Body Corporate for Sunseeker Apartments CTS 618 v Jasen
[2012] QDC 51
•28 March 2012
DISTRICT COURT OF QUEENSLAND
CITATION:
Body Corporate for Sunseeker Apartments CTS 618 v Jasen [2012] QDC 51
PARTIES:
BODY CORPORATE FOR SUNSEEKER APARTMENTS CTS 618
(Plaintiff)AND
CAROL DIANE JASEN
(Defendant)FILE NO/S:
D322/08
DIVISION:
PROCEEDING:
Review of costs assessment
ORIGINATING COURT:
District Court, Southport
DELIVERED ON:
28 March 2012
DELIVERED AT:
Brisbane
HEARING DATE:
29 August 2011
JUDGE:
McGill DCJ
ORDER:
Assessments varied, subject as to amount to further submissions on one point.
CATCHWORDS:
HOME AND COMMERCIAL UNITS – Body Corporate Fees – proceedings to recover unpaid contributions – recovery costs – test for assessment of
COSTS – Assessment – recovery for costs in respect of proceedings to recover unpaid body corporate contributions – test on assessment – whether costs reasonable
Body Corporate and Community Management (Accommodation Module) Regulation 1997 s 97(1)(c)
Anderson v Bowles (1951) 84 CLR 310 – considered.
Amos v Monsour Legal Costs Pty Ltd [2007] QCA 235 – considered.
Attorney-General of NSW v Kennedy Miller Television Pty Ltd (1998) 43 NSWLR 729 – followed.
Bottoms v Reser [2000] QSC 413 – followed.
Crane Distribution Ltd v Dark Star Two Pty Ltd [2011] QSC 90 – followed.
EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 – considered.
Hawkins v Permarig Pty Ltd [2004] 2 Qd R 388 – considered.
Owners of Strata Plan 36131 v Dimitriou [2009] NSWCA 27 – considered.
Schweppes’ Ltd v Archer (1934) 34 SR (NSW) 178 – applied.
Seven Network Ltd v News Ltd [2007] FCA 1062 - cited.
Re Skinner and Smith’s Bills of Costs (No. 2) [1990] 1 Qd R 180 – cited.
Voet v Body Corporate for Swell Apartments [2011] QCATA 48 - not followed.
Warren v Body Corporate for Buon Vista Community Title Scheme 14325 [2004] QCA 104 – considered.
Warren v Body Corporate for Buon Vista Community Title Scheme 14325 [2002] QDC 371 – considered.COUNSEL:
S.M. McNeil for the plaintiff
N. Hiscox for the defendant
SOLICITORS:
Short, Punch and Greatorix for the plaintiff
The defendant was not represented
This is a review under UCPR r 742 of the decisions of a costs assessor with respect to costs statements assessed by him pursuant to an order made by another judge. On 18 June 2009 Newton DCJ gave judgment in the action that the defendant pay the plaintiff a certain amount, including an amount for “recovery costs” up to a certain date, together with “ongoing legal fees in accordance with s 97 of the 1997 Module (s 143 of the 2008 Module) to be assessed.”[1] On the same day he dismissed an application by the defendant and ordered the defendant to pay the plaintiff’s costs of and incidental to the application to be assessed on the indemnity basis.[2] The plaintiff subsequently filed a costs statement in respect of each of these orders, and on 27 November 2009 Irwin DCJ ordered that each of them be assessed by a particular costs assessor. That costs assessor filed in the court on 15 November 2010 certificates that costs were assessed, in respect of the first costs order, at $43,240.12, and in respect of the second costs order, at $17,564.95.
Background and history of the litigation[3]
[1]I shall refer to this as “the first costs order” and the statement of costs for it as the “first costs statement”.
[2]I shall refer to this as “the second costs order”, although technically it ought to have been made before the first costs order. The second costs statement relates to it.
[3]This is a highly simplified outline; the litigation was lengthy and the file unusually bulky for this court.
The defendant is or was the owner of a unit in the Community Title Scheme, the body corporate for which is the plaintiff. Under the Body Corporate and Community Management Act 1997 (“the Act”) the plaintiff is entitled among other things to levy owners for contributions in respect of certain matters. The Accommodation Module is the applicable regulation module for the scheme under the Act. As is common with such schemes, there was a manager appointed whose functions included taking care of the common property, but who was also entitled to conduct a business managing the letting to holiday makers of the home units of those owners who chose to take advantage of that service.
The defendant’s unit was not let out through this manager, and in the late 1990s she became concerned that the amounts being levied by the body corporate covered payments by the body corporate to the manager for doing things which ought to have been the responsibility, and at the cost, of the owners who were having their units let out through the manager. As a result she stopped paying body corporate contributions, and apparently did not pay any for many years. I do not know and it is obviously not relevant for me to consider whether there was any justification in her original complaint, but if there was I strongly suspect that the appropriate response was not to refuse to pay contributions.
The Body Corporate and Community Management (Accommodation Module) Regulation 1997 (“the regulation”) provided in s 97(1):
“If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt—
(a)the amount of the contribution or instalment;
(b)any penalty for not paying the contribution or instalment;
(c)any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.”
Proceedings to recover unpaid contributions were initially commenced in a Magistrates Court in October 2003; they were subsequently transferred to the Commissioner under Part 4 of the Act, although it appears that step was ultimately rejected. Eventually it found its way to the District Court, as time passed, additional contributions were levied and not paid, and the amount by way of penalty and recovery costs increased. By the time the matter came to trial the plaintiff was claiming unpaid contributions between 1 April 1999 and 1 June 2008, in respect of which an amount of $34,295.85 was allowed.[4] The plaintiff also claimed interest. Judge Newton allowed interest under the Supreme Court Act 1995 s 47 in respect of contributions levied prior to 24 May 2002, in the sum of $7,046.98, and in respect of the period thereafter, the penalty provided for as determined under s 96 of the regulation, in the sum of $20,403.93.[5] In addition, his Honour allowed an amount by way of recovery costs in the sum of $41,445.41 for the period from September 2003 to August 2008. His Honour accepted evidence before him that these costs were reasonable. His Honour also made the order in relation to ongoing legal costs indicated above.
[4]It is difficult to accept that the delay was due just to obstruction by the defendant, as the plaintiff asserts. This was conceptually a simple claim, and ought to have been brought speedily to trial.
[5]The penalty adopted by the body corporate by ordinary resolution was simple interest at 2.5% per month, the maximum allowed under s 96.
The action came on for trial on 5 February 2009, and was heard over two days. Counsel appeared for the plaintiff; there was no appearance for the defendant. Evidence was given and documents were tendered, and his Honour reserved his decision. Subsequently, the defendant applied to reopen the trial so that she could be heard in relation to the matter. That application was in due course heard by his Honour, and the decision on that application was reserved. Both decisions were given together on 18 June 2009. The defendant’s application was dismissed, and the second costs order was made. His Honour ordered expressly that those costs be assessed on the indemnity basis. There has been no dispute that as a consequence those costs are to be assessed under r 703.
The defendant initially filed a notice of objection to each of the costs statements. Under the rules a notice of objection is to be served rather than filed, but it seems that the notice or a copy of the notice was served on the solicitors for the plaintiff. Subsequently, however, amended notices of objection were prepared dated 26 March 2010. The evidence was not very clear as to when these were served on the plaintiff’s solicitors,[6] and whether they were before the costs assessor. The costs assessor did not give reasons for his decisions, a matter to which I shall return, so I do not know whether the assessments were in fact conducted on the basis of the amended notices of objection or the original notices of objection. However, the application for review sought to support particular objections by reference to the amended notices of objection, and the review was conducted by reference to the amended notices of objection.[7] I consider that that was appropriate in all the circumstances, and if there was any failure to comply with the rules involved I nevertheless validate the giving of those amended notices of objection.
[6]The amended notes of objection to the first costs statement was served under cover of a letter dated 26 March 2010: Affidavit of defendant filed 25 March 2011; Exhibit CDJ‑24.
[7]See UCPR r 742(3)(a), (5)(b).
The defendant has at times not had solicitors acting for her in relation to this matter. At times she has had various solicitors who have received instructions; it is probably fair to say that none of these lasted very long. For a time there were solicitors acting in relation to the costs dispute; the amended notices of objection and amended application to review were filed on behalf of the defendant by a firm of solicitors, who have subsequently withdrawn. By the time of the review the defendant did not have solicitors on the record, but on the hearing of the review counsel appeared for the defendant, and informed me that he was appearing on a direct brief. I was told (though I think the matter is not the subject of evidence) that the amended notices of objection had been prepared by a costs assessor, and that may provide a reason why there would be some practical advantage in looking at the amended notices of objection rather than the original notices of objection.[8]
[8]As I indicated during the hearing, I do not regard that as in any sense evidence of the opinion of the costs assessor concerned in relation to any of the objections in the amended notices.
The application for review has previously been before another judge, who made various orders, including orders for costs, and gave various directions. The hearing of the review was allocated to me by the Chief Judge. I have not previously been involved in the proceedings between the parties.
The effect of s 97 of the regulation
In relation to the second costs order, there is no reason to doubt that the order was made in the exercise of the court’s power to order costs on the indemnity basis, under the court’s general discretion in relation to costs: UCPR r 681. There is, however, a potential difficulty about the effect of s 97(1)(c) of the regulation, quoted earlier. On its face, it is inconsistent with UCPR r 680 which provides:
“A party to a proceeding cannot recover any costs of the proceeding from another party other than under these rules or an order of the court.”
The combination of r 680 and r 681, which provides that costs are in the discretion of the court, reflect a long standing part of the ordinary processes of dealing with costs of court proceedings. They have their analogues in earlier provisions in Queensland and elsewhere, although these particular rules were introduced into the UCPR by amendment in 2009.
The effect of a similar inconsistency divided the New South Wales Court of Appeal in Owners of Strata Plan 36131 v Dimitriou [2009] NSWCA 27. That appeal concerned a provision in similar legislation in New South Wales which provided in s 80:
“An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.”
The wording of that section is slightly different from the wording in s 97, the Queensland provision, but the differences are not material, particularly since all members of that court agreed that on its correct interpretation the New South Wales provision covered legal costs, and restricted the amount of such legal costs payable as “expenses” to costs and disbursements reasonably incurred and reasonable in amount. It seems to me that if “expenses incurred” are limited by implication to those reasonably incurred and reasonable in amount, then “costs reasonably incurred” must be equally so limited. I shall return to this point.
Another issue, on which there was not unanimity, was whether the entitlement to recover expenses under s 80 extended to the costs of proceedings where the statute dealing with those proceedings either made no provision for costs, or provided for costs only in limited and specific circumstances. In Dimitriou the plaintiff had commenced a proceeding to recover outstanding levies in the Small Claims division of the Local Court, where costs were circumscribed by provisions of the rules. The defendant made an application to the Consumer and Tenancy Tribunal disputing the validity of the levies, and the Local Court proceedings were stayed until the Tribunal dismissed the defendant’s claim, with no order for costs being made; in that Tribunal an order for costs could be made only as specifically authorised by the Act or in relation to an order dismissing an application or appeal because it was frivolous, vexatious, misconceived or lacking in substance, or because the relief sought was not within the jurisdiction of the Tribunal: s 192.
The Local Court proceedings were revived but an amended statement of claim was then filed which took the matter out of the Small Claims division and moved it to the general division. This gave rise to a dispute as to whether legal costs could be claimed as a substantive component, so as to move the proceeding into the general division. After some further delay while the parties were invited to resolve the matter, ultimately judgment was given for an amount which included an amount of expenses, and “plaintiff’s costs as agreed or assessed” between certain dates. That decision was challenged on appeal to a single judge of the New South Wales Supreme Court who allowed the appeal, set aside the decision and sent the matter back. A further appeal was allowed, and the original decision upheld.
Evidently there was no agreement as to what the issues on the appeal were; each of the three members of the Court of Appeal defined the issues in different terms.[9] Each considered as one of the issues the question of how to reconcile the provision entitling recovery of costs as expenses with another provision of what was in that matter the same Act limiting costs before the Tribunal. Hodgson JA referred to Anderson v Bowles (1951) 84 CLR 310, and at [43] said:
“The Act does preclude orders for costs being made by an Adjudicator or (with limited exceptions) by the Tribunal. However, it also provides that an owners corporation is entitled to expenses (including legal costs) incurred in recovering arrears of contributions; so in my opinion, if legal costs incurred in proceedings before an Adjudicator or the Tribunal are truly to be characterised as having been incurred in recovering arrears of contributions, the legislative intention is that they should be recoverable.”
[9]See Hodgson JA para [22], Basten JA para [55]; Handley AJA para [155]. I wonder what Professor Raymond would make of that.
His Honour noted that there may be a real question about whether proceedings before an adjudicator or the Tribunal were properly so characterised but noted that that issue had not been raised previously in that particular matter: [44]. Accordingly, the magistrate had not erred in including costs of the proceedings in the Tribunal.
Handley AJA noted that the restriction on costs in the Small Claims division of the Local Court was also applicable, but held that that restriction, and the provision of the statute dealing with proceedings in the tribunal in relation to costs, were both properly characterised as general provisions which did not qualify the special provision that applied in relation to the costs covered by s 80, the equivalent of s 97(1)(c) of our Act: [122]. His Honour went on at [127] to express the view that the provision conferred a right to recover these expenses “independently of any costs order that may or may not be made.” It is not at all clear that his Honour was intending to lay down there a principle that if the question of costs of some particular proceedings were resolved in a particular way by a court which had jurisdiction to decide that question, it would be open in later proceedings between the parties in the same or some other court to re-litigate that issue.
As a general proposition, once an issue properly before a court of competent jurisdiction is decided by that court, the rights of the parties in relation to the matter are merged in the judgment, and it is the rights arising under the judgment which are to be enforced rather than any other rights.[10] Hence in Anderson v Bowles (supra) four justices in a joint judgment at p 323 said:
“It is a general rule that where it is sought to include costs incurred in other proceedings in the damages arising upon a cause of action, costs shall not be included, if as a matter of judicial determination or by a positive rule of law they are treated as costs which should be borne by the party suing. Accordingly it is not possible to recover as part of such damages the difference between party and party costs awarded to the plaintiff in the original litigation and the costs as between solicitor and client which he has incurred. Further, if costs are expressly withheld by the court in the original proceeding none can be recovered in the action for damages brought by the plaintiff from whom they were so withheld.”[11]
[10]Blair v Curran (1937) 62 CLR 464 at 532; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597; Mango Boulevard Pty Ltd v Spencer [2008] QCA 274 at [45]-[67].
[11]Citations of authority omitted.
In that case proceedings were brought by the plaintiff against the defendant to recover possession under the Summary Ejectment Act 1867. The proceedings were long and complicated, but ultimately the plaintiff was put into possession of the property. Regulation 75 of the National Security (Landlord and Tenant) Regulations, which corresponded with the Landlord and Tenant Acts 1948 s 62, provided that no costs should be allowed in any proceedings in relation to which the part applied, not being proceedings in respect of an offence. Subsequently an action was brought seeking damages for trespass, and including in those damages the legal expense incurred by the plaintiff in the earlier proceedings. The court held that there was a cause of action for trespass, or for breach of contract, but in relation to the question of costs, that regulation amounted to a legislative declaration that the parties to proceedings for the recovery of possession or proceedings arising thereout should not be liable to one another for the costs of those proceedings. Their Honours said that if such costs could be recovered by an action for damages, they would be “made recoverable by a side wind”: p 323. Accordingly, the effect of the relevant legislation was to prevent a claim for costs being advanced in the subsequent action.[12]
[12]Applied on this basis in Russell v Roman Catholic Archdiocese of Sydney [2008] NSWCA 217 at [48], [49].
That decision was distinguished by the majority of Queensland Court of Appeal in Hawkins v Permarig Pty Ltd [2004] 2 Qd R 388. The question in that matter was whether the Integrated Planning Act 1997 s 4.1.23, which provided that each party to a proceeding in the Planning and Environment Court must bear its own costs, applied not only to the proceeding in that court but also to an action in another court to recover the amount of those costs as damages for breach of contract, a proposition that was rejected by the majority. McPherson JA at [18] said:
“The matter can be tested by asking whether the direction in s 4.1.23(1) is so broadly designed as to render ineffectual an express contract between parties to proceedings in that court that one of them should indemnify the other, wholly or in part, in respect of the costs of that party in those proceedings. Such agreements to indemnify would, one might suppose, be not uncommon in practice … It would be surprising if the reach of s 4.1.23(1) is so wide as to invalidate an agreement like that altogether; and, if that is so in the case of a specific agreement to pay the other party’s costs, it must also be true of the general right to recover damages arising out of a breach of contract measured, as in this case it would be, by the loss occasioned by having to pay one’s own costs in accordance with the statutory direction in s 4.1.23(1).”
It seems to me that the difference between these two decisions lies in the different interpretations which were placed on the relevant legislative provisions. In Anderson the section was interpreted as preventing the plaintiff from recovering the legal costs of the proceedings at all, whereas in Hawkins the section was interpreted as merely restricting the orders as to costs which could be made in a proceeding by the Planning and Environment Court. I suspect that if in Anderson there had been an express contract between the parties that the defendant should indemnify the plaintiff in respect of any costs that the plaintiff might be put to in taking proceedings to recover possession following the determination of the tenancy, the High Court would have held that that right was excluded by the terms of the legislation. It would otherwise have been very easy for astute landlords to evade the prohibition which the legislature for policy reasons had imposed.
In the light of these authorities I have difficulty in accepting the proposition of Handley AJA that the New South Wales section gave a right to recover expenses independently of any costs order that may or may not be made. That meant that if in a proceeding to recover unpaid contributions an order for costs was made other than as provided in s 80, or if no order for costs were made, in a later proceeding the amount of the costs could be recovered. In my opinion the true position is that, if the costs were recoverable under s 80, they ought to have been recoverable in that proceeding. That may mean that there was an error of law in the decision under which they were not recovered, but that would be an error within jurisdiction and while it stood, in my opinion, a separate proceeding could not be brought to recover the costs not recovered in the first proceeding. However, I think that the passage should be understood as meaning that there was under s 80 a right to recover the costs independently of, and overriding, the ordinary discretion in relation to costs possessed by the relevant court or, in the case of a tribunal which had a more limited power in relation to costs, notwithstanding that more limited power.
The third member of the court in Dimitriou, Basten JA, in a detailed consideration of the point, analysed the various statutory provisions applicable to the relevant court and tribunal and also other courts which might be affected by the operation of s 80, and how any possible inconsistency between them could be reconciled. At [83] he noted that “the apparent anomaly in having costs in the tribunal or before an adjudicator recovered as expenses incurred in recovering contributions, pursuant to s 80, in circumstances when neither the adjudicator nor the tribunal had power to award costs with respect to proceedings before them, may be resolved in one of five ways.” After a consideration of these various possibilities he said at [85] that “the preferable construction is that s 80 either permitted recovery of costs limited to the debt recovery proceedings or it permitted the recovery of costs which were themselves recoverable by order of a court of competent jurisdiction.” He analysed this by reference to the question of whether s 80 purported to be a statutory provision which overrode the general provisions relating to costs in the various courts, and held at [92] that it did not.
A similar issue might have arisen in the proceedings before Newton DCJ. In those proceedings he ordered the defendant to pay the costs as recovery costs under s 97 of the regulation, but did he have a discretion to make any other order? How can rr 680 and 681 be reconciled with the statutory entitlement in s 97? It is difficult to believe that the legislative intention was to override the ordinary discretion in relation to costs, but that does seem to be the effect of the decision of the majority of the New South Wales Court of Appeal in Dimitriou. If that is correct, it may be that the second costs order made by Newton DCJ, awarding costs of the defendant’s application on the indemnity basis, was one he ought not to have made, because the only order available was that the defendant pay the plaintiff’s costs under s 97. There was no appeal from that order, and it is not for me to review its correctness. Nevertheless, it seems to me that any process of analysis of a provision such as s 97 of the regulation which does not deal with issues such as these is at least not comprehensive, and is likely to be unsatisfactory.
There are important policy considerations on each side. Contributions are the lifeblood of a body corporate in much the same way as taxes are the lifeblood of the state. Just as legislatures have imposed special regimes restricting the capacity of taxpayers to delay their liability to pay tax by arguing about it, and otherwise limiting such disputes,[13] it may be unsurprising if the legislature were to impose a regime which would provide particularly favourable treatment for recovering body corporate contributions, including legal costs incurred in the process. On the other hand, the exercise of a discretionary power in relation to costs is an important part of a court’s capacity to control its own process, particularly when orders for costs are made or withheld on what approach disciplinary grounds.[14] One would expect that a court would ordinarily require fairly clear words to justify any legislative intrusion into its capacity to use its discretionary power in relation to costs to regulate its own process in this way. It is not difficult to think of situations where the automatic operation of s 97, to the exclusion of the ordinary rules, would be unsatisfactory, if not capricious.[15] Hopefully in time this issue will be resolved.
[13]See for example FJ Bloemen Pty Ltd v Commissioner of Taxation (1981) 147 CLR 360 at 375.
[14]For example, orders for costs on the indemnity basis are sometimes made on this basis: Di Carlo v Dubois [2002] QCA 225. See also Amos v Monsour Legal Costs Pty Ltd [2007] QCA 235 at [29].
[15]For example, what if a body corporate sues to recover $X for unpaid contributions, the lot owner promptly offers to pay $Y under the rules, which is not accepted, and at the trial the body corporate recovers as unpaid contributions only $Y, or even $Z, which was less than $Y?
In the past there have been provisions in by-laws entitling a body corporate to recover such costs, which seem to have been treated by courts as not excluding the ordinary provisions in relation to costs of a proceeding.[16] That appears to have been the approach in Warren v Body Corporate for Buon Vista Community Title Scheme 14325 [2002] QDC 371. Robin DCJ expressed agreement with something I had said in an earlier matter, where I had noted a concern that there should not be any duplication between the amounts claimed and payable under the by-law on this basis and the amounts recoverable as assessed costs of the action. That matter was an appeal from an order that the defendant pay certain levies and “moneys duly levied upon the owner by the body corporate” pursuant to the Act to be assessed by the registrar. The magistrate also made an order for the defendant to pay the costs of the assessment to the plaintiff in any event. The appeal was dismissed, before the assessment took place, with Robin DCJ ordering “costs [of the appeal] to be assessed on the standard basis but that that occur on the basis that the matter had been concluded today before lunch.” This order did not even give full standard costs, let alone the amount which would have been recoverable either as indemnity costs or under regulation 97.
[16]A by-law could not override the provisions of the UCPR: see Body Corporate and Community Management Act 1977 s 142(1), Reprint 1, and see Acts Interpretation Act 1954 s 7(1). Note also s 142(5). The position is analogous to the effect of a contract between the parties: Gomba Holdings (UK) Ltd v Minories Finance Ltd [1993] Ch 171 at 194; Platinum United II Pty Ltd v Secured Mortgage Management Ltd [2011] QCA 229 at [6].
An application for leave to appeal to the Court of Appeal was dismissed: [2004] QCA 104. The defendant in that matter sought to raise the question of the jurisdiction of the magistrate to order costs under the by-law, and whether such costs were costs of the proceeding contemplated by the UCPR. Rule 690 was relied on. Ultimately the Court of Appeal did not consider it appropriate to grant leave to appeal, bearing in mind that by this time the Magistrates Court registrar had assessed the amount payable pursuant to the judgment at under $1000. The court refused the application for leave to appeal “with costs to be assessed”. Rule 702(1) would suggest only standard costs were ordered. Obviously, however, the points to which I have referred were not decided in that matter.[17]
[17]The President did comment at p 5 that the body corporate was only entitled to recover its costs and expenses “properly incurred”.
This decision was described by QCAT in Voet v Body Corporate for Swell Apartments [2011] QCATA 48 at [27] as endorsement by the Court of Appeal of the magistrate’s decision to allow the recovery of indemnity costs. I cannot see how it is capable of being characterised in those terms; the court plainly refused leave to appeal and therefore decided not to consider the question of the entitlement to costs on a “solicitor and client basis” under a by-law, but it dealt with costs before it apparently on the assumption that the by-law did not apply to “costs of the proceeding”, and so did not apply to the costs of the application for leave to appeal.[18] The issue has not, as far as I know, been decided by the Court of Appeal in Queensland, nor does it appear to have received much careful consideration from any Queensland court. That is why I have discussed it at some length, although strictly speaking the point does not arise in the review.
[18]The QCAT decision also seems to misinterpret the New South Wales decision in Dimitriou, and to have treated the decision of Newton DCJ in this matter as implying that the amount recoverable under s 97 “can include indemnity costs”, which I think also misses the point.
The test for assessment under s 97
One point which undoubtedly arises, however, is the test to be applied on the assessment of the first costs statement. That was expressly for costs payable under s 97(1)(c) of the regulation, or its 2008 successor, which is in the same terms,[19] and therefore was to be assessed on the basis of what costs were payable under that section. There is no Queensland decision binding on me on that point, but, as I mentioned earlier, one of the matters decided in Dimitriou was that the equivalent provision in that state carried costs and disbursements reasonably incurred and reasonable in amount.[20]
[19]Section 145(1). For this reason I have ignored the question of which section was applicable at any particular time, a point not raised by either party.
[20]See also Crane Distribution Ltd v Dark Star Two Pty Ltd [2011] QSC 90 at [33]; Owners of Strata Plan 58631 v Caporale [2011] FCA 109 at [19].
At first glance this is essentially the test for indemnity costs under UCPR r 703(3), although it appears that in New South Wales it corresponds to party and party costs assessed on the ordinary basis. In New South Wales the test for indemnity costs is all costs other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount are to be allowed.
The difference between “reasonable” and “not unreasonable” may appear to be essentially semantic, but such a difference has been recognised as giving rise to a different test by the legislature in New South Wales, and by the Court of Appeal. Indeed, the difference has been recognised for some time. In EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 Megarry VC identified four bases for assessing costs under the English rules then in force: the party and party basis which embodied the traditional “necessary or proper” test, the common fund basis which allowed a reasonable amount in respect of all costs reasonably incurred,[21] the trustee basis where all costs incurred were allowed except those which should not have been incurred in accordance with the duty of the trustee, and the solicitor and own client basis where the test was “all costs except insofar as they are of an unreasonable amount or have been unreasonably incurred.” The issue in that case was the effect of an order for costs on “the indemnity basis”, something not provided for under the English rules at that time, although orders in such terms had been made, particularly before 1960.
[21]Said by his Lordship to have replaced the old “solicitor and client” basis.
One question was whether such an order had to be equated with one of the orders contemplated by the rules. The Vice Chancellor held that it did not, and under the applicable statute the court’s discretion was not confined to making an order for taxation on one of the specific bases in the rules: p 70. Nevertheless, the Vice Chancellor considered that the test to be applied where costs were ordered to be taxed on the indemnity basis was the test applied for solicitor and own client costs: p 71. His Lordship said there that this test gave:
“the litigant a complete indemnity, shorn only of anything that is seen to be unreasonable. The litigant does not have to establish that the costs were necessary or proper, or that the costs were of a reasonable amount and reasonably incurred. Provided they are costs of and incidental to the proceedings, he is entitled to recover them, subject only to the qualification that they are liable to be reduced in respect of anything that the taxing master considers to fall within the headings ‘unreasonable amount’ or ‘unreasonably incurred’. In a word, the difference is between including only the reasonable and including everything except the unreasonable.”
Despite the logical point that any particular charge must be either reasonable or unreasonable, so that both tests should in theory produce the same result, the practical difference lies in the fact that in the real world there will be a third category of charges, where there is doubt as to whether the charge is reasonable or unreasonable. If the party claiming the costs has the onus of showing that they are reasonable, then such costs will not be recovered; but if the question is whether the costs are shown to be unreasonable, then such costs will be recovered. This is the point recognised by his Lordship, and in the New South Wales Court of Appeal.
As Hodgson JA said in Dimitriou at [40]:
“The onus is on an owners corporation to prove that the costs and disbursements it claims have been reasonably incurred and are reasonable in amount, so that if a selection has to be made from the three different bases I have referred to, the second basis is most appropriate. In my opinion, the third basis [i.e. indemnity costs] would not be appropriate, because that would include any costs that are not shown to appear to be unreasonable. Further, in my opinion the costs and disbursements cannot be made reasonable by agreement between the owners corporation and its legal practitioner …”
This last point is of some importance; the mere fact that the body corporate and its lawyers have agreed that costs are to be payable in a particular way, for example at a certain hourly rate for certain partners and staff, is not something which in itself makes those costs reasonable. In determining whether the costs in fact charged on a certain hourly rate are reasonable, it is therefore necessary to consider whether that hourly rate is reasonable. That is an objective matter, and does not depend simply on the fact that parties have agreed to a charge at that rate, subject only to the qualification that the amount payable under s 97(1)(c) could not exceed the amount in fact charged to the body corporate, because of the requirement that the costs be “incurred”.
Nevertheless, it would be interesting to know whether in practice in New South Wales there is much difference between party and party and indemnity costs assessed on this basis. The test in Queensland for party and party costs on the standard basis is “all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed”: r 702(2). This is the traditional test for party and party costs, and in practice these days in Queensland provides an amount which is likely to be very much less than the amount actually charged by the parties’ lawyers.[22] Part of the difference is no doubt explained by the fact that the standard basis of assessment in Queensland is conducted by reference to the scale of costs in the schedules to the UCPR, whereas indemnity costs are usually assessed by reference to a costs agreement between the parties, although that is subject to a test of reasonableness.
[22]A point on which I enlarged in Henley v State of Queensland [2005] QDC 94.
Interestingly, in the past the difference between the test for party and party costs and solicitor and client costs was not very great, at least in terms of the wording of the test and the rules: there was little difference in the wording of RSC O 91 r 81 and r 82,[23] although the position was complicated by the fact that additional costs might be allowed as between solicitor and own client particularly if the client had been warned that particular expenses might not be recovered from the other party if successful, but had nevertheless approved them: Re Skinner and Smith’s Bills of Costs (No. 2) [1990] 1 Qd R 180.
[23]Re Price (dec) [1941] St R Qd 205 at 209. Both were taxed under the scale, and commonly the same amount would be allowed for the same item of work on both bases. Also in England there is not much difference: Penn v Bristol & West Building Society [1997] 1 WLR 1356 at 1365.
Although the test adopted in New South Wales, and in my opinion appropriate in Queensland under s 97(1)(c), is similar in wording to the test under r 703, what was said about the onus is a matter of some significance, and provides a distinction from the test under r 703. I am going into this point in some detail because there was read before me an affidavit by a costs assessor who prepared the costs statements on behalf of the plaintiff and who swore in paragraph 7:
“When undertaking an assessment of costs on an indemnity basis a costs assessor is to allow all costs incurred unless unreasonably incurred or of an unreasonable amount.”
Authority was cited. This is following the wording of the New South Wales rule for indemnity costs, not the Queensland rule, which as I have indicated is more in line with the New South Wales rule for party and party costs, but there is more to it than that. So far as I am aware, the first decision in Queensland interpreting the test for indemnity costs under r 703 was that of the Chief Justice in Bottoms v Reser [2000] QSC 413.[24] In that matter an order was made by another judge after the commencement of the UCPR for “solicitor and own client costs”, and the question was how the costs were to be assessed. His Honour was aware of the decision of EMI Records, which he referred to in his reasons, but said that the UCPR should be interpreted as specifying only two bases for assessment, the standard basis and the indemnity basis, and that as a matter of interpretation the order should be treated as one for costs on the indemnity basis under r 703.
[24]It is most unfortunate that this decision, which is of such importance in this area and has been referred to in a number of later cases, is not available on the court web page. At that time the relevant rule was r 704.
His Honour went on to say:
“That encompasses all costs except so far as they may be of unreasonable amount or were unreasonably incurred. … In approaching such an assessment, the registrar ought to be conscious of the caution of the Vice-Chancellor in EMI that in determining reasonableness ‘the receiving party will be given the benefit of any doubt’. In other words, considerable liberality should ordinarily be extended in assessing reasonableness. That is indeed implicitly recognised by the reference in para (b) of sub-rule (3) to any costs agreement between a client and the client’s solicitor. It would perhaps be an unusual case where, costs having been agreed in that way, they were then, on this process of assessment, to be excluded as ‘unreasonable’. Plainly, however, if they warranted the characterisation of outlandish, they ought not no doubt nevertheless to be excluded. I emphasise my view that in such an assessment, no niggardly or unduly narrow approach would be warranted.”
In the context of the analysis in EMI Records, his Honour was clearly laying down the principle that the approach to be adopted in applying the test in r 703 was to be equated with that adopted for the assessment of indemnity costs by his Lordship in EMI Records. It may be that this interpretation owed more to the term “indemnity costs” than the actual wording of r 703, although there is the consideration that on his Honour’s approach this is the most generous order for costs that a court can make under the rules.[25] As I subsequently recognised in Henley, in the absence of a decision on the point from the Court of Appeal his Honour’s decision should be treated as laying down in an authoritative way the test for the assessment of costs under r 703. That was also recognised by the District Court judge in Amos v Monsour Legal Costs Pty Ltd [2006] QDC 485, although it seems to me that when the matter reached the Court of Appeal – [2007] QCA 235 – that court in its reasons for judgment did not fully endorse the approach of the Chief Justice;[26] the court at [29] quoted the relevant rule, and when it came to apply the test said simply that it was open to the magistrate (who had done the assessment in that case) to conclude that the costs in question were “reasonable”: [30].[27]
[25]It may be as well that the decision was a product of its time, bearing in mind that it was decided in the context where there was in Queensland a particular difficulty in relation to the assessment of costs by the court, which is illustrated by the facts set out in my reasons in Henley (supra).
[26]It did at [29] approve his statement that no niggardly or unduly narrow approach would be warranted.
[27]It might be going too far to read significance into the choice of this word rather than “not unreasonable” in a context where there was no express discussion about the point; the court also did not criticise the approach which had been adopted by the Chief Justice. It seems to me that the point remains open before the Court of Appeal, but that unless and until that court decides to the contrary the Chief Justice’s approach should be applied under r 703.
It follows that, despite the similarity in wording between the test in r 703 and the test adopted by the Court of Appeal in New South Wales in Dimitriou, the tests are to be applied in different ways. If one applies the test in Dimitriou to costs payable under s 97, which I consider is the approach that should be adopted, and the Chief Justice’s approach to the assessment of indemnity costs under r 703, s 97(1)(c) does not provide for either costs assessed on the standard basis or costs assessed on the indemnity basis, but rather an intermediate test, which may be equated with the old common fund or solicitor and client basis in England. Unlike the situation for indemnity costs, the onus is on the body corporate, and the defendant is to be given the benefit of the doubt.[28]
[28]That appears to have been the approach in fact adopted by Newton DCJ in the trial: [2009] QDC 169 at [42].
On the face of it, therefore, the first costs statement was prepared on the wrong basis, and if it had been allowed as prepared it would follow that the costs assessor had applied the wrong test. However, it was not allowed in full, and therefore I cannot deduce from that that the wrong test has been applied.[29] I think, however, it is a matter of some importance that costs assessors when assessing costs under s 97 of the regulation apply the Dimitriou test rather than the r 703 indemnity basis test.
[29]My impression from the amounts taxed off the two costs statements is that the first was assessed more rigorously than the second: e.g. photocopying charges were reduced in the first but not the second. This suggests that the assessor applied different tests.
After the hearing the defendant put in further written submissions, that the reasonableness of the costs payable under s 97 should be considered in the light of the principle of proportionality, so that the legal costs were proportional to the amounts in dispute. Reference was made to comments by Sackville J in Seven Network Ltd v News Ltd [2007] FCA 1062 at [8]-[10] (of summary), [17]-[18] (of reasons). His Honour there was not speaking about proportionality as a principle to be applied in the assessment of costs under s 97 or any other regime; he was complaining about the inherent inefficiency involved in the parties having spent in that matter far more costs than was justified by the amount in dispute.[30] Whether or not as a reform some concepts of proportionality should be introduced to the law of costs, I am not aware of any authority that the current law applying to these assessments includes any such principle.
[30]See now Federal Court Rules 2011 r 1.32(2): “The court may deal with the proceeding in a manner that is proportionate to the nature and complexity of that proceeding.” There is no Queensland equivalent.
Test for review under r 742
The test traditionally adopted for the review by a court of decisions of a taxing officer is that laid down by Jordan CJ in Schweppes’ Ltd v Archer (1934) 34 SR (NSW) 178 at 183-4:[31]
“In appeals as to costs, the principles to be applied are these. The court will always review a decision of a taxing officer where it is contended that he has proceeded upon a wrong principle, for the purpose of determining the principle which should be applied; and an error in principle may occur both in determining whether an item should be allowed and in determining how much should be allowed. Where no principle is involved, and the question is, whether the taxing officer has correctly exercised a discretion which he possesses and is purporting to exercise, the court is reluctant to interfere. It has undoubted jurisdiction to review the taxing officer’s decisions even where an exercise of discretion only is involved, and will do so freely on a proper case using its own knowledge of the circumstances, but it will in general interfere only where the discretion appears not to have been exercised at all, or to have been exercised in a manner which is manifestly wrong; and where the question is one of amount only, will do so only in an extreme case.”
[31]Adopted by Kitto J in Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621 at 628-9, and by Thomas J in Re Bain Gasteen & Co’s Bill of Costs [1990] 1 Qd R 412 at 416.
One difference between the situation here and the situation in the past is that in the past the taxing officers were always officers of the court, whereas now they are independent costs assessors who are simply approved for the purposes of performing assessments generally, and appointed to perform a particular assessment, under the rules. However, I do not think that in itself makes much difference; the approach is similar to that adopted by appellate courts dealing with appeals from any specialist or expert tribunal.[32] Another distinguishing feature is that in the past what was reviewed was the decision of the taxing officer upon an objection to the initial taxation, in respect of which the taxing officer would provide reasons: O 91 r 118(1). These reasons were available to the judge conducting the review. However, as I mentioned earlier, I do not have the benefit of reasons from the costs assessor.
[32]Bhattacharya v General Medical Connal [1967] 2 AC 259 at 265; Medical Board of Queensland v Thurling [2003] QCA 518 at [12]; Fletcher v Queensland Nursing Council [2011] 1 Qd R 111 at [86].
Absence of reasons from the costs assessor
Rule 738 provides a mechanism for a party to obtain the costs assessor’s reasons for any decision included in the certificate. The certificates in the present case followed the usual form, certified a particular amount as being the costs assessed, divided between professional fees and disbursements, stated the assessor’s fee, and that it has been included as a disbursement, and that the plaintiff is entitled to be paid the costs of the assessment which were assessed at the amount of the assessor’s fee. Nothing was said about which objections had been allowed and which disallowed, or anything about any decisions taken in the course of arriving at that assessment. In these circumstances a party seeking reasons was faced with no option but to seek reasons for all of the decisions taken in the assessment.[33]
[33]These circumstances show that this must be possible, despite the reservations of Holmes JA in Romely v Vandenberg [2009] QCA 17.
Rule 738(3) provides that “a party requesting reasons must pay the costs assessor’s reasonable costs of preparing the reasons and those costs form part of the party’s costs in any subsequent review.” I was told that in the present case when the costs assessor was asked for reasons he provided an estimate of his costs of providing such reasons of $8,400.[34] This the defendant said she could not afford, so no reasons were obtained. It was argued that as a result the application for review was defective and did not comply with r 742(3)(b), in that it did not “have attached to it a copy of any written reasons for the decision given by the costs assessor.” The paragraph uses the word “any”, which clearly indicates that the obligation to attach written reasons exists only if written reasons exist. If the costs assessor has not given any written reasons there is no obligation to attach them. In any case, any deficiency in this respect would have been only an irregularity: r 371(1).
[34]Affidavit of defendant filed 25 March 2011 para 39.
I must say that the notion that an amount like $8,000 could qualify as “reasonable costs” of providing reasons for the costs assessor’s decisions in this matter strikes me as manifestly fanciful. That implies that the costs assessor was going to spend a long time constructing reasons for the decisions, rather than, as ought to have been done, simply preparing a document setting out what those reasons were in terms which the party seeking the reasons, and the court, can understand.
The costs assessor is expected to exercise a quasi judicial function in a rational way consistent with the applicable law, and ought therefore to have reasons for any decision taken in the course of undertaking an assessment. Whenever an amount claimed in a costs statement is disallowed or adjusted, or whenever an objection is rejected, if the costs assessor has done his job properly he must have reasons, if only in his mind. Given that the rules contemplate that the costs assessor may be required to provide reasons for any decision, it seems to me obvious that the costs assessor in the course of conducting the assessment should keep working papers which contain notes sufficient to indicate to him what the reasons were for each decision taken. When asked to provide reasons therefore it should simply be a matter of going back through the notes and setting out, in a form which would be comprehensible to others, what those reasons were.
This is not a novel proposition. In 1997 Sperling J in New South Wales, in a passage quoted and approved on appeal in Attorney-General of NSW v Kennedy Miller Television Pty Ltd (1998) 43 NSWLR 729 at 735-7, said:
“It does not seem to me that what I have proposed would be particularly onerous or that it would materially increase the cost of the process. It may be preferable for assessors to anticipate the possibility of a request for reasons when processing the bill. In the ordinary course, the assessor would need to note against any item reduced the amount of the reduction or the reduced amount in order to be able to tally up the result. It would be easy enough to record the reason for the reduction in each instance at the same time. In each case, the reason must be readily to mind. Otherwise, the item would not have been reduced. In most instances, a word or two would suffice. A code could be devised for recurring reasons. I doubt that this would add much to the cost of the assessment. It would, in my view, be a reasonable incident of the assessment and chargeable as part of the assessment. If a request for reasons were made at a later time, little extra work would be required to produce the reasons in suitable form.”
In the present case the amended notice of objection to the first costs statement included a general objection in relation to the question of whether indemnity costs were recoverable, and 174 specific objections, most of which followed one of a small number of standard forms. The first costs statement contained 354 items. The second costs statement contained only 202 items, and the amended notice of objection only 71 objections, many of which were again in a standard form. It seems to me that if the costs assessor had conducted the assessment properly in the way I have indicated, reasonable costs for providing reasons should not have exceeded a couple of hundred dollars.[35] The figure quoted suggests that what the costs assessor was contemplating doing, at the cost of the party, was setting out to construct a reasoned justification for the result he had arrived at. That is not a proper part of the provision of reasons.
[35]The certificates show that the costs assessor had already charged $8,400 for the two assessments.
Since the “reasonable costs” of providing reasons form part of the costs in the review, I suspect it would be open to the court to review these costs, but there are practical difficulties in recovering costs which have already been paid; no doubt the costs assessor would not actually hand over the reasons until he had received payment. I suspect that the court has power, if appropriate, to order a refund by the costs assessor. Apart from that, a decision of a costs assessor would appear to be a decision of an administrative character made under an enactment, whether or not in the exercise of a discretion, and therefore a decision to which the Judicial Review Act 1991 applies: s 4(a). It seems to me that if a party to the assessment requests reasons for the decision under s 32 of the Judicial Review Act, the costs assessor is obliged to provide such reasons pursuant to s 33 of that Act, a section which makes no reference to any charge to be imposed for such a statement of reasons. The District Court does not exercise jurisdiction under the Judicial Review Act 1991, and I have no close familiarity with the workings of the Act, but if my suspicion is correct and a party can obtain reasons free under that Act, it would provide a substantial practical constraint on costs assessors who might otherwise be disposed to charge unreasonable fees under r 738.
In any case, I do not have reasons from the costs assessor for the decisions he arrived at. That does not mean that I cannot conduct a review; I can and have. But it does seem to me that I cannot accord the traditional respect referred to in the authorities to the decisions of the costs assessor in relation to particular matters, including matters of quantum, if I do not know what they are or why they were arrived at.[36] What I do have, however, is a list of the adjustments made to those items in the costs statements which were reduced or disallowed, from which I can deduce that in the case of particular objections they were either allowed in full, allowed in part or disallowed. This has helped, though sometimes even with this information the assessment process remains impenetrably obscure. For example, Item 46 of the first costs statement sought an amount of $357 for drafting certain submissions, from which an amount of $13.40 was deducted by the assessor. The amount claimed represented 17 units at $21 per unit,[37] and hence the deduction is 0.638 of a unit, or three minutes and forty-nine point seven seconds of the solicitor’s time. I cannot imagine how such a deduction could have been arrived at. In this instance, it is not difficult to conclude that whatever the assessor’s reasons the decision was likely to be wrong.
[36]And see Fleming and Fleming [2009] Fam CA 552 at [27].
[37]A unit is six minutes of time charged; the costs statements were drawn on the basis of time charging.
This limited information from the costs assessor must have been forthcoming before the amended application was filed in the court on 19 May 2011, since there is attached to it a copy of the costs statements marked up to show the amounts taken off where that occurred. In these circumstances it is somewhat puzzling that some of the objections pursued in the amended application in respect of each costs statement were to items in the statement which had already been disallowed by the costs assessor. In other cases, the objection was that the amount claimed was excessive and an amount had been deducted by the costs assessor. On the hearing of the review, counsel for the defendant did not press most of these. In addition, the ground of objection in the amended notice of objections to a number of specific items in the first costs statement was simply that the amount claimed was not a standard cost. That was consistent with the general objection that the costs should be assessed on a standard basis, an objection I would reject as indicated earlier, and which was not pressed on the hearing. It follows that these objections should not be allowed.[38]
[38]This applies to objections 29, 31-36, 38-41, 43, 49-53, 67, 68, 70, 71, 79, 83-86, 95, 150, 154-156, 158, 159, 160, 165, 166, 168, 171 and 172.
Review of assessment of first costs statement
There are a number of items in the amended notice of objection which were pursued on the review where the objection was simply that the time taken was excessive. For the costs assessor this would have been largely an exercise in looking that the material on the file and what was achieved and assessing the question of whether the length of time claimed was reasonable. The solicitor concerned was charging the equivalent of $210 an hour, a rate which was not alleged to be excessive and which is indeed comparable with the rate allowed for a solicitor under the scale. Sometimes the documents concerned were documents which were on the court file, either because they had been filed or because they were attached to one of the filed affidavits. In some cases, however, the relevant documents were not immediately available; the plaintiffs’ solicitors had not brought their file to court. In relation to a number of these objections, all that can be said on the review is that no sufficient reason has been shown to depart from the conclusion of the costs assessor, that the amount claimed was reasonable. This applies to objections numbered 1, 3, 10, 17, 30, 37, 46, 63, 65, 66, 74 and 101.
There were, however, a number where as a result of my looking at the documents I cannot see how a costs assessor could have regarded the amounts claimed as reasonable. In the case of Item 3, this covered perusing the fourth amended defence and what was presumably a formal email from the defendant enclosing it, and drafting and sending what strikes me as a formal reply. I have looked at the fourth amended defence; there is little indication of any great change compared with the previous defence. Even if some time was taken to compare the two documents carefully and identify just what change was involved, the amount claimed of 10 units seems to me clearly excessive. No amount was deducted by the costs assessor; in my view a reasonable amount of time for this was at most five units.
There are two other matters I should mention. The first is that the additional written submissions from the defendant referred to earlier complained in general terms about the costs covered by this costs statement as being excessive or unreasonable. I can understand that a person who is not experienced in litigation will often fail to appreciate just what is involved in the process, the work involved and the time taken for that work, and therefore the costs involved. The conduct of litigation is an inherently labour-intensive activity, and is therefore always going to be expensive. This fact has always been one of the most compelling reasons why parties ought wherever possible to resolve their differences without litigation. The other matter is that my comments about the assessment of the costs of the assessment apply here as well. The relevant items in the cost statement are Items 169-201. Again, there may be some potential for overlap, although I notice that this time a number of the items associated with the application for the costs assessment appear to have been disallowed by the assessor. Again, this matter will have to be dealt with after the reasons are delivered.
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