Young v King

The Provisions

1. Section 98 of the CP Act relevantly provides (my emphasis): Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. ... (6) In this section, costs include: (a) the costs of the administration of any estate or trust, and (b) in the case of an appeal to the court, the costs of the proceedings giving rise to the appeal, and (c) in the case of proceedings transferred or removed into the court, the costs of the proceedings before they were transferred or removed.
2. Clearly the Court has a substantial discretion in costs matters, but it must be exercised judicially, and the power to make a gross sum order should be exercised only if the Court finds it fair and equitable in all the circumstances of the parties and the case: Harrison v Schipp ("Harrison") (2002) 54 NSWLR 738; [2002] NSWCA 213, especially at [21]-[22].
3. When the powers in s 98 are exercised, the Court must observe the injunction in the CP Act (s 56 etc.) to pursue the just, quick and cheap resolution of the real issues in the proceedings. Nonetheless, resort to the s 98 powers should not be "too quick": Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863.
4. Lump sum orders are often made when the assessment process would be protracted and expensive, and/or if it appears that the party obliged to pay costs would not be able to meet a liability of the order likely to result from the assessment. A recent article in the Law Society of NSW Journal (Issue 45, June 2018, pp82-83) noted that assessment (or taxation) processes can cause "aggravation, expense and delay". The Court must have confidence, on the materials before it, that an appropriate gross sum can be arrived at: per Garling J in Young v Hones (No 3) [2014] NSWSC 499, at [25].
5. Garling J continued (at [26]-[30]): 26 When dealing with gross sum costs orders, in Hamod v State of NSW [("Hamod")] [2011] NSWCA 375, Beazley JA, with whom Giles and Whealy JJA agreed, said at [816]: "The terms of s 98(4), together with the more general considerations reflected in the [CP Act] ..., suggest that factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred ...; the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their costs; and the capacity of the unsuccessful party to satisfy any costs liability ..." 27 The exercise of the power under s 98(4) of the [CP Act] may be appropriate where the Court considers that it is desirable to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment. This may arise from the likely length and complexity of the assessment process, or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: see Hamod at [817]. 28 In making a gross sum costs order, the Court is not required to undertake a detailed examination of the kind that would be appropriate to a taxation or a formal costs assessment: Harrison at [39]; Hadid v Lenfest Communications Inc [("Hadid")] [2000] FCA 628 at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at [16], [49], [79] and [84]; Hamod at [819]. 29 The approach to a gross costs order must be, although an estimate, a process which is logical, fair and reasonable, and may involve an impressionistic discount of the costs actually incurred or estimated in order to take into account the contingencies that would be relevant in any formal costs assessment: Hamod at [820]. 30 In exercising the power to award a gross sum for costs, the Court needs to be astute to prevent prejudice to the respondent on the one hand, by over-estimating the costs, and on the other hand, not to cause an injustice to the successful party by applying some form of failsafe discount on the costs estimate submitted: Leary v Leary [1987] 1 All ER 261 at 265; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]; Savage v Australian Unity Funds Management Ltd [2011] NSWCA 270 at [31]-[33]; Hamod at [794].
6. His Honour concluded (at [67]) that a lump sum costs order in that case was in the interests of justice and would limit the expense to the parties.
7. Newell accepted (at Tp33, L8) the principles laid out by Garling J. The principles were also discussed by Sackar J in Lawcover Insurance Pty Ltd v Muriniti and Newell [2018] NSWSC 558, at [6] to [10].

Some Background

1. The hearing which took place on 5 October 2017 led to judgment No 12 in these proceedings ([2017] NSWLEC 150).
2. Before the Court on that date were: 1. an application by the successful first and second respondents, the Kings, for personal costs orders against the Lawyers, in respect of the Kings' costs of the substantive proceedings; 2. Davies's application for a gross sum costs order; and 3. an application by the Lawyers for me to recuse myself from dealing with Kings' motion.
3. As that day's proceedings commenced, Newell made, with "scant notice", an oral application that I recuse myself also from dealing with the Davies motion (see judgment No 12, at [7]).
4. Newell said on that occasion (T05.10.17 p4, LL28-33): ... if your Honour was against us in relation to the application raised against the costs application by the Kings, then it seems it would follow inexorably that we would not proceed with the recusal application in relation to the application for a lump sum cost order by Mr Davies unless your Honour's judgment was the subject of an appeal, and I wouldn't know the answer to that at this stage.
5. He then accepted (T05.10.17 p7, LL18-21) that, if I adjourned both the Davies motion, and the recusal motion in respect of it, he and Muriniti could not resist an order for Davies's costs of that day.
6. Mr Faulkner SC, appearing for Davies, then withdrew from that hearing (T05.10.17 p8, L8).
7. In judgment No 12 (at [6]-[10]), I adverted to those events, and I went on to then deal with the King recusal matter, in which I found against the Lawyers (at [66]-[69]). (I have subsequently given my judgment on the Kings' personal costs application - No 13 [2018] NSWLEC 150.)
8. Relevantly, however, I ordered in judgment No 12 (at 74): (1) In respect of the lump sum costs order application made by Davies, and the application made by Muriniti and Newell for an order that I recuse myself from dealing with Davies's application: (a) The order I made on 5 October 2017, that Muriniti and Newell pay Davies's costs of appearing that day, is affirmed; (b) The application by Davies, and the Notice of Motion for recusal filed by Muriniti and Newell on 6 October 2017, are stood over to the Registrar's list on Friday, 8 December 2017 for directions, and the fixing of new hearing dates for, the recusal application, if it is to be pursued, and, if not, for Davies's application for a lump sum costs order.
9. Ultimately, Newell (c.f. [17] above) proceeded with the second recusal application, and both Davies matters were fixed for hearing on 22 August 2018.

The Evidence now before the Court

1. The gross sum (of costs) sought by Davies in this application is $125,016.20 (T22.08.18 p13, L38).
2. It is particularized in the first of two affidavits of Lisa Anne Schumacher (the solicitor now representing Davies), sworn 30 June 2017 and 29 September 2017, and read in the proceedings.
3. Schumacher was required for cross-examination by Newell, appearing for the Lawyers, and she also gave some supplementary oral evidence.
4. After her re-examination, Mr Faulkner SC, appearing again for Davies, tendered a bundle of her "working documents" (Exhibit D2), which underpinned her calculation, and explained her evidence.
5. Both advocates tendered professional biographical material regarding Ronan Guyomarc'h (Exhibits D1 and R1), a solicitor who formerly had carriage of the case, prior to Schumacher, both being employed by Gilchrist Connell.
6. Guyomarc'h was admitted in NSW only in 2015, but has extensive experience in the professional indemnity insurance industry.
7. Schumacher was admitted in New Zealand in 2008 and in NSW in 2011. She has been with Gilchrist Connell since then, subject to a 15 month sabbatical in 2015-16 with Liberty International Underwriters (T22.08.18 p17, LL21-50). She took over the conduct of the matter from Guyomarc'h in early 2017 (Tp19, L29).
8. Each of these solicitors was responsible for some of the costs items claimed as parts of the lump sum sought.
9. On the other side of the matter, the Lawyers relied upon an affidavit sworn by Muriniti on 4 October 2017, but he was not required for cross-examination.

Recusal?

1. I turn, firstly, to the recusal application.
2. The Lawyers relied in the present hearing upon not only Newell's own submissions, but also some written submissions earlier prepared by Geoffrey Watson SC, at a time when he was briefed to appear for Newell (judgment No 12, at [15]).
3. As I noted in judgment No 12 (at [14]), the Lawyers, in late September 2017, parted company with the legal representatives organised for them by their professional indemnity insurers. Newell noted (Tp11, LL22-23) that there is currently a dispute between the Lawyers and LawCover regarding the conduct of the costs hearing by Mr D Lloyd of counsel.
4. The principles to be applied to applications for recusal on the grounds of apprehended bias are well established.
5. They have been often confirmed by the High Court and the Court of Appeal, and were set out at length in judgment No 12 ([26]-[34]), in which I declined to recuse myself from hearing the Kings' application for personal costs orders against the Lawyers in respect of the substantive proceedings ([20] above).
6. As those principles guided my decision that I not recuse myself on this occasion, I repeat them now.
7. The test was stated by the plurality in Ebner v The Official Trustee in Bankruptcy ("Ebner") (2000) 205 CLR 337; [2000] HCA 63, at [6], in these terms (emphasis added): ... a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide
8. Not surprisingly, this principle has come to be known as the "double might" test.
9. The High Court went on to say, in Ebner (at [8]): The apprehension of bias principle admits of the possibility of human frailty. Its application is as diverse as human frailty. Its application requires two steps. First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits.
10. Significantly, their Honours added (at [19] and [20]): 19 Judges have a duty to exercise their judicial functions when their jurisdiction is regularly invoked and they are assigned to cases in accordance with the practice which prevails in the court to which they belong. They do not select the cases they will hear, and they are not at liberty to decline to hear cases without good cause. Judges do not choose their cases; and litigants do not choose their judges. If one party to a case objects to a particular judge sitting, or continuing to sit, then that objection should not prevail unless it is based upon a substantial ground for contending that the judge is disqualified from hearing and deciding the case. 20 This is not to say that it is improper for a judge to decline to sit unless the judge has affirmatively concluded that he or she is disqualified. In a case of real doubt, it will often be prudent for a judge to decide not to sit in order to avoid the inconvenience that could result if an appellate court were to take a different view on the matter of disqualification. However, if the mere making of an insubstantial objection were sufficient to lead a judge to decline to hear or decide a case, the system would soon reach a stage where, for practical purposes, individual parties could influence the composition of the bench. That would be intolerable.
11. Kirby J said, in Minister for Immigration and Multicultural Affairs v Jia (2001) 205 CLR 507; [2001] HCA 17 (at [114]), that the test "is a stringent one ... designed to uphold very high standards of manifest impartiality on the part of those who exercise public power", and (at [135]) "bias must still be 'firmly established' ... It is not enough that the reasonable bystander has a vague sense of unease or disquiet".
12. In British American Tobacco Australia Services Limited v Laurie (2011) 242 CLR 283; [2011] HCA 2, French CJ said (at [33]): In judging whether the appearance of impartiality has been lost difficulties of principle and application can arise. Courts must make their judgments upon criteria referable to a legally constructed, fair-minded lay observer. That means, in effect, that their judgments are made on a subset of the available information. That is because the reasonable apprehension of bias goes to confidence in the courts on the part of litigants and the public, who will not have access to details of the substantive law and all relevant aspects of the practice and procedure of the courts. In determining whether an apprehension of bias has a reasonable basis, the courts are asked to see themselves as others, not judges or lawyers, would see them. As Laws LJ put it in Sengupta v Holmes [[2002] EWCA Civ 1104, at [11]]: "it is not enough to show that those in the know would not apprehend any bias." A standard for apparent bias dependent upon how the matter appeared to judges and lawyers would be difficult to distinguish, in practical effect, from a standard of actual bias.
13. Later in 2011, the High Court reiterated the Ebner test in Michael Wilson & Partners Ltd v Nicholls ("Michael Wilson") (2011) 244 CLR 427; [2011] HCA 48, the plurality affirming (at [31]): ... that the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias (in this case, in the form of prejudgment) is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide. ...
14. Their Honours went on to add ([32] and [33]): 32 As the plurality in Johnson v Johnson ... explained, "[t]he hypothetical reasonable observer of the judge's conduct is postulated in order to emphasise that the test is objective, is founded in the need for public confidence in the judiciary, and is not based purely upon the assessment by some judges of the capacity or performance of their colleagues." 33 Because the test is objective it is important to keep an inquiry about apprehension of bias distinct from any inquiry about actual bias. An inquiry about actual bias in the form of prejudgment would require assessment of the state of mind of the judge in question. No doubt that would have to be done, at least for the most part, on the basis of what the judge had said and done. But to allow an inquiry about whether the judge had in fact prejudged some issue to enter into a debate about what a fair-minded lay observer might apprehend is to introduce considerations that are irrelevant to the issue that is to be decided when a party submits that there is or was a reasonable apprehension of bias. ... (See also paragraph [63] of Michael Wilson; the Court of Appeal's judgments in Spencer v Bamber [2012] NSWCA 274; Crossman v Sheahan [2016] NSWCA 200; Golden v V'landys [2016] NSWCA 300; the High Court's decision in Isbester v Knox City Council (2015) 255 CLR 135; and other authorities which I discussed in judgment No 12, at [46] to [65]).
15. At this latest hearing I asked Newell if he had anything to put to me on recusal which he had not put to me in the recusal argument on 5 October 2017, which led to judgment No 12, and he replied: "Yes I do ..." (T22.08.18 p2, L1).
16. However, no fresh arguments were advanced. His case on this occasion was again based upon arguments that I had failed to give proper reasons for some critical remarks I had made about the Lawyers in earlier judgments.
17. Not only have I repeatedly rejected that argument, it was also rejected by the Court of Appeal, and by other judicial "commentators" on this litigation, to whom I have referred in earlier judgments.
18. In my conclusion to judgment No 12, I said (at [66] to [70]): 66 The Lawyers may well feel "unease" or "disquiet" ... about my continued involvement in the matter, but I doubt that the hypothetical bystander would feel that way. 67 Their "reasons" argument cannot be upheld, and they have not satisfied the "double might" test. 68 Criticism in a judgment does not automatically amount to prejudgment of a question not yet argued and determined. 69 All remarks in my earlier judgments and during earlier arguments would be read fairly by the hypothetical observer, in their respective contexts. ... 70 The hypothetical observer would not see it as inappropriate for me to now adjudicate upon the Kings' application for personal costs orders in respect of the substantive proceedings, which Young effectively lost in judgment No 6.
19. The test I must apply in the present case is, therefore: Would a fair-minded lay observer, acquainted with the relevant facts, reasonably apprehend that it was possible that I would not bring an independent mind to the determination of the Davies's application for lump sum costs orders against Young's lawyers?
20. The merits of making a personal costs order against the Lawyers in favour of Davies have already been found in his favour - the Court finding that he should never have been joined in Young's costs application, and that the Lawyers were entirely at fault for that.
21. That issue cannot now be re-litigated, but the issues of how that order ought be satisfied, and whether I should hear that application, are separate matters which I am now considering.
22. Having closely examined and considered all the written and oral submissions Newell placed before me, I came readily to the conclusion that the "double might" test was not satisfied on this occasion.
23. I respectfully agree with Faulkner (recusal subs par 17) that the case for recusal in this Davies matter was "immeasurably weaker" than in the Kings' matter.
24. The recusal application was rejected, and, my reasons having now been given, Davies is entitled to an order for his costs in respect of it.
25. I turn, therefore, and belatedly, to Davies's lump sum costs order application, which has been delayed by that late recusal application (Tp35, LL27-29), Davies having been brought into the proceedings in August 2015.

A Lump Sum Costs Order?

1. Schumacher opined that the costs of an assessment would be about $12,000, that it would take 6 to 8 months, and that about 95% of Davies's properly attributable costs (totalling $131,596 out of his total account of more than $147,189.45) would be allowed (on an indemnity basis). 95% is $125,016.20.
2. She attributed to "all parties" (affidavit 29 September 2017, par 7) "a reasonable approach", and Muriniti expressed no disagreement with the 95% prediction.
3. Schumacher was closely cross-examined about her analysis of the firm's file on the matter, and her attribution of various elements of work to Davies's claim in respect of the order already made in his favour. She said (T22.08.18 p21, LL23-25, 31-33, and 40, and p22, L6-7): ... we've made an assessment to carve out just the costs that are relating to the personal costs application ... [It] was an estimate but it was an estimate based on my assessment of the bills and which costs relate to each of the matters ... based on my review of the invoices ... What I did was I went through and took all of the entries that he was entitled to and I added all of them up.
4. She insisted that she did not include any items outside those properly recoverable, such as those involved in advising Davies or his insurer on issues of indemnity (Tpp22-23), and she summarized (at Tp24, LL1-7) as follows: When I went through the bills I looked for all of the entries that identified that they related to either of the two recoverable types of costs and I carved out those entries and added them up. So I didn't look specifically for matters that related to advising on indemnity, but I wouldn't have picked up those costs because they weren't related to the two recoverable costs motions that are carved out of the invoices. and again (at Tp25, LL26-32): ... I went through and identified each of the matters in the early entries that referred to the recoverable matters, and then I had a look at them and when there was some ambiguity about what that was about and whether or not it was recoverable, I went and looked at the particular document or I looked more detailed into the matter and spoke to Paul Kozub and made the determination about whether or not that was a recoverable matter.
5. She admitted (Tp26, L2) that she "applied a broad brush approach" (as mandated by authorities such as Hadid, per Lehane J at [35] - see [11] "28" above), but (LL3-6) she was careful to apportion time conservatively where more than the Young costs application was involved in any item.
6. In his re-examination, Faulkner "drilled down" further into the way she assembled her assessment of recoverable costs, largely by colour-coding items blue, yellow, pink, and orange in the actual "bill of costs" (which document became Exhibit D2, without any objection from Newell).
7. Schumacher described her approach as "broad brush", but I accepted Faulkner's submission (Tp30, LL35-36) that it was "a surprisingly detailed and thorough process".
8. I accept Schumacher's qualifications, thoroughness, and conclusions, and the Lawyers have not brought any evidence to dispute the charge-out rates involved; indeed the "vastly experienced" Muriniti (Tp30, L47) did not attack the rates she used, as excessive.
9. Like Garling J in Young v Hones (No 3), I find the evidence put forward by Davies's lawyers in this case "logical and acceptable", and not "overstated", as to the merits of the costs claims (see Garling J at [59] and [61]).
10. I reject the Lawyers' submissions (par 10) that Schumacher's evidence "provides no proper basis" for the assessment of Davies's costs on a lump sum basis.
11. As submitted by Faulkner (subs par 12(i)), the Court can be confident in the fairness and appropriateness of the discounted amount claimed, and in making the gross sum order sought.
12. I agree with him that the order sought, as now quantified, ought to be made, and that, as the application was resisted, Davies should also get his costs of it.

Orders

1. The Court makes the following orders: 1. The Notice of Motion, filed on 5 October 2017, seeking that I be recused from hearing the Notice of Motion filed by Warwick Davies on 30 June 2017, seeking orders affecting Leonardo Carlo Muriniti and Robert Duane Newell, is dismissed. 2. Leonardo Carlo Muriniti and Robert Duane Newell are ordered, jointly and severally, to pay Warwick Davies's costs of that Notice of Motion filed 5 October 2017. 3. The Notice of Motion, filed on 30 June 2017 by Warwick Davies seeking an order pursuant to s 98(4)(c) of the Civil Procedure Act 2005, that Leonardo Carlo Muriniti, principal of L.C. Muriniti & Associates and/or the law practice of L.C. Muriniti & Associates and/or Robert Duane Newell, a legal practitioner associate of the law practice of L.C. Muriniti & Associates pay the eighth respondent (Warwick Davies) a specified gross sum, in satisfaction of the costs order made by me in his favour on 27 March 2017 in Young v King (No 11), is upheld. 4. The "specified gross sum" to which Order (3) refers is determined in the sum of $125,016.20. 5. Leonardo Carlo Muriniti, and/or the law practice of L.C. Muriniti & Associates, and/or Robert Duane Newell, jointly and severally, are ordered to pay Warwick Davies's costs of that Notice of Motion, filed 30 June 2017. 6. The exhibits are returned.

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