Wende v Horwath

District Court of NSW|2014-10-21|Before: Basten JA, Barrett JA

A. INTRODUCTION 1The plaintiffs successfully appealed to the Court of Appeal regarding a costs assessment and the proceedings were remitted to this Court to make orders consequential on the decision of the Court of Appeal.

B. BACKGROUND 2The history of the dispute is set out in my earlier judgment, Wende v Horwath (NSW) Pty Limited [2013] NSWDC 10 (hereafter "Wende (No 1)") at [2] - [15] and by the Court of Appeal in Wende v Horwath (NSW) Pty Limited [2014] NSWCA 170 (hereafter "Wende CA") at [15] - [21] per Basten JA and [104] - [113] per Barrett JA. 3In summary, Herbert and Margaret Wende and Mark Lloyd ("the plaintiffs") unsuccessfully resisted a claim in the Local Court by Horwath NSW Pty Ltd ("Horwath") for payment of fees. An order for costs was made. The plaintiffs unsuccessfully appealed to the Supreme Court and to the Court of Appeal. In each case a costs order was made in favour of Horwath. An application for leave to appeal to the High Court was also dismissed. 4Horwath sought an assessment of its costs payable pursuant to the orders of the Local Court, Supreme Court and the Court of Appeal. The assessor determined the costs payable to be $175,052.78, noted that $15,000 of those costs had been paid by the Legal Aid Commission but mistakenly allowed a credit for only $10,000. The Costs Review Panel ("Review Panel") corrected this error but otherwise affirmed the assessment, thus determining the amount of costs to be $160,052.78. The Review Panel issued a certificate for this amount. The plaintiffs appealed against the decision of the Review Panel under s 384 of the Legal Profession Act 2004. Fourteen grounds were raised and all were dismissed. 5In the Court of Appeal the plaintiffs contended that there were ten errors of law: see Wende CA at [116]. Barrett JA rejected all of these contentions: see [274]. Beazley P at [1] agreed with Barrett JA in all respects save one. In no respect does Beazley P adopt the reasons (as distinct from the orders) of Basten JA, see Wende CA at [14]. Thus, save for one issue, the reasons of Barrett JA represent the reasons of the majority of the Court. 6The one crucial issue concerned a ground or grounds sought to be added to the appeal at the hearing. The relevant grounds were in these terms (Wende CA at [32]): "Whether one bill of costs can validly claim costs under costs orders made by different court for purposes of costs assessment regime in Legal Profession Act 2004 (NSW) 2A The primary judge erred in his interpretation and application of ss 353 and 354 of the Legal Profession Act 2004 by his determination that the fact that a court order is needed to precede a valid costs assessment does not mean that each separate item or group of costs need be the subject of a separate court order. 2B The primary judge erred in his interpretation and application of ss 353 and 354 of the Legal Profession Act 2004 by failing to determine that the first respondent's bill of costs was invalid for the purposes of ss 353 and 354 on the ground that it included the costs ordered to be paid under three (3) separate and distinct costs orders made by three (3) different courts (namely, the Local Court, the Supreme Court and the Court of Appeal in three (3) sets of proceedings without distinction as to which costs were incurred under which order as to costs, or were incurred in which court or were incurred in which particular proceeding)." 7At the hearing, the Court of Appeal granted leave to amend to add these grounds: see Basten JA at [37]; Barrett JA at [120]. 8So far as these additional grounds are concerned Beazley P at [8] agreed with Barrett JA that an omnibus application - one seeking an assessment of several costs orders - was permissible under the legislation. The learned President also agreed with Barrett JA that a determination was required in respect of each costs order. Barrett JA, dissenting, held at [203] that because separate amounts could be ascertained: "in the particular circumstances of this case, the costs assessor acted in conformity with s 367A to make, in respect of each costs order, a determination of the reasonable amount of the costs payable as a result of the order" and, therefore, at [207], application to the Review Panel was, "as a matter of substance, an application in relation to each of the three determinations". 9Her Honour the President decided at [10], however, that a global determination of all the costs was not permissible and, at [11], that the determination in this case "[o]n its terms and in its form" was but one global determination even though "it may be possible...to ascertain the amount that was determined in respect of the three costs orders". 10Although Basten JA focused more on the certificate or application than on the determination, it is clear that his Honour's decision on this aspect (see [47]) was to the same effect as Beazley P. 11The Court of Appeal, relevantly, made the following orders: "(1) Set aside the orders made in the District Court on 15 February 2013 dismissing the appeal from the determination of the Review Panel dated 6 January 2012. (2) In place of the orders made in the District Court: (a) set aside the certificates as to determination of costs issued by the Review Panel on 6 January 2012; (b) set aside the certificates as to determination of costs issued by Ms Dulhunty, Costs Assessor, on 11 January 2011. (3) Remit the matter to the District Court to make any consequential orders with respect to the appeal to that court and to take such steps as it considers necessary with respect to the costs of the assessments undertaken by Ms Dulhunty and the Review Panel. (4) Order the respondent to pay the applicants' costs in this court."

C. ISSUES 12Arising out of the remittal of the proceedings to make consequential orders and deal with the costs of the assessments, as provided by order 3 of the decision of the Court of Appeal, three issues have arisen between the parties: (a)What should be the order dealing with the costs in the District Court? Each party submits that the other should pay the costs of the District Court proceedings. Horwath submits in the alternative that the plaintiffs should bear the major proportion of those costs. (b)What should be the order in respect of the costs of the assessments? The plaintiffs submit that the Court should remit this matter to the Manager, Costs Assessments (contrary to their written submission where they seek an order for these costs), whereas Horwath submits that the plaintiffs should pay these costs. (c)What if any other consequential orders should be made? The plaintiffs submit that no order should be made whereas Horwath submits that I should order that certificates be issued in respect of the three sets of costs. 13As the consequential orders may impact on the costs orders to be made in the proceedings, it is convenient to deal with these issues in reverse order.

D. CONSEQUENTIAL ORDERS 14The plaintiffs submit that no consequential orders should be made because of the Court of Appeal orders. By those orders, it is submitted "the substratum [of the proceedings] has been removed" and: "it is not open to this Court to treat the decision of the Court of Appeal as if it was this Court's decision and pass that back to the costs assessor by the mechanism provided by section 384(2)(b) of the Legal Profession Act." 15The plaintiffs submit, that apart from orders concerning costs, the Court should, by order, "Otherwise dismiss the matters referred to the Court by the Court of Appeal." 16Section 384 of the Legal Profession Act 2004 provides: "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." 17Horwath relies on s 384(2)(a). It submits that as a result of the Court of Appeal decision the District Court has not affirmed the Review Panel's decision and so has the power to and should make the determination that should have been made by the Review Panel. 18The plaintiffs raise against this course, the opening words of s 384(2), "After deciding the question the subject of the appeal". They submit that the District Court has not decided the question the subject of the appeal, rather it has been decided by the Court of Appeal. Strictly, s 384(2) does not require the District Court to "[decide] the question", but that is certainly the most natural reading of the phrase in its context. 19The reasons for the Court of Appeal "deciding the question" are, again, not altogether apparent. Basten JA gives detailed reasons at [95] - [101] but Beazley P, who joined in the order made, gives no indication that the reasons of Basten JA found favour with her Honour. 20Basten JA does not refer to the text of s 384 as a factor to be considered in that decision. His Honour gives no indication that the powers of the District Court under s 384(2) would be removed, lessened or otherwise affected by whether the Court of Appeal, or alternatively, the District Court, set aside the certificates of the Review Panel and the assessor. On the contrary, his Honour assumed that the District Court retained the power to deal with or remit the question of the costs of the costs assessment (at [94]), a matter the plaintiffs support. Yet if a precondition to the exercise of powers under s 384(2) is not satisfied, it is difficult to identify where the necessary power is to be found to deal with or remit the question of the costs of the costs assessment. Neither party could identify at the hearing a power outside s 384. 21In my view, such a strict reading of the opening words of s 384(2) as advocated by the plaintiffs is not compelled by the text and is not warranted as a matter of law. Rather, "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to [the statutory] meaning than the logic with which it is constructed": Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69]. See also French CJ and Hayne J in Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander [2012] HCA 56; (2012) 248 CLR 378 at [23] - [25] and Deputy Commissioner of Taxation v Zammitt [2014] NSWCA 104 at [67]. 22The setting aside of the certificates and determination of the Review Panel and the assessor, whether by the Court of Appeal or the District Court, leaves the assessment without a valid determination. Yet a determination is a necessary consequence of an assessment (see ss 367(1) and 375(1)). This informs the proper construction of s 384(2). The District Court not affirming the earlier determinations (which is the effect of the Court of Appeal decision in this case) remains a necessary precondition to the use of those powers. 23In my view, the opening words of s 384(2) should be read as meaning "After the question the subject of the appeal is decided" to take account of the possibility that the decision of the District Court might ultimately be made by the Court of Appeal in the manner adopted by Basten JA at [95] and [101]. Thus, the powers under s 384(2) are enlivened. 24The determination that should have been made by the Review Panel as determined by the Court of Appeal is not immediately apparent. Beazley P held that the only error was a failure to make, "a determination in respect of each costs order " (at [12]). Basten JA agreed with this finding at [46] and [47] but also determined that the arbitration costs should not have been included in the determination (at [73]), that an omnibus application cannot be made (it seems) (see [43] and [46]) and reserved his decision on whether the 15% rule in s 369(3)(c) of the Legal Profession Act 2004, which he said needed to be taken into account (see [87]), was wrongly not considered (see [88]). Barrett JA determined that there was no defect in the Review Panel's decision established in the grounds of appeal (see [274]). 25Thus, it appears that a majority of the Court of Appeal (Beazley P and Barrett JA) supported the determination of the Review Panel save as to the global determination of costs. On that issue a majority (Beazley P and Basten JA) held that such a determination had occurred. The Court held that a global assessment alone was not permissible. 26Accordingly, the question that s 384 leaves open is whether this Court should make the three determinations of the fair and reasonable costs in respect of each costs order under s 384(2)(a), or remit that matter for decision to the Review Panel (or the Manager, Costs Assessment): see s 382 and compare s 389(1). 27In deciding whether to remit or decide the matter the reasons of Basten JA in relation to another issue in the appeal are broadly analogous: "Where the conclusion follows as a matter of law, and no alternative order is available, the just, quick and cheap resolution of the real issues would appear to require that orders be made by this Court". See Wende CA at [95] and the Civil Procedure Act 2005, s 56(1). 28In the present case, Barrett JA found at [201] that: "The amount attributable to a particular order was not stated as a single figure but was easily ascertainable by reference to the timing of items of work relative to the proceedings to which the order related and the specific eliminations, reductions and adjustments affecting those particular items of work." 29Beazley P held at [11]: "As Barrett JA has carefully explained, it may be possible in this case, given the way in which the itemised bill upon which the costs assessor made her determination was structured, to ascertain the amount that was determined in respect of the three costs orders subject of the assessment application." 30Thus, a majority of the Court of Appeal has decided that the appropriate separate determinations are calculable. Apart from this failure to calculate and determine the amounts of the three costs orders, a majority of the Court of Appeal (Beazley P and Barrett JA) has held that there was otherwise no defect in the assessments. If that is so, there seems to be no reason why I should not proceed to make three separate determinations in accordance with the reasons of the assessor and the Review Panel. These are the determinations that the Court of Appeal decided should have been made by the assessor or subsequently by the Review Panel. For this Court to do so saves time and costs and will necessarily cure the solitary defect identified by the Court of Appeal. It also seems to be the very type of matter to which s 384(2)(a) is directed. 31One final matter arises. The scheme of the Act contemplates that in the case of each determination by an assessor (see s 368(1)) or by a Review Panel (s 378(1)) a certificate is to be issued. 32The issue of the certificate enables enforcement of the determination. The filing of the certificate in an appropriate court operates as a judgment of the Court (s 368(5), s 378(2)(b)). But the statutory regime does not contemplate a certificate of the Court being issued or filed. A determination of the Court under s 384(2) is thus not to be given the status of a judgment by the procedure of the creation and filing of a certificate. Rather, that status results from the orthodox means whereby court determinations become enforceable, namely, the issuing of court orders consequent upon determinations. This seems to me to be the appropriate result of a determination under s 384(2)(a), not an order in respect of certificates as was sought by Horwath. 33The parties accepted that in the event that the Court decided it should make determinations in accordance with s 384(2)(a) the most convenient course was to stand over the matter. In the event that the parties could not agree on the calculation of the three sums corresponding to the three costs orders the matter could be the subject of further argument. I propose to take this course.

E. COSTS OF THE COSTS ASSESSMENT 34Barrett JA found no error in upholding the decision of the Review Panel that the costs of the assessment and the review should be paid by the plaintiffs (at [265] - [276]). Beazley P agreed with these reasons (at [1]). For reasons given in the previous section of this judgment, the decision by this Court on that matter, to order the plaintiffs to pay these costs, seems empowered by s 384(2) of the Act and justified in the circumstances identified. The reference to this matter by Basten JA (at [94]) and by the majority (in order 3 at [102]) is not contrary to this approach. 35The failures by the assessor and the Review Panel to identify the particular sum of costs determined against each costs order does not seem to me to be a reason why I should make a different order to those previously decided, especially in circumstances where I do not propose to remit the matter for a re-determination of the application, so that there are no further assessment costs to be incurred. In that event, there seems to be no reason to reach a different decision in respect of the costs of the costs assessment and the Review Panel from the decisions previously reached by the assessor and the Review Panel, decisions apparently endorsed by a majority of the Court of Appeal. The plaintiffs should pay the costs of the assessment and the Review Panel.

F. THE DISTRICT COURT COSTS 36The orders I propose to make under s 384(2) determining the assessed costs in respect of the separate costs orders indicate that as a matter of substance Horwath has largely succeeded in the proceedings. Horwath has failed to have the Review Panel's decision affirmed having lost on one of the 14 or so grounds raised by the plaintiffs. But the orders I propose to make under s 384(2) establish that that loss was on a matter of form whereas Horwath has in substance succeeded in obtaining a judgment which will total a sum equal to the amount assessed by the Review Panel. This suggests that any reduction in the award of costs because of the plaintiffs' success in setting aside the determinations should be small. 37Also, on the other issue before me, the costs of the costs assessment, Horwath has been successful. 38The general rule that costs "follow the event" refers to the practical result of a particular claim: see Windsurfing International Inc v Petit (1987) AIPC 90-441 per Waddell J. The practical result directs the Court to matters of substance rather than form: see generally the discussion in Ritchie's Uniform Civil Procedure NSW at [42.1.10], [42.1.15]. 39Both parties submitted that I retained a discretion in relation to costs. However, there are three matters in the Court of Appeal judgment that potentially impact upon that discretion. 40First, it may be relevant whether the grounds of success in the Court of Appeal were raised in the District Court. Ground 9 in the District Court was of some significance. It was in these terms: "The Statement of Reasons of the Costs Review Panel does not allow the Appellants to arrive at total costs in respect of each of the three proceedings namely the Local Court proceedings, the Supreme Court proceedings and the Court of Appeal proceedings, in contravention of the authority of Frumar v Owners of Strata Plan 36957 [2006] NSWCA 278." 41I dealt with this ground in Wende (No 1) at [96] - [106]. The ground was informed by paragraph 75 of the plaintiffs' written submissions in respect of this ground, which was to the following effect: "This ground relates to the fact that the Review Panel simply adopted the reasoning of the Assessor but for the mathematical error (see paragraph 6.4 of the Reasons), and failed to give reasons as to the way in which it dealt [with] the [plaintiffs'] submissions." 42Although in written submissions at paragraph 76 the plaintiffs referred to being "effectively [denied the] opportunity to rely on s.385 of the Legal Profession Act 2004" no argument was advanced that the global assessment of costs was contrary to any provision, including s 367A in particular, of the Legal Profession Act 2004. Given the "inconvenient consequences" (see Wende CA at [13]) of such a construction of the provisions, had it been raised it may presumably have raised the application of the principles in Project Blue Sky quoted above (see also Certain Lloyd's Underwriters), principles which the Court of Appeal recently reminded this Court of in Zammitt at [67]. 43Although I found in Wende (No 1) at [103] that there was force in the argument that a party should have an opportunity to appeal an assessment of costs payable on the result of an order, I concluded that the appellants were not denied this opportunity holding at [105] and [106]: "The assessment and the Review Panel determination enable the appellants to identify with sufficient clarity which costs relate to which proceedings. The professional costs are in every instance dated, and the assessment also has headings dealing with the proceedings for the Supreme Court and the Court of Appeal (see AB 347 and 349). Further, the disbursements are identified by date and so it is a straightforward procedure to identify by those dates which disbursements relate to which proceedings. Accordingly, even if section 385(2) of the Legal Profession Act 2004 does require an assessment to enable a party to identify which costs relate to which proceedings, in circumstances where the assessment covers the costs in more than one court or tribunal, this obligation has been satisfied in the present case by the assessment and the determination of the Review Panel." 44The new grounds, 2A and 2B, upon which the plaintiffs succeeded in the Court of Appeal were different from ground 9 quoted above and were not directly raised by ground 9, see Basten JA at [36]. Yet Basten JA stated at [39] that ground 9 raised a question of "the validity of a single determination (and certificate)" arising from the separate costs orders in the separate courts. 45This statement was not referred to or adopted by any other member of the Court and, with great respect to his Honour, its correctness might be doubted, given that neither the ground nor the written submissions of the plaintiffs nor the District Court judgment in dealing with ground 9 referred in terms to the "validity" of the "determination" or "certificate" (contra Basten JA at [35]), and the submissions of the plaintiffs suggest a rather different matter. 46Although I do not regard this particular factor - whether the successful ground was raised in the District Court appeal - as a weighty one in respect of costs, nevertheless it lessens the analogy that might otherwise exist between the order of the Court of Appeal made in respect of costs and the order that I should make in respect of costs in this Court. 47Secondly, at [93], Basten JA stated, "The applicants should, presumably, have their costs of the proceedings in the District Court, although there is an issue as to whether this court can make that order". Horwath submitted that this passage simply reflected the prima facie position of the plaintiffs having succeeded. I do not accept this submission. The terms of the statement refer not to a general rule but to the particular case, indicating that the statement reflected guidance from a member of an appellate court on the question of costs. But the reasons of Basten JA were not, as I have noted, supported by the other members of the Court. Thus, they do not reflect the majority view. Nor is this statement of Basten JA reflected in any order made by the Court of Appeal. Further, it is premised on the plural "errors" of law found by Basten JA. The other members of the Court found either no errors (Barrett JA at [274]), or one error (Beazley P at [10]). Basten JA found three errors: the omnibus application, the omnibus certificates and the inclusion of the arbitration costs; and a possible fourth error, the cost of the assessment (see at [88]). In these circumstances, the direction given by Basten JA that the plaintiffs should presumably receive their costs is unsurprising. It is a different matter when the plaintiffs have raised many issues but succeeded on only one. 48Thirdly, the plaintiffs also rely on the order of the Court of Appeal that Horwath pay the costs of the Court of Appeal. They say that this order is analogous. The plaintiffs have succeeded on only one ground out of eight or ten in the Court of Appeal, yet were nevertheless awarded their costs. I accept that this circumstance is relevant and is loosely analogous. I say loosely because it is not correct that, so far as Basten JA was concerned, the plaintiffs succeeded only on one issue. Rather, as indicated above, in his Honour's view the plaintiffs succeeded on three, perhaps four issues. That lessens the proximity of the analogy. 49However, Beazley P did find only one issue in which the plaintiffs succeeded and joined in the order that Horwath pay the plaintiffs' costs. 50With the greatest respect to the President, no clear reason for that decision emerges expressly from her Honour's judgment. Merely because her Honour agreed "with the orders proposed by Basten JA" (at [14]) is insufficient to establish agreement with the reasons, especially when her Honour either expressly agreed with the opposing reasons of Barrett JA (at [1], [8], [9]) or gave her own reasons for the one departure from the decision of Barrett JA (at [10], [13]). 51Thus, the decision of Beazley P in awarding costs in favour of the plaintiffs when it succeeded on one issue, albeit a crucial one, and lost on the other nine grounds, does not guide me in the present case because, first, it is a decision of one judge in a bench of three which differs from the other two; secondly, it is without reasons by her Honour in respect of the particular order; and, thirdly, it does not refer to the authorities or purport to establish a principle that costs should follow the result no matter how many issues by the successful party are advanced, argued and lost. 52For all these reasons, I do not think that the order of the Court of Appeal deciding the costs of the appeal is a determinative or weighty matter in guiding this Court as to the appropriate order in respect of the costs in this Court. 53In my view, Horwath is entitled to its costs in the District Court since the time of the Court of Appeal decision, since it has succeeded on all the issues argued before me. 54In respect to the proceedings previous to the Court of Appeal, but bearing in mind the Court of Appeal's orders and reasons, the plaintiffs have failed on all but one of the issues. They have succeeded in having the certificate set aside and having the errors in the underlying determinations identified but the end result is, in substance, that the plaintiffs will be obliged to pay the same amount in respect of the costs the subject of the assessment as was found by the Review Panel. In that event, Horwath has been substantially successful and the plaintiffs are only entitled to a small reduction in respect of costs. 55In my view, the issue on which the plaintiffs succeeded equates with about 10% of the dispute reflected in the litigation. Deducting 10% of the costs from the costs the defendant would receive in respect of the other 90% of the dispute (issues in which the defendant was successful) leaves a net sum of 80% in favour of the defendant. I am persuaded that Horwath should be awarded 80% of its costs in the District Court prior to the Court of Appeal proceedings. 56Horwath sought an order that a lump sum for costs be awarded rather than that the costs be assessed. The parties accepted that those matters - whether a lump sum for costs should be awarded and if so, the quantum of that sum - should be dealt with on another day when evidence can be prepared and considered. I propose to adopt that course.

G. ORDERS 57The orders of the Court are: (1)Order that the plaintiffs pay the defendant's costs of the District Court proceedings occurring after the Court of Appeal proceedings, up to the date of this judgment. (2)Order that the plaintiffs pay 80% of the defendant's costs of the District Court proceedings occurring before the Court of Appeal proceedings. (3)Stand over to a date to be notified by my associate the question of whether the amount of costs in orders 1 and 2 should be the subject of a lump sum order. (4)Order that the assessed costs of the Local Court, Supreme Court and Court of Appeal be determined by the District Court under s 384(2)(a) of the Legal Profession Act 2004 in accordance with the reasons of the assessor, Ms Dulhunty, and the Review Panel. (5)Stand over to a date to be notified by my associate the question of the quanta of those three determinations, in the absence of prior notification by the parties of agreement as to quanta. (6)Order the plaintiffs to pay the costs of the assessment in sum of $13,128.76 and the costs of the Review Panel in the sum of $5,818. (7)Stand over any other residual matters to a date to be notified by my associate. (8)List the matter for directions on Friday, 31 October 2014 at 10am before P Taylor SC DCJ.

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: 27 November 2014

Legal Profession Act 2004(NSW)

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