Attard v James Legal Pty Limited
[2013] NSWSC 1767
•05 December 2013
Supreme Court
New South Wales
Medium Neutral Citation: Attard and ors v James Legal Pty Limited and anor [2013] NSWSC 1767 Hearing dates: 21 November 2013 Decision date: 05 December 2013 Before: Bellew J Decision: (1)Pursuant to r. 20.24 of the Uniform Civil Procedure Rules the report of Ms Alyson Ashe, Referee, dated 16 August 2013 is adopted.
(2)The defendants' notice of motion is stood over until Monday 16 December 2013 at 9.15 am before me, at which time the parties are to bring in short minutes reflecting the order in (1), together with my conclusions expressed in this judgment as to the payment of interest and the payment of the costs of the reference.
(3)Each party is to provide to my Associate, by 4.00 pm on Friday 13 December 2013, written submissions, not exceeding one page in length, regarding the question of the costs of the notice of motion.
Catchwords: PRACTICE AND PROCEDURE - application for adoption of report by referee in respect of costs claimed by a solicitor - where part of the costs claimed were incurred by the solicitor in circumstances where he had been found to be negligent - where referee allowed such costs - whether referee erred in doing so - whether report should be adopted
COSTS - where costs incurred in proceedings where solicitor found to have been negligent - whether such costs recoverableLegislation Cited: Civil Procedure Act 2005
Corporations Act 2001Cases Cited: Alfred Attard and Ors. v James Legal Pty Limited and Peter James t/as James Solicitors [2004] NSWSC 478
Attard v James Legal Pty Limited [2009] NSWSC 811
Attard v James Legal Pty Limited [No 2] [2009] NSWSC 901
Attard v James Legal Pty Limited [2010] NSWCA 311
Attard v James Legal Pty Limited [No 2] [2010] NSWCA 363
D'Orta-Ekenaike v Victorian Legal Aid [2005] HCA 12; (2005) 223 CLR 1
Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543
Homebush Abattoir Corporation v Bermria Pty Limited (1991) 22 NSWLR 605
Lahoud v Lahoud [2011] NSWSC 994
Pitcher Walton and Co. v Efato Pty Limited
[2008] NSWCA 86
Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589
Sinkovich v Attorney General of NSW [2013] NSWCA 383
Super Pty Limited (formerly known as Leda Constructions Pty Limited) v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549Category: Principal judgment Parties: Alfred Attard and ors. - Plaintiff
James Legal Pty Limited and anor. - DefendantRepresentation: Counsel:
S A Wells - Plaintiffs
M Southwick - Defendants
Solicitors:
Lazarus Legal Group Pty Limited - Plaintiffs
James Legal Pty Limited - Defendants
File Number(s): 2004/177117 Publication restriction: Nil
Judgment
INTRODUCTION
By notice of motion filed on 18 November 2013 the defendants seek orders that:
(i) pursuant to rule 20.24(1)(a) of the Uniform Civil Procedure Rules ("the rules") the court adopt the report of Ms Alyson Ashe, referee, dated 16 August 2013;
(ii) the plaintiffs pay to the defendants interest in accordance with s. 100(1) of the Civil Procedure Act 2005 ("CPA");
(iii) the plaintiffs pay the defendants' costs of the reference by way of a lump sum order, or as agreed or assessed.
In response, the plaintiffs:
(i) but for two discreet matters in the report, do not oppose its adoption;
(ii) do not resist an order for the payment of interest, but dispute the amount payable (such amount being dependent, at least in part, upon the extent to which the report is adopted);
(iii) submit that the defendants should pay the plaintiffs' costs of the reference, and submit in the alternative that each party should bear its own costs.
A HISTORY OF THE PROCEEDINGS
In order to put the present issues in context, it is necessary for me to summarise some aspects of the lengthy history of the proceedings.
The proceedings at first instance
The first defendant, James Legal Pty Limited (JL), is a solicitor corporation of which the second defendant Peter James ("James") is a director and shareholder. At the material time James, through JL, provided commercial litigation services to clients, with a focus on the provision of such services to the building industry.
The first plaintiff, Alfred Attard ("Attard") and the second plaintiff, Michael Anthony Henry ("Henry") were, at the material time, directors of the fifth plaintiff, Construction Management Group Pty Limited ("CMG"), a company engaged in property development. Each of Attard and Henry were also directors of one or other of the third and fourth plaintiffs.
The five named plaintiffs brought proceedings in this Court against the first and second defendants alleging breach of contract, negligence and false and misleading conduct. The defendants filed a cross-claim seeking damages arising out of the failure on the part of the plaintiffs to pay amounts pursuant to retainers and cost agreements. These proceedings were heard by Simpson J in March and April of 2009.
Part of the cause of action brought by the plaintiffs arose from the following circumstances.
In 1997 CMG:
(i) entered into a contract ("the FCL contract") with Franks Centre Lofts Pty Limited ("FCL") for the development of a block of residential apartments in Camperdown ("the FCL development");
(ii) entered into a further contract ("the Allatech contract") with Allatech Pty Limited ("Allatech") a company related to FCL, for the construction of a retirement village at Prestons; and
(iii) entered into a sub-contract ("the Orlando contract") with Orlando Interiors Pty Limited ("Orlando") for the supply and installation of plasterboard ceilings for the FCL development.
By letter dated 4 May 1999, CMG's then solicitors purported to terminate the FCL contract. Subsequently, the Orlando contract was novated by CMG and FCL, following which Allatech purported to terminate the Allatech contract.
There followed what Simpson J described as a "multiplicity of litigation". That litigation included proceedings brought by Orlando against FCL in the District Court of NSW ("the Orlando proceedings"), in which FCL filed a cross-claim against CMG asserting deficiencies in building work performed by CMG in relation to the Orlando contract.
In or about June 2000, proceedings were brought seeking the appointment of a liquidator to CMG. CMG's then solicitors failed to take the necessary action to avoid a winding up and on 15 June 2000 Mr Peter Hillig was appointed as Administrator. A Deed of Company Arrangement ("the Deed") was entered into on 28 July 2000.
In or about July 2000, the defendants agreed to take over (inter alia) the representation of CMG in the Orlando proceedings.
The Orlando proceedings were listed for hearing in the District Court for four days commencing on 26 November 2001. They did not conclude in that period but were adjourned, part heard, until 21 January 2002. According to Attard, it was he who drew attention to the fact that CMG was subject to the Deed and that accordingly, by reason of the operation of s. 440D of the Corporations Act 2001proceedings could not be commenced by or continued against CMG without the leave of this Court, or the written consent of Mr Hillig. In these circumstances the further hearing of the Orlando proceedings was adjourned.
Proceedings were then taken by Allatech in the Equity Division of this Court seeking (inter alia) an order for termination of the Deed and the removal of Mr Hillig from his position. The evidence before Simpson J did not establish the outcome of those proceedings. It was at about the time of the commencement of those proceedings that the professional relationship between the plaintiffs and the defendants came to an end.
Prior to coming before Simpson J for hearing, the proceedings came before Bell J on 7 May 2004. On that occasion her Honour was asked to determine whether or not applications made by the defendants for assessment of their costs should be stayed pending the determination of the proceedings as a whole (see Alfred Attard and Ors. v James Legal Pty Limited and Peter James t/as James Solicitors [2004] NSWSC 478). Her Honour observed (at [20]):
"The only prejudice that might be occasioned to the defendants in the event that the Court granted the stay, at least with respect to the Allatech and master file assessments, was the question of interest. Mr Kaye SC, who appeared on the plaintiffs' behalf, indicated that they would be willing to give an undertaking to the Court in the following terms:
'In the event that Professional Negligence proceedings, and Equity proceedings, are determined or otherwise resolved, and such determination gives rise to a liability on the part of the Applicants to pay costs or disbursement (sic) to the Respondents, the Applicants will pay interest upon such terms as may be assessed at Supreme Court rates as and from the dates of filing of the respective applications for assessment of costs' ".
Her Honour concluded (at [28]) that a stay should be granted upon the undertaking which had been given.
Part of the case brought by the plaintiffs in the proceedings before Simpson J was that the defendants were negligent, or had breached their contract with the plaintiffs, by purporting to act for CMG in the Orlando proceedings in the absence of the consent of the Deed Administrator. In respect of this claim, her Honour reviewed the nature and extent of the immunity of advocates against suit discussed by the High Court in Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 343 and D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1. Having done so, her Honour concluded (Attard v James Legal Pty Limited [2009] NSWSC 811 at [80] - [82]):
"Although it is a reasonable inference that Mr James did not explicitly turn his mind to the provisions of s. 440D of the Corporations Act and therefore make a decision, such as is referred to in Giannarelli and D'Orta-Ekenaike - the whole point of the claim is that he overlooked those provisions - nevertheless, what he did in representing CMG in the Orlando proceedings was "intimately connected with" the litigation, and certainly was preliminary to decisions about how that litigation was to be conducted.
If the giving of allegedly erroneous, and allegedly negligent erroneous, advice to plead guilty to a criminal charge, resulting in incarceration, can not be impugned by a claim in negligence (because it might cast doubt upon the subsequent conviction and sentence) then, it seems plain to me, a cause of action in civil proceedings that is "intimately connected with" that litigation can not be so impugned".
On this basis alone, the first claim must be rejected".
Her Honour then proceeded to set out other bases upon which the plaintiffs' claim could not succeed. Ultimately, she dismissed the proceedings brought by the plaintiffs and ordered that they pay the defendants' costs.
Her Honour (at [159]) also rejected the plaintiffs' defence to the cross-claim. Having done so, she said (commencing at [160]):
"However, I am not satisfied that I have been referred to all available material in relation to the cross-claim. I am satisfied that the cross-claimants (Mr James and James Legal) are entitled to recover in accordance with the various costs agreements. What I have not heard is adequate argument on the availability to the plaintiffs, at this stage, of assessment of costs.
[161] Accordingly, while there ought to be a verdict for the cross-claimants on the cross-claim, I will refrain from making such an order, or entering judgment, until the parties have had an opportunity of putting further material or argument before me."
On 25 August 2009 the matter came back before her Honour for further argument on the cross-claim. In a second judgment (Attard v James Legal Pty Limited (No 2) [2009] NSWSC 901) her Honour made the following orders:
(1) Statement of claim dismissed.
(2) Verdict and judgment for the cross-claimants against the first and second cross-defendants in the sum of $903,450.00 plus interest in the sum of $534,174.69.
(3) Verdict and judgment for the cross-claimants against the third cross-defendant in the sum of $300,000 plus interest in the sum of $126,196.24.
(4) Verdict and judgment for the cross-claimants against the fourth cross-defendant in the sum of $300,000 plus interest in the sum of $126,196.24.
(5) Note that the verdict and judgment amounts in paragraphs 3 and 4 are included in the amount in paragraph 2.
(6) The plaintiffs to pay the defendants' costs of the proceedings and cross-claim.
The proceedings in the Court of Appeal
An appeal brought by the plaintiffs against the decision of Simpson J was heard by the Court of Appeal (Beazley, Giles and Tobias JJA) on 8 and 9 June 2010. In a judgment delivered on 23 November 2010 (Attard v James Legal Pty Limited [2010] NSWCA 311) the Court made the following orders:
(a) Appeal allowed in part.
(b) Set aside Order 2 made by Simpson J on 4 September 2009.
(c) In lieu thereof, subject to Order (d), order pursuant to UCPR 20.14 that the amount due and owing by the first and second cross-defendants to the cross-claimants pursuant to the cross-claim be referred to a referee experienced in the assessment of legal costs and disbursements for assessment as to the fairness and reasonableness of the costs claimed by the cross-claimants in their cross-claim upon condition that the first and second cross-defendants pay to the cross-claimants 60% of the amounts referred to in the said Order 2 within 28 days of the date of this order.
(d) Direct that the parties submit within 21 days of the date of these orders, an order for reference in accordance with Order (c) to an agreed referee which order will be made in chambers.
(e) Stay Orders 3 and 4 made by Simpson J on 4 September 2009 until the said reference has been completed and any report of the referee has been adopted or otherwise dealt with by the Court pursuant to UCPR 20.24.
(f) The appellants to pay 75% of the respondents' costs of the appeal.
(g) The costs of the reference referred to in Order (b) above be reserved to the trial judge when dealing with the referee's report pursuant to UCPR 20.24.
(h) Grant liberty to the parties to apply for variation of these orders by notice of motion accompanied by written submissions to be filed and served within 7 days of the date of these orders.
In dealing with the Orlando proceedings, Tobias JA, having made reference to an earlier decision of Philip Walton trading asPitcher Walton and Co v Efato Pty Limited [2008] NSWCA 86 said (at [108] to [112]):
"108 The facts of that case were quite different to those of the present. However, the question which I posed in that case may, I think, also be posed in the present case with appropriate amendments, namely: did Mr James' failure to advise that a stay applied to FCL's cross-claim in the Orlando proceedings against CMG unless and until the Court granted leave to FCL to proceed (which may or may not have been granted) lead to a decision by the appellants affecting the conduct of their defence to the cross-claim in the District Court.
109 In my opinion, the answer to the question so posed should be in the affirmative. Mr James' negligence may be described as his failure to advise Messrs Attard and Henry in their capacity as directors of CMG and as the only possible funders of the litigation that:
● FCL's cross-claim against CMG was stayed;● FCL could not proceed on that cross-claim unless leave was granted to it pursuant to s 440D(1) or, after 28 July 2000, s 444E(3) of the Corporations Act;● as the Deed did not authorise Messrs Attard and Henry to give instructions on behalf of CMG with respect to the Orlando proceedings, it would be a matter for Mr Hillig, the Administrator of CMG under the Deed, whether he wished to consent to any application by FCL for a grant of leave;● it was a matter for Messrs Attard and Henry whether they would indemnify Mr Hillig for the costs of defending the cross-claim on behalf of CMG until any order for costs was made in CMG's favour on the cross-claim and if they would fund CMG's own costs of the cross-claim;● the costs of defending the cross-claim would in all probability exceed the amount of FCL's claim; ● they should oppose any application by FCL for leave to proceed and not offer to indemnify Mr Hillig so that he would oppose the grant of leave which, on the authorities, was unlikely to be granted as a consequence thereof;● they would therefore be saved a deal of costs and expenses.
[110] I would interpose that the reason why Mr James should have advised Messrs Attard and Henry that the Deed did not authorise them to give instructions on behalf of CMG in respect of the Orlando proceedings was because those proceedings did not fall within the definition of "Litigation Claims" in Clause 1 of the Deed. As a consequence the conduct of such proceedings was a matter for Mr Hillig as Administrator. Messrs Attard and Henry, as directors of CMG, were only empowered by the Deed to manage, conduct and pursue the Litigation Claims as defined.
[111] It is necessary to then identify a decision caused by Mr James' negligence that affected the conduct of CMG's case in the District Court. In my opinion that decision was to instruct Mr James on behalf of CMG to brief counsel for the purpose of defending the cross-claim and to pursue that defence in the manner which occurred. From this it follows, in my view, that Mr James' negligence did lead to a decision which did affect the manner in which Messrs Attard and Henry conducted CMG's case in the District Court, namely, that the claim was actively defended where had Mr James not been negligent, it would not have been defended unless and until FCL obtained leave to proceed.
[112] Accordingly for the foregoing reasons, in my opinion her Honour was correct to find that the Orlando proceedings claim was subject to advocates' immunity with the consequence that it was rightly rejected."
Pursuant to the order in (h) made by the Court of Appeal (at [21] above) both the plaintiffs and the defendants filed notices of motion seeking a variation of the orders. On 17 December 2010 the Court of Appeal delivered a further judgment (Attard v James Legal Pty Limited (No 2) [2010] NSWCA 363). In the course of that judgment Tobias JA said (at [14] to [17]):
"[14] It was then submitted that this Court had found Mr James negligent in failing to advise Messrs. Attard and Henry that, amongst other things, FCL's cross-claim against CMG in the Orlando proceedings was stayed and, second, that an application made by FCL for a grant of leave to proceed with its cross-claim against CMG would have been denied. As a consequence the stay of FCL's cross-claim would have remained and the costs incurred by the appellants in respect of that litigation would have been avoided.
[15] Relying upon the statement of Kirby P in Cachia v Isaacs (1985) 3 NSWLR 366 at 371, it was submitted that on assessment a solicitor may not recover fees for services provided in the very proceedings in which he has been found negligent unless he can show that despite his negligence, some real advantage accrued to the client from those services.
[16] In the present case at [109] of the principal judgment, I referred to Mr James' negligence in failing to advise Messrs. Attard and Henry in their capacity as directors of CMG as to the application of a stay to FCL's cross-claim. It was also made clear that Mr James was protected by advocate's immunity. Accordingly, it followed that he was not liable in negligence to the appellants.
[17] Although we have not heard argument on the point and it was not raised during the course of the appeal, there must be considerable doubt as to whether the principle expounded by Kirby P in Cachia has any application to a case such as the present. As the present notice of motion is not an appropriate vehicle for determining such an issue, I do not regard the appellants' submissions with respect to it as carrying any weight insofar as reliance is placed upon it for the purpose of reducing the amount which this Court in the principal judgment required the appellants to pay as a condition of there being a reference to an appropriately experienced assessor of the amount of costs alleged to be due and owing by the appellants to the respondents."
Ultimately the orders which had previously been made were varied by the Court of Appeal as follows (at [24]):
"(1) Vary Order (c) by deleting therefrom the words "within 28 days of the date of this order" and substituting therefor the words "on or before 5pm on 15 February 2011".(2) Vary Order (d) by deleting the words "within 21 days of the date of these orders" and substituting therefor the words "on or before 5pm on 4 February 2011".(3) Delete Order (e) and substitute therefor the following order:
"Stay Orders 3, 4 and 6 made by Simpson J on 4 September 2009 until the said reference has been completed and any report of the referee has been adopted or otherwise dealt with by the Court pursuant to UCPR 20.24. If after any report of the referee has been adopted or otherwise dealt with by the Court, the amount due and owing to the cross claimants pursuant to the cross claim is found to be $500,000 or less, grant liberty to the first and second cross defendants to apply for a variation to the trial judge who deals with the report of the referee for a variation and/or further stay of Orders 3, 4 and 6 made by Simpson J on 4 September 2009."
(4) Delete Order (g) and substitute therefor the following order:
"The costs of the reference referred to in Order (c) above and of any variation of Orders 3, 4 and 6 made by Simpson J pursuant to the liberty granted in Order (e) above be reserved to the trial judge when dealing with the referee's report pursuant to UCPR 20.24."
(5) Delete Order (h) and substitute therefor the following order:
"In the event that the parties cannot agree on a referee for the purposes of Order (d), grant liberty to the parties to apply to the Registrar of the Common Law Division of the Supreme Court on or before 5pm on 31 January 2011 for his determination of a referee who meets the requirements of Order (c)."
(6) Each party to pay their and/or its own costs of the Notices of Motion filed on 30 November 2010 and 6 December 2010."
THE REFERRAL TO THE REFEREE AND THE REPORT
On 10 May 2011 an order pursuant to rule 20.14 of the rules was made by the Registrar with the consent of the parties, referring the following issue to Ms Alyson Ashe ("the referee") for inquiry and report:
"To determine the fairness and reasonableness of James Legal's costs the subject of the Cross-Claim in New South Wales Supreme Court Common Law Professional Negligence proceedings 2004/177117".
Pursuant to that order the referee provided final a report dated 16 August 2013 ("the report"). The plaintiffs object to the adoption of the following parts of the report:
(i) paragraphs [121], [297] - [313] and [334] - [347], all of which relate to the costs claimed by the defendants in respect of the Orlando proceedings (the totality of which were allowed by the referee);
(ii) that part of the table of third party expenses at p. 972 documenting a payment to Mr Mahoney AO QC $52,245.00 (which was also allowed subject to further evidence being forthcoming).
In addition, the plaintiffs raise issues as to the payment of interest, and the payment of the costs of the reference.
THE RELEVANT PROVISIONS OF THE RULES
Rule 20.24 of the Uniform Civil Procedure Rules is in the following terms:
20.24 Proceedings on the report
(1) If a report is made under rule 20.23, the court may on a matter of fact or law, or both, do any of the following:
(a) it may adopt, vary or reject the report in whole or in part,
(b) it may require an explanation by way of report from the referee,
(c) it may, on any ground, remit for further consideration by the referee the whole or any part of the matter referred for a further report,
(d) it may decide any matter on the evidence taken before the referee, with or without additional evidence,
and must, in any event, give such judgment or make such order as the court thinks fit.
(2) Evidence additional to the evidence taken before the referee may not be adduced before the court except by leave of the court.
There are a number of general principles applicable to an application to adopt a referee's report pursuant to r. 20.24. They include the following:
(i) the discretion to adopt, vary or reject a report is to be exercised in a manner consistent with the object and purpose of the rules. That purpose would be frustrated if it were to be treated as some kind of "warm up" for the real contest (Chocolate Factory Apartments v Westpoint Finance and ors. [2005] NSWSC 784);
(ii) but for the principle in (i) above, it is undesirable to attempt to confine the manner in which the discretion to adopt the report is to be exercised. The nature of the complaints made about the report, the type of litigation involved and the length and complexity of the proceedings may all be relevant considerations (see Super Pty Limited (formerly known as Leda Constructions Pty Limited) v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 548);
(iii) if the report reveals error of principle, an absence or excess of jurisdiction, or some patent misapprehension of the evidence, such matters would ordinarily be reason for rejecting it (see Super Pty Limited (supra) at 548);
(iv) if the subject matter of dissatisfaction is a question of law, or the application of legal standards to established facts, then a proper exercise of the discretion would require a judge to consider and determine that matter afresh (see Homebush Abattoir Corporation v Bermria Pty Limited (1991) 22 NSWLR 605);
(v) where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would negate both the purpose and the facility for referring complex technical issues to independent experts for enquiry and report (see Chocolate Factory Apartments (supra));
(vi) generally speaking, the referee's findings of fact should not be re-agitated in the court (see Chocolate Factory Apartments (supra)).
THE COSTS OF THE ORLANDO PROCEEDINGS
The Referee's report
At paragraphs [119] to [120] of the report the referee stated as follows:
"Objections raise Jurisprudential Matters: Advocates and Solicitors Immunity
119. I have reflected with concern upon the Reasons for Decision at first instance and on appeal in respect of the Orlando proceedings which is the only one of the various proceedings in the litigation conducted by James Legal Pty Ltd where there has been a finding of negligence. The claim affected by this issue contributes costs in the order of $43,000 to the dispute. The Court of Appeal in Attard v James Legal Pty Ltd [2010] NSWCA 311 per Beazley JA (as she then was) refers to these concerns at paragraph 3, Tobias JA at paragraph 188 and Giles JA at paragraph 31-
"It may be thought that in some respects the law as to advocate's immunity is not entirely satisfactory. However, I must give effect to it."
120. The issues raised by the Objectors are significant and troubling. They concern important matters of public policy. They are troubling because jurisprudentially it is hard to understand (particularly for a layman) how a wasted costs case could ever entitle the solicitor to be able to recover costs for the work done which was wasted or said to be wasted. The position is no doubt different if there had been no judicial determination of negligence. If there had been no stay (Bell J) on the assessment of costs under the NSW Assessment Scheme could the immunity have been raised successfully or would the clients have succeeded."
In the first of the sections of the report to which objection is taken, the referee said (at paragraph [121]):
"Mr James urges upon me that the immunity is the only answer that is open to me in the circumstances and in the end result I agree."
At paragraphs [297] to [313] (those paragraphs being the second area of objection to the report) the referee said:
"Objection 7 Finding - Can the Clients Oppose Claims by the Solicitor for Costs in Respect of Work which was Performed Negligently
297. Referee: This is the nub only of the Orlando matter. I accept that it is very hard to explain why "at large" negligent work can be charged for. In the special circumstances of this matter I have found that the work done in Orlando can be charged for.
298. The difficult question for me is whether the finding of negligence (by omission) from which the solicitor was protected by the principle of advocates immunity and hence was entitled to be successful on the cross claim for his outstanding fees, should permeate my assessment/quantification of the fairness and reasonableness of the costs claimed in that cross claim. The Objectors urge upon me that no costs at all are payable in the Orlando matter because of the negligence. When determining whether the manner in which the work was done was reasonable they would urge that I could not find that it was reasonably and professionally and appropriately done because there was negligence. They do not say that all the matters in the cross claim are tainted with the negligence - only Orlando which was a fresh proceeding by FCL and Orlando which was not contemplated in the Deed of Company Arrangement.
299. On the other hand the solicitor asserts that advocates/solicitors immunity and the decisions of the Court of Appeal and at first instance upholding his cross claim (and providing for the reference) prevents this matter being further addressed. If that were so, then a client upon whom the negligence of a solicitor was visited, would have to pay for the carrying out of the negligent act.
300. The quantification of the cross claim in respect of Orlando therefore leaves me with somewhat of a conundrum. If poorly done work, or overly resourced work or excessive time spent can be disallowed on assessment on the basis that the work is not fair and reasonable then surely, when applying the test of fair and reasonable as between solicitor and client the existence of negligence is a fortiori susceptible of disallowance. The Court, in referring the cross claim to a Referee has not given any guidance as to how the Referee should handle this difficult issue .
301. The working out of disputed costs ("the nuts and bolts") is seen as a specialist area in which Courts do not lightly engage or see themselves appropriately equipped.
302. This is not a case where the negligent act is one to which costs attach because it is an act of omission. The most that can be said in respect of its affect on costs or the quantum of costs is that it caused more costs to be incurred than would have been the case if the solicitor had been alive to the issue of a "moratorium" and hence a possibility that the proceedings would come to a premature end.
303. In this matter however the primary judge declined to consider the hypothetical question of whether leave would have been granted or denied. Furthermore she stated that there was no evidence as to what the client would have done (eg would they have consented to leave).
304. If there had been no appeal and Simpson J had referred the matter I would have derived some comfort from the uncertain position seen from Simpson J's perspective. The probability of leave being refused would have been low. There is also the issue of the self serving evidence of Mr Attard as to what he would have instructed. Overarching all was the insistent Advice of Mr. Jacobs QC that the prospects in Orlando were good and would help stave off liquidation. At all times this was the approach taken when settlement discussions and tactics were on the agenda with the clients. The inter-relationships of this truly interconnected litigation does not really come through before the Court as it is apparent from the files. Helpful listing of some of this appears in Mr James's Preliminary Submissions. Continuously Senior Counsel adopted this mantra, often in his own quickly typed emails in a stream of consciousness interspersed with concerns as to the escalating and unpaid fees. From the files my strong impression is that theclients accepted his advice although the temperature in the lengthy conferences with counsel at which the clients were often present is never capable of being measured.
305. My decision on this matter might also have been otherwise had the way the work was done been negligent (eg giving negligent advice) and the work of giving that advice had been charged for in the bill. Nor does the period of the reference include the time when Mr James took instructions and had cause to inspect and consider the provisions of the DOCA when he could have immediately raised the issue. In fact the arbitrary starting point for the Cross Claim is the date from which the invoices re unpaid, not the early part of the matter. In evidence Mr James even suggested that he may have thought that the DOCA clause (which enabled the continuation of the FCL and the Allatech proceedings) also included Orlando because FCL was a party.
306. It was also said that James and the Attards lacked standing in the Hillig proceedings. No negligence was found in that matter.
307. If I were assessing damages on a loss off (sic) chance the probabilities would be high in favour of the solicitor based on the findings of Simpson J.
308. However the Court of Appeal was much clearer as to the likelihood s 444E (sic) leave would have been refused. As to the client's intentions had they been duly apprised of the moratorium, the Court of Appeal put reliance on Mr Attard's statements. If I were assessing chance the probabilities would be considerably less high in favour of the solicitor based on the findings of the Court of Appeal - although of course they did not have access to the file.
309. The very detailed submissions of the Objectors urge me to exercise my discretion to make findings which they say are open to me by treading between the lines drawn by Simpson J and the Court of Appeal. This course has the attraction of protecting a client from the unpalatable position of paying for work that was done negligently.
310. In the end result I reject that approach and apply the immunity to most of the costs claimed in Orlando.
311.However I am of the opinion that there is a small amount of work done which would not have been done if an early application for leave had been forced upon FCL and Orlando and succeeded.
312. In this way there is a working out of advocates immunity while still carrying out the function and purpose of the Reference by making a finding what work was fair and reasonable and the fair and reasonable cost thereof.
313. I also decline to be tempted by the Objectors to consider issues that enable a relitigation of the cross-claim. I have approached the Reference with the principle of finality in mind."
At paragraphs [334] - [347] (these paragraphs being the third area to which objection is taken) the referee said:
Orlando and the File of the Whole of the Proceedings
334. This is a wasted costs case and the outworking (in this context being a decision as to fair and reasonable costs) of the advocates immunity principle as it relates to solicitors might well be different where the actual negligent act was the "work done". In the circumstances of this matter I do not have to make such a finding.
335. Neither Simpson J nor the Court of Appeal directed that the costs in Orlando could not be allowed in any consideration of fair and reasonable costs. It is open to me to allow the costs of work done in the period of the Reference. The period of the reference does not include the work done by the solicitor in reviewing the Deed upon taking instructions generally.
336. Both Ryan v Hansen and Cachia v Isaacs were decided prior to the commencement of these proceedings. They are also cases which precede the High Court's extension in 2005 of the advocates immunity principle to solicitors. They are cases which deal directly with the effect of negligence on costs of the work. Cachia also deals with the effect of whether or not the client received any benefit from the work done. The work done which is allegedly wasted is that of keeping alive the Orlando proceedings by presenting a successful defence. I have been careful though to remember that I am asked to quantify the amount owing under a successful Cross Claim and not a NSW Costs Assessment.
337. It seems to me that by actively engaging in the Orlando proceedings the bargaining power for a settlement with FCL or denying a substantial judgment for FCL/Mr Mann elsewhere in the litigation was enhanced.
338. It is perhaps demonstrated that the consent order for leave in October 2002 also included the reciprocal leave for Mr Attard and Mr Henry to continue with their own Cross claim "nunc pro tunc". Had the stay stultified Orlando, Mr Attard and Mr Henry would not have achieved a quid pro quo in the Allatech proceedings. .
339. It also seems to me that much of the time spent by and with Mr Jacobs SC (sic) (including the barrage of emails he sent on the overall threads in the litigation) was increased by the circularity of thought processes as to how best to resolve or move forward in this wall of litigation confronting the former clients. They did not begin the litigation. They were drawn in to the vortex as defendants to proceedings commenced by FCL from circumstances arising from the negligent advice of Blessington Judd. The damages they hoped to gain from the Blessington Judd proceedings was a continuing motivator. Just as their lack of funds to comfortably mount their side of the dispute was a negative factor. The only proceedings commenced by CMG was the Allatech proceeding (which was the proceeding upon which Simpson J had no information or evidence).
340. From the information before me several important factors have in my opinion been established-
341. Mr Attard and Mr Henry were intent upon succeeding against FCL not only to protect their personal positions and CMG but because of their animosity to Curtis Mann and their perceived need to protect their reputations and position in the construction industry from FCL/Mr Mann (an influential force). Maintaining their reputation and ascendancy was a personal and a business decision.
342. Success in the Blessington Judd proceedings was the most significant factor that emerges from my review of the files. Damages from Blessington Judd would provide the salvation and FCL had to be prevented not only from but also from further damaging Mr Attard and Mr Henry personally by insolvent trading allegations. Actual success in Orlando would strongly contribute to the bargaining power of the directors of CMG. Mr Jacobs SC's (sic) unwavering point of view was to prevent FCL becoming a major creditor controlling a liquidation because that would have personal consequences for the directors. Thus developed the almost circular mantra from Mr Jacobs SC (sic) of the need to remember the inter-connected nature of all of the litigation and which saw the directors taking that advice and pressing ahead on all fronts. They did so even when they lacked the means to do so. Reaching success in Orlando was part of that agenda. The question of whether or not there was benefit to the clients arising from the process of defending those proceedings which a moratorium on Orlando would have denied them is, in my opinion, very likely answered "yes".
343. I observe that the evidence before the Court does not appear to go that far.
344. I note that the Preliminary Submission of Mr James (PS) states-
"The complexity of the proceedings was compounded by their multiplicity and inter relationship. The various proceedings arose out of three major projects and two smaller projects. CMG had to succeed in the Orlando proceedings in order to succeed in the FCLreference.
Similarly, the Hillig proceedings were commenced by Allatech to try to liquidate CMG prior to hearings in the other matters. If Allatech had succeeded it was possible that the Whitehall Group of Companies would become the major creditor of CMG in its liquidation.
The liquidation of CMG would prevent it pursuing the claim against Blessington Judd. A further major concern was the likelihood that the liquidator would be funded to pursue Mr
Attard and Mr Henry personally for insolvent trading." PS 7 and 8
345. The family companies of each of the directors were also, so it seems to me, to have been at risk.
Was there a benefit from Orlando?
346. As a Referee "experienced in costs assessing" I am asked only to find the fair and reasonable costs recoverable by the solicitors. There is a fine line between assessing damages for loss of chance and assessing the fair and reasonable costs which are wasted. The claim for unpaid costs in Orlando is only $43,132.54 (of which I would allow $34,150.05 incl GST as fair and reasonable absent the issues in this Reference). I refer to "loss of chance" because of the findings in Donnellan.
347. The amount of the claim in Orlando had not been excised by either the trial judge or, importantly the Court of Appeal, from the starting point of the quantum of the Cross Claim. It has at all times been the case in the judgments that the solicitors' immunity has protected the full amount of the Cross Claim. However the Court has been careful to acknowledge that without a consideration
of what is fair and reasonable in those accounts the legal professional costs of James Legal Pty Ltd as claimed in the Cross Claim may contain claims that are unreasonable. That is what appears to me to be the real reason for the Reference. The referral is in my opinion not intended to be an opportunity for re-litigation of these difficult issues. Or the opportunity to apply of hindsight to the recovery of the claim. On the question of the quantum of fair and reasonable costs in Orlando I am of the view that advocates/solicitors' immunity protects the overall claim from reduction because of the negligent omission but that, upon the application of the usual tools of costs assessment only $34,150.05 incl GST is fair and reasonable."
Submissions of the parties
The plaintiffs' submission that those paragraphs of the referee's report dealing with the costs of the Orlando proceedings should be rejected was advanced on two primary bases, namely:
(i) that the referee had failed to have proper regard to the findings made by the Court of Appeal in relation to the negligence of the defendants in the Orlando proceedings; and
(ii) that the referee had failed to have proper regard to the decision in Cachia v Isaacs (1985) 3 NSWLR 366.
As to the first of those matters, counsel emphasised that the Court of Appeal had found (per Tobias JA at [109] and following) that (inter alia):
(i) James had been negligent in failing to advise Attard and Henry (inter alia) that FCL could not proceed with its cross-claim against CMG without leave;
(ii) such negligence led to a decision which affected the conduct of CMG's case in the Orlando proceedings, namely the decision to instruct James on behalf of CMG to brief counsel for the purpose of defending the cross-claim and to pursue that defence in the manner which occurred; and
(iii) had James not been negligent, the cross-claim would not have been defended unless and until FCL had obtained leave to proceed.
As to the second matter, counsel for the plaintiffs relied upon the decision of Kirby P in Cachia (supra), as well as the decision of Kirby J in Ryan v Hansen trading as Hansens Solicitors [2000] NSWSC 354 which, he argued, were directly applicable to the circumstances of the present case. Counsel submitted that but for the defendants' negligence, the costs of the Orlando proceedings would not have been incurred and that the defendants had failed to establish that, despite their negligence, some real advantage had accrued to the plaintiffs. He submitted that the failure of the referee to apply the decision in Cachia reflected an error of principle.
In response, counsel for the defendants made three primary submissions, namely:
(i) the principle in Cachia did not apply in light of the decision of the High Court in D'Orta-Ekenaike;
(ii) there was, in any event, evidence that a benefit had flowed to CMG in the Orlando proceedings despite the defendants' negligence and that in these circumstances, the case fell within the exception referred to in Cachia;
(iii) no submission based upon the decision in Cachia had previously been made, and that the principle of finality of litigation operated to prevent the matter from being raised at this point;
(iv) the fact that the referral to the referee included a referral as to the reasonableness of the costs in the Orlando proceedings was consistent with a rejection, by the Court of Appeal, of the proposition that a negligent solicitor was unable to recover his costs.
Conclusion
It is evident from the referee's report (at [336]) that she did not apply the decision in Cachia. She concluded that the decision did not apply to the present case because:
(i) the High Court, in D'Orta-Ekenaike, extended the principle of advocate's immunity to apply to a person in the position of a solicitor instructing counsel and that in these circumstances the defendants could recover their costs despite their negligence; and
(ii) in any event, some benefit had flowed to CMG from the Orlando proceedings.
In Cachia the Court of Appeal considered the question of whether a solicitor who was found to have negligently performed his professional duties could nonetheless sue for the recovery of the fees incurred in performing those very duties. Kirby P said (at 371):
"The result of the authorities (which are reviewed by Hope JA) and of the principles of contract law of which this is but a special species is that a solicitor, who has been found to be negligent, may nonetheless recover from his client those costs which are severable, untainted by negligence and which relate to matters distinct from those upon which the solicitor has been found negligent. He may not recover fees in respect of the very proceedings in which he has been found negligent, unless he can show (the onus being on him) that, despite the negligence, some real advantage has accrued to the client from those services, or some of them, which would render it unjust for the client to escape liability for those fees or part of those fees.
Thus, if a solicitor were acting both in a damages action and in proceedings in the Family Court, negligence in the former would not disentitle the solicitor to his fees in respect of the latter. Similarly, in the case of a separate retainer to act in the conveyance of real property. But where the whole point of the retention of the solicitor has been the conduct of a particular legal proceeding, the mere fact that the solicitor has acted courteously and correctly will not entitle him to fees in respect of that proceeding if he fundamentally misadvises the client or overlooks a limitation period or is otherwise negligent, thereby making his courtesy and attendances entirely futile from the point of view of his clients relevant interests.
The judgment of Kirby P was subsequently applied by Kirby J in Ryan v Hansen trading as Hansens Solicitors (2000) 49 NSWLR 184 at [70] and following.
The second of the judgments of the Court of Appeal in the present case dealt with competing applications for variations to the orders which had been made following the disposition of the appeal. In that second judgment Tobias JA made specific reference (at [15] and following) to the decision in Cachia. His Honour expressed "considerable doubt" about the applicability of that decision to the present case. However, he pointed out that the Court had not heard argument on the matter and that as a consequence, the notices of motion which were then before the Court were not an appropriate vehicle for the determination of such an issue.
In Giannarelli the High Court upheld the principle of advocate's immunity and held that a Barrister could not be sued by his or her client for negligence in the conduct of a case in court, or in relation to work out of court which leads to a decision affecting the conduct of a case in court. That decision was subsequently applied in D'Orta-Ekenaike. Importantly, in the latter decision, the majority of the High Court (at [91];32) found that the principle of immunity extended to a legal practitioner instructing an advocate.
The decision in D'Orta-Ekenaike, which came well after those in Cachia (supra) and Hansen (supra), makes it clear that the immunity referred to in Giannarelli (supra) applies to a legal practitioner in the position of a solicitor instructing counsel. Simpson J applied the decisions in both Giannarelli and D'Orta-Ekenaike in reaching a conclusion (which was upheld by the Court of Appeal) that James was entitled to the protection of the immunity in the circumstances of the present case. There would, in my view, be something of an inconsistency between that conclusion, and a conclusion that James was precluded, by the negligence in respect of which he was found to be immune from suit, from recovering the fees payable to him in respect of those same proceedings in respect of which such negligence was found.
Moreover, the principle in Cachia has no application in the event that there is evidence that despite the solicitor's negligence, some particular advantage has accrued to the client from the services rendered which would render it unjust for the client to escape liability for the payment of the costs incurred. In the present case, the referee concluded (commencing at [337]) that a number of advantages accrued to CMG in the Orlando proceedings notwithstanding the negligence of the defendants. Those conclusions were comprehensively expressed by the referee, and were clearly based upon a thorough analysis of the material which was before her. Nothing which has been put to me on behalf of the defendants would cause me to reject those conclusions.
Further, it has been observed that a central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined circumstances (see D'Orta-Ekenaike at [34]; 17; see also Sinkovich v Attorney General of NSW [2013] NSWCA 383 per Basten JA at [42]). That tenet underpins the extension of principles of preclusion to some circumstances where the issues sought to be raised in a later proceeding could have been raised in the earlier proceeding (see generally Port of Melbourne Authority v Anshun (1981) 147 CLR 589). In the present case, it was open to the plaintiffs raise the issue of the costs of the Orlando proceedings, and the defendants' ability to recover them, when the defendants' cross-claim was being litigated before Simpson J. However, they did not seek to do so at that time. The only time that the issue was raised was in support of a motion for a variation of the orders made after the disposition of the proceedings by the Court of Appeal. In my view, the failure of the plaintiffs to raise the matter earlier offends the principle of finality. Allowing the issue to be raised at this point for the first time would, in my view, effectively amount to the plaintiffs being permitted to relitigate an aspect of the original cross-claim brought against them.
As I have previously noted, I was invited by counsel for the defendants to conclude that the referral, by the Court of Appeal, of the entirety of the costs issues (including the costs of the Orlando proceedings) to the referee amounted to a rejection of the proposition that the defendants' negligence prevented recovery of the costs incurred in acting for CMG in those proceedings. Whilst that argument has some superficial attraction, the fact is that the issue of whether the defendants were able to recover their costs of the Orlando proceedings was not the subject of any argument before the Court of Appeal on the hearing of the two motions to which I previously referred. It was for this reason that Tobias JA concluded that the notices of motion were not an appropriate vehicle for the resolution of this issue. In these circumstances I am not prepared to draw the inference which was urged upon me.
For these reasons, the entirety of those passages of the referee's report which relate to the costs of the Orlando proceedings should be adopted.
THE PAYMENT TO MR MAHONEY AO QC
The Referee's report
The second area of dispute in terms of the adoption of the report concerns an amount of $52,250.00 payable to Mr Mahoney AO QC who had previously been appointed a referee for the purposes of reporting on another issue.
At page 972 of the report the referee recorded the nature and ground of the objection to this amount in the following terms:
"The clients believe that all fees owed to Mr Mahoney QC may have been paid. Before the Reference hearing commenced, Mr Mahoney required payment in advance of $80,000.00 ($40,000.00 from each side). The clients have also made a further payment of $21,700.00 in February 2002. They have never received a reconciliation statement in respect of the application of payments made by them and note that the document provided in JL 1, tab 11, is only a memorandum, not a tax invoice. They require a reconciliation and tax invoice and do not admit any fees are owing by them in respect of this item."
The referee recorded the defendants' response as follows:
"This invoice was not paid by the applicants. The respondents paid that invoice on 21 February 2011 from the lump received from the applicants following the Court of Appeal hearing. The applicants have never sought reconciliation and have never disputed that this amount was owning (sic). Mr Mahoney OA QC (sic) confirmed that it was outstanding and it would be highly unlikely that Mr Mahoney OA QC (sic) would accept a payment if it was not due to him. Furthermore the applicants admitted to the third party's expenses at the hearing before Justice Simpson. If the Referee requires reconciliation from Mr Mahoney AO QC it will be requested by the respondent although exclusive amounts is payable and any interest calculated by the parties."
The referee's conclusion was in the following terms:
"Assuming the amount was outstanding and paid, then only the GST exclusive amount is recoverable (less $4,750.00) - allow on the basis that a Statutory Declaration is provided by Mr James showing payment ledgers."
In an affidavit of 13 November 2013 which was read in support of the notice of motion James stated the following at paragraphs (50) to (53):
"Mr Dennis Mahoney AO QC
50. I refer (sic) the appendix page 972 item 7 being the third party expense of Mr D H Mahoney AO QC and confirm that the amount of $52,250.00 was paid to Mr Mahoney AO QC on 1 February 2011.
51. Annexed and marked "FF" (page 529) is a true copy of the Defendants' PCLaw office bank journal for 1 February 2011 showing the payment to Mr Mahoney of the $52,250.00 and its component of $4,750.00 for GST.
52. Mr Mahoney AO QC did not send me a receipt and I did not pursue one from him as he was elderly.
53. The defendants claimed the GST credit of $4,750.00 in the 1 January 2011 to 31 March Business Activity Statement."
Annexure "FF" is a document dated 12 November 2013 headed "James Legal Pty Limited Office Bank Journal. The fourth entry on that document makes reference to a payment to Mr Mahoney of $52,250.00.
In addition, at the hearing of the present motion the defendants tendered (without objection) a bank statement showing the presentation of a cheque in the sum of $52,250.00.
Submissions of the parties
In written submissions, counsel for the plaintiffs drew attention to the terms of the referee's conclusion that this payment should be allowed subject to a statutory declaration being provided by James annexing the relevant payment ledgers. Counsel submitted that the affidavit of James annexed only a journal entry which was not sufficient to establish that the payment had been made. In doing so, he drew attention to the absence (at that stage) of a cheque butt or bank statement evidencing the payment. In oral submissions, counsel reiterated this latter proposition, submitting that the journal entry relied upon was not the "best evidence" and that this would cause me to reject this part of the report.
A bank statement was ultimately tendered without objection, which evidenced a payment in the amount identified by the referee. Plainly, that was the payment made to Mr Mahoney. Even though the bank statement constituted the "best evidence" to which counsel for the plaintiffs had referred, and even though it was tendered without objection, counsel maintained his objection to the adoption of this part of the report.
Counsel for the defendants submitted that the opposition advanced to the adoption of the referee's report in this respect overlooked the fact that James had deposed to the fact that the amount in question had been paid. Counsel pointed out, with some force, that this evidence was not the subject of any challenge. He further submitted that in any event, the bank statement eliminated any doubt which might otherwise have existed as to the fact of the payment.
Conclusion
The submissions advanced on the plaintiffs' behalf completely ignore the sworn, and unchallenged, statement made by James, who is an officer of the court, concerning the amount paid to Mr Mahoney. Although it was not submitted that that James had been untruthful in his affidavit, no satisfactory submission was advanced as to why, in the circumstances, his evidence should not be accepted. That evidence, without more, is a sufficient basis upon which to adopt the relevant parts of the report. Such evidence is directly corroborated by the bank statement.
In my view, the objections raised by the plaintiffs to the adoption of those parts of the report dealing with the payment to Mr Mahoney were completely without merit. I accept Mr James' evidence, which is corroborated by the bank statement, and I am satisfied that the payment was made by the defendants.
Accordingly, this part of the report should also be adopted.
INTEREST
Submissions of the parties
The defendants did not submit that no interest was payable at all. However, leaving aside the fact that the determination of the two principal objections to the report have a bearing upon the interest calculation, the plaintiffs submitted that:
(i) because GST was not payable by the defendants until the costs were paid, no interest should be payable on any GST component;
(ii) by virtue of the provisions of s. 174 of the Legal Profession Act 1987 no interest was payable in respect of the amount of costs set out in a series of specified Tax Invoices issued by the defendants, totalling a sum of $197,924.87.
The first of those propositions was not, as I understood it, the subject of any controversy. As to the second, Counsel for the defendants submitted that:
(i) the Tax Invoices were not before me in evidence (at least not in their entirety);
(ii) the issue of the application of s. 174 of the Legal Profession Act 1987 had not previously been raised and that the failure to do so offended the principle of finality;
(iii) the proposition that some interest was not payable was at odds with the undertaking given to Bell J to which I referred earlier.
Conclusion
I accept the submission made on behalf of the plaintiffs concerning the interest in respect of the GST payable on the defendants' costs. GST does not become payable until such time as the costs are received. For that reason there should be no interest paid in respect of any GST component.
However, I reject the plaintiffs' second submission concerning the operation of s. 174 of the Legal Profession Act 1987. I do so for two reasons.
Firstly, that is a matter which could, and should, have been raised when the matter was first litigated. The failure to do so contravenes the principle of finality to which I have referred. Once again, the attempt to raise the matter now amounts to an attempt to relitigate an aspect of the cross-claim.
Secondly, to allow such a submission to be made at this point would be contrary to the undertaking given to Bell J. The terms of that undertaking were clear and unequivocal. The plaintiffs should not, at this stage, be permitted to act in a way which is tantamount to placing a qualification upon that undertaking, in circumstances where no such qualification was sought to be placed upon it at the time at which it was given.
The remaining question concerns the basis upon which interest should be calculated. Counsel for the defendants argued against the calculation of interest by reference to each individual Tax Invoice which, he submitted, would be an "enormous task". Counsel for the plaintiffs submitted that a date for the commencement of any interest calculation be determined by reference to one particular tax invoice. The arbitrary nature of the latter approach is, in my view, capable of operating unfairly on the defendants. Enormous or not, the only proper method of calculating interest is by reference to the individual Tax Invoices.
I was referred in the course of argument to a decision in Lahoud v Lahoud [2011] NSWSC 994 in which Campbell JA (commencing at [9]) exhaustively reviewed the history of the various statutory provisions pertaining to the payment of interest. The calculation of interest in the present case should be carried out in accordance with his Honour's decision. I agree with the observations of the referee (at [324]) that her report is sufficiently transparent to permit the parties to perform the necessary calculation.
COSTS
Submissions of the parties
Two questions arise in respect of costs. The first concerns the costs of the reference, and the second concerns the costs of the present notice of motion. The second question can only be determined once the parties have been given an opportunity to make further submissions in light of the conclusions I have reached.
As to the first question, the plaintiffs submitted that in circumstances where the effect of the referee's conclusions was that the costs claimed by the defendants had been reduced by an amount of $122,443.85, either:
(i) the defendants should pay the plaintiffs' costs of the reference; or
(ii) each party should pay its own costs.
In the course of oral argument, counsel for the plaintiffs submitted, as a further alternative, that in the event that I were to find that the defendants were entitled to an order in their favour in respect of the costs of the reference, such an order should reflect the fact of the referee's reduction by awarding the defendants a proportion of their costs of the reference which corresponded to the percentage of the total costs which the referee found to be properly payable.
Counsel for the defendants submitted that they should have the benefit of an order in their favour that the plaintiffs pay the entirety of their costs of the reference. It was submitted that the referee's reduction was minimal when the matter was viewed overall. Reliance was also placed on the fact that the majority of that reduction was referable to disbursements in respect of photocopying.
Conclusion
In my view, in circumstances where the referee found that more than 85% of the costs sought by the defendants were properly payable, there is no basis whatsoever for the making of either of the orders initially submitted by counsel for the plaintiffs as being appropriate. The defendants have been overwhelmingly successful in terms of the referee's conclusions and should have an order made in their favour in respect of the costs of the reference.
The only question which arises is whether some adjustment should be made to reflect the fact that some reduction was made by the referee in respect of the amount of costs payable.
There is no evidence before me that the resolution of the issues which led to the referee's reduction lengthened the finalisation of the reference. Similarly, there is no evidence that the resolution of those issues operated to increase the costs associated with the reference.
In these circumstances there is no reason why the defendants should not have an order made in their favour for the costs of the reference, as agreed or assessed.
THE VARIATION OF THE ORDERS OF SIMPSON J
Orders 3, 4 and 6 made by Simpson J (at [20] above) are the subject of a stay ordered by the Court of Appeal (see [24] above). The liberty to apply for a variation and/or further stay of those orders was granted on the basis that the amount due and owing to the defendants was found to be $500,000.00 or less. The effect of the conclusions I have reached is that the amount owing is substantially in excess of that sum.
In these circumstances the basis on which liberty to apply for a variation has not eventuated.
ORDERS
I therefore make the following orders:
(i) Pursuant to r. 20.24 of the Uniform Civil Procedure Rules the report of Ms Alyson Ashe, Referee, dated 16 August 2013 is adopted.
(ii) The defendants' notice of motion is stood over until Monday 16 December 2013 at 9.15 am before me, at which time the parties are to bring in short minutes reflecting the order in (1), together with my conclusions expressed in this judgment as to the payment of interest and the payment of the costs of the reference.
(iii) Each party is to provide to my Associate, by 4.00 pm on Friday 13 December 2013, written submissions, not exceeding one page in length, regarding the question of the costs of the notice of motion.
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Decision last updated: 05 December 2013
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