Catto v Hampton Australia Ltd (in liq)

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SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

CATTO & ORS v HAMPTON AUSTRALIA LTD (IN LIQ) & ORS

[2008] SASC 231

Judgment of The Full Court

(The Honourable Justice Vanstone, The Honourable Justice Anderson and The Honourable Justice White)

22 August 2008

PROCEDURE - COSTS - APPEALS AS TO COSTS

Order for indemnity costs made following a civil trial - successful parties had already paid their solicitor's costs in full - whether the costs order encompassed all the costs which the successful parties had already paid to their solicitors or only those costs which the solicitors could have enforced by application against their clients.

Held: when a party has already paid its solicitor's costs, indemnity costs comprise (subject to issues of reasonableness) costs actually paid.

Applications to the Full Court to review, at first instance, provisional costs orders made by a master - whether review procedure correct - whether the matters were appropriately before the Full Court.

Held: review procedure inappropriate - however, in the circumstances, applications for review treated as appeals.

Legal Practitioners Act 1981 (SA) s 42; Mutual Recognition Act 1993 (SA); Supreme Court Act 1935 (SA) s 40, s 48, s 49 and s 50; Judiciary Act 1903 (Cth) s 55B; Supreme Court Rules 1987 r 101, Second Schedule; Supreme Court Civil Rules 2006 r 8, r 16, r 271, r 276, r 277 and r 278 , referred to.
Halliday v SACS Group Pty Ltd (1993) 67 ALJR 678; Pickering v Smoothpool (No 6) [2001] SASC 440; Latoudis v Casey (1990) 170 CLR 534; Kelly v Noumenon Pty Ltd (1988) 47 SASR 182, applied.
R v Miller [1983] 3 All ER 186, distinguished.
Cachia v Hanes (1994) 179 CLR 403; Fullalove v Parker (1862) 31 LJCP 239; In Re Jones (1869) LR 9 Eq 63; In Re Hope (1872) LR 7 Ch App 766; TNT Bulkships Ltd v Hopkins (1989) 65 NTR 1; Elders Trustee and Executor Company Ltd & Anor v Estate of Herbert & Anor (1996) 111 NTR 25; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2002) 1 Qd R 183; Cannon Street Pty Ltd v Karedis (2006) 229 ALR 699; Theden v Nominal Defendant [2007] QSC 316, discussed.
Burford v Allan [1998] SASC 6693; Santos Ltd v Delhi Petroleum Pty Ltd (2005) 240 LSJS 366; Minister for Works v Australian Dredging and General Works Pty Ltd [1986] WAR 235; Cannon Street Pty Ltd v Karedis [2007] 1 Qd R 505; McNamara Business and Property Law v Kasmeridis (2005) 92 SASR 382, considered.

WORDS AND PHRASES CONSIDERED/DEFINED

"Costs incurred", "Indemnity costs"

CATTO & ORS v HAMPTON AUSTRALIA LTD (IN LIQ) & ORS
[2008] SASC 231

Full Court:      Vanstone, Anderson and White JJ

  1. VANSTONE J:     I agree with the orders proposed by White J and with the reasons he has given.

  2. ANDERSON J:     I also agree with the orders proposed by White J and with his reasons.

  3. WHITE J:             Following a substantial civil trial…

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Details
Case
[2008] SASC 231
Decision Date

CaseChat Overview and Summary

In the case of Catto v Hampton Australia Ltd (in liq), the defendants appealed against an order for indemnity costs made following a civil trial. The defendants, who were the appellants, argued that the indemnity costs to which they were entitled should encompass all the costs they had already paid to their solicitors. The plaintiffs, who were the respondents, contended that the order should only cover those costs which the solicitors could have enforced by application against them. The appeal also considered whether the costs arrangements between the defendants and their respective solicitors were enforceable under the Legal Practitioners Act 1981 (SA). Additionally, the court examined whether the master was correct in holding that the amounts paid by the second defendant to one of its firms of solicitors could not be recovered at all because the solicitors did not have an entitlement to practise the law in South Australia at relevant times.

The court found that the meaning of the expression "costs incurred" in subrule 101.07(6)(d) of the Supreme Court Civil Rules 2006 made it unnecessary to consider the defendants' submission that s 42(6) of the LPA does not preclude the agreements which they had made with their respective solicitors from being enforceable. It was also not necessary to consider the plaintiffs' submission that the Full Court decision in McNamara Business and Property Law v Kasmeridis was plainly wrong. The court concluded that the master’s order of 29 January 2008, which purported to dispense with the first stage review contemplated by r 278(1)-(4), was doubtful. The court held that completion of the first stage review is a necessary step before a dissatisfied party can apply for a review by a single judge. Therefore, dispensing with this step in the process was not appropriate. The court allowed the appeals and set aside the orders made by the master on 29 January 2008, and orders 4 and 5 made by the master on 17 December 2007. The matters were remitted to the master for completion of the adjudication of the costs claimed by the defendants in accordance with the court’s reasons.

The court granted each of the defendants permission to appeal against the order made by the master on 17 December 2007 and extended the time within which each of the defendants could appeal against that order to 12 February 2008. The court also directed that each of the applications for review filed by the first and third defendants, and by the second defendant, stand as notices of appeal against the order numbered 4 made by the master on 17 December 2007. Finally, the court heard the parties as to costs.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The principal question is whether the indemnity costs to which the defendants are entitled are the amounts which they actually expended in defending the plaintiffs’ claims, or are only those amounts which their respective solicitors could have enforced in an action against them, ie, the amounts which they were legally obliged to pay. The defendants (who are the present appellants) contend for the former, and the plaintiffs (the present respondents) for the latter. If the plaintiffs’ submission is accepted, there is then an issue as to whether subs 42(6) and (7) of the Legal Practitioners Act 1981 (SA) (LPA) have the effect that the costs arrangements between the defendants and their respective solicitors were unenforceable. Finally, there is an issue as to whether the master was correct in holding that the amounts paid by the second defendant to one of its firms of solicitors could not be recovered at all because at relevant times those solicitors did not have an entitlement to practise the law in South Australia.Background Circumstances It is not necessary to recount the circumstances of the plaintiffs’ claims at first instance. The judge gave short reasons for the order for indemnity costs. She was satisfied that the plaintiffs should have been well aware that the chances of success of their claims were “at best slim and at worst non existent”. The judge considered that there was, to an extent at least, a “wilful blindness to the weakness of the plaintiffs’ case and a forlorn hope that the second defendants would choose to negotiate a general settlement as against a long and costly defence to the action”. The judge said that aspects of the plaintiffs’ case were “all but hopeless” and considered that the claim made against the third defendant, a liquidator, lacked any basis. The terms of the order were as follows:“The court orders that … 4.All the plaintiffs and Robert John Charles Catto in his own right pay the costs of the first, second and third defendants in defending the claims, inclusive of costs reserved, on an indemnity basis …” Mr Robert Catto was separately identified in the order as he had been a plaintiff in the proceedings in his capacity as executor of an estate. It is convenient in these reasons to refer to all those ordered to pay the defendants’ costs as “the plaintiffs”. It was common ground on the appeals that the respective solicitors for the defendants had, from time to time during the currency of the litigation, rendered accounts to them for their work and that the defendants had, very shortly after receiving those accounts, paid them in full. All amounts claimed by the solicitors for costs had been paid by the defendants prior to the judge making the order for indemnity costs. The practice and procedure governing the underlying action, including the costs regime, was that contained in the Supreme Court Rules 1987 (the 1987 Rules). The Supreme Court Civil Rules 2006 (the 2006 Rules) came into operation on 4 September 2006. By r 8(3) of the 2006 Rules, the regime contained in Ch 12 of those Rules is applicable to the adjudication of the costs ordered by the judge.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

My conclusion concerning the meaning of the expression “costs incurred” in subrule 101.07(6)(d) makes it unnecessary to consider the defendants’ submission that s 42(6) of the LPA does not preclude the agreements which they had made with their respective solicitors from being enforceable. Similarly, it is not necessary to consider the plaintiffs’ submission that the Full Court decision in McNamara Business and Property Law v Kasmeridis[30] is plainly wrong. It may be necessary at some time in the future for the decision in Kasmeridis to be reconsidered, but it is not necessary to do so for the disposition of this appeal.[30] [2005] SASC 269; (2005) 92 SASR 382.Conclusion For the reasons given above I would allow the appeals and make the following orders:1.I would set aside each of the orders numbered 5 and 6 made by the master on 29 January 2008.2.I would direct that each of the applications for review filed by the first and third defendants, and by the second defendant do stand as notices of appeal against the order numbered 4 made by the master on 17 December 2007.3.I would extend to 12 February 2008 the time within which each of the defendants may appeal against the order made by the master on 17 December 2007.4.I would grant each of the defendants permission to appeal against that order.5.I would allow the appeals and set aside each of the remaining orders made by the master on 29 January 2008, and orders 4 and 5 made by the master on 17 December 2007.6.I would remit the matters to the master for completion of the adjudication of the costs claimed by the defendants in accordance with these reasons.7.I would hear the parties as to costs.

Ratio Decidendi

Legal Principle Established

It can be seen that r 278 provides for a review of a provisional costs order, in the first instance, by the same master who made the order (r 278(1)-(3)). On that review, the master may either confirm the order and direct that it be entered in the court’s record as a judgment of the court or, alternatively, vary the provisional costs order and then direct that the provisional costs order (as varied) be entered in the court’s record as a judgment of the court. A person who is dissatisfied with the decision on review may, within 14 days, apply for a further review by a single judge (r 278(3)). Rule 278 contemplates that a judge will conduct the review only after the provisional costs order has been entered in the court’s record as a judgment of the court. Consideration of the Process In the present case, the master’s order of 29 January 2008 purported to dispense with the first stage review contemplated by r 278(1)-(4). In my opinion, it is doubtful that a dispensation of this step in the process can be made. That is because completion of the first stage review is a necessary step before a dissatisfied party can apply for a review by a judge. Put slightly differently, what the 2006 Rules contemplate is the single judge reviewing the order or decision made on review by the master. If that review is dispensed with then there is no order or decision which may be reviewed by a judge. Further, it is not altogether clear that a master may refer to the Full Court a matter which the 2006 Rules contemplate will be heard and determined by a single judge. The parties referred in this respect to r 16(1) of the 2006 Rules which provides:(1) A Master may refer a matter for consideration by—(a) the Court constituted of a single Judge; or(b) the Full Court.In addition, the parties referred to s 48(2)(c) and s 49(1) of the Supreme Court Act 1935 (SA). Section 48(2)(c) provides:(c) the jurisdiction of the court may be exercised by a master to the extent authorised by this Act or any other Act, or by rules of court made under this Act or any other Act. Section 49(1) provides:(1)The court constituted of a single judge or a master may reserve a question of law for the consideration of the Full Court. I do not consider s 49(1) to be relevant. Even though several of the issues raised on the appeal are questions of law, this was not a case in which the master was reserving a question of law for the consideration of the Full Court. Section 48(2)(c), in combination with r 16(1), does indicate that masters have power to refer a matter for consideration of the Full Court. However, r 16(1) appears to be confined to matters which would otherwise be before the master, ie, matters which masters could, absent the referral, hear and determine themselves. It is not appropriate to express a concluded view about this point because the Court did not hear full argument on it. However, even if the masters’ powers under r 16(1) are not limited to matters which may be heard by them, one would expect, in the ordinary course, that a master would exercise considerable restraint before referring a matter in the nature of an appeal or review from the master's own decision to the Full Court. That is because it would be undesirable for there to be an impression that a judicial officer could determine the constitution of the court to hear appeals or reviews from his or her own decisions.