Burford v Allan

[1998] SASC 6693

BURFORD  v  ALLAN

Full Court:  Doyle CJ, Millhouse and Nyland JJ

DOYLE CJ

Background and procedural matters

This is an appeal against a decision by a judge of this Court.  The judge’s decision was made upon a review of a decision by a master upon a taxation of costs: see Supreme Court Rules 1987 r101.21.

Section 50 of the Supreme Court Act 1935 (“the Act”) provides:

“(2)     No appeal shall lie without the leave of the judge from any order-

(a).... ...

(b).... as to costs only which by law are left to the discretion of the judge.”

The issue on appeal is whether the master had the power to allow the item in question.  The judge held that he did not have that power.  Accordingly, the issue on appeal is not the manner in which the discretion as to costs was exercised, nor whether there was an error of law in the course of making a decision, but a question of the scope of the power in relation to costs.  It follows, in my opinion, that leave to appeal was not required: see Copping v ANZ McCaughan Ltd (1995) 63 SASR 523 at 529 King CJ. In any event, the judge gave leave to the extent that leave might be required.

The appellant was the successful plaintiff in an action claiming damages for personal injury that she sustained in a motor vehicle accident.  The plaintiff is an infant.  She sued by her next friend.  The plaintiff suffered very severe injuries.  She ultimately recovered damages amounting to $6 323 698.47.

As I understand it, there was no dispute that the plaintiff and her family lacked the funds required to meet the disbursements that her solicitors had to incur in preparing her case for trial.  The disbursements were heavy.  The bill of costs claimed disbursements amounting to $361 061.66, and disbursements were allowed at $196 640.07.

Because the plaintiff was unable to provide funds to cover the disbursements, the plaintiff’s solicitors arranged for what is called a litigation loan.  We were not provided with any precise details about the loan, but I do not think that that matters.  I proceed on the basis that a bank lent money to the plaintiff’s next friend or, perhaps, to her mother, for the purposes of meeting disbursements to be incurred by the solicitors in connection with the litigation.  I assume that the bank took some form of security over the anticipated proceeds of the action.  We were informed that the loan was not used to meet costs payable to the solicitors or to meet counsel fees.  The amount finally repaid to the bank was $185 650.85, which included $26 270.85 for bank fees and interest.

The amount paid to the bank by way of interest and charges in respect of the litigation loan was claimed by the plaintiff upon the taxation of costs.  The master allowed the sum of $14 000.00.  It is not necessary to consider how he arrived at that amount.  The master said that the incurring of disbursements is a necessary part of the preparation of a case.  He said that some plaintiffs will lack the funds to meet the necessary disbursements, and that it cannot be assumed that the plaintiff’s solicitor will always be willing or able to meet those disbursements on the plaintiff’s behalf.  The master is clearly correct.  The amount expended on disbursements in this case illustrates the nature of the problem.  The master considered that it was a fact of life that plaintiffs will, on occasions, have to borrow money to meet disbursements, and as a result of that incur interest and other charges.  He said that fairness and justice required that the plaintiff should be able to recover the expense incurred.

Upon a review, the judge took the view that there was no authority to support the allowance of such an item, and that the allowance was not authorised by the relevant statutory provisions or rules.  He reversed the decision of the master.

Nevertheless, as a result of a decision by the judge relating to other items, the amount of the costs awarded to the plaintiff was increased by the judge from $412 890.07 to $415 463.38.  The judge ordered that the defendant pay to the plaintiff three-quarters of her costs of and incidental to the review of the taxation of costs.  The plaintiff complains that the judge should have ordered that costs follow the event, and should not have deprived the plaintiff of any of her costs of the review.

The defendant has filed a notice of cross-appeal.  The defendant complains of the award to the plaintiff of $110 000.00 by way of interest upon the taxed costs.  That amount was ordered to be paid by way of interest upon the taxed costs computed from the date of judgment in the action rather than from the date of the allocatur.  The master had awarded interest in respect of the same period, but had reduced the amount claimed by approximately $25 000.00.  The master did so because, in his opinion, there was a period of about 10 months during which the plaintiff’s solicitors had not progressed the taxation as actively as they should have.  Upon the review, the judge differed.  He said that there had never been any default on the part of the plaintiff herself.  The plaintiff had been unable to conduct her own affairs since the accident, because of the severity of her injuries.  The judge increased the amount of interest to $110 000.00.

The defendant did not obtain leave to appeal from the judge. Such leave is required by the provision of the Act set out above. The provision is unusual in that it is only the judge in question who may grant leave to appeal. The Full Court does not have power to grant leave: see Copping v ANZ McCaughan Ltd (1995) 63 SASR 523 at 529 King CJ. I consider that s50(2)(b) of the Act applies to a decision as to costs made by a judge upon the review of a taxation of costs. The relevant decision by both the master and the judge involved the exercise of a discretion that the court undoubtedly has. For the purposes of the statutory provision, there is in my opinion no reason to distinguish between the decision of the master upon taxation and the decision of the judge upon review. In Halliday v High Performance Personnel Pty Ltd (In Liq) (1993) 113 ALR 637 Mason CJ (at 638-639), dealing with an appeal from a decision by a judge on an application for a review of a taxation of costs by a taxing officer, took the view that a similarly expressed provision had the effect of requiring leave to be obtained, but relied upon the fact that the provision referred to “a decision ... with respect to costs ...” to conclude that the provision applied to a decision on an application for review. In my respectful opinion the decision made by the judge in the present case was a decision “as to costs only”, being costs that are left to the discretion of the judge.

It follows, in my opinion, that as leave to appeal has not been obtained from the judge, the cross-appeal is incompetent and should be struck out.

Nevertheless, I propose to make some brief observations about the power to award interest.

The appeal

It was not argued on appeal that the amount charged by the bank was not a reasonable or proper amount, having regard to prevailing rates of interest.  Nor was it suggested that the plaintiff need not have borrowed money to meet the disbursements.

I am prepared to proceed on the basis that it was proper for the plaintiff to incur the interest and bank charges, and on the basis that the amount allowed by the master was an appropriate amount.

In my opinion, the only issue is whether the court has power to allow such an item by way of costs.

The power to award costs is statutory. It is contained in s40(1) of the Act. That sub-section provides as follows:

“Subject to the express provision of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.”

“Costs” are not defined by the Act. In my opinion the outcome of the appeal depends upon the meaning of “costs” in s40.

The awarding of costs is regulated by the Rules.  It is regulated by r101 in particular, and throughout that Rule “costs” is used from time to time, and again without any definition.  For example, r101.01(1) provides:

“Notwithstanding the following provisions of this Rule and of the provisions of Rule 101A.01, the costs of any party, the amount thereof, the party by whom, or the fund or estate, or portion of an estate, out of which they are to be paid are in the discretion of the Court, and the Court may:

...”

Rule 101.02(1) provides as follows:

“Subject to these Rules, the costs of and incidental to a proceeding shall follow the event unless the court otherwise orders.”

On occasions provisions are found that make it clear that a particular expense is a cost.  Rule 101.16(d) provides:

“Any just and reasonable charges and expenses that appear to have been properly incurred in procuring evidence and the attendance of witnesses are to be allowed;”

Rule 101.16(b) gives general guidance to a taxing officer.  It provides as follows:

“On every taxation the taxing officer shall allow such charges and expenses as appear to him to have been necessary or proper for the attainment of justice, but save as against the party who incurred the same, no costs shall be allowed which appear to the taxing officer to have been incurred or increased through over caution, negligence or mistake, or by payment of special fees to counsel or special charges or expenses to witnesses or other persons, or by other unusual expenses;”

Despite the apparent width of this provision, I consider that it governs the exercise of the discretion to award costs, and is not to be read as authorising the award of any amount that is considered to be a charge or expense necessary or proper for the attainment of justice. I say that partly because of the use of “costs” in the sub-paragraph, partly because of the constant use of “costs” throughout r101, and also because of the use of that expression in s40 of the Act.

In other words, I can find nothing in the Rule to suggest that an amount may be allowed upon a taxation, that does not fall within the recognised meaning of “costs”.

Rule 101A.01 provides that costs are to be “allowed and paid” in accordance with a scale set out in a Schedule to the Rules.  That Schedule is in the traditional form.  It deals with items of work that would be performed by a solicitor.  Item E of the Notes to the Schedule provides:

“Only the amount of disbursements actually paid or payable are to be shown in the bill as disbursements.  Where a disbursement is yet to be paid, this must be specifically stated.”

I have not been able to find any definition of the term “disbursement”.

In Cachia v Hanes (1994) 179 CLR 403 the High Court decided that a litigant in person, who was not a lawyer, could not by way of costs recover compensation for time spent in preparing and conducting his case. The provisions of the Supreme Court Act 1970 (NSW) and of the Supreme Court Rules 1970 (NSW) appear to be in relevant respects essentially the same as the South Australian provisions set out above.  The relevant provisions are set out in the reasons for judgment, but I will refer to some of them briefly.  Section 76(1) of the New South Wales Act provides:

“Subject to this Act and the rules and subject to any other Act:

(a) costs shall be in the discretion of the Court;

(b) the Court shall have full power to determine by whom and to what extent costs are to be paid; and

(c) the Court may order costs to be taxed or otherwise ascertained on a party and party basis or on any other basis.”

“Costs” are defined to include “costs of or incidental to proceedings in the Court.” “Costs” are defined by s19(1) to include “fees, charges, disbursements, expenses and remuneration”. That provision appears to be to the same effect as s40 of the Act. It is certainly no narrower. In the New South Wales Rules the expression “costs” appears frequently. Rule 23(2) of the New South Wales Rules provides:

“On a taxation on a party and party basis there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed.”

When allowance is made for the scope of the definition of “costs” in s19(1), r23(2) appears to be to the same effect as r101.16(b) of the Rules.

The approach of the majority (Mason CJ, Brennan J, Deane J, Dawson J and McHugh J) was that the outcome of the case was governed by the meaning of “costs”.  They said (at 409):

“The ‘costs’ provided for in the Rules do not include time spent by a litigant who is not a lawyer in preparing and conducting his case.  They are confined to moneys paid or liabilities incurred for professional legal services.  It is only in that sense that the Rules speak of ‘costs’.”

Although the focus of this passage is upon the claim advanced by the litigant in person, the reasoning rests upon the conception that “costs” are limited to expenses incurred for professional legal services.  Those expenses, of course, will include the expenses that might be incurred by the practitioner.  The majority made this clear a little later when they said (at 410-411):

“To use the Rules to compensate a litigant in person for time lost would cut across their clear intent.  Costs, within the meaning of the Rules, are reimbursement for work done or expenses incurred by a practitioner or practitioner’s employee.  Compensation for the loss of time of a litigant in person cannot be said to constitute costs within the meaning of the Rules.

This is hardly surprising.  It has not been doubted since 1278, when the Statute of Gloucester 1278 (UK) 6 Edw. I c 1 introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation.  They were never intended to be comprehensive compensation for any loss suffered by a litigant.”

In my opinion these passages have a twofold significance.  First, the emphasis upon “costs” being professional legal costs, that is reimbursement to a practitioner for work done or expenses incurred by the practitioner.  Secondly, the emphasis upon the fact that the award of costs is not intended to be complete compensation for losses suffered by a litigant.

For both those reasons the majority concluded that the litigant in person could not recover compensation for time spent by him in preparing and conducting his case.  In principle, I can see no difference between the claim made in that case and the claim made in the present case.  First of all, in each case the claim is for an expense that does not represent remuneration paid to a legal practitioner or an expense incurred by the practitioner in the course of representing the client.  The claim is for a cost to the client, not to the practitioner.  Secondly, each claim seems to rest in part on the premise that an award of costs should adequately compensate a litigant for any cost or loss associated with the conduct of the litigation.

It is surprising that no authority has been found by the parties more closely in point.  However, in my opinion the principle that underlies the decision in Cachia v Hanes (supra) is that costs recoverable under s40 of the Act are a reimbursement for work done or expenses incurred by a practitioner, and do not extend to an expense of the type claimed in the present case. In my opinion the judge was right, for this fundamental reason, to reverse the master’s decision on the point.

For what it is worth, I am of the view that the claim made by the plaintiff is a reasonable one. There are differing views on the appropriate approach to costs in civil litigation. From time to time it is said that costs should not be awarded to a successful litigant. Whatever might be the best approach, I must say that while it continues to be that a successful litigant can ordinarily expect to recover costs in accordance with the Rules, it would be reasonable to allow a claim such as was made here to be recovered. On my view of the matter, that would require an amendment of the Rules and, possibly, an amendment to s40 of the Act. If such an amendment were to be made, it would be necessary to take care not to open up, inadvertently, other possible claims.

I turn now to the decision of the judge relating to the award of interest upon the taxed costs.  There is no fixed rule that costs must follow the event.  By r101.02, that is the order to be made “unless the Court otherwise orders”.  There is a well recognised practice of awarding costs in accordance with the outcome of particular issues, although that practice does not detract from the general rule.  In the present case there were several discrete issues argued before the judge.  Each party had some successes.  In my opinion it cannot be said that it was not open to the judge to exercise his discretion in the manner that he did.  I would not interfere.

Cross-appeal

An award of costs to a litigant bears interest pursuant to s114(1) of the Act. In the case of taxed costs, interest is computed from the date of the certificate of the taxing officer “... or an earlier date specified by the taxing officer in the certificate.” That provision, in my opinion, gives to the master or judge concerned a discretion. The discretion is unfettered and is to be exercised having regard to the facts and to the interests of justice.

The starting point is not an award of interest from the date of the judgment by virtue of which the party is entitled to costs.  There must be some basis for the exercise of the discretion to order that interest be computed from a time earlier than the date of the certificate, and in particular to order that interest be computed from the date of the relevant judgment.  All sorts of matters could be relevant to this question, including delay by the party ordered to pay costs or an unreasonable approach to the taxation of costs which causes delay.  Some of the brief remarks made by the master and by the judge are capable of suggesting that the plaintiff had a right to have interest computed from the date of the judgment in her favour, subject only to the defendant establishing some reason to deprive the plaintiff of interest from that earlier date.  It may be that that was not what was intended.  Reference is made by the master, in particular, to other matters that would support the computation of interest from an earlier date.  I merely make the point that, in my opinion, there is no such presumption about the time from which interest is to be computed, and it is a matter of the court being satisfied that there are proper grounds upon which interest should be computed from a date earlier than the date of the certificate, and in particular from the date of the judgment that confers the entitlement to costs.

Conclusions

For those reasons, I would dismiss the appeal and order that the cross-appeal be struck out as incompetent.

MILLHOUSE J

I agree. To dismiss the appeal is the correct course for us to take but it does lead to injustice. I hope either that we, through an amendment to the Rules, or Parliament through amendment to s.40 of the Act, may be able to remedy the injustice.

NYLAND J

I agree with the reasons of the Chief Justice and the orders he proposes.