the first plaintiff would be automatically disallowed rather they would be disallowed unless it can be shown that the attendances were fair and reasonable for the purposes of the second and third plaintiffs' case." 26 After reading further submissions, the Costs Assessor in his reasons dated 26 July 2007, maintained the view he expressed in his letter dated 13 June 2007. The Costs Assessor added: "The rule of thumb is just that. It is not a hard and fast rule. As stated by Justice Young in Longreach v Southern Cross Exploration NL (NSWSC, unreported, 9 March 1988) at page 7: "This rule, that in the absence of material being put before the court to show that some other liability was assumed by the persons who severally retained the solicitor, that each pays or is entitled to an equal amount of costs, has been called a rule of thumb. See Korner v H Korner & Co Ltd [1951] Ch 10. It is a rule of thumb because when judges are considering whether to make an order and matters are put by counsel as to the form of the order the judge may make an order other than the usual one. However, if nothing is put to the judge and the normal order is made then generally speaking the taxing officer would be expected to carry out the taxation according to the rule of thumb, at least if no one makes any objection to him treating the taxation on that basis." That is, the rule of thumb applies in absence of any evidence of arrangements between the solicitors and the clients. In this case there is evidence that the first plaintiff is not liable for any costs to his solicitors because of the conditional costs agreement. As observed by Justice Einstein in Currabubula & Paola v State Bank NSW [2000] NSWSC 232 at paragraph [95] "The rule operates upon the premise that defendants are proportionately responsible for and liable for the joint costs involved in mounting the defence. … Where the premise is falsified or the rule does not achieve its intended effect, if finds no application." The rule applies where there is a "normal" order as to costs, which I would take to mean, in this case to be a simple order that the defendant to pay the successful plaintiffs' costs…" (The Costs Assessor reproduced the costs order made by Bell J here) Accordingly, in my view it is implicit in Her Honour's orders that there be no additional apportionment of the plaintiffs' costs than as per the orders. If it were otherwise, there would have been no reason to specifically state that the costs in so far as they relate to the first plaintiff's claim specifically are excluded. That interpretation is also supported by the interpretation of similar orders by Justice Einstein in Currabubula & Paola v State NSW [2000] NSWSC 232, see paragraph [107] where his Honour observed that the orders he dealt with " represent a scheme, complete in itself, designed to do substantial justice between the parties as to the matter of costs ." In my view the same can be said of the costs order made by Justice Bell in this case. Finally, there is a strong argument that the rule has no application in case of costs orders in favour of plaintiffs as opposed to defendants, see Currabubula & Paola v State Bank NSW [2000] NSWSC 232 at paragraphs [102]-[104]."

The Costs Review Panel's reasons 27 The Review Panel in its reasons dated 20 March 2008 stated: "24. The Review Applicant contends that the Non Specific Costs that were allowed by the Assessor should be reduced by a proportion (it says one third) because the solicitors for the Review Applicant also acted for an unsuccessful Plaintiff (AW). All three plaintiffs entered into separate conditional costs agreements with their solicitor that entitled him to recover costs from them only if they were successful in the proceedings. 25. The Review Applicant argues that a successful party can only recover from the unsuccessful party costs that it is obliged to pay its lawyers (the indemnity principle). The Review Applicant says that as the lawyer acting for all three Applicants is not entitled to recover costs from AW (and he was represented by the same lawyers) then the costs recovered should be reduced by that proportion of the costs that AW would have been obliged to pay those lawyers had he been successful in the proceedings. The Review Applicant says that this should lead to a reduction of one third of the Non Specific Costs. 26. The Review Applicant's argument did not address the specific orders of the trial Judge (Bell J) in relation to costs orders on 30th November 2005. The second order of her Honour makes this issue perfectly clear. The Order refers to the costs of the parties generally (and this is what the panel has referred to as the Non Specific Costs), and the costs of the second and third plaintiffs specifically but not the first plaintiff specifically. 27. If her Honour had considered that the Defendant in the proceedings should not pay the whole of the costs of the parties generally (the Non Specific Costs) then she would have said so. In contrast she deals with both types of costs and then says that the costs be apportioned (that is the benefit of the costs order be apportioned) in the manner specified in the Order. 28. It is the view of the panel that the Orders in regard to costs define those costs that are recoverable and that the Assessor correctly interpreted that order. 29. Even if the Panel's interpretation of the Costs Order is not correct the argument based on the indemnity principle also fails. The Review Applicant refers to cases involving multiple parties being entitled to costs. Those authorities refer to a "rule of thumb" that suggests that if there are multiple parties in proceedings the costs of those proceedings are to be borne equally by them and this is surely true. The cases though refer to a rule of thumb, not an absolute rule and in this case that rule of thumb does not apply by reason of; · The orders of the Court referred to above and referred to in detail by the Assessor. · The very specific and individual costs agreements between each of the plaintiffs and their lawyers. Those costs agreements obliged the plaintiffs to pay the costs of the solicitor of the proceedings that is the whole of those costs if the Plaintiffs were successful. They were individual obligations. Those individual obligations to pay the costs of the proceedings displace the rule of thumb in this case. · The cases seem to refer to the burden of costs, not their benefit as in this case. · The cases referred to address the issue of an unsuccessful party having to pay the same costs incurred more than once (that is for each successful party) even if incurred only once. That is not the case in this matter, where the Review Applicant is obliged only to pay the costs the plaintiffs incurred in conducting the proceedings. There is no suggestion in the assessment or the claim that the lawyers are "double dipping", that is recovering more than the costs actually incurred. 30. The Review Panel agrees with the reasons of the Costs Assessor as set out in his letters of 13 June and 26 July 2006 in regard to the issue of the Failure to Apportion."

The rule of thumb 28 The rule of thumb is an assumption where persons severally retain a solicitor, each person pays or is entitled to an equal amount of costs. 29 While the rule of thumb is a general rule which is convenient to apply in ordinary cases, there is no authority to apply it in every case. The judge may make an order other than the usual one - see Korner v H Korner [1951] Ch 10; Woodward & Anor v Gaha & Anor (New South Wales Supreme Court, Rolfe J, 28 September 1995, unreported); and Longreach Oil Ltd v Southern Cross Exploration NL (New South Wales Supreme Court, Young J, 9 March 1988, unreported at 7). 30 The State referred to Keen v Towler (1924) 41 TLR 86 where only one in four jointly represented plaintiffs recovered costs. In Keen v Towler five plaintiffs sued the defendant in respect of the same motor accident. The defendant had made a payment into court. One plaintiff, L, accepted the money paid in. The other plaintiffs rejected it. Three of the plaintiffs were awarded less than the amount paid in, while one plaintiff, C, was awarded more than the amount paid in. Accordingly, there was only one successful plaintiff amongst the four plaintiffs who had rejected the payment in. The costs order made was as follows: "(1) judgment for all five plaintiffs for their costs down to time of acceptance by the plaintiff L of the defendant's payment in; (2) judgment for costs for the successful plaintiff C amounting to one fourth of the four plaintiffs' costs (that is, the four plaintiffs who did not accept the payment in) since the time L accepted the money, common to all the plaintiffs, including the general costs of the cause, but excluding any costs applicable to the plaintiff C only;

(3) judgment for costs for the plaintiff C for costs incurred only by reason of the joinder of the plaintiff C or such as were incurred by him only; (4) judgment for the defendant for costs from the time of acceptance by the plaintiff L, only so far as they were occasioned by the joinder of the plaintiffs other than C and L." 31 In delivering the opinion of the Privy Council, Lord Darling said (at 87): "One must assume, in the absence of evidence to the contrary, that all these four plaintiffs are solvent, and that no special arrangement was made between them as to their liability to their solicitor for costs. On this assumption, although each of the four plaintiffs may be liable to the solicitor for the whole of the costs common to all of them, still, as between themselves, each is liable to contribute one fourth. From this it follows that ultimately each of the plaintiffs is only liable to pay one fourth of the common costs, and that therefore, as costs are given as an indemnity only, one fourth is all that the defendant should be called upon to pay to one plaintiff." 32 In Keen v Towler, the assumption was made that all four plaintiffs were liable to their solicitor for the whole of the costs common to all of them. This is not the situation in this current appeal. AW is not liable to his solicitor for any costs or disbursements. 33 In Rogers v Kabriel (No 2) [1999] NSWSC 474, Young J (as he then was) explained at [15]-[17]: "15 The rule is that in the absence of any evidence as to how the defendants have retained their solicitor the court infers that each is liable to pay an aliquot part of the costs, so that if successful the only order in their favour is an aliquot part of the total costs. 16 That is a rule of thumb and not a rule that must be applied in each case and in the appropriate case the court will order an assessment of costs on the basis that the costs are to be split between the costs referable to all defendants and the costs referable to a particular defendant; see Korner v H Korner & Co Ltd [1951] Ch 10. The rule of thumb will also not apply where there is evidence before the court of the exact arrangement that has been made by the defendants with their solicitor, particularly where the other side is aware of that arrangement. 17 Although I have given some thought in the instant case as to whether the defendants' costs should be apportioned between what are obviously joint costs and what appear to be costs applicable to each particular defendant, it seems to me that doing that might cost the parties more than it is worth and that a broad brush approach should be taken." 34 In other words, Young CJ in Eq in Rogers in the exercise of his discretion did not apply "the rule of thumb" but opted for the "broad brush approach". 35 Counsel for the State also referred to a passage from a text R Quick, Quick on Costs (2001), Law Book Company at 4.3260. It reads: "As a rule of thumb, where a solicitor acts for two or more parties in the same proceedings, each successful party is entitled to her or his proportion of the costs incurred on behalf of all, the general or common costs as they are referred to in older cases, plus any costs incurred exclusively on her or his behalf: Beaumont v Senior [1903] 1 KB 282; Ellingsen v Det Skandinaviske Co [1919] 2 KB 567; Keen v Towler (1924) 41 TLR 86; Korner v Korner & Co Ltd (1951) Ch 10; Woodward v Gaha (unreported, NSWSC, Rolfe J, 28 September 1995, No 50167/94). … Complications arise with this rule where there are several plaintiffs … and some of the plaintiffs … succeed and some fail, because then the rule in effect means that each successful party recovers an equal part of the total costs incurred by the plaintiffs … according to the number on the record of the plaintiffs." 36 Returning to this appeal there are two points to be made, firstly, that there is a wide discretion in making an order for costs and the rule of thumb is not one that has to be applied in each case. The second point is that not all of the plaintiffs were successful. Importantly, the first plaintiff under the terms of his costs agreement has no liability to pay legal costs and disbursements to his solicitor. The rationale behind the rule of thumb is that where there are several parties, be they all plaintiffs or all defendants, and they engage the same solicitor and all receive the same benefit or the same burden they all share it equally for the work done which is common to all of them. But this rule only applies if all the plaintiffs or defendants are liable to the solicitor for payment of costs. If all three plaintiffs were successful and the solicitor sought to be paid the full costs of performing common work from each plaintiff, he or she would receive three times the amount he or she was entitled to be indemnified. Likewise, if the solicitor is to recover from only plaintiffs who are liable to pay him, he would only receive two thirds of his costs. The rule of thumb as contended by the State does not apply to this situation. Under the two costs agreements, one between the second plaintiff and the solicitor and one between the third plaintiff and the solicitor, the solicitor is entitled to be paid for costs that were incurred in the conduct of these proceedings. Examples of items of non-specific costs in the bill of costs include telephone attendances and attendances at court by the solicitor for the listing of the matters, receipt and perusal of written submissions and solicitor's travelling time to and from court. 37 Only two of the plaintiffs are liable to pay the solicitor the costs and disbursements. The Costs Assessor divided the total amount of costs he assessed as being reasonable in equal portions between the two successful plaintiffs. The State was to pay each of them the sum of $714,207.15. It could be said that the Costs Assessor did apply the rule of thumb as between the two plaintiffs who were liable to pay their solicitor. 38 In any event, costs order (2) reads "[t]he defendant is to pay the second and third plaintiffs their costs of the proceedings, not otherwise dealt with" (the non-specific costs) and then goes on to articulate how defined specific costs are to be treated. In my view the trial judge ordered the State to pay the whole second and third plaintiffs' costs, if they were not otherwise dealt with elsewhere in the orders. So far as the first plaintiff was concerned he was ordered to pay 20% of the State's costs. Specific orders were made as to the second and third plaintiffs' entitlement to claim certain costs. The Costs Assessor had to assess the costs in accordance with those orders. This is a case where orders made were other than the usual costs order. The rule of thumb does not operate when specific orders are made as to costs. The costs assessor is expected to the assess those costs in accordance with those orders. 39 In my view the decision of the Costs Review Panel dated 20 March 2008 is correct. That decision is affirmed. The appeal is dismissed. The summons filed 22 April 2008 is dismissed. 40 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendants' costs as agreed or assessed.

(1) The decision of the Costs Review Panel dated 20 March 2008 is affirmed.

(4) The plaintiff is to pay the defendants' costs as agreed or assessed. **********

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