Aktas v Westpac Banking Corporation Ltd
[2013] NSWSC 1451
•30 September 2013
Supreme Court
New South Wales
Medium Neutral Citation: Aktas v Westpac Banking Corporation Ltd [2013] NSWSC 1451 Hearing dates: 30 September 2013 Decision date: 30 September 2013 Jurisdiction: Common Law Before: Beech-Jones J Decision: (1) Leave to appeal under s 385 of the Legal Profession Act 2004 is refused.
(2) The plaintiff's summons is dismissed.
(3) The plaintiff is to pay the defendant's costs of the proceedings.
Catchwords: COSTS - assessment - Review Panel - application for leave to appeal - when leave should be granted - accountant and solicitor fees - filing fee - whether determination of Panel arbitrary - whether reasons were inadequate. Legislation Cited: - Legal Profession Act 2004 Cases Cited: - Aktas v Westpac Banking Corporation Ltd [2007] NSWSC 1261
- Aktas v Westpac Banking Corporation Ltd [2009] NSWCA 9
- Aktas v Westpac Banking Corporation Ltd [2010] HCA 25; 241 CLR 79
- Aktas v Westpac Banking Corporation Ltd (No 2) [2010] HCA 47; 241 CLR 570
- Aktas v Westpac Banking Corporation Ltd [2013] NSWSC 1198
- Andrews v John Fairfax & Sons Ltd [1980] 2 NSWLR 225
- Chapmans Ltd v Yandell [1999] NSWCA 361Category: Principal judgment Parties: Paul Uysal Aktas (Plaintiff)
Westpac Banking Corporation Ltd (Defendant)Representation: Counsel:
J.F. Heazlewood (Plaintiff)
Ms K. Dawson (Defendant)
Solicitors:
Penhall & Co (Plaintiff)
King & Wood Mallesons (Defendant)
File Number(s): 2013/006067, 2013/202401
EX TEMPORE Judgment
This is an application under s 385 of the Legal Profession Act 2004 (the "Act") for leave to appeal from a decision of a Review Panel reviewing a costs assessment in accordance with Subdivision 5 of Division 11 of Part 3.2 of the Act.
Background
The plaintiff, Paul Aktas, was the sole shareholder and chief executive of Homewise Realty Pty Limited ("Homewise"). Homewise conducted a real estate business. It maintained a trust account with the defendant, Westpac Banking Corporation Limited ("Westpac"), holding rent payments received from tenants of properties it managed.
On or about 1 December 1997, Westpac wrongly dishonoured thirty cheques drawn by Homewise on the trust account. It endorsed each cheque "refer to drawer".
Homewise and Mr Aktas commenced proceedings against Westpac in this Court. Homewise sued Westpac for defamation, breach of contract and negligence. Mr Aktas sued in defamation. At first instance, both Mr Aktas' and Homewise's defamation claims failed. However, Homewise succeeded in its claim for breach of contract and was awarded $84,500 in damages together with interest (Aktas v Westpac Banking Corporation Ltd [2007] NSWSC 1261).
Subsequently, Mr Aktas was ordered to pay Westpac's costs of the proceedings. Westpac was ordered to pay Homewise's costs of its contract claim up to 23 December 2005, but Homewise was ordered to pay Westpac's costs of its other actions and the cost of all of its actions after 5 June 2007 on an indemnity basis.
Mr Aktas appealed to the Court of Appeal, but his appeal was dismissed. Homewise appealed and succeeded, but only to the extent of increasing the amount of damages it recovered for breach of contract to $117,000 (Aktas v Westpac Banking Corporation Ltd [2009] NSWCA 9). Homewise was ordered to pay 60% of Westpac's costs of its appeal. Mr Aktas was ordered to pay Westpac's costs of his appeal.
Mr Aktas obtained a grant of special leave for appeal to the High Court. On 4 August 2010 the High Court allowed his appeal and substituted a judgment in his favour for defamation in the amount of $50,000 with interest (Aktas v Westpac Banking Corporation Ltd [2010] HCA 25; 241 CLR 79).
The High Court ordered Westpac to pay Mr Aktas' costs in that Court as well as his costs in this Court, including on appeal. A subsequent attempt by Westpac to vary those costs orders was unsuccessful (Aktas v Westpac Banking Corporation Ltd (No 2) [2010] HCA 47; 241 CLR 570).
It should be noted that in the meantime, on 23 April 2010, Homewise was de-registered. Thus, the outcome of the litigation was that Westpac was ordered to pay all of Mr Aktas' costs of the various proceedings, but Homewise was ordered to pay 60% of Westpac's costs of the appeal to the Court of Appeal. There were competing costs orders concerning Homewise's claims against Westpac at first instance, but the effect of those orders appears to be that Homewise owed substantial amounts to Westpac.
Costs assessment
Apparently the disputes over the costs of the appeal to the High Court were resolved.
On 21 November 2011, Mr Aktas filed an application for an assessment of the party/party costs owing to him in respect of the proceedings in this Court at first instance and on appeal. The amount claimed was $1,212,750.81. His application was referred to a cost assessor.
On 3 April 2012, the assessor advised the parties that he had completed his assessment. The amount assessed as owing was $594,708.36. The assessor determined that each party should bear their own costs of the assessment.
On or around 16 April 2012, certificates were issued giving effect to the assessment.
On or about 11 May 2012, Mr Aktas applied for review of the costs assessment. His application was referred to a Review Panel.
On 14 December 2012, the Review Panel provided the parties with the reasons for their assessment. The Panel allowed the application for review. It determined that the amount of costs payable was $857,592.11. Having regard to the increase in the amount that was payable, the Panel ordered Westpac to pay the costs of the review application. It also ordered Westpac to pay a proportion of the original filing fee, being $8,575.92.
On 17 December 2012, certificates were issued giving effect to the Review Panel's reasons.
On 8 January 2013, Mr Aktas filed a summons in the District Court seeking to appeal from the Review Panel's assessment. The summons asserted that the appeal was brought pursuant to s 384 and s 385 of the Act. However, the only available form of appeal to the District Court was that conferred by s 384 of the Act, being one that was referable to a complaint about a question of law. The grounds of the summons did not appear to identify any question of law resolved by the Review Panel that Mr Aktas was said to be dissatisfied with. In any event, just prior to the hearing of that summons in the District Court, Mr Aktas successfully applied for a transfer of those proceedings into this Court so that they could be treated as an application for leave to appeal under s 385 (Aktas v Westpac Banking Corporation Ltd [2013] NSWSC 1198).
The matter came before me only on the question of whether leave to appeal should be granted under s 385.
Applications for leave to appeal under s 385
Sections 384 and 385 of the Act provide:
"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.
385 Appeal against decision of costs assessor by leave
(1) A party to an application for a costs assessment relating to a bill may, in accordance with the rules of the District Court, seek leave of the Court to appeal to the Court against the determination of the application made by a costs assessor.
(2) A party to an application for a costs assessment relating to costs payable as a result of an order made by a court or a tribunal may, in accordance with the rules of the court or tribunal, seek leave of the court or tribunal to appeal to the court or tribunal against the determination of the application made by a costs assessor.
(3) The District Court or court or tribunal may, in accordance with its rules, grant leave to appeal and may hear and determine the appeal.
(4) An appeal is to be by way of a new hearing and fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.
(5) After deciding the questions the subject of the appeal, the District Court or court or tribunal may, unless it affirms the costs assessor's decision, make such determination in relation to the application as, in its opinion, should have been made by the costs assessor."
In Chapmans Ltd v Yandell [1999] NSWCA 361 at [11], Fitzgerald JA, with whom Mason P and Davies AJA agreed, noted that requirements for leave to appeal were intended to "act as a filter" to avoid unsuitable appeals that place burden upon the resources of the Courts and the parties. In relation to the predecessor to s 385, which in this respect was not relevantly different, his Honour stated (at [12]):
"It is also in my opinion important to keep in mind that s208M must be considered in the context of s208L, which restricts an appeal as of right to matters of law. In considering whether or not leave to appeal is granted, it must be decided whether or not, there not being a matter of law arising in the proceeding and there being an appeal as of right only as to a matter of law, there is some other matter which in justice requires that leave to appeal be granted to allow that matter to be relitigated. The party seeking leave to appeal obviously bears the burden of establishing that justice does require that leave to appeal be granted. Further, the master when considering whether to grant leave to appeal obviously has a very wide discretion: see CDJ v VAJ [1998] HCA 67 per McHugh, Gummow and Callinan, JJ."
It is not possible to exhaustively state the variety of circumstances in which the interests of "justice" will require that there be a grant of leave under s 385. Clearly, two factors relevant to whether leave will be granted are the strength of the argument as to the asserted error, usually being one which cannot be addressed on an appeal under s 384, and the amount in issue.
Forensic accountants' costs
Mr Aktas contends that leave to appeal is warranted in respect of the Review Panel's treatment of three matters. The first matter was some disallowed costs of two firms of forensic accountants, Profin Consulting and T.A. Khoury. The second matter was some solicitor's costs referable to dealing with those accountants. They can be dealt with together.
During the course of costs assessment, there was a considerable debate about the position of Homewise given that it owed costs to Westpac and had been de-registered.
In particular, Westpac contended that there should be applied the so-called "rule of thumb" explained by Young J at 7 in Longreach Oil Ltd v Southern Cross Exploration NL (Supreme Court of New South Wales, 9 March 1988, unreported) to the effect that:
"... in the absence of material being put before the court to show that some other liability was assumed by the persons who severally retained the solicitor, that each pays or is entitled to an equal amount of costs ..."
For reasons that are unnecessary to describe, the Review Panel decided not to adopt that approach. Instead, it advised the parties the approach it would adopt, as follows:
"Accordingly in the Panel's view, Mr Aktas is able to recover all of the common costs paid by him and all of the unpaid common costs as well as all of the costs that are specific to his claim. However, he is not, on a party/party basis, entitled to recover costs that are unique to Homewise's claims.
Nor is in our view Mr Aktas able to recover costs that were already paid by Homewise. Homewise is deregistered and has no ability to seek a contribution from Mr Aktas."
The Panel disallowed the costs of the two sets of forensic accountants that I have referred to, stating as follows:
"The Panel disallowed the fees claimed by Profin on the basis that these were probably paid by Homewise. Further, the fees more likely relate to the breach of contract claim by Homewise. The Panel perused the submissions made on behalf of [Mr Aktas] and the judgments referred to above, particularly the judgment by Fullerton J. Mr Hilton of Profin gave evidence in relation to damages suffered by Homewise. There is no reference to his evidence in relation to the defamation part of the judgment involving [Mr Aktas]. In any event the damages awarded to [Mr Aktas] were not assessed by reference to any losses suffered by Homewise. The submissions also do not appear to submit that [Mr Aktas'] damages should be based on loss of profits of Homewise. Whilst there is no doubt that [Mr Aktas] would be adversely affected by the loss of profits by Homewise, his loss is not independent of Homewise and to the extent that Homewise was awarded damages for such losses his loss was thus also compensated.
T A Khoury & Co's work also related directly [to] the claim by Homewise for loss of profits and thus the same considerations apply."
The fees claimed by Profin referred to in this extract were $80,370.50. The fees payable to T.A. Khoury & Co that were disallowed amounted to $28,138. Mr Aktas has also estimated that $5,676 in solicitor's costs referable to dealing with these accountants was disallowed by the Review Panel. Hence, the amount in issue on this matter is in excess of $110,000.
Counsel for Mr Aktas, Mr J.F. Heazlewood, submits that the reasons of the Panel set out in the above extract contain an important factual error and are otherwise erroneous, or at least arguably so. He submits that those matters, in combination with the amount in issue, warrant the grant of leave to appeal.
The allegedly erroneous factual conclusion is the finding that the fees claimed by Profin "were probably paid by Homewise". Before the Review Panel was Profin's invoice dated 27 July 2011. This post-dated Homewise's de-registration. The invoice indicates that $8,000 had been paid, but $72,387.50 was still outstanding. To supplement this, material was placed before the Court to confirm that the balance of this account has still not been paid. Thus, there is a strong basis for contending that there was a factual error on the part of the Panel.
Counsel for Westpac, Ms K. Dawson, contended that there was no evidence as to whether there had been payment of the balance of the amounts in issue on this topic, and that it was clearly open to Mr Aktas to bring forward evidence in that regard. This is true, but the Panel's reasons only assert the Profin's fees were probably paid by Homewise. If this matter were the only basis for the Panel's rejection of these costs, then there would be a strong case for a grant of leave to appeal, at least so far as Profin's fees were concerned and leaving aside any argument as to whether this matter could have raised a no evidence ground and, thus, been the subject of an appeal under s 384.
However, the substance of the Review Panel's reasons for rejecting the accountants' fees is the balance of the extract set out above (at [26]). In this Court, there was a substantial argument over whether the material obtained from the accountants concerning particular items of financial loss suffered by Homewise was relevant to Mr Aktas' claim that he suffered damage as a result of a defamatory publication. Both counsel took the Court to various passages from the judgment in Andrews v John Fairfax & Sons Ltd [1980] 2 NSWLR 225.
Prior to the Panel's decision, the solicitor for Mr Aktas provided a submission contending that the accountants' fees were not unique to Homewise's claims but were also relevant to Mr Aktas' claims. He cited the decision in Andrews. One aspect of Mr Aktas' complaint is that he says the Panel ignored his solicitor's submission. I do not accept that contention. To the contrary, the Review Panel expressly addressed the solicitor's submission. It did so by reviewing the various judgments, especially that of Fullerton J at first instance. It concluded that, irrespective of whether Mr Aktas could have relied on the material from the accountants, there was nothing to indicate that he had in fact sought to rely on it, nor was there anything in the judgments to indicate that the Courts had taken it into account in assessing his damages. Thus, whatever be the theoretical position that was open to Mr Aktas in terms of relying upon the accountants' material, the Panel concluded that the "fees more likely relate to the breach of contract claim by Homewise".
Mr Heazlewood took me to one part of Fullerton J's judgment. However, even the passage to which I was referred does not contradict the Panel's assessment of that judgment or the Court of Appeal's judgment. Mr Heazlewood conceded that there was no material placed before the Panel to suggest that Mr Aktas had in fact relied on the accountants' reports as part of his case. However, there was read on the application for leave an affidavit from junior counsel who had appeared for Mr Aktas at the trial before Fullerton J. Annexed to his affidavit were extracts from two sets of written submissions handed up to her Honour. In the first set of submissions and under the heading "Damages" there is a reference to the decision in Andrews. However, that reference is only made in the context of Homewise's claim. The only matter stated concerning Mr Aktas' damages in those submissions is that they "must be sufficient to indicate the harm to his reputation and to compensate him for the substantial hurt to feelings that he has suffered". No attempt was made in those written submissions to cross-refer any aspect of his claim for damages to what might be said to be revealed by the accountants' evidence. Thus this submission is completely consistent with the Panel's analysis that I have extracted above.
The other submission annexed to the barrister's affidavit is not so clear. It includes the following:
"The cheque dishonours had an immediate impact in and about the real estate agency premises. Many cheque recipients attended and acted aggressively. This had an immediate impact on the staff - a fair majority of whom were cheque recipients themselves. They started to leave. They started looking elsewhere. They were loosened by this event. In turn they start questioning management: see T228 to 244. Other real estate agents start using the defamation too. For example, Mustafa Dalgic. The agency is weakened. This in turn has cross-impacts. The impact on the reputation of Aktas and the company increases - the bank has admitted that that Mr Aktas is the alter ego of the company."
It seems to me at least arguable that the reference to "cross-impacts" in this passage was an attempt to argue that Homewise's worsening financial position impacted on Mr Aktas' reputation. Nevertheless, it is noteworthy that there is no reference in this submission to the accountants' evidence. Instead, there is a reference to the evidence of other witnesses concerning the events that were transpiring at the real estate agency.
The judgment of Fullerton J reveals that the accountants' reports addressed the quantification of the lost rental income and sales income of the real estate agency business. There is nothing in the above submission which attempts to tie the quantification of that loss to any question as to the loss of reputation on the part of Mr Aktas.
Ultimately, I am left in a position where the assessment of the Panel was clearly correct on the material that was before it. The only matter put against it is an unclear submission that does not directly refer to the accountants' evidence. The relevance, if any, of the accounting material to Mr Aktas' claim for damages was clearly not of such significance that it was considered by Fullerton J. There was no complaint about any failure on her Honour's part to refer to that material when the matter went on appeal.
As I have said, the Panel's decision was correct on the material before it. The material said to cast doubt upon it is not particularly cogent, and there is otherwise no explanation why that material was not placed before the Panel. In those circumstances, I do not consider that the interests of justice justify a grant of leave to appeal concerning this matter.
Filing fee
At the time of the filing of the application for a costs assessment, Mr Aktas paid a fee of $12,127.51 representing 1% of the amount claimed, which was $1,212,751. As stated, the Review Panel assessed the costs paid as $857,592.11 and the Panel ordered Westpac to pay the costs of review and the costs of the filing fee for the application for review, namely $275.
The Panel's reasons also reveal that it determined that Westpac was to pay "a portion of the filing fee representing 1% of the total costs of disbursements allowed", being the figure already mentioned of $8,575.92. Mr Aktas seeks leave to appeal in respect of the Panel's decision to only allow that portion of the fee on its review of the costs assessment. He contends that he should have recovered the entirety of the filing fee.
In his written submissions Mr Aktas contended that the Panel's determination was arbitrary. This contention has no basis. The cost of the filing fee for the application for the costs assessment is not a "costs of review" for the purposes of s 379(3) of the Act. Instead, it forms part of the costs of the costs assessment as referred to in s 369. When a Review Panel awards part or all of this fee, it is exercising the functions conferred under s 369(2) and s 369(3)(b) of the Act (whilst standing in the shoes of a costs assessor: see s 375(2)).
In exercising those powers, the Review Panel was entitled to have regard to, inter alia, the extent to which the determination of the amount of fair and reasonable party/party costs differs from the amount of those costs claimed in the application for assessment (see regulation 126A of the Legal Profession Regulation 2005).
It follows that the Panel's determination was anything but arbitrary. It clearly assessed the amount of the filing fee recoverable by having regard to the amount recovered and comparing it with the amount claimed.
Mr Heazlewood also submitted that the Panel's reasons were inadequate in that they failed to explain the basis upon which it ordered Westpac to pay only part of the filing fee. For the present, I will assume that such a complaint is not one that could be agitated on an appeal under s 384. Nevertheless, the complaint has no substance. The basis for the calculation of the figure was clearly set out in the Panel's reasons. When one reads those reasons having regard to a legislative context that includes regulation 126, then in my view, it was obvious that the Panel made an assessment by comparing the amount recovered against the amount claimed.
Having regard to the size and complexity of the assessment in question, the statement in the Panel's reasons noted in [40] was sufficient to discharge its duty to give reasons.
No arguable basis for an error on the part of the Panel has been shown in respect of this matter. Given that conclusion and the small amount the subject of this complaint, I am not satisfied that it is in the interests of justice to grant leave to appeal on this matter either.
Conclusion
Accordingly, leave to appeal will be refused.
The orders of the Court are:
(1) Leave to appeal under s 385 of the Legal Profession Act 2004 is refused.
(2) The plaintiff's summons is dismissed.
(3) The plaintiff is to pay the defendant's costs of the proceedings.
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Decision last updated: 03 October 2013
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