Catto v Hampton Australia Limited (in Liquidation) (No 2) - [2009] SASC 171

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CATTO & ORS v HAMPTON AUSTRALIA LIMITED (IN LIQUIDATION) & ORS (No 2)
[2009] SASC 171
Reasons of Judge Lunn a Master of the Supreme Court
12 June 2009
PROCEDURE - COSTS
Determination of preliminary objection to adjudication - whether all defendants should have had common representation - held under 6R 269 a taxing Master has no power to decide the issue.

CATTO & ORS v HAMPTON AUSTRALIA LIMITED (IN LIQUIDATION) & ORS (No 2)
[2009] SASC 171
Reasons on preliminary objection to the schedule of costs of the 1^st and 3^rd defendants.

JUDGE LUNN: After a long trial Vanstone J ordered that all the plaintiffs and Robert John Charles Catto (“the costs plaintiffs”) pay the costs of the first, second and third defendants in defending the claims, inclusive of costs reserved, on an indemnity basis. Pursuant to that order on 7 November 2008 the first and third defendants filed an itemised schedule of costs, FDN 183. On 30 March 2009 the costs plaintiffs filed a notice of dispute to that schedule. On 31 March 2009 I ordered by consent that there be a preliminary determination under 6R 271(6) of the issue raised in paragraph 9 of that notice of dispute which stated:
As regards to the remaining items on the First and Third Defendant’s Long Form Bill of Costs, the Plaintiffs admit the sum of $200,000, taking a global approach, on the basis that the case being advanced by the Second Defendant was essentially identical with the case being advanced by the First and Third Defendants.
It is submitted that the conduct by the Defendants, globally, is unreasonable having regard to the nature of the claims being made. That is, it is submitted that it unreasonable for the Defendants to have appointed two very senior and experienced Senior Counsel to act in relation for separate Defendants where those Defendants had, essentially, identical interests to be protected in the conduct of their defence and as such that they were interests which were capable of being protected by one Senior Counsel only together with an appropriate junior.
The interests of the second defendant, on the one hand, and those of the first and third defendants on the other, were sufficiently similar to justify the appointment of one legal team only. The corporate defendants were all part of one “group” and all of the costs of all of the defendants were costs met by one of the principal entities in the corporate group.
In those circumstances, it is submitted that it is excessive to permit the Defendants to charge what is essentially double for the conduct of the defences. Take it together, the fees associated with the defences exceed $1.5M and as such it is submitted that that amount is excessive having regard to the similarity of interests as between the Defendants.
The adjudication of costs is proceeding under the Supreme Court Civil Rules 2006 (the “2006 Rules”). The adjudication of the costs payable by the costs plaintiffs to the second defendant has been completed.
The primary submission of counsel for the costs plaintiffs on the matters raised by paragraph 9 of the notice of dispute was that I, as the Master adjudicating under 6R 273 on the first and third defendants’ schedule of costs, could exercise the power of the Court under 6R 269 to disallow the whole of the costs claimed by the first and third defendants on the basis that all three defendants should have had common representation in the action. 6R 269 provides:
269Over-representation of parties with common interest
If two or more parties have identical or similar interests but are separately represented and, in the Court’s opinion, unnecessarily so, the Court may exercise either or both of the following powers –
(a)the Court may order that costs to which the parties are entitled be determined on a basis that would be appropriate if they had common legal representation;
(b)the Court may order the over-represented parties to compensate other parties to the action for additional costs incurred by them as a result of the over-representation.
I consider that 6R 269 does not confer power on the Master adjudicating on a schedule of costs under 6R 273 to disallow the whole of the costs of a separately represented party on the ground that there should have been common representation with another party having a similar interest. It is a power which can only be exercised by the Court which made the order for the costs, which here was Vanstone J. A taxing Master has no power to alter the costs order: Arthur v McLeish [1996] 1VR 410. To disallow these costs as sought by the costs plaintiffs would be to negate the order for costs against the first and third defendants.
I am not aware of any decision on 6R 269 on the point. Reported authorities on its predecessors, which were in similar but not identical terms, are mostly decisions by Courts making orders for costs. (See the cases referred to in the footnotes to Dal Pont Law of Costs paras [11.46-11.48]).
Although they were not referred to in argument, there are two cases which suggest that a taxing officer may have power to disallow the entire costs of a party where that party should have been jointly represented with another party. The first case is A G Spalding v A W Gamage Ltd [1914] 2 Ch 405, where it was accepted that a taxing officer could exercise such a power under the English Order 65 Rule 27(8), which was almost identical to 87R 101.016(c) quoted below. As far as I can ascertain there was not in England at the time any equivalent of 87R 101.04. The other case is Read v Chown (1929) 46 WN NSW 154 at 156 where Harvey CJ in Eq stated as dicta:
There is only one other matter which I think also calls for comment. Where it is desired by the trustees or by the beneficiaries to put the case for one set of costs (and it is the duty of the trustees to do so in every case where it appears to them it should be done), it is advisable that that application be made always on the hearing of the summons because the Court which is dealing with the matter is in the best position to judge of the propriety of the parties appearing separately; but, in my opinion, it is also open to a Taxing Officer, without any special reference, under the general powers which he has under r. 50 of the rules of the Court for dealing with taxation, to disallow any costs, or only to allow costs which seem necessary or proper, and in a case which appears to him to be clearly within the principle only to allow one set of costs notwithstanding that the Court may have directed the taxing of all costs and made no reference to allowing one set of costs on the taxation. Of course, the Taxing Officer would not move, unless it seems to him a particularly clear case, because he would not be as well able to judge of the matter as the Judge who heard the case, but if the facts clearly show the Taxing Officer that the costs were incurred improperly – that is to say, it was not a justifiable case for the parties to appear separately, he might in my opinion exercise his discretion in that way and only allow one set of costs to defendants in the same interest in spite of the direction of the Court that all costs should be taxed, because that direction that all costs should be taxed only means all proper costs should be taxed.
From this judgment it does not appear that there were any rules in New South Wales at the time governing the topic.
I was invited to exercise the power under 6R 269(a). The adjudication of costs is proceeding under Part 12 of the 2006 Rules which contains 6R 269. It was not suggested that there was any inherent power which I could exercise for this purpose which existed over and above 6R 269, and in any event for the reasons appearing below I consider the 2006 Rules impliedly exclude any such power.
The position under the repealed Supreme Court Rules 1987 (the “1987 Rules”) was somewhat different and the changes are significant. 87R 101.04 provided:
Where several defendants defend an action separately costs may be disallowed to all of such defendants except one, or to any of such defendants, if it appears that the defendants, or any of the defendants, might have joined in their defence.
87R 101.16, which laid down the powers of taxing officers, provided in subr (c):
(c)Where the same solicitor or firm of solicitors is employed by two or more plaintiffs or defendants, and separate pleadings are delivered or other proceedings had by or for any of the parties separately the taxing officer on the taxation of the bill of costs of the solicitor or solicitors involved may disallow any costs occasioned by separate pleadings or other proceedings that he considered to have been unnecessarily or improperly incurred; (Underlining added).
It would seem that 6R 269 is similar in its effect to 87R 101.04. A partial equivalent in the 2006 Rules of 87R 101.16 is 6R 274(3), but its equivalent subrule to 101.16(c) is 274(3)(c) which states:
(c)if the same solicitor or firm of solicitors represents two or more parties to an action – costs will not be allowed separately for each party but on the basis of the aggregate work necessary and reasonable for the representation of both or all parties;
Significantly, 6R 274(3)(c) does not contain any equivalent of the underlined portion in the quotation of 87R 101.16(c) above, which would be the relevant head of power if it had applied to this case. I consider that the inference to be drawn from the changes on this topic from the 1987 Rules to the 2006 Rules is that the power to disallow costs for common representation has been removed from a taxing Master and has been given by 6R 269 solely to the Court under as constituted for the making of the costs order. This conclusion is supported by 6R 269 appearing in Part 2 of Chapter 12 of the 2006 Rules, which deals with “Court’s discretion as to costs”, and not in Part 3, which deals with “Adjudication upon costs”.
Even if the Rules allowed me an implied power on the topic, as Read v Chown above said existed in New South Wales, it is only to be exercised in clear cases, but this is not by any means a clear case.
Counsel for the costs plaintiffs claimed support from s 40 of the Supreme Court Act, but that section deals with the making of costs orders and not adjudications for their quantification.
Another reason why any power under 6R 269 should not be exercised on this adjudication is that the costs of the second defendant have already been adjudicated upon and allowed without the costs plaintiffs taking any objection to those costs based on the common representation point. Where a common representation objection succeeds the Court usually apportions one set of costs between the parties that should have been commonly represented. If the point could be taken here, it would mean, if successful, that the second defendant would obtain 100% of its costs and the first and third defendants would obtain none of their costs. While the costs of all of the defendants have ultimately came out of a common fund, the first and second defendants are still separate legal entities and there is legal significance for accounting and other purposes in what costs each might recover. If the point had been taken on the costs argument before Vanstone J in September 2004, and her Honour had upheld it, this point would have been addressed.
Insofar as paragraph 9 of the notice of dispute seeks total disallowance of the costs claimed by the first and third defendants under 6R 269 I determine that the objection should be rejected.
Paragraph 9 also contains some matters going to the exercise of the taxing Master’s discretion on the adjudication. It is not appropriate to determine these discretionary matters as preliminary issues and they will need to be raised on the adjudication in relation to particular items in the schedule.
It is not appropriate that I deal with the other submissions based on the exercise of a power which I do not have. It is open to the costs plaintiffs to apply to Vanstone J under 87R 84.12 to vary her costs order if they wish to pursue the point further.