Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 8]
[2011] WASC 27
•4 FEBRUARY 2011
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: CLAMBAKE PTY LTD -v- TIPPERARY PROJECTS PTY LTD [No 8] [2011] WASC 27
CORAM: EM HEENAN J
HEARD: 15 DECEMBER 2010
DELIVERED : 4 FEBRUARY 2011
FILE NO/S: CIV 1707 of 2003
BETWEEN: CLAMBAKE PTY LTD (ACN 009 242 371)
Plaintiff
AND
TIPPERARY PROJECTS PTY LTD (ACN 054 744 713)
First DefendantWARREN PERRY ANDERSON
Second Defendant
FILE NO/S :CIV 2093 of 2003
BETWEEN :OWSTON NOMINEES No 2 PTY LTD (ACN 001 769 099)
First Plaintiff
TIPPERARY PROJECTS PTY LTD (ACN 054 744 713)
Second PlaintiffAND
CLAMBAKE PTY LTD (ACN 009 242 371)
First DefendantLAND CAPITAL PTY LTD (ACN 058 548 806)
Second DefendantIVOR FREDERICK COHEN
Third DefendantWARREN PERRY ANDERSON
Defendant to counterclaim
Catchwords:
Contract - Lessor and lessee - Guarantor - Covenant for lessee in default to pay to lessor legal expenses associated with action to remedy default or recover moneys due - Guarantor of lessee's liabilities - Default by lessee in payment of rent over lengthy period - Action by lessor to attempt to enforce covenant and recover unpaid rent and associated moneys - Only proper and reasonable costs enforceable - Reference to registrar to determine costs which would be allowed to lessor's solicitors and counsel on a solicitor and client taxation - Report of registrar - Separate hearing of issue of costs recoverable - Effect of insurance indemnity for costs - Interest
Legislation:
Legal Aid Practice Act 2003 (WA)
Legal Profession Act 2008 (WA)
Supreme Court Act 1935 (WA)
Result:
Judgment for plaintiff for $364,045.61 to take effect from 15 December 2010
Category: B
Representation:
CIV 1707 of 2003
Counsel:
Plaintiff: Mr M P Cornes
First Defendant : No appearance
Second Defendant : No appearance
Solicitors:
Plaintiff: Minter Ellison
First Defendant : No appearance
Second Defendant : No appearance
CIV 2093 of 2003
Counsel:
First Plaintiff : No appearance
Second Plaintiff : No appearance
First Defendant : No appearance
Second Defendant : No appearance
Third Defendant : No appearance
Defendant to counterclaim : No appearance
Solicitors:
First Plaintiff : No appearance
Second Plaintiff : No appearance
First Defendant : No appearance
Second Defendant : No appearance
Third Defendant : No appearance
Defendant to counterclaim : No appearance
Case(s) referred to in judgment(s):
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3] [2009] WASC 52
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 7] [2009] WASC 390
EM HEENAN J: This has been the trial of one of the issues remaining from the first joint trial of the rent action and the fire claim in these consolidated actions: Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3] [2009] WASC 52. The history of how this separate issue was, in the course of the original trial, deferred for trial as a separate special issue is explained in that decision at [147] ‑ [150].
Later, in Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141 at [12] ‑ [18] I gave reasons for my decision to refer to a Registrar of the court, pursuant to s 50 of the Supreme Court Act for the purposes of the Registrar conducting an inquiry and making a report to the court, the amount which it would be proper to allow as the costs chargeable to Clambake by its solicitors and counsel for the professional services charges and expenses for which Clambake had itself become liable in consequence of or in connection with any default by Tipperary in performing or observing the covenants, conditions or stipulations contained or implied in the lease. Part of the role of the Registrar was to inquire into and report the quantum of costs which Clambake would be liable to pay to its own solicitors and counsel in connection with these issues had it sought a review of those costs between itself and its own solicitors and counsel by a process of taxation under s 228 of the Legal Profession Act 2008 (WA).
As I said in Clambake [No 5] at [17], in conducting such an inquiry the Registrar should be able to, and I directed that she should, report on whether any challenged item has or has not been incurred in consequence of the matters provided for in the lease, and determine the proper costs for which the parties to be charged, Tipperary and Mr Anderson, shall be liable. In making that order, I further directed that the Registrar should, in undertaking the inquiry, have all or any powers such as may be necessary or applicable to vary, extend or to dispense with limits provided in any applicable scale of costs, having regard to the complexity, importance and natures of the matters involved. Upon the inquiry being completed, the result was reported to the court following which the parties were given an opportunity to make further submissions before I would decide what judgment, if any, should be entered in favour of Clambake in respect of those costs.
This separate issue has, since the original trial in the rent action in the fire claim, been consistently referred to as the 'contractual costs issue' and was one of the issues still outstanding at the time of the most recent decision in this litigation in Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 7] [2009] WASC 390, but was not dealt with on that occasion.
This 'contractual costs issue' arises solely as part of the original rent claim; that is, as part of the first of these two consolidated actions, namely CIV 1707 of 2003. Although both actions remain consolidated, nothing in the determination of the 'contractual costs issue' affects the issues arising in the second consolidated action, the fire claim, CIV 2093 of 2003, and, for those reasons, there was no appearance by or on behalf of any of the parties to the fire claim at the trial of this issue.
Although Tipperary Projects Pty Ltd and Mr W P Anderson appeared by solicitors and by counsel at the original trial of the rent action and the fire claim, and in all the subsequent hearings up to and including Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 7], there was no appearance by or on behalf of either of these two defendants at the trial of this issue. However, those defendants did appear and were heard at the inquiry conducted by the Registrar which was heard on 15 January 2010 and which resulted in the Registrar's report to this court of 22 April 2010. Since then, however, affidavit evidence and direct communications to the court from Mr W P Anderson have revealed that because of a major change in Mr Anderson's current financial circumstances, apparently resulting from the appointment by secured creditors of receivers to Owston Nominees No 2 Pty Ltd and, more particularly, because of orders made in the Family Court of Australia in proceedings between Mr Anderson and his then wife, the control of the largest part of his financial affairs have been taken out of his hands or have been made subject to such restrictions that he is unable to engage solicitors or counsel or appear at this hearing. I am satisfied that notice of the hearing has been given to Mr Anderson and to Tipperary Projects and that each has been served with the relevant documents, but that neither is able to appear or be heard on this occasion.
The inquiry which I directed should be conducted by the Registrar was undertaken by Registrar S Boyle, who produced her report to the court dated 22 April 2010. This was accompanied by two large schedules, being lists of evidentiary materials, provided to the Registrar in the course of the inquiry. Copies of the report and those materials were sent to the parties that day.
The matter was then listed for a directions hearing before me on 30 November 2010 at which I made several orders, including a direction for the filing and service of written submissions, to address questions of whether or not GST was included or payable upon any portion of the costs claim and, if so, to what extent. I also directed that the plaintiff should prepare computations of the interest payable upon the costs claim, having regard to several contingencies. That was later done.
The trial of this separate contractual costs claim is, of course, the trial of a claim for moneys due under a contract. However, from the outset it has proceeded on the basis that the proof of the contract, namely the lease, and the liability of the second defendant, as guarantor of the lease, and the proof of various defaults under the lease giving rise to the need for the plaintiff to engage solicitors and/or counsel or to take other steps to enforce the lease, were established by the evidence taken and the findings made at the original trial of the rent claim in Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3]. All that evidence at that trial, so far as it was relevant to this issue, was treated as evidence at the trial of this issue and the findings as to the nature and extent of the breaches by Tipperary of its obligations under the lease, and concurrent liability of Mr Anderson as guarantor were also treated as having been determined by the findings made after the trial of the original rent action. What remained in issue and which was the subject of the inquiry report and now the trial of this issue was the quantum of those costs.
At this hearing the evidence received, as tendered by the plaintiff, comprised:
(a)the Registrar's report of 22 April 2010 and the two volumes of accompanying schedule; and
(b)an affidavit of Justine Katherine Condon sworn 9 December 2010.
Registrar's report
The learned Registrar set out the material terms of cl 3.08 of the lease (exhibit 4) which provided:
The lessee shall pay to the lessor on demand, all legal costs, charges and expenses for which the lessor shall become liable in consequence of or in connection with any default …
The uncontested evidence before the Registrar indicated that the fees being claimed by the plaintiff were fees which were incurred solely in respect of the rent action. They comprised fees charged to the plaintiffs by their solicitors Minter Ellison over the period from June 2004 and they had been clearly isolated and billed separately from fees which had been rendered by the solicitors in connection with the fire claim. Indeed, they had been invoiced directly to Clambake as distinct from the insurer client (GIO) in the fire action. There were also fees from two other legal firms, fees charged by six separate counsel, and a schedule of disbursements.
The learned Registrar, correctly, rejected the submission by the plaintiffs that the costs to be recovered should be assessed on an indemnity basis. The Registrar pointed out that this was not a party and party bill for taxation, nor analogous to any such process. It is instead the determination of an amount due under the terms of the lease for legal costs and the amount of the costs which could be recovered by legal practitioners at the material times was controlled by the statutory scheme set up under the Legal Practice Act 2003 (WA), later superseded by the Legal Profession Act 2008 (WA).
As the Registrar explained, under the Legal Practice Act 2003 s 215, the statutory right to recover costs between practitioner and client and the basis on which they are recovered can arise in two ways. First, pursuant to a costs agreement (made in accordance with s 221 pt 13 of the Act) between the client (Clambake) and its own lawyers. Second, in the absence of a costs agreement, fees are charged pursuant to an applicable costs determination of the Legal Costs Committee under the Act. Section 215 of the Act provided that subject to any costs agreement made in accordance with s 221, the taxation of the bills of lawyers; and (b) any other aspect of the costs charged by lawyers is regulated by an applicable costs determination.
Although the Registrar's task was not a taxation of costs but an assessment of the costs recoverable from a third party under the terms of this lease, it was still governed by the statutory scheme and the defendants, as parties to be charged, were entitled to the protection of that scheme. In undertaking the inquiry and making the report, the learned Registrar applied the usual criteria for assessment of legal costs. She considered in each instance whether or not it was reasonable for the lawyers to have carried out the work to which the legal costs related and then considered the fairness and reasonableness of the amount of the legal costs in relation to the work. In particular, she assessed the reasonableness against either the terms of the applicable fee arrangement or the applicable costs determination.
The evidence taken by the Registrar on the inquiry (and appearing in the schedule) showed that since 31 July 2003 Clambake has paid a total of $554,400.41 in legal fees, disbursements and GST which it claimed is recoverable against the defendants under the lease. In addition, it claimed interest of $99,693.37 upon that amount.
In her report the learned Registrar sets out the fee history of these charges and the succession of firms of solicitors who acted for the plaintiff in connection with this aspect of the claim. The learned Registrar also refers to fees charged by various counsel, all of which are tabulated in the schedule, and then proceeds to examine the work for which charges were raised, its connection with the rent action, and the reasonableness or necessity for the charges, examining these features against the documentary material recording the activity and the fees raised. In dealing with counsel fees the learned Registrar identified the counsel retained, in some cases Queen's Counsel or Senior Counsel, the basis for retaining Senior Counsel, and the rates charged.
For detailed reasons contained in the learned Registrar's report, she considered that, in a number of instances, no allowances should be made for various items charged and, in other instances, smaller allowances than had been charged would be all that should be recoverable against the party to be charged if an assessment were to be conducted under the provisions in the Legal Practice Act 2003. The learned Registrar also examined, and it seems allowed, as claimed, the disbursements (other than counsel fees) included in the claim.
The conclusion of the learned Registrar was that the total costs of professional services reasonably charged in this action to recover rent was $251,351.76. The Registrar reported that that amount represented her objective assessment of that portion of the costs charged to Clambake which Tipperary is obliged to pay to Clambake as a consequence of its default. The learned Registrar left it to the parties to work out the appropriate GST components on this amount and the interest due and directed that they should inform the judge at the trial of this issue of these additional amounts at the time final orders on the determination of the issue were to be made.
In the affidavit of Ms J K Condon, there is a table detailing the amount allowed by the Registrar for each item of the contractual costs claim (as categorised by the Registrar in her report) and the amount of applicable GST. That shows that the total sum assessed by the Registrar for Clambake's contractual costs claim plus applicable GST, but excluding interest, becomes $268,150.21.
In its submissions Clambake expressly concedes that it does not object to this court awarding costs, which reflect the conclusions of the Registrar as prepared in her report. Again in the affidavit of Ms J K Condon there is a table detailing the interest applying to the costs (exclusive of GST) allowed by the Registrar at the rate of 17% per annum as determined by my decision in the original rent action: Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3]. Interest calculated on that basis up to and including 15 December 2010 (the date of the hearing) amounted to a further $95,895.40. Subject to one question, yet to be addressed, Clambake therefore submitted that in respect of this contractual costs issue it was entitled to judgment in the total sum of $361,045.61 made up as follows:
Costs as assessed by a Registrar
but excluding GST $243,772.92
GST on those costs $ 24,377.29
Interest on those costs $ 35,895.40
TOTAL $364,045.61
It is immediately to be noticed that the figure of $243,772.92 mentioned in this submission is less than the $231,351.76 found as the Registrar's objective assessment in her report to the court. This is because the Registrar's report includes within the amounts allowed for counsel fees, the GST component on counsel fees, which in the written submissions of Clambake have been taken out and included in the separate claim for GST on all charges.
Issues arising after the report
Counsel for Clambake has properly pointed out that his client perceives that there may be some misunderstanding in the report about how its legal costs were funded and allocated as between the rent action and the fire action.
The position, as already alluded to earlier, is that a series of solicitors acted for Clambake in the early stages in relation to the rent action before its present solicitors were engaged in or about June 2004. The Registrar found on the evidence, and as reported, that all these costs in connection with the rent claim were in fact billed to and paid by Clambake progressively over the periods of the several retainers. In relation to the fire claim and its related counterclaims and cross‑claims, Clambake was covered by a policy of indemnity insurance and the insurer agreed to meet the costs of the defence of the fire claim and conduct of the related counterclaims and cross‑claims. Nevertheless, because the matters were interrelated and were to be heard together, it was agreed between Clambake and its insurer that the same solicitors would act for Clambake in the rent action and in the fire claim and that the same counsel would be retained as, indeed, happened.
Clambake and its insurer agreed upon a basis of apportioning the legal fees, both from the solicitors and from counsel, as between the two actions so that legal costs and charges, including counsel fees and disbursements, associated with the rent action were billed directly to Clambake and, in due course, paid by that company. On the other hand, all the costs, including counsel fees and disbursements, associated with the fire claim and its related counterclaims and cross‑claims, were billed by the solicitors and counsel to the insurer and paid by the insurer. That was the evidence before the learned Registrar and she reported accordingly with the result that her report and her findings relate only to legal costs, counsel fees and disbursements associated with the rent action. It now seems that, in relation to counsel fees, a slightly different regime of payment of those costs was followed.
For reasons set out in the report, the learned Registrar concluded that the full amounts charged by counsel for Clambake in relation to the rent action were more than should be allowed and certain reductions were made and some claims disallowed. Clambake does not now suggest that there should be any review of or alteration to the recommendations contained in the Registrar's report about appropriate allowances either generally or in relation to counsel fees. The amounts which the learned Registrar reported should be allowed for counsel fees were as follows:
Senior counsel $ 53,295 (including GST)
Junior counsel $ 25,520 (including GST)
TOTAL $ 78,815 (including GST)
By contrast, the amounts which had been charged by counsel in relation to the rent action, and which were the subject of the claim put to the Registrar by the plaintiff were as follows:
Senior counsel $139,892.50 (including GST)
Junior counsel $ 68,832 (including GST)
TOTAL $208,724.50 (including GST)
In order to ensure that there has been no inadvertent misunderstanding, counsel for Clambake now wishes to make plain that the total contribution made by Clambake itself towards the aggregate of counsel fees charged and paid in relation to the rent action was $86,660 and that the balance was met by its insurer. In the affidavit of Ms Condon sworn 9 December 2010, which was received into evidence (excluding hearsay) it was established that Clambake had itself paid a total of $86,660 for counsel fees, being portion of a larger total the balance of which had been met by its insurer.
This in turn at first led counsel for Clambake to submit that rather than the $78,815 allowed by the Registrar for counsel fees in connection with the rent claim the total amount which it actually paid, namely $86,660, should be allowed in substitution, the figure recommended in the Registrar's report. At least, that was the position foreshadowed by Clambake at the directions hearing on 30 November 2010.
However, by the time this separate cause came on for hearing on 15 December 2010 Clambake no longer sought any allowance for counsel fees beyond the amounts reported by the Registrar in her report of 22 April 2010, namely, $78,815 (inclusive of GST) made up as follows:
Senior counsel $53,295 (including GST)
Junior counsel $25,520 (including GST)
TOTAL $78,815 (including GST)
However, at this hearing, it emerged that the actual mechanism for the payment of counsel fees did not follow the sharp allocation between Clambake itself and its insurer which had been put to the Registrar. Despite the evidence put to the Registrar upon the inquiry, and the submissions made at the directions hearing on 30 November, the situation as it was finally clarified at the hearing on 15 December 2010 was that all the counsel fees (notwithstanding that they had been rendered in such a way as to distinguish between fees for the rent action and the fire claim respectively) were initially paid by the insurer. Then, subsequently, pursuant to the agreement for the allocation of the liability for fees as between Clambake and the insurer reached between them, Clambake paid to the insurer two instalments, the first of $75,000 and the second of $11,660, representing Clambake's agreed liability to meet counsel fees for the rent action. So it came about that Clambake paid from its own funds a total of $86,660 towards counsel fees for the rent action ‑ although this was done by reimbursing its insurer for that money because the insurer had discharged all the counsel fees initially. This reveals that Clambake itself paid more for counsel fees in connection with the rent action than the figure reported by the Registrar as reasonable, namely, $78,815 including GST.
While it has been necessary and correct for Clambake to explain these additional features of, and the mechanisms for, the payment of counsel fees as between itself and its insurer, I do not consider that these details require any alteration to the findings or recommendations made by the Registrar.
In my respectful view, the learned Registrar was entirely correct in focusing upon the question of how much, out of the aggregate amounts charged by counsel for work associated with the rent action, it was reasonable for the lawyers to recover having regard to the provisions of the Legal Practice Act 2003. The Registrar made a finding in that regard and reported that the aggregate amount including GST should be allowed at $78,815. Because of information put to her, the Registrar made that finding under the impression that the total amount paid to counsel in connection with the rent claim had been paid by the plaintiff without any contribution from its insurer. It now emerges that this was not entirely correct and that the share of counsel fees for the rent action met by Clambake was, as I have now stated several times, $86,660. However, as this is more than the amount reported as reasonable charges, I am satisfied that Clambake should be indemnified for the figure reported upon by the Registrar, namely $78,815 including GST, being the component for counsel fees for the rent action. That is the figure which I shall allow.
Interest
Under the terms of the lease Clambake is also entitled to interest on these legal costs. As stated earlier, the rate of interest payable was an issue at the original joint trial of the rent action and the fire claim and I decided, for reasons given in Clambake [No 3] that the applicable rate was 17% per annum simple interest. There have since been appeals instituted from my decisions in the rent action and in the fire claim and in subsequent claims in Clambake [No 5] and Clambake [No 7]. For this reason I inquired of counsel whether or not the finding in relation to the rate of interest was subject to appeal. I was informed by counsel that Tipperary and, possibly, Mr Anderson had initiated an appeal from the decision in the rent action, Clambake [No 3], which included a challenge to the rate of interest allowed but that that appeal did not proceed and that no challenges to the rate of interest which I had allowed were made at the hearings of the appeals which have since taken place, but the decisions upon which are at present reserved. Accordingly, I am satisfied that I should proceed to allow simple interest at 17% per annum upon the amounts allowed for costs as reported by the Registrar.
The calculations of interest on the components of the costs as reported by the Registrar, but excluding GST, have been set out in the materials accompanying the affidavit of Ms Condon. That interest, to and including 15 December 2010, amounts to $95,895.40.
Consequently, the amount which I consider should be the subject of judgment in favour of Clambake is $364,045.61, made up as follows:
Costs as assessed by the Registrar
excluding GST $243,772.92
GST on those costs $ 24,377.29
Interest on those costs $ 95,895.40
TOTAL $364,045.61
As explained earlier, the above figure for costs of $243,772.92 is slightly less than the figure recommended by the Registrar in her report of $251,351.76. However, it does not, in substance, amount to any alteration to the figure recommended by the Registrar because it excludes any component of GST. The figure certified by the Registrar included GST on counsel fees. This last formulation of the components, however, has all the costs as allowed, including counsel fees, being stated without GST but makes separate provision for GST on counsel fees as reported by the Registrar plus the fresh calculations of the GST on the balance of the component for costs. To make it entirely clear, I repeat my earlier observation, that the interest has been calculated on the costs, including counsel fees, without any GST component.
Accordingly, the plaintiff is entitled to judgment on its contractual costs claim in the amount of $364,045.61. Because that figure includes interest calculated to 15 December 2010, I consider that this judgment should take effect from that date and, therefore, I order pursuant to RSC O 42 r 2(2) that the judgment should be dated and take effect from 15 December 2010 notwithstanding that it to be entered pursuant to an order of the court made today. This will mean that from 15 December 2010 until it is satisfied this judgment debt will bear interest at the judgment rate ‑ see Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 7] [2009] WASC 390 [99] ‑ [111].
Also at the hearing counsel for Clambake moved for an order for costs of the determination and trial of this contractual costs issue, relying again on cl 3.08 of the lease for that claim as a contractual right. I am satisfied that Clambake is entitled to its proper costs of pursuing this 'contractual costs issue' to and including judgment and any further steps necessary to complete the satisfaction of that claim. The costs which were the subject of the inquiry before the Registrar, her report and this judgment represent costs only up to the end of the trial of the rent action in Clambake [No 3]. They do not include costs associated with the separate subsequent trial of this special issue.
However, as I raised with counsel at the hearing on 15 December, this raises a choice for the plaintiff to make. Either the plaintiff accepts an order for its costs of the trial of this issue to be taxed by the court and paid by the defendants or, instead, it can pursue its contractual claim for costs under the lease. If the first course is chosen by the plaintiff, then I would be prepared to order that the plaintiff should have its taxed costs of this issue, in which case the costs would be taxed and determined having regard to any applicable scale of costs and the ensuing entitlement to costs would take effect as an order of this court in the ordinary way. But I am satisfied that, rather than seeking to have its costs taxed in the action, the plaintiff would be entitled to pursue its contractual claim for costs under the lease, which would not involve any taxation. However, unless those costs can be agreed, it may take the trial of a further issue, or even a further inquiry and report, to determine the quantum of the entitlement, following much the same procedure as has occurred at the trial of this issue. That would be because the entitlement to costs is a money claim pursuant to a contract rather than the assessment of costs as an incident to the determination of the cause by the court.
I consider that the plaintiff should have an opportunity to consider what approach it wishes to pursue in relation to its remaining entitlement to costs associated with the trial and determination of this cause and I will, if the plaintiff so desires, allow it an opportunity to consider its alternatives in this regard.
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