Cassegrain v Cassegrain [2008] NSWSC 457
Coshott v Spencer [2018] HCA Trans 81
[2019] HCA Trans 166
Ex Parte Aala (2000) 204 CLR 82
Source
Original judgment source is linked above.
Catchwords
Cassegrain v Cassegrain [2008] NSWSC 457
Coshott v Spencer [2018] HCA Trans 81[2019] HCA Trans 166Ex Parte Aala (2000) 204 CLR 82
Judgment (29 paragraphs)
[1]
Background
The Defendant ("Tzaneros") brought proceedings for relief in the Supreme Court of New South Wales in 2009, in relation to defective concrete paving laid at its container terminal in about 2002 - 2003. That claim was made against the plaintiff in this costs appeal ("WGC"). WGC in turn brought a cross-claim against the second defendant in the Tzaneros proceedings ("AMT") for the same damage. Tzaneros was successful against WGC, and judgment against WGC for $11,612,013.53 was entered: Tzaneros Investments Pty Limited v Walker Group Constructions Pty Limited [2016] NSWSC 50. WGC effectively did not proceed with its cross-claim against AMT; one of the costs issues for the trial judge was the entitlement of Tzaneros to costs additional to its own claim incurred by reason of WGC bringing that cross-claim.
After Ball J handed down his decision on costs, which included an indemnity costs order (Tzaneros Investments Pty Limited v Walker Group Constructions Pty Limited (No. 3) [2016] NSWSC 526), there was an unsuccessful appeal (Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27). The costs order from that appeal does not form part of the subject matter of this appeal. Essentially, the relevant costs orders, made on 29 April 2016, were:
1. WGC pay the costs of Tzaneros of the proceedings against WGC including on an indemnity basis from 14 December 2010 (order 1); and
2. WGC pay 20% of the second defendant's costs of the proceedings (order 6).
Following the appeal, the costs of the cost hearing and stay application were dealt with by consent and the following orders made on 23 March 2018:
"By and with consent of the parties the Court orders in relation to the costs of the application on costs heard on 15 April 2016 (Costs Applications) and the First Defendant's notice of motion filed on 6 April 2016 and amended notice of motion filed in court on 20 April 2016 ("First Defendant's motions):
1. The Plaintiff's costs of the costs application against the First Defendant and the First Defendant's motions be the Plaintiff's costs in the proceedings as against the First Defendant, such costs to be on an indemnity basis in accordance with order 1 of the orders made by his Honour Justice Ball on 29 April 2016."
It was not until 24 November 2017 that Tzaneros made an application for a gross sum costs order, instead of assessed costs, in respect of the costs ordered on 29 April 2016 (this application was later amended to include the costs ordered on 23 March 2018). The total claimed by Tzaneros for work over five periods of time was estimated, for the purposes of the gross sum costs order application, as $4,162,059.76: Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) [2018] NSWSC 431 at [13].
Ball J refused Tzaneros's application for a gross sum costs, stating that there was "considerable force" in WGC's submissions that the cost estimate was "broad brush", that it did not sufficiently take into account the cross-claim against AMT, and that the delay in bringing the application meant that any assessment of costs based on his Honour's "faint" recollection of the trial would be difficult (at [25] - [30]).
The assessment of Tzaneros's costs and disbursements, for sums totalling $4,059,168.28 (about $100,000 less than the sum sought from Ball J) was referred by the Manager Costs Assessment to a Costs Assessor, Mr M Connery ("Mr Connery"), on 1 August 2018. There were extensive submissions made by both parties. On 6 December 2019, Mr Connery's six Certificates of Determination were forwarded to the parties. These were:
1. Three Certificates of Determination of Costs of Assessment (Form C-LPA-3) for $38,939.82, $4,635.69 and $2,781.42 respectively (Court Book at pp. 5346 - 5348).
2. Three Certificates of Determination of Costs Ordered (Party/Party) Costs Assessment (Form C-LPA-4) for $347,171.67, $2,916,241.98 and $208,303.00 respectively (Court Book at pp. 5349 - 5351).
Mr Connery provided comprehensive written reasons (Court Book at pp. 5352 - 5389), commencing with the description of the materials considered. He stated that the Tzaneros bills totalling $4,059,168.28 had been assessed at legal costs in the sum of $1,322,413.24 and disbursements in the sum of $2,108,711.73, totalling $3,431,124.97, which included a 10% reduction in relation to adjustments relating to the cross-claim (see the reasons set out at pp 5357 - 5358, which are reproduced below in relation to Ground 3 of this appeal).
Mr Connery's six Certificates of Determination dated 6 December 2019 were based on the following costs types and periods:
1. First determination: ordered (party/party) costs - ordinary basis costs up to 13 December 2010.
2. Second determination: ordered (party/party) costs - indemnity basis costs from 14 December 2010.
3. Third determination: ordered (party/party) costs - costs payable under order made on 23 March 2018.
4. Fourth determination: costs of assessment - ordinary basis up to 13 December 2010.
5. Fifth determination: costs of assessment - indemnity basis from 14 December 2010.
6. Sixth determination: costs of assessment - costs payable under order made on 23 March 2018.
WGC's Review Application, filed on 3 January 2020, set out 11 grounds, which may be summarised as follows:
1. Challenges to the findings as to hourly rates.
2. Asserted inadequacies in the descriptions and reasons.
3. Breaches of the costs indemnity principle.
4. Failure to have sufficient consideration of the costs of the Higginbotham Report.
5. Allowing costs which were the subject of adverse interlocutory costs orders.
6. The manner in which legal costs for related work were dealt with.
7. Allowing legal costs in relation to the first cross-claim.
8. Allowing legal costs for work relating to AMT and in adequate reasons for making the apportionment of 10% for common/mixed costs by using a "blunt instrument of justice".
9. Treatment of the costs of joint experts.
10. Failure to provide adequate reasons in relation to certain challenged costs.
11. The order for costs of assessment, including the allowance of these costs on an indemnity basis.
The Review Panel, in its Statement of Reasons dated 14 March 2020, made a series of findings in a lengthy Determination, and issued two Certificates of Determination of Review in relation to the claims made by the parties, namely:
1. In respect of the cost of the proceedings, one certificate only, for a sum payable to Tzaneros of $3,107,660.73; and
2. In respect of the costs of the Review Panel, in favour of WGC, a sum of $38,868.78.
WGC filed a summons on 15 April 2020 (amended on 1 June 2020) appealing from the determination of the Review Panel under ss 382(1) and 384(1) of the Legal Profession Act 2004 (NSW), the applicable legislation by reason of the date for these proceedings (which, as is noted earlier, were commenced in 2009). WGC's grounds are set out below.
Tzaneros cross-appealed by Cross-Summons filed on 12 May 2020 (the subject of amendment by way of notice of motion filed on 11 September 2020, which was the subject of an application for leave to amend at the hearing). Tzaneros's grounds are set out below.
[2]
The orders sought by the parties
WGC's Amended Summons (Appeal from a Costs Review Panel) filed on 1 June 2020, raises the following grounds of appeal:
"1 That the Costs Review Panel erred in law in making, in response to the Plaintiff's application for review filed on 3 January 2020 for the review of six Certificates of Determination by the Costs Assessor, a single determination and embodying such decision in two Certificates of Determination issued by the Costs Review Panel on 14 March 2020 (and sent by the Manager, Costs Assessment on 18 March 2020) thus contravening sections 375 and 378 of the Legal Profession Act 2004 (NSW).
1A In issuing a single Certificate of Determination of Review, the Costs Review Panel denied the Plaintiff procedural fairness by failing to give the Plaintiff the opportunity to be heard in relation to its intention to issue only one Certificate of Determination for the purposes of section 378(1) of the Legal Profession Act 2004 (NSW).
2 That the Costs Review Panel erred in law in that, having determined that the Costs Assessor had himself had erred in determining that the costs indemnity principle had not been breached (at [5.5] of the Costs Assessor's Reasons), erred in that:
(a) having found that the Bill of Costs included claims for work done which was not in the Tax Invoices and that this constituted an impermissible amendment of the Tax Invoices, the Costs Review Panel failed in applying a mathematical formula to reduce the sum of the amounts claimed by the 3 Defendant instead of considering and comparing each amount claimed in such Tax Invoices with the amounts claimed in such Application for Assessment in the manner required by section 375 of the Legal Profession Act 2004 (NSW), or alternatively, failed in taking a small random sample from only some of the Tax Invoices and extrapolating the results;
(b) having found that the amounts of disbursements claimed in the Bill of Costs exceeded the disbursements invoiced to the client in the Tax Invoices by the amount of $282,879.52, the Costs Review Panel failed to investigate and then disallow such claimed disbursements that breached the costs indemnity principle.
2A In applying a mathematical formula to reduce the sum of the amounts claimed by the Defendant to address the additional claims in the Bill of Costs not appearing in the Tax Invoices (at [135] of the Costs Review Panel's Reasons), the Costs Review Panel denied procedural fairness to the Plaintiff by failing to give the Plaintiff the opportunity to be heard in relation to its intention to apply a mathematical formula.
3 That the Costs Review Panel erred in law in failing or refusing to determine what costs claimed by the Defendant in its Application for Assessment related to the Defendant's claim in the relevant proceedings in the Equity Division against the Plaintiff, what costs related to the Defendant's costs in such proceedings of its separate claim against AMT Engineers Pty Ltd, and what costs so claimed by the Defendant were shared or common costs by:
(a) adopting the approach taken by the Assessor, which he described as "the blunt instrument of justice", allowing a reduction of 10% of the costs claimed by the Defendant against the Plaintiff without any, or any adequate, explanation or reasons;
(b) having found that a "broad brush" approach did not apply and having determined that the Costs Applicant had the onus of proving the claims made, then failed to undertake a detailed formal assessment to determine whether the Costs Applicant had discharged the onus in relation to the balance of the common costs claimed,
thereby disregarding the obligations imposed upon it by Sub-division 5 of Division 11 of Part 3.2 of the Legal Profession Act 2004 (NSW)."
The Cross-Summons sought the following orders:
"1 That the Costs Review Panel erred in law in disallowing the Defendant (TZI) the filing fee of $40,591.68 paid by TZI on the application for assessment (Reasons at [44], [88]-[90]) on the erroneous basis that these costs would not have been incurred if TZI had accepted an offer made by the Plaintiff (WGC) dated 25 June 2018 before the costs assessment application was made. In reaching that conclusion, the Review Panel took into account an irrelevant consideration, being the making of an offer by WGC which was not made, and failed to take into account relevant considerations namely the offer made on 28 June 2018 by TZI to WGC to accept $3.3 million plus interest, and the interest that accrued on costs from the date of the offer and the date of the determination.
2 That the Costs Review Panel erred in law in by setting aside three certificates in favour of TZI as to the costs of the assessment totalling $46,356.93 (Reasons [41]) by taking into account an irrelevant consideration being whether WGC had succeeded on the Review (cf Reasons at [40]), by failing to take into account relevant considerations namely the offer made by TZI to WGC to accept $3.3 million plus interest, and the interest that accrued on costs from the date of the offer and the date of the determination, and otherwise by failing to provide any or any adequate reasons for that decision.
3 That the Costs Review Panel erred in law in its determination as to who was to pay the costs of the Review by failing to apply section 379 (3) of the Legal Profession Act 2004 which required that the Panel determine that WGC would pay the costs of the Review as the Panel reduced the costs payable to TZI by less than 15%."
An additional Ground 4 (addressing the calculation of Tzaneros's interest on costs in paragraph 49 of the Reasons for Determination) has since been abandoned, but its existence should be noted, as it is the explanation for the orders in the proposed amended Cross-Summons starting with the number 5, numbering which is retained both in the submissions and in this judgment. Mr Dempsey SC's submissions contain references to this argument; my associate has raised with the parties whether this ground is still pressed but, as no reply has been received I assume this is no longer an issue.
An application was made by Tzaneros at the hearing on 23 October 2020 for leave to amend the Cross-Summons to rely upon on the following additional grounds:
"5 That the Costs Review Panel erred in law in that the finding that there had been a breach of the indemnity principle (that the amount recoverable on assessment cannot be greater than the amount incurred by the successful party, referred to Reasons at [96]) by reliance on the Bill of Costs attached to the application (Reasons at [95] and [129]) was not rationally open on the whole of the evidence including, in particular, the evidence of the payment by TZI of invoices to Fielder of $83,637.50 (referred to in Reasons at [228]-[232] and being item 15010 in the Bill of Costs at CB 2/1584-1585 and reproduced at CB 4/2803) and to Costacomp (referred to in Reasons at [131] and [256]-[261] and being item 15406 and 15407 at CB 2/1601 and reproduced at CB 4/2797) (each of which the Costs Review Panel allowed over WGC's objection) with the result that the Bill of Costs did not exceed but was less than the amount incurred by TZI.
6 In the alternative to ground 5, that the Costs Review Panel erred in law in its determination that there had been a breach of the indemnity principle by misconstruing for the purpose of the application of that principle, that:
a. At Reasons [85] and [95], the relevant class of disbursements paid by TZI was limited to the amount of $916,143.51 included in the Tax Invoices listed in Table B.2 (Reasons [81]); and
b. did not include the invoices referred to in Reasons at [228]-[232] (Fielder $83,637.50), and at [256]-[261] (Costacomp $90,032) ("Other Disbursements"); or alternatively,
c. by failing to take those Other Disbursements into account in its determination of whether there had been a breach of the indemnity principle; or d. by failing to provide any or any adequate reasons as to why those Other Disbursements were not taken into account for the purposes of construing whether there had been a breach of the indemnity principle.
7 If the Costs Review Panel had not erred as contended in 5 or 6 above, it would have determined that no breach of the indemnity principle had occurred (cf Reasons [129]- [135]) and, as a result, the disallowance of the sum on Item 1J in Table A (Reasons at [50]) should be set aside."
These additional grounds cover the same errors of law in relation to lack of procedural fairness concerning the asserted breach of the indemnity principle, but propose a different solution.
As is set out below, some of the grounds in the Summons and Cross-Summons are agreed by the parties to require remittal to the Review Panel.
[3]
Grounds of appeal agreed to be errors by the Review Panel
In one respect, this appeal differs from other costs appeals in terms of the acknowledgment by the parties that most of the grounds raised, on both sides, correctly identify serious errors. Those agreed to be wrong fall within categories (a) - (c) of the table below, leaving two main issues (which were referred to informally during submissions as the "fall-back" argument (set out in (c) below) and the "10%" finding referred to (set out in (d) below) to be determined. I also note challenges to grounds 5 - 7 of the amended Cross- Summons are challenged as being errors of fact but not of law.
I make the following preliminary observations:
1. Grounds 5 - 7 of the Cross-Summons: Although WGC formally opposed the granting of leave to amend the Cross-Summons, in practical terms it acknowledged all of the errors identified by Tzaneros (although submitting these were not errors of law) and that it could meet the argument for an alternate remedy in relation to the alternate method for dealing with the procedural fairness ground of appeal. In those circumstances, since the parties have effectively agreed to this issue between themselves (although not agreeing upon the orders which accordingly flow) and since those errors are self-evident, I indicated to the parties on 23 October 2020 that I proposed to grant leave to amend and that they should address me on this basis when the matter returned for hearing on 3 February 2021.
2. Ground 1 of the Summons: It is agreed that the Review Panel erred by failing to issue separate certificates in respect of the costs and the cost of the assessment and review: Wende v Howarth (NSW) Pty Ltd (2014) 86 NSWLR 674 ("Wende"). The Court's decision on that "question" (the "matter of law") should be remitted to the Review Panel to reissue certificates in accordance with Wende.
3. Ground 2 of the Summons: Nothing could be clearer than that both parties were denied procedural fairness as the Review Panel had effectively disregarded all the submissions in favour of a method of assessment which was neither foreshadowed to, or discussed with, the parties. The remaining issue was agreed to be whether (as Tzaneros proposed) I should, either on the basis of the assessor's findings or by reason of a novel argument raised before me, make findings on the issue of the indemnity principle or remit the issue to the Review Panel for a fresh determination.
4. Ground 3 of the Summons: Unlike all the other grounds, the substantive issue raised in this ground is not the subject of agreement. Once again in broad terms, the adequacy of reasons for the challenged finding of 10% would normally be a straightforward issue. However, the difficulties caused by the failure to provide six certificates and the sheer weight of other errors in the Review Panel's Reasons for Determination constitute a formidable hurdle, as Mr Green SC points out.
5. Grounds 1, 2 and 3 of the Cross-Summons: Independently of the three additional grounds the subject of the application for amendment, both parties agree that the errors identified in the three grounds of the Cross-Summons as originally filed are errors which, if these are errors of law, require remittal to the Review Panel for fresh determination (Mr Green SC says these are not errors of law).
6. Remitter: The parties are at odds as to the orders to be made for the remitter of this appeal, particularly given the problems caused by Mr McGruther no longer being a Review Panel member. I note, however, there is no challenge to Mr McGruther being validly appointed at the time he and his co-member made the determinations the subject of this appeal.
[4]
The hearing on 22 and 23 October 2020
The circumstances of the adjournment of the hearing on 23 October 2020 should be explained. The sheer weight of the number of errors resulted in extensive submissions, set out in a six-volume Court book and a "core bundle" for the purpose of the hearing. However, it became apparent that there was now a degree of unanimity as to what the errors were.
At my request, the parties formulated what they considered to be the remaining issues in dispute, the errors on matters of law made by the Review Panel which were not the subject of dispute, and the orders that each party should be made as a result.
As noted above, I also told the parties I proposed to grant leave to Tzaneros to amend the Cross-Summons and that they should deal with these issues on that basis, and the hearing proceeded on 3 February 2021 accordingly.
[5]
How to approach errors in a judgment the subject of appeal
The issues raised in this appeal raise complex questions as to the correct approach a court should take where there are substantial and significant errors in the decision appealed from, and the correct orders to make in such circumstances.
The first matter to note is that, in addition to being a creature of statute (Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435 at [50] per Gaudron J), the District Court exercises a limited statutory power in the hearing of a s 384 costs appeal. It does not have power to grant prerogative or other relief of the kind possessed by the Supreme Court.
While the wording of s 384 of the Act is "wide enough to encompass a denial of procedural fairness" (Reavill Farm Pty Ltd v Burrell Solicitors Pty Ltd [2017] NSWCA 156 at [264]), caution should be taken not to adopt a course which would be ultra vires. In particular, the court's power is confined by its inability, under s 384, to conduct a rehearing or otherwise engage in fact-finding: Wende v Howarth (No 2) [2015] NSWCA 416; 91 NSWLR 588 ("Wende No 2") at [65] and [112]. While I note the submission that neither party seeks such relief (Tzaneros's submissions, 2 February 2021, paragraph 6), that does not absolve me of the need to exercise caution, particularly in relation to the orders to be made, which should not be drafted in such a manner as to restrict the fact-finding issues for the Review Panel.
Section 384 of the Act is in the following terms:
"384 Appeal against decision of costs assessor as to matter of law
(1) A party to an application for a costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the District Court, appeal to the Court against the decision.
(2) After deciding the question the subject of the appeal, the District Court may, unless it affirms the costs assessor's decision:
(a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or
(b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application.
(3) On a re-determination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given."
Once the issues the subject of appeal have been determined, if the court has not affirmed the decision pursuant to s 384(2), the court should remit for reconsideration those grounds of appeal where the court is satisfied that error has occurred (s 384(2)(b)) or, in appropriate circumstances, make such determination as the court considers should have been made (s 394(2)(a)). The same is the case whether the decision is made by an assessor or by the Review Panel.
It should also be noted that any appeal under s 385 pf the Act would need to have been brought in the Supreme Court of New South Wales, as this was the court which heard the proceedings (Frumar v Owners of Strata Plan 36957 (2006) 67 NSWLR 321("Frumar") at [17]).
[6]
The Bellevarde requirement
As a general rule, where error in the costs determination appealed from is demonstrated, there is an additional step to take into account, namely the need for the court to be satisfied that the error is material and such as to justify disturbing the assessment: Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2011] NSWDC 55 at 16.
I note, however, that I have not been addressed as to any of the errors made are being anything other than material (thereby justifying disturbing the assessment), although inferentially speaking, this appears to be one of the submissions relied upon by Tzaneros in relation to Ground 3 of the Summons. I am in any event satisfied that each of the errors resulting in a remitter is a material error warranting the disturbing of the assessment.
[7]
The parties' submissions as to the errors and orders which should be made
Mr Dempsey SC provided an Error Schedule as follows:
text version of Defendant's Error Schedule (182303, rtf)
Mr Green SC provides a Schedule as follows:
text version of Plaintiff's Error Schedule (146623, rtf)
[8]
Ground 2: Absence of Procedural Fairness
I must start with consideration of the second of the three main grounds of appeal brought by WGC, by reason of the observations made by Leeming and Emmett JJA in Reavill Farm Pty Ltd v Burrell Solicitors Pty Ltd at [96], namely that where a claim of absence of procedural fairness forms part of the grounds of appeal, it should be considered first. The reasons for this are obvious: where there has been an absence of procedural fairness on a significant issue, findings on other issues that are intertwined may also be infected.
[9]
The challenged method of assessment
Although the Review Panel stated that they had read the parties' submissions on the costs indemnity rule issues, they do not refer to them. Instead, they surprised both parties with the following novel approach to fact-finding:
"67 The Panel was faced with the task of examining 14,305 items, and has decided to examine a random selection of the Tax Invoices using a random number generator to select a number of Tax Invoices and compare the claims in the Bill of Costs. This examination shows that there are additional claims in the Bill of Costs (not appearing in the Tax Invoices) which either increase the time claimed or the claim is not in the Tax Invoices at all. This increase averages 14.41 %, as follows: [there then follows several pages of entries]."
The Review Panel did not expose its reasoning in relation to the desirability or suitability of this method, or the way the random number generator worked, or indeed any technical aspect of this method. Moreover, they gave the parties no prior notice of this procedure or opportunity to make submissions.
The lack of procedural fairness is not merely obvious, but agreed between the parties to be so. (This relates not only to the matters set out in Ground 2 of the appeal, but also to the complaint of procedural unfairness in relation to Ground 1A).
However, it is necessary to refer briefly to the relevant principles, in relation to the proposal by Tzaneros that I should determine the issue of the indemnity principle myself rather, than remit this issue to the Review Panel, a process which in itself is arguably a denial of procedural fairness to WGC.
[10]
The proposal put by Tzaneros
The argument put by Tzaneros (which the parties agree cannot be raised on remitter to the Review Panel) may briefly be summarised as follows. If I were to answer what is described as a "sequentially anterior question" (written submissions, 2 February 2021, section K) as to whether there had in fact been a breach of the indemnity principle, and made a finding in favour of Tzaneros, then the acknowledged breach of procedural fairness by the Review Panel in relation to calculation of quantum would be immaterial. That anterior question is essentially the basis of the new grounds set out in the Cross-Summons set out above.
I note that it is acknowledged by Tzaneros (submissions, 22 October 2020, paragraph 4) that the newly added Cross-Summons grounds are not "errors of law" but errors of fact falling within s 385 of the Act, which would require leave from the Supreme Court (s 385(2)), and which leave this court cannot give: see the decisions and legislation set out in Altaranesi v Sydney Local Health District [2012] NSWDC 90. I was not addressed on this issue, which is but the first of many obstacles in the path of these submissions.
How are errors in first instance judgments dealt with on appeal? To borrow the description from Adams v Lambert (2006) 228 CLR 429 at [5] and [23], there are "many different kinds and degrees of error", but where errors sufficiently strike at the heart of the findings, whether in terms of number or seriousness, "the problem cannot be avoided by looking at the form as a whole and observing that, like the curate's egg, it is bad only in part". The identification of the error is only the first step; the next step is to determine how to resolve it.
While defects of form in documents for bankruptcy proceedings have a technical flavour of a kind comparable to failing to provide the correct number of judgment certificates of the kind identified in Ground 1A, denials of procedural fairness (which the parties agree occurred in relation to the indemnity principle ground) go to jurisdictional issues and, in particular, to the nature of the legislation as well as the powers of the court or tribunal in question. A denial of procedural fairness has been held to be a 'decision' as to a 'matter of law arising in the proceedings' pursuant to s 384 of the Act in the manner outlined in Re Refugee Tribunal; Ex Parte Aala (2000) 204 CLR 82; [2000] HCA 57 at [5] per Gleeson CJ, [41] per Gaudron and Gummow JJ, [142], [169] per Kirby J, [210] per Callinan J; this decision was noted, in relation to costs appeals, by Leeming and Emmett JJA in Reavill Farm Pty Ltd v Burrell Solicitors Pty Ltd [2017] NSWCA 156).
Both parties have provided me with comprehensive submissions as to the principles of procedural fairness, referring to Minister for Education and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [15], [53], [67], [135], [155] and [163]; Hossein v Minister for Immigration and Border Protection (2018) 264 CLR 123 at [30]; and Minister for Immigration and Border Protection v SZRSG (2019) 264 CLR 421 at [3]. (I note WGC's submissions concerning the apparent uncertainty on the issue of "materiality" in Minister for Immigration and Border Protection v SZMTA [2019] HCA 3; 264 CLR 421 but, given the clear lack of procedural fairness in these proceedings, I do not consider this is necessarily an issue for determination.)
The principles in relation to the obligation to provide procedural fairness, as an implicit part of statutory construction are not the subject of challenge. The real question is the consequential orders to make, firstly in relation to the request that this court should determine the indemnity principle and secondly, if the matter is remitted to the Review Panel, the terms upon which it should be remitted.
When determining the next step to take after the absence of procedural fairness has been acknowledged, caution must be exercised in terms of the form and content of the orders to be made. This is particularly the case in costs appeals, no doubt by reason of the fact-driven nature of the subject matter.
As to the first of the questions before me, I agree with the submissions of WGC (written submissions, 3 February 2021, paragraph 17 - 25) that the application of principles relating to jurisdictional error involving denial of procedural fairness outside the statutory context of costs assessment legislation should be approached with caution, conformably with the application of the principles set out in Wende No 2 at [41] and [99].
I set out why that is the case. First, the quasi-inquisitorial nature of costs appeals must be taken into account. In eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284 at [49], Basten JA described the role of the costs assessor as follows:
"No doubt they must accord the parties to an assessment an appropriate level of procedural fairness, but the procedure is essentially inquisitorial rather than adversarial, requiring the assessors to exercise a degree of expertise as to what constitutes fair and reasonable costs of litigation." [Emphasis added]
This point was also emphasised in CSR Ltd v Eddy (2008) 70 NSWLR 725 at [30]:
"Although the assessor was not bound by the rules of evidence and had broad powers to inform himself or herself on any matter in issue (s 208(2)) it was not in doubt that he or she was required to comply with the rules of procedural fairness. In part those rules were given statutory effect by requiring that the parties be given a reasonable opportunity to make written submissions and requiring the assessor to give due consideration to those submissions: s 208(1)." [Emphasis added]
The factual background to this case explains these observations. Mr Eddy had commenced proceedings in the Dust Diseases Tribunal and obtained a judgment and costs orders in his favour. After his death, an administrator was appointed. The party liable for the costs sought copies of the costs agreement between the administrator and his solicitors to support an argument that, conformably with the indemnity principle, no costs were payable because no invoice had ever been rendered either to Mr Eddy or to the administrator of his estate. The costs assessor refused, and the Review Panel upheld this decision. The Court of Appeal found that there had been a denial of procedural fairness on the basis that CSR Ltd had not established that the failure to provide them with the costs agreement caused them "practical injustice" (at [36]).
No such absence of "practical injustice" could be said to have occurred here. The nature of the absence of procedural fairness in these proceedings is self-evident. In brief, the Review Panel, finding itself faced with the task of examining 14,305 items, "decided to examine a random selection of the tax invoices using a random number generator to select a number of tax invoices and compare the claims in the bill of costs" (paragraph 87 of the Determination). The Review Panel found an increase averaging 14.41% for additional claims (at paragraph 87), which they set out in a table of nearly 5 pages in length.
Not only did the Review Panel disregard the submissions of the parties as to the indemnity principle but, by asking me to similarly ignore the parties' submissions and instead answer his "anterior question", Mr Dempsey SC is effectively asking me to do the same thing.
Nor is this a case where the court is in as good a position as any costs assessor to determine assessment issue, because it would require me, if I did look at the parties' submissions, to wend my way through many thousands of pages of material and make findings of fact in order to come to a view, a power not available to the court under s 384(2).The question of potential breach of the indemnity principle in relation to the 14,305 items would require careful analysis of factual issues as well as of the methods of analysis proposed by WGC and Tzaneros. I note this was the position that Judge Taylor SC found himself in in the judgment under appeal in Wende (No 2) at [65] (and see also Strinic v Singh [2009] NSWCA 15), where the Court of Appeal determined that the correct course to take was to refer back, not to re-perform the task.
While Tzaneros submits that I may either exercise power under s 384(2)(a) to make such determination in relation to the application as it should have been made by the Review Panel (which Tzaneros submits is a finding that there was no breach of the indemnity principle), I consider that the appropriate course to take is to remit my finding on the question of law to the Panel with an order for it to re-determine the application.
[11]
The form of the order to remit
The next issue is the form and content of the order remitting the ground relating to procedural fairness to the Review Panel. Both parties have provided me with proposed findings and orders.
The version proposed by WGC identifies two kinds of errors. First, there is a procedural unfairness in applying the random sampling method in lieu of comparing each amount claimed in the tax invoices in the time-honoured manner. Second, as an alternative, the method failed in that it took a small random sample from only some of the invoices (some of which were for disbursements only) and extrapolated those results.
The version proposed by Tzaneros identifies the application of a sampling method which had not been disclosed and discussed, adding that the Review Panel also issued by "failing to consider the amount that the bill of costs exceeded (if at all) [Tzaneros's] liability for the costs claimed in its bill of costs and substituting a flawed statistical method in place of that enquiry."
Both versions seek to raise arguments which do not arise out of the procedural fairness issue. The remitter to the Review Panel should be made in terms requiring the Review Panel to consider "from scratch" the claim of breach of the indemnity issue conformably with the content of the parties' submissions on this issue and with their obligations as set out in the Act (and in particular s 375).
[12]
Conclusions as to ground 2
I am satisfied that, as the parties agree, the Review Panel erred in law by adopting and applying a random sampling methodology to determine the breach (if any) of the costs indemnity principle by Tzaneros, and that the issue identified in ground 2 should be remitted to the Review Panel to determine in accordance with the submissions made by the parties on this issue.
[13]
Grounds 5, 6 and 7 of the amended Cross-Summons
As noted above, the new argument raised by Tzaneros in relation to Ground 2 is set out in grounds 5, 6 and 7.
Mr Green SC submits that, if I do not accept the proposition that I should determine the costs indemnity issue, I should dismiss the grounds of appeal brought in these three paragraphs.
Mr Dempsey SC submits that I should make a second finding that the Review Panel erred in law in finding that there had been a breach of the indemnity principle and remit these grounds to the Review Panel as well, on the basis that there was a breach of the indemnity principle "as there was no evidence capable of rationally supporting that conclusion" (Consolidated Schedule of Errors, February 2, 2020, p. 12).
I have rejected Mr Dempsey's submission that I should determine the issue of the breach of the indemnity principle. Both parties agree that the argument he put to me could not be put to the Review Panel as it had not form part of the submissions made to the assessor or the Review Panel. I also note that the additional grounds now set out in the Amended Cross-Summons relate to errors of fact and not to errors of law, as Mr Green SC points out (Consolidated Schedule of Errors, February 2, 2020, p. 12).
The issue of absence of procedural fairness in relation to the asserted breach of the indemnity principle is already the subject of an order remitting this issue for determination by the Review Panel. It is not necessary to make such an order twice. In those circumstances, the appropriate order to make is for grounds 5, 6 and 7 to be dismissed.
[14]
Grounds 1 and 1A
As noted in the summary set out above, the Review Panel's failure to issue a Certificate of Determination of review in relation to each of the costs orders is acknowledged by both parties to the contrary to the express warnings of the necessity of this step set out in Wende.
The parties agree that I should make findings that the Review Panel:
1. Failed to issue a separate Certificate of Determination of review in respect of each costs order; and
2. Failed to issue a separate Certificate of Determination of Review Panel costs in respect of each costs order.
WGC asks me to make the following to additional findings that the Review Panel:
(c) denied the plaintiff procedural fairness by failing to give the plaintiff the opportunity to be heard in relation to the Review Panel's intention to issue only one Certificate of Determination of review for the purpose of section 378(1) of the Act; and
(d) adopted errors made by the costs assessor in the costs assessor's computation of the amount allowed under each costs order.
Mr Dempsey SC submitted that these additional orders were surplusage. I am satisfied that Ground 1A correctly identified the Review Panel's failure to give the parties the opportunity to be heard in this departure from the regular and proper practice. However, I do not consider it is necessary for me to specify these findings in my orders. It is sufficient for me to make an order that the Certificates of Determination be set aside and remit to the Review Panel my findings to assist them to issue certificates in accordance with those findings on these issues.
[15]
Ground 3
The "nub" of WGC's complaint to the Review Panel (written submissions, 24 June 2020, paragraph 99) is that Mr Connery's reasons did not identify what regard he had to the detailed submissions made by WGC or how the figure of 10% was arrived at, and that the Review Panel simply repeated this error.
Mr Connery's findings on this issue may be summarised as follows:
1. In his reasons, he notes, at paragraphs 5.13 and 5.14 that Tzaneros has no entitlement to claim any costs relating solely to the proceedings between WGC and AMT and that such claims had been disallowed in schedule A to the findings. However, there were many items which related to "shared or common costs", but that the appropriate reduction to make was not the subject of agreement. WGC submitted that the appropriate deduction "maybe 40%", while Tzaneros said it should be "minor".
2. Mr Connery then referred to Ball J's observations that WGC's claim against AMT had not been pursued with any great conviction and had in fact made no submissions, which led Ball J to conclude that AMT was joined for forensic reasons only, in the event that its own claim under s 35 of the Civil Liability Act succeeded.
3. Mr Connery went on to note that AMT did not serve any evidence in relation to quantum (although it did on liability) and that it relied upon the submissions of WGC.
4. For these reasons, by "applying the blunt instrument of justice", Mr Connery determined that "an apportionment of 10% is appropriate, meaning a 10% reduction of all costs and disbursements."
The Review Panel was required to address this question conformably with the requirement to give adequate reasons as required by s 380 of the Act and regulation 134 of the Legal Profession Regulations 2005 (NSW).
The common law obligation of costs assessment decision-makers to give reasons must be read in accordance with the observations of the Court of Appeal as to this task, in Wende v Horwath (NSW) Pty Ltd (2014) 86 NSWLR 674 at [176] - [179]. This is helpfully summarised in the headnote as being:
"The requirement to give reasons under s 380 of the Legal Profession Act 2004 does not require a review panel to provide its own paraphrase of the reasons of a decision under review if it agrees with the conclusions and the reasons of that decision, provided the review panel makes a statement to that effect and makes it clear that it adopts those reasons."
The submissions by WGC (24 June 2020, paragraph 102) draw my attention to the observations of Barrett JA at [161]:
"[161] The function of the review panel will vary according to the way in which the applicant for review chooses to frame the application. If specific objections are stated, the panel will, of necessity, deal with them. If no objections are stated and the implicitly indicated desire of the applicant is merely to have the review panel conduct a general review, no specific matters will call for attention. In either such case, however, the function of the review panel is, as stated in s 375(1), to "review the determination of the costs assessor" and to decide whether the assessment should be affirmed or altered."
In addition, his Honour stressed, at [158], that "the panel must consider competing contentions and make up its mind in the light of them".
WGC submits that the task of the Review Panel was "at least to consider the detailed submissions made by WGC and, having considered them, to give adequate reasons for rejecting them." This would involve answering how the figure of 10% was arrived at.
WGC submits that Mr Connery's determination of 10% was based on a misunderstanding of observations made by Ball J in the cause of the gross sum costs order judgment the reasons which preceded their conclusion did not refer to the detail of the submissions made by WGC, but only to WGC"s estimate of 40% and the competing estimate of a "minor" adjustment by Tzaneros (which is expressed to be "0%" in WGC's submissions at paragraph 104). In those circumstances, it is submitted, I should assume that the Review Panel, by reason of the absence of reasons, did not independently arrive at the figure of 10%, and instead abrogated its statutory function in an impermissible way.
As is noted in the submissions in reply from Tzaneros (28 July 2020 at paragraph 98), the concept of a "percentage approach" came from WGC which initially submitted that it was difficult and impractical to assess but later estimated at "maybe 40%". This discount was proposed without WGC itself conducting a line by line analysis, even after leave to make further submissions was granted (paragraph 102). The response of Tzaneros was to draw Mr Connery's attention to the observations of Ball J at [31], which were as follows:
"[31] In my opinion, the issue in this case is not so much whether costs should be apportioned as whether there is a reasonable basis for dividing those costs that should be allowed or taken account of because they were incurred in connection with the claim against WGC and those that should not because they were incurred in connection with the claim against AMT. In the circumstances of this case, in my opinion the appropriate approach would be to permit Tzaneros to recover all the costs it incurred in relation to the claim against WGC even if the work the subject of those costs was also relevant to the claim against AMT. I also accept that, in principle, in determining costs for the purposes of a gross sum costs order, that could be done by the Court considering the total costs incurred in the claim against both WGC and AMT and allowing a proportion of those costs on a broad brush approach to reflect the fact that some of those costs were only relevant to the claim against AMT."
Although the assessor did not expressly refer to this passage of the judgment, I am satisfied that it was the starting point for the submissions of the parties in terms of using a global percentage approach. As is noted at paragraph 105 of the Tzaneros's submissions, this was effectively the position of Tzaneros on appeal.
[16]
Resolution of the arguments
Two preliminary issues must be determined.
The first is that, as WGC know acknowledges, these were indemnity costs, where the onus of proof is effectively reversed, as was noted by the Review Panel (at paragraphs 101 to 104). Accordingly, WGC's submission that Tzaneros failed to provide sufficient information to dispel the possibility that some costs were referable to AMT misconceives the onus issue.
The second is whether the error of the Review Panel in issuing only one certificate must vitiate this finding of 10% as well. This was not, however a mistake that the assessor, Mr Connery, made; he correctly issued six Certificates and his finding of 10% (made in circumstances where there was no certificate issue problem) was upheld in circumstances unrelated to any certificate errors made by the Review Panel.
As noted above, it was WGC which introduced the concept of a percentage deduction; WGC's complaint is that it is not the 40% deduction that it sought. The grounds for review essentially repeat the assertion that the increase should be 40%; there is no challenge to the acceptance of a global reduction approach.
I consider that the allowance of 10% was favourable to WGC, given the observations made by Ball J, and that the shorthand way in which this fi nding was made would reflect this.
WGC additionally submits that, given the series of errors made by the Review Panel in relation to other grounds of the Summons and Cross-Summons, this finding by the Review Panel should not be left standing, because the absence of procedural fairness permeates through the whole of the decision the subject of the appeal (except, it would appear, grounds 1 - 3 of the Cross-Summons).
I do not accept this submission. Unlike the other findings made by the Review Panel, the 10% deduction is based on an acceptance of the findings of the assessor, Mr Connery, whose findings cannot be vitiated on the basis of absence of procedural fairness, failure to issue the correct number of certificates and/or any other Review Panel error. It is, moreover, a finding which resembles Ball J's observations on the costs of the costs claim, as is noted above. These were indemnity costs, where the burden of establishing the quantum lay on WGC, in circumstances where WGC's own submissions at all relevant times were for a percentage, and where the basis of complaint is one of degree.
In these circumstances, it was open to the Review Panel to endorse and agree with the conclusions of the assessor for the reasons set out in Wende, above, as well as the observations of Gyles J in Frumar at [42] - [45].
For the above reasons, Ground 3 of the Summons should be dismissed.
[17]
The remaining grounds of the Cross-Summons
I briefly note the subject matter of the Cross-Summons in its original form:
1. Ground 1: The Review Panel disallowed the filing fee paid by Tzaneros ($40,591.68) on the erroneous basis that these costs would not have been incurred if it had accepted the offer made by WGC of 25 June 2018. In fact, that offer was made by Tzaneros to WGC.
2. Ground 2: The Review Panel set aside the three Certificates of Determination of cost assessments in the sum of $46,356.93 on the irrelevant consideration that WGC had succeeded in the review.
3. Ground 3: the Review Panel erred in its findings as to who should pay the costs of the review by failing to apply s 379(3) of the Act, which required the Review Panel to order WGC to pay those costs as the costs payable to Tzaneros had been reduced by less than 15%.
[18]
Ground 1: the filing fee
The Costs Assessor had determined the filing fee was payable by WGC (along with other costs of the assessment including the Costs Assessor's fees) because Tzaneros made an offer on 25 June 2018 to accept $3,300,000.00 plus interest, this offer was not accepted by WGC, and Tzaneros bettered this offer on the assessment.
The Review Panel disallowed the filing fee of $40,591.68 because, in circumstances I can understand in terms of the enormity of the documentation, the Review Panel made an embarrassing error - they thought the offer had been made by WGC and not Tzaneros.
Mr Green SC submits that while this is an error, it is not an error of law of the kind that can be corrected under s 384.
Mr Dempsey submits that it is an error of law in that it takes into account an irrelevant consideration, namely who made the offer. That is a thin argument, but one which, in the circumstances, I am prepared to regard as an error of law.
I raised with the parties whether this would fall within the rubric of s 381 of the Act, which provides:
"381 Correction of error in determination
(1) At any time after making a determination, a panel that conducts a review may, for the purpose of correcting an inadvertent error in the determination:
(a) make a new determination in substitution for the previous determination, and
(b) issue a certificate under section 378 (Certificate as to determination of panel) or 379 (Recovery of costs of review) that sets out the new determination of the panel.
(2) Such a certificate replaces any certificate setting out the previous determination of the panel that has already been issued by the panel and, on the filing of the replacement certificate in the office or registry of a court having jurisdiction to order the payment of the amount of the new determination, any judgment that is taken to have been effected by the filing of that previously issued certificate is varied accordingly."
Mr Dempsey SC's response was that this had been his client's initial response to this problem, but that WGC refused to agree it was an error. Indeed, Mr Green SC's submissions on s 381 not only state as much, but go on to add that the Review Panel was entitled to make this order in any event.
As Professor Dal Pont explains ("Law of Costs", 2nd Ed., 2009 (LexisNexis, Australia) at [18.39]), and as the High Court noted in Minister for Immigration and Cultural Affairs v Bhardwaj at [6]), inadvertent errors of this kind can themselves be a form of procedural unfairness because they amount to ignoring the clear facts (I note that WGC made a similar point in relation to Ground 1 by adding procedural fairness into Ground 1A).
Accordingly, if I have erred in holding that the error identified in Ground 2 is an error of law, I would have referred it for correction under the slip rule. Whether it would still be an error (in terms of success) will depend on the findings concerning the indemnity principle, but its obvious wrongness is an error requiring reconsideration under the slip rule, even after any adjustment in WGC's favour, following reconsideration of the grounds in relation to the indemnity principle.
[19]
Ground 2: the finding that WGC had succeeded
The Review Panel disallowed $46,356.93 for three certificates for costs of the assessment which the Costs Assessor had awarded to Tzaneros for bettering the offer (for the same wrong reasons as Grounds 1 and 3). The Review Panel also found that some of the defendant's claims for the costs of the assessment should not be allowed because of the particular view taken by the Panel at 268-271.
Mr Green SC submits that this is not an error of law.
As is noted in relation to the other grounds in the Cross-Summons, the Review Panel's errors in relation to the identities of the offeror and offeree are capable of being errors of law or, alternatively, correctible under s 381, and this ground of appeal should be allowed as well.
[20]
Ground 3: Costs of the Review
The Review Panel's findings were as follows:
"Costs of the Review
30 The Panel may issue a certificate determining by whom and to what extent costs of the Review are to be paid: LPA s379 (Recovery of costs of review).
31 LPA s369(3)(c) (costs that on assessment are reduced by 15% or more) has no application in a party and party assessment, as it applies only to Practitioner/Client assessments: Wende v Horwath (NSW) Pty Ltd [2014] NSWCA170 at [74] at [78] Basten JA and [265] - [273] Beazley P and Barrett JA agreeing referring to Bellevarde Constructions Pty Limited v CPC Energy Pty Limited [2011] 11 NSWDC 55 per Johnstone DCJ - the question for the assessor is simply which party is to pay the costs of the assessment.
32 WGC has succeeded and TZI is to pay the costs of this Review. The Panel has issued a separate Certificate to this effect."
Mr Green SC submits that, while this is an error, it is not an error of law, but of fact (or alternatively fact and law) which is impermissible in a s 384 appeal (noting this court would not have jurisdiction in a s 385 appeal, for the reasons set out elsewhere in this judgment).
This is clearly incorrect. As Mr Dempsey SC points out in his written submissions of 2 February 2021 (paragraphs 130 - 134), WGC failed in nearly all the grounds but, more importantly, there is a substantial error of law in their application of the law to their factually wrong findings, in that, unlike a costs assessor at first instance, the Review Panel did not have any such discretion.
Section 379(3) of the Act provides:
"379 Recovery of costs of review
…
(3) If the panel sets aside the determination of the costs assessor, and makes a determination in favour of the party who applied for review, the panel is to require the party who applied for the review to pay the costs of the review if the determination of the panel increases or decreases the total costs payable (as assessed by the costs assessor) by an amount that is less than 15 per cent (or such other percentage as may be prescribed by the regulations) of the total costs payable as assessed by the costs assessor.
…"
When the Review Panel corrects this on remitter, I should note the erroneous facts upon which their ruling was based, namely that the amount payable was in fact reduced only by 9.435% and not 15%. This 9.435% figure may change in any event given the remitter in relation to Ground 2, so I have taken this into account in the form of the orders for all three matters.
[21]
Orders in relation to the first three orders sought in the Cross-Summons
Having read the schedule prepared by the parties, I propose to make orders remitting each of the following further issues to be re-determined by the Review Panel:
1. I remit the question of which party should pay the costs of assessment ($46,356.93) to the Review Panel for determination in accordance with the law, once the Review Panel has determined the factual matters otherwise within the scope of the remitter.
2. I remit the question of which party should pay the filing fee application ($40,591.68) to the Review Panel for determination in accordance with the law, once the Review Panel has determined the factual matters otherwise within the scope of the remitter.
3. I remit the question of which party should pay the Review Panel charges ($38,868.72) to the Review Panel for determination in accordance with the law, once the Review Panel has determined the factual matters otherwise within the scope of the remitter
The balance of the Amended Cross-Summons (which added further grounds which have not been successful) will be dismissed.
The next issue for determination is whether the referral to the Review Panel should be made on terms, including terms for the appointment of a different panel.
[22]
Remitting to the Review Panel
Remitting the successful grounds does not mean that these will be determined de novo; what will be considered on remitter will be the "decision on the question" (s 384(2)(b)). It is necessary to identify the errors of law with precision so that it is clear what the decision-maker is required to do. Part of the problem is that the error of law made by the Review Panel is not simply the imposition of sampling methods without informing the parties, but in its understanding of the indemnity principle generally.
However, I do not accept Tzaneros's submission that the misunderstanding of the indemnity principle means that the finding is not rationally open on the whole of the evidence (submissions, 24 November 2020, paragraphs 39 to 41). The Review Panel's principal error was to ignore the submissions of the parties, including the submissions as to the indemnity principle generally. That is not an indicator to bias or inherent unfairness to one party over the other. However, as the parties agreed that procedural unfairness had occurred, I raised the question of whether the remittal should be to the same Review Panel (which was fortunate, as it led to the discovery that one of the Review Panel members was ineligible to sit).
[23]
What should be remitted, and to whom?
Questions of remitter following cost appeals depend on the following:
1. The subject matter of the issues (for example, a claim of bias or procedural unfairness: Lyons v Wende [2007] NSWSC 100 at [4] - [5]).
2. The relevant legislation under which the remitter is made, including provisions (if any) which come into play where the relevant decision-maker is unavailable due to death, retirement or for other reason.
3. The jurisdiction of the court or tribunal making the order. Particular caution should be exercised by courts which are the creature of statute, such as the District Court.
[24]
Mr McGruther's departure from the Review Panel
The parties inform me that the Manager Costs Assessment has confirmed to them that Mr McGruther was a member of the Review Panel at the time of appointment and of determination, but that he has since allowed his appointment as a Review Panel member (although not, apparently, as costs assessor) to lapse.
The parties are unaware whether Mr McGruther would be willing to accept appointment as a Review Panel member for the purposes of completing the re-determining of the issues I have identified.
The parties are also unaware whether the Chief Justice of New South Wales, who makes all such appointments, would be prepared to do so. Appointments of this kind are generally made on a January - December basis; Mr McGruther's appointment lapsed on 31 December 2020.
Tzaneros submits that, while s 387 of the Act permits the court to make members of a Panel parties to the appeal, such applications are generally refused: Lyons v Wende at [3]; Young v Annis-Brown t/as Lincoln Smith & Company [2011] NSWSC 475.
I do not agree. In practice, costs assessors may be, and are joined as parties, such as for the reasons expressed by White J in Cassegrain v CTK Engineering; Cassegrain v Cassegrain [2008] NSWSC 457 at [133]; see also Coshott v Spencer [2018] HCA Trans 81; [2019] HCA Trans 166; [2019] HCA Trans 183, where not only the Costs Assessor but also the Costs Manager were both joined, as the third and fourth respondent respectively. (Surprisingly, the District Court of New South Wales was also joined, as the second respondent, although the decision the subject of appeal was in fact the costs assessor's determination and not a decision of the District Court of New South Wales at all.) If the High Court is prepared to accept the joinder of the Costs Manager as a party to a costs appeal, that is of some importance.
Tzaneros further submits that the language of ss 382, 384(2)(b) and 387 of the Act mean that references to "costs assessor" (and, by extension, to "the panel") are to the "individual personality" rather than the office that they hold. This would impose something of a unique burden onto these individuals in the event that change of occupation, retirement or death occur.
I do not accept this submission. As is the case with costs appeals in general, these may be remitted back to the judicial officer (or assessor) in question (as occurred in Wende) or, where the court determining the appeal considers it necessary, to a different judicial officer (or assessor). It would be a triumph of form over substance if the referral could only be to a specific person in circumstances where the intervention of the Chief Justice was necessary to ensure the task was appropriately passed on.
Such orders have been made in the District Court in appeals brought under the Act. Although other decisions of the District Court are not binding, I am encouraged by a similar view expressed by Johnstone DCJ of this court, who was prepared to remit issues to a differently established Review Panel in in Randall v Willoughby City Council [2009] NSWDC 118. His Honour, who had himself worked as a costs assessor and was very experienced in this field, made orders as follows:
"[…]remit the decision of the Review Panel to the Manager Costs Assessment and order that the application for review be re-determined in accordance with these reasons, either by the original Review Panel or at her discretion by a fresh panel."
There was no question of bias, or absence of procedural fairness, or other disentitling ground; as Johnstone DCJ noted, the problem was one of inadequacy of reasons. This makes his decision to refer the matter back to the Manager Costs Assessment for consideration of the constitution of the Review Panel all the more compelling.
I note Tzaneros's submission that Giles JA's observations in Frumar support their argument, but I prefer the interpretation of Frumar put forward by WGC. Johnstone DCJ specifically refers to Frumar as well as to Cassegrain in his judgment (although on other issues), and the fact that his Honour was prepared to make this order (whether it was sought in the Summons or not) is significant.
In practical terms, the Manager Costs Assessment is regularly joined in appeals, such as Coshott v Vardas [2017] NSWCA 258 (where he was the second respondent to an appeal dismissed on competency grounds). There is no consideration of the basis upon which the joinder was made. I should add, however, that in Lahoud v Lahoud [2018] NSWSC 5 at [20], McCallum J noted that relief was sought against the Manager Costs Assessment in circumstances that were "unusual" and "arguably not within the scope of the statutory power conferred upon the District Court under the Legal Profession Act 2004", relief which her Honour went on to refuse. This is the only consideration I could find concerning statutory power and, it is clearly not on point, it is of no assistance.
It has not been considered necessary to identify the specific decision-maker in other appeals with the administrative flavour to be found in the costs appeals process. In Mann v Paterson (2019) 373 ALR 1 at [219], in the course of remitting proceedings to the VCAT for further determination, Nettle, Gordon and Edelman JJ dealt with a contention that, while it was a matter for the tribunal to determine, the facts of the case (a construction dispute) were perhaps more easily determined by the original decision maker:
"[219] The contention is not persuasive. Ultimately, it will be a matter for VCAT to decide how it is to be composed for the purposes of the further determination. But it is to be observed that, subject to the overriding discretion of VCAT, there should be no need or justification for any of the parties to have an opportunity of adducing further evidence. The further determination should involve no more than the application of the law, as explained in these reasons, to the facts as already found, and the recalculation of amounts in accordance with contractual rates and, if determined by VCAT to be applicable by reference to the criteria prescribed by s 38(6)(b), by reference to the rate prescribed in relation to variations by s 38(7) of the DBC Act. The evidence already adduced and the findings already made are complex and extensive, and it is evident that the Senior Member, with the benefit of having dealt with the matter until now, would be much better placed to apply the evidence and findings than would another member coming freshly to the task. Given the nature of the task involved in the redetermination, it is difficult to accept, or even suppose, that the hypothetical observer could reasonably perceive a realistic possibility of any degree of bias.
In contrast, the default position under other legislation, particularly in the Federal Court, has been stated to be that a remittal should be undertaken by a different Tribunal member: Hewitt v Comcare [2020] FCA 527 at [75] per Snaden J. However, the manner in which the discretion to do so should be exercised will depend on the circumstances of the case and the question of referral to a different Tribunal member "should not be constrained by any presumptive or preordained rule of thumb": Hollis v Comcare [2017] FCA 558; 154 ALD 541 at [34].
Finally, I do not accept the submissions of Tzaneros that the power to direct constitution of the Panel is not a necessary implication of the power to remit the decision for re-determination. There may be reasons why an assessor, even if still appointed, may refuse to comply. As Ball J noted in Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) and the Review Panel themselves noted in their reasons for determination, the complexity of the factual issues and the large number of items to be considered makes a determination of costs issues in these proceedings are more than usually complicated task. It is a task that one can no longer perform, and the other should not be compelled to perform if, in those circumstances, he has reservations about performing the task.
[25]
WGC's proposals
WGC notes that there are three alternatives before the Court:
1. Remit to both the remaining Review Panel member and to the Manager Costs Assessment, with a view to reconstituting the original Review Panel (if the necessary consents are provided by Mr McGruther and the Chief Justice). WGC notes that this is problematic as there is a high likelihood that Mr McGruther may not want to return to the Panel if he was prepared to let his association with it lapse at the end of 2020.
2. Remit to the Manager Costs Assessment (and the other Review Panel member) to appoint a replacement for Mr McGruther. WGC notes that this could create problems as it would "weight" the Panel by one member having performed the task before and the other being new to it.
3. Do nothing and just hand judgment down. This is "a wholly unsatisfactory solution" (written submissions, paragraph 12).
WGC is opposed to the joinder of either the Manager Costs Assessment or the remaining Review Panel member, arguing that the appeal process by which this court's jurisdiction is engaged does not permit the joinder of additional parties. This opposition overlooks the examples set out above, where the Manager Costs Assessment and/or Review Panel members have been joined as parties.
WGC is also concerned about who will pay the costs of any such joinder. This is not a meritorious submission. The Review Panel will almost certainly need one, if not both, of the members replaced and this must be attended to promptly. The costs involved, if any, are an inevitable part of the costs assessment process and should not stand in the way of expeditious resolution of the costs issues remaining in this long-running litigation saga.
[26]
Conclusions
While I was not addressed on jurisdiction, circumstances such as the replacement of a judge or other decision maker are generally approached in a constructive manner by the trial and appellate courts. Death, retirement or other impediments to completion of the decision-making role should not be occasions for injustice. The overarching principles of ss 56 - 62 of the Civil Procedure Act 2005 (MSW), as well as the power to dispense with rules under s 14, suggest adopting the course of common sense.
Taking all of the above into account, I propose to make orders which include leaving the issue of the composition of the Review Panel to the Manager Costs Assessment in the same way as was done in Randall v Willoughby City Council.
The only different steps I propose to take will be to join the Manager Costs Assessment as a party, notify him of the date for judgment in advance, provide him with a copy of this judgment, and grant him liberty to apply so that he may be heard as to whether the orders I have made are appropriate. In proceedings where procedural fairness has been a significant issue, the least I can do is to permit the Manager Costs Assessment to be heard on this issue.
Conformably with this approach, my associate (copying in the parties) notified the Manager Costs Assessment of these issues, in the event that he wished to be heard on the questions raised with him by the parties. He replied on 24 February 2020 to the effect that he was only asked about the status of Mr McGruther and was not apprised of the problems thereby arising. If there is an administrative solution available, the parties' failure to raise this with Mr Bellach puts the court in a difficult position.
In those circumstances, I consider it necessary, in the orders I set out below, to include the joinder of Mr Brendan Bellach, the Costs Assessment Manager as the second defendant, as well as making an order granting him liberty to apply.
[27]
Costs
The parties have had mixed success in relation to the issues for determination on this appeal. I particularly note:
1. The plaintiff (WGC) has succeeded on two of the three grounds set out in the Summons, one of which is the subject of agreement between the parties.
2. The defendant (Tzaneros) has succeeded on the contested third ground set out in the Summons, but failed in its alternate argument in relation to the second ground of the Summons.
3. The defendant (Tzaneros) has succeeded in relation to each of the three grounds in the Cross-Summons, but this was in circumstances where the Cross-Summons was amended late, in circumstances requiring leave to amend at the hearing.
4. Both parties conducted their case with fairness, making concessions where appropriate, in circumstances where the errors made by the Review Panel were not of the parties' making.
5. The problem of Review Panel composition following termination of Mr McGruther's membership of it is not of the parties' making.
I have reserved costs and granted liberty to all parties to apply, in addition to the liberty to apply in relation to the form of the orders made. This will include any application for gross sum costs orders under s 9 of the Civil Procedure Act 2005 (NSW).
[28]
Orders
I make the following orders:
1. The Manager Costs Assessment, Mr Brendan Bellach, is joined as the second defendant to these proceedings for the purpose of facilitating order (2) below.
2. I remit the decision of the Review Panel to the Manager Costs Assessment and order that the application for review be re-determined in accordance with these reasons, either by the original Review Panel or, at Mr Bellach's discretion and subject to the necessary consents from the Chief Justice of the Supreme Court of New South Wales, by a fresh panel.
3. Ground 1 of the Amended Summons: appeal allowed: Certificates of Determination set aside and remitted to the Review Panel (whether the same or differently constituted) to issue certificates in accordance with my findings in relation to this ground.
4. Ground 2 of the Amended Summons: appeal allowed: remit the determination of the Review Panel in relation to the cost indemnity principle to the Review Panel (whether the same or differently constituted) to determine this issue based on a consideration of the submissions of the parties and in the manner required by s 375 of the Legal Profession Act 2004 (NSW).
5. Ground 3 of the Amended Summons is dismissed.
6. Grant leave to the defendant to file an Amended Cross-Summons adding Grounds 5 - 7 and abandoning Ground 4, and dispense with any requirement for service.
7. Ground 1 of the Amended Cross-Summons: appeal allowed: the matter be remitted to the Review Panel (whether the same or differently constituted) to re-determine the plaintiff's entitlement to the filing fee in accordance with the findings set out in this judgment.
8. Ground 2 of the Amended Cross-Summons: appeal allowed: the matter be remitted to the Review Panel (whether the same or differently constituted) to re-determine the plaintiff's entitlement to the cost of the assessment in accordance with the findings set out in this judgment.
9. Ground 3 of the Amended Cross-Summons: appeal allowed: the matter be remitted to Review Panel (whether the same or differently constituted) to re-determine the plaintiff's entitlement to the costs of the review (in light of the redetermination) in accordance with the findings set out in this judgment.
10. Grounds 5, 6 and 7 of the Amended Cross-Summons are dismissed.
11. Liberty to apply in relation to the form of the above orders.
12. Costs reserved with liberty to apply.
[29]
Amendments
01 March 2021 - Add initials "N Y H" to the Defendant's representation
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 01 March 2021
Legal Profession Uniform Law Application Regulations 2015 (NSW) reg 59
Cases Cited: Adams v Lambert (2006) 228 CLR 429
Altaranesi v Sydney Local Health District [2012] NSWDC 90
Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2011] NSWDC 55
Cassegrain v CTK Engineering; Cassegrain v Cassegrain [2008] NSWSC 457
Coshott v Spencer [2018] HCA Trans 81; [2019] HCA Trans 166; [2019] HCA Trans 183
Coshott v Vardas [2017] NSWCA 258
CSR Ltd v Eddy (2008) 70 NSWLR 725
eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284
Frumar v Owners of Strata Plan 36957 (2006) 67 NSWLR 321
Hewitt v Comcare [2020] FCA 527
Hollis v Comcare [2017] FCA 558; 154 ALD 541
Hossein v Minister for Immigration and Border Protection (2018) 264 CLR 123
Lahoud v Lahoud [2018] NSWSC 5
Lyons v Wende [2007] NSWSC 100
Mann v Paterson (2019) 373 ALR 1
Minister for Education and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597
Minister for Immigration and Border Protection v SZMTA [2019] HCA 3
Minister for Immigration and Border Protection v SZRSG (2019) 264 CLR 421
Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435
Randall v Willoughby City Council [2009] NSWDC 118
Re Refugee Tribunal; Ex Parte Aala (2000) 204 CLR 82; [2000] HCA 57
Reavill Farm Pty Ltd v Burrell Solicitors Pty Ltd [2017] NSWCA 156
Strinic v Singh [2009] NSWCA 15
Tzaneros Investments Pty Limited v Walker Group Constructions Pty Limited [2016] NSWSC 50
Tzaneros Investments Pty Limited v Walker Group Constructions Pty Limited (No. 3) [2016] NSWSC 526
Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) [2018] NSWSC 431
Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27
Wende v Horwath (NSW) Pty Ltd (2014) 86 NSWLR 674
Wende v Howarth (No 2) [2015] NSWCA 416; 91 NSWLR 588
Young v Annis-Brown t/as Lincoln Smith & Company [2011] NSWSC 475
Texts Cited: "Law of Costs", 2nd Ed., 2009 (LexisNexis, Australia)
Category: Principal judgment
Parties: Plaintiff:
Walker Group Constructions Pty Ltd