Coshott v Spencer

[2016] NSWDC 43

District Court

New South Wales

Medium Neutral Citation:	Coshott v Spencer [2016] NSWDC 43
Hearing dates:	28 January 2016
Date of orders:	08 April 2016
Decision date:	08 April 2016
Jurisdiction:	Civil
Before:	Gibson DCJ
Decision:	(1) Summons dismissed. (2) Plaintiff pay defendant’s costs. (3) Liberty to apply in relation to costs, such liberty to be exercised in 28 days. (4) Exhibits retained for 28 days.
Catchwords:	COSTS – appeal under s 384 Legal Profession Act 2004 (NSW) – third party payer – whether costs assessor had power to determine third party payer issue – whether referral by Manager under s 357 requires a determination by the Manager that the claim is “valid” – whether costs assessor’s change in determination of third party payer status occurred in circumstances amounting to absence of procedural fairness
Legislation Cited:	Legal Profession Act 2004 (NSW), ss 302A, 350, 356, 357, 358, 359, 361, 367 and 384
Cases Cited:	Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2011] 12 DCLR (NSW) 304 Boyce v McIntyre [2009] NSWCA 185 Clare v Australian Community Pharmacy Authority [2015] FCA 653 Colbron v Freeman [2014] NSWSC 1210 Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 127 ALR 699 Griffith v Australian Broadcasting Corporation [2013] NSWSC 750 Legal Services Commissioner v Wright [2012] 2 Qd R 360 Meads v Meads [2012] ABQB 571 SAS Trustee Corporation v Woollard [2014] NSWCA 75 Thurai Rajah Lawyers v Villanueva & Anor [2001] NSWSC 596 Wende v Horwath (No 2) [2015] NSWCA 416 Wentworth v Rogers [2006] NSWCA 145
Texts Cited:	M Brabazon SC, “Legal Costs: Solicitors’ Relations with Counsel and Clients” (NSW Bar Association, 2010) G E Dal Pont, “Law of Costs”(3rd ed., 2013, LexisNexis)
Category:	Principal judgment
Parties:	Plaintiff: Ronald Coshott Defendant: Keith Robert Spencer
Representation:	Counsel: Plaintiff: Mr O Jones Defendant: Mr R P V Carey   Solicitors: Plaintiff: Martin Place Lawyers Defendant: Spencer & Co Legal
File Number(s):	2015/220241
Publication restriction:	None

Judgment

Introduction

1. This is an appeal from the dismissal of the plaintiff’s application for costs assessment by Costs Assessor Ms K M Dulhunty on 29 June 2015.

2. The circumstances in which the costs and disbursements (totalling $57,585.00) were incurred were as follows. A firm of solicitors, Kejus Pty Ltd trading as Spencer & Co Legal (referred to in place of the defendant, Keith Robert Spencer, who was erroneously named in the Summons), received urgent instructions from Mr and Mrs Coshott and a corporation with which they were associated on 20 June 2013 to seek an adjournment of a hearing listed to commence on the following Monday (24 June 2013). Mr Ronald Coshott, the plaintiff, was not a party to those proceedings, but he was a witness, and a company with which he was associated, Fewin Pty Ltd, provided funding for the litigation by a series of transfers to Spencer & Co Legal.

3. The application for adjournment was refused. Spencer & Co Legal’s involvement in the substantive proceedings commenced on Friday 21 June 2013 and involved conferences over Saturday and Sunday, 22 and 23 June 2013, at the offices of Ronald Coshott (“the plaintiff”) and Fewin Pty Ltd, where the papers relevant to the proceedings were located. The hearing of the proceedings was completed and a memorandum of costs was rendered on 8 July 2013.

4. The members of the Coshott family who were involved in this litigation were as follows. Both the plaintiff and his brother, Robert Coshott, were present at conferences. Robert Coshott’s wife Ljiljana Coshott did not attend, but instead gave instructions in writing appointing her husband for the purpose of giving instructions. The plaintiff attended court for part of the hearing as well as the conferences with the solicitors, and gave evidence in the proceedings.

5. No application was made for assessment of costs until 4 August 2014, more than twelve months after the date of issue, which application was made by the plaintiff, James Coshott, Ljiljana Coshott and Schlotzsky’s Nominee Company Pty Ltd. All applicants except the plaintiff withdrew their applications on 9 December 2014 by reason of their acknowledgement that the application had not been brought within twelve months of receipt of the memorandum of costs. The plaintiff advised that he was a third party payer and, more importantly, that he had never been provided with a copy of the memorandum of costs, which meant that his application was not outside the twelves-month time limit. The application for assessment by the plaintiff was referred to the Costs Assessor, Ms Dulhunty, on 19 December 2014.

6. On 29 June 2015 the Costs Assessor dismissed the plaintiff’s claim that he was a third party payer. That meant that the application for costs to be assessed could not proceed. The Costs Assessor provided Reasons for Determination which was sent on 9 July 2015.

The grounds of appeal

7. The orders sought in the Amended Summons are as follows:

1. The determination of costs assessor in costs assessment 2014/0228663 is set aside on the basis of an error of law pursuant to section 384 of the Legal Profession Act, 2004 (“the Act”).

2. An order remitting the assessment to the Manager, Costs Assessment, for allocation to a costs assessor to determine the application.

3. In the alternative to 2, an order remitting the matter to the costs assessor to re-determine the application.

4. Costs.

8. I set out the exact text of the grounds of appeal contained in the Amended Summons filed on 18 September 2015:

1. The costs assessor erred in a matter of law by failing to determine the application as required by section 367 [sic] of the Legal Profession Act 2004, instead purporting to have power to dismiss the costs assessment application.

2. The costs assessor erred in a matter of law by determining the costs assessment application without giving the plaintiff a reasonable opportunity to make written submissions in relation to the application contrary to s 359 of the Legal Profession Act 2004, as the costs assessor did not give the plaintiff a reasonable opportunity to make written submissions on the issue of the plaintiff’s status as a third party payer.

3. The costs assessor erred in a matter of law by denying the plaintiff natural justice in dismissing the costs assessment application on the basis that the plaintiff was not a third-party payer without providing the plaintiff an opportunity to be heard on that question.

9. This has been a difficult appeal to determine because:

1. The plaintiff’s three grounds of appeal appear at first blush to be variations of a claim of denial of procedural fairness arising out of the conduct of the assessment by the Costs Assessor. However, it emerged in argument that Ground (a) is in fact what I would call a “no jurisdiction” argument, on the basis that Costs Assessors have no power to determine issues such as third party payers, that power being reserved to (or, possibly in this case, usurped by) the Manager, Costs Assessment (and not the Costs Assessor) by her act of sending the file to the Costs Assessor. This court thus lacks jurisdiction, because the decision of the Manager is only reviewable by way of judicial review by the Supreme Court. This nature of this novel submission was further disguised by the reference, in Ground (a), to s 367; it was only in the course of submissions from counsel for the plaintiff that I learned that reliance was placed on s 357 of the Act.

2. The documents attached to Mr Hocking’s affidavit are, according to counsel for the plaintiff, incomplete. Although Mr Hocking states in paragraph 4 that he attaches the documents he would have provided to the Costs Assessor had he been accorded procedural fairness, counsel for the plaintiff told me that this was not the case, and that he would need an adjournment to inquire about and obtain documents in support of the third party payer claim if I were to consider the issues the subject of the grounds of appeal under s 384(2)(a) of the Act.

3. Although not having cross-appealed, the defendant brought a surprise application at the hearing, seeking to argue that the plaintiff had appealed against the wrong party (Mr Spencer), instead of Kejus Pty Ltd t/as Spencer & Co Legal.

4. The grounds of appeal (when I discovered what they were really intended to be) require a series of findings on procedural fairness to be made, whether the “no jurisdiction” argument was accepted or not. However, I was only addressed on some of these. Counsel for the plaintiff only argued the “no jurisdiction” and absence of procedural fairness issues, and did not address the alternative argument that, under s 384(2)(a), if I rejected Appeal Ground (a) but accepted Ground (b) and/or (c), the question of whether the plaintiff was a third party payer could be determined by the court in lieu of remitting the matter, particularly since the documents which would have been produced to the Costs Assessor were stated to be attached to Mr Hocking’s affidavit.

5. The Costs Assessor states, at paragraphs 4.15 – 4.16 of her Reasons for Determination, that the parties were “most unhelpful” and that she was “obliged to determine the matter on the sparse documentation provided.” There also appears to be hostility between the parties. This has impacted on the conduct of the appeal, just as it did on the conduct of the assessment.

10. The plaintiff submits there are only two issues before the court, namely to determine his “no jurisdiction” argument (that the Costs Assessor did not have the power to determine whether the plaintiff was a third party payer), and whether there was an absence of procedural fairness or denial of natural justice.

11. However, the determination of these issues cannot restrict the findings of the court necessary to dispose of all issues between the parties. Whether I accept the “no jurisdiction” argument or not, I am obliged to make findings on each of the grounds of appeal as well as consider whether I should remit the third party payer issue, or determine it myself under s 384(2)(a), having regard to the new documents attached to Mr Hocking’s affidavit, which would have been produced, he says, if procedural fairness had been afforded to his client.

Should a finding as to whether the plaintiff is a third party payer be made by this court?

12. The preliminary issue for determination is whether the plaintiff was in fact a third party payer. However, counsel for the plaintiff submitted that:

1. This court had no jurisdiction to consider the issue of third party payer because the Manager’s “decision” on this issue can only be challenged by judicial review in the Supreme Court. It was up to the defendant to bring such an application in the Supreme Court, and he has not done so. All that this court should do is to remit the proceedings to the Manager (or to the same costs assessor) so that the process of assessing the costs can commence.

2. No finding by me under s 384(2)(a) Legal Profession Act 2004 (NSW) (“the Act”) as to whether the plaintiff was a third party payer should be made, because the plaintiff had not sought this in his orders. Unless a plaintiff actually permits the court to take this step by including it in his orders, the court may not do so (I infer from this submission that any defendant seeking such a consideration would need to file a cross-appeal to this effect, but this submission was not put in express terms).

3. For the court to determine such an issue without granting the plaintiff an adjournment to provide the relevant documents on the third party payer argument would amount to procedural unfairness, in that the plaintiff would be forced on to put a case for which he was not ready, even though Mr Hocking’s affidavit attached documents said to be those which he would have produced to the Costs Assessor had his client been afforded procedural fairness.

13. Section 384(2)(a) provides:

“(2) After deciding the question the subject of the appeal, the District Court may, unless it affirms the costs assessor’s decision:

(a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or…”

14. Where this court is in the same position as the costs assessor, determination of a disputed issue of law, as opposed to remitting such an issue to the costs assessor, is often a desirable alternative: Wende v Horwath (No 2) [2015] NSWCA 416.

15. Paragraph 4 of Mr Hocking’s affidavit sworn on 26 November 2015 clearly identifies the documents which would have been produced if the plaintiff had been afforded procedural fairness:

“Annexed hereto and marked B are copies of documents/evidence which the Costs Applicant would have provided to the costs assessor had the costs assessor requested the costs applicant to provide evidence going to the issue of third party payer.”

16. I indicated to Mr Jones that it was preferable for there to be a ruling on this issue by me than for the matter to be remitted to the Manager for reallocation or the Costs Assessor for re-determination of the third party payer issue, which would be the other course to take if I rejected his “no jurisdiction” argument. While he formally opposed this course, he indicated that he would seek, after the luncheon adjournment, not only to address me concerning “possible further material, but also what inferences your Honour might draw from the existing material, if your Honour does exercise 384(2)(a)” (T 53). After the luncheon adjournment, he told me that no further material was produced (T 58).

17. In determining the issue of third party payer, I have taken the documents attached to Mr Hocking’s affidavit into account, as well as the submissions made on the plaintiff’s behalf to the Costs Assessor on this issue and what few submissions counsel for the plaintiff made to me on this issue.

What is a third party payer?

18. Section 302A of the Act provides:

“302A Terms relating to third party payers

(1) For the purposes of this Part:

(a) a person is a “third party payer”, in relation to a client of a law practice, if the person is not the client and:

(i) is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client, or

(ii) being under that obligation, has already paid all or a part of those legal costs, and

(b) a third party payer is an “associated third party payer” if the legal obligation referred to in paragraph (a) is owed to the law practice, whether or not it is also owed to the client or another person, and

(c) a third party payer is a “non-associated third party payer” if the legal obligation referred to in paragraph (a) is owed to the client or another person but not the law practice.

(2) The legal obligation referred to in subsection (1) can arise by or under contract or legislation or otherwise.

(3) A law practice that retains another law practice on behalf of a client is not on that account a third party payer in relation to that client.”

19. A helpful starting point is this explanation in “Legal Costs: Solicitors’ Relations with Counsel and Clients” (NSW Bar Association, 2010, at p. 3) by Mark Brabazon SC:

“Broadly, a third party payer is a non-client who is obliged to pay legal costs or who, being obliged, has paid such costs. The obligation may be owed to the law practice or to someone else – often but not necessarily the client. If the third party payer’s obligation is owed to the law practice (with or without some other obligee) it is an associated third party payer and has, as one might expect, stronger rights than a non-associated third party payer.”

20. Professor G E Dal Pont (“Law of Costs”, 3rd ed., 2013, LexisNexis, [2.23] fn 98) defines a third party payer as a person who is not the client and:

1. is under a legal obligation to pay all or any part of the legal costs for legal services provided by the client, or

2. being under that obligation, has already paid all or a part of those legal costs.

21. The concept of a “third party payer”, and the requirement that this person be legally obliged to pay the costs in question is explained in Legal Services Commissioner v Wright [2012] 2 Qd R 360 where McMurdo J refers to a series of decisions as to what “liable to pay” means in the terms defined by the statute (which are effectively the same here), noting:

“… there are likely to be many cases where the burden of a lawyer’s bill will fall to a substantial extent upon someone other than the client and who therefore has more than an academic interest in having the costs assessed. But where the line is to be drawn, in defining who apart from the client should be entitled to an assessment, has been decided by the Parliament in unambiguous terms: it is according to the existence or otherwise of a legal obligation to pay the costs.”

22. Before examining (on the basis of the additional material in Mr Hocking’s affidavit) whether I am satisfied that the plaintiff is a third party payer, I shall first set out the Costs Assessor’s findings, noting that, in circumstances the subject of the procedural fairness/denial of natural justice grounds, she first stated that the plaintiff was a third party payer and then, after the receipt of further correspondence, changed her mind.

The Costs Assessor changed her mind as to the plaintiff’s status as a third party payer

23. As is set out in the section below on absence of procedural fairness, the Costs Assessor wrote to the parties on 6 May 2015 stating that she had determined the plaintiff was a third party payer and asking Spencer & Co Legal for a bill in assessable form. Spencer & Co Legal replied on 3 June 2015 challenging the finding that the plaintiff was a third party payer on the basis that the plaintiff’s loans for the litigation were personal and he was not a party to the costs agreement. Martin Place Lawyers, the solicitors for the plaintiff, responded to Spencer & Co Legal by saying the statements in this letter were further support for their argument and the documentation provided, and asking for the costs assessment to proceed. Instead, without further notice, the Costs Assessor issued reasons on 29 June 2015 (sent on 9 July 2015) dismissing the application on the basis that the plaintiff was not a third party payer.

What were the Costs Assessor’s reasons?

24. The Costs Assessor set out her reasons at paragraphs 4.10 and 4.13 – 4.20:

“4.10 The threshold issue in this matter is whether or not the Applicant was a third party payer in respect to the matter as defined in the LPA. The Applicant was not a client of the Respondent in respect to the substantive proceedings or as far as this application for assessment is concerned. Did he fund the litigation personally or did Fewin Pty Ltd provide the funds? Was there any obligation on the Applicant’s part to fund the proceedings?

…

4.13 On the basis of the definition in Section 302A of the LPA, the Applicant is not an associated third party payer even if he provided the funds personally. The issue is whether or not he is a non-associated third-party payer. Examples of non-associated third-party payers are:

a) a sub-Lessee with contractual obligations to pay the head lessee’s legal costs of renewing a lease: Boyce v McIntyre [2009] NSWCA 185 (20 July 2009);

b) a lot owner in a strata plan facing a claim for recovery of expenses incurred by an owners corporation: Gannon v The Owners – Strata Plan No 14403 [2013] NSWSC 1916 (19 December 2013);

c) a tenant: Universal 1919 Pty Limited v Barraket Stanton Lawyers Pty Ltd [2015] NSWSC 540 (7 May 2015).

4.14 The Respondent makes references to loan agreements between the Applicant and various members of the Coshott family. No loan agreement has been produced and I am not prepared to guess who the parties to the agreement are.

4.15 The parties have been most unhelpful in referring to various documents and not producing those documents. If a party refers to documents in the context of relying on the document then it must produce a copy of the document at least. Furthermore, the Respondent has failed to comply with my direction to provide an itemized bill without any explanation and he is in breach of Section 358 of the LPA. Breaches of Section 358 of the LPA can be professional misconduct: Section 358(4) of the LPA.

4.16 The matter has now been going for an excessively long time and I have determined the matter on the sparse information provided.

4.17 As far as I can see, the Applicant has no contractual, statutory or other obligation to pay the legal costs for James Coshott, Ljiljana Coshott or Schlotzsky’s Nominee Company Pty Ltd’s litigation as envisaged by Section 302A(1)(c) of the LPA. If he has paid the costs of the litigation personally then he has elected voluntarily to do that for family members rather than being obliged to pay their costs of the litigation. If in fact Fewin Pty Ltd has provided the funds then Ronald Coshott has been incorrectly named as the Applicant for the application. As noted numerous times throughout these reasons Fewin Pty Ltd is not a party to the application and no determinations or assessments can be made with respect to it. It has no standing in respect to this application.

4.18 Either the Applicant or Fewin Pty Ltd has required there to be a loan agreement to evidence the loan and possibly as some security. As no one has produced a copy of the loan agreement I do not know what its terms are. Furthermore, the Applicant in a written authority allowing the Respondent to transfer funds from the trust account actually states that the money was paid by Fewin Pty Ltd not by him so again it appears that Ronald Coshott is incorrectly named as the Applicant. There is also no evidence before me that the Applicant is a trustee for James Coshott, Ljiljana Coshott and/or Schlotzsky’s Nominee Company Pty Ltd.

4.19 The fact that Ronald Coshott is named as the Applicant does not make Fewin Pty Ltd a party to the application. Fewin Pty Ltd is an entirely separate legal entity from Ronald Coshott. If it is to be a party to an application, it has to be named separately as a party to the application. The same threshold issues would then need to be determined in respect to it, i.e. whether the application is out of time and if not whether it is a third-party payer or not.

4.20 I determine that the Applicant is not a third-party payer within the definition of Section 302A of the LPA and he has no standing to bring this application.”

25. These are correct statements of the facts before the Costs Assessor and of the relevant legal principles. No submission was made to the contrary.

26. Before I consider whether the additional documentation provided to me casts any fresh light upon these findings, I set out the additional submission made by the plaintiff to the Costs Assessor that the defendant had in fact conceded that the plaintiff was a third party payer.

Did Spencer & Co Legal concede that the plaintiff was a third party payer?

27. One of the submissions made to the Costs Assessor (see the letter from Martin Place Lawyers dated 13 April 2015) was that Mr Spencer effectively conceded, in his letter of 9 April 2015, that the plaintiff was a third party payer.

28. The relevant portions of Mr Spencer’s letter making this admission are not precisely identified in the 9 April 2015 letter, nor were they identified to me, but they appear to be the reference to the plaintiff loaning his brother and his brother’s wife “significant monies to assist… with their various legal problems” during a lengthy history of litigation in other courts, in circumstances where the plaintiff’s brother was an undischarged bankrupt and his brother’s wife was likely to go bankrupt. The letter goes on to say:

“As Ronald Coshott/Fewin Pty Ltd had been the original source of the funds and Robert, Ljiljana, James and Michael Coshott deferred to him (they were in no position to argue without his financial assistance; they would never have had legal representation, at least by this firm) as a matter of courtesy copies of invoices rendered were also provided to him and were approved by him and payment authorised.”

29. This is not a concession that he was a third party payer who was “liable to pay”, but a description of the plaintiff’s involvement in the litigation. I am satisfied that this was not an admission that the plaintiff was a third party payer.

30. I also note that, according to the orders made by Elkaim SC DCJ on 24 September 2015, the defendant called upon the plaintiff to state whether or not he was a third party payer (i.e. that he is “liable to pay” the costs: Legal Services Commissioner v Wright [2012] 2 Qd R 360). It is unclear to me whether that call has been answered. The grounds upon which this appeal is brought are of a technical nature, and do not appear to include any concession by anybody (including the plaintiff) that the plaintiff is a third party payer.

31. However, the Costs Assessor had not always been of the view that the plaintiff was not a third party payer. In her letter of 6 May 2015 she said that she was satisfied that he was. What was that determination, and what made her change her mind?

A determination that the plaintiff is a third party payer is made

32. On 6 May 2015, the Costs Assessor wrote to Spencer & Co Legal setting out her decision that the plaintiff was a third party payer:

“The evidence indicates that Ronald Coshott was the third party payer for the matter.

Unfortunately the costs disclosure document and agreement does not name Ronald Coshott as a party to the document so, as the evidence currently stands, I have no evidence that any disclosure was made to Ronald Coshott. I note that my letter dated 20 March 2015 to you asked for a copy of any and all costs agreement between your firm and Ronald Coshott for this matter.

The bill submitted for assessment does not name Ronald Coshott as one of the parties and I have not been provided with any evidence of a bill addressed to Ronald Coshott for this matter nor do I have any evidence of a request for payment issued to Ronald Coshott in respect to this matter. Again my letter dated 20 March 2015 sought a copy of any request for payment issued to Ronald Coshott.

For the purposes of the calculation of time in which a party can apply for an assessment, Section 350(4) of the Legal Profession Act 2004 allows 12 months from the date that the bill or request for payment was given or 12 months from the date that the costs were paid if no bill or request for payment was given.

As far as Ronald Coshott is concerned, on the evidence I have currently, the application is within time as I have no evidence that he was given a bill or a request for payment and the application has been made within 12 months of his payment of the other parties’ bill.

Accordingly, you are directed to provide an itemised version of the bill dated 8 July 2013 and the file for the matter by 20 May 2015.

This letter is a notice pursuant to Section 358 of the LPA. Pursuant to Section 358 of the LPA you are required to answer particulars sought and to produce any documents requested.”

33. A signed authority from the plaintiff was provided, as well as the authorisation from Mrs Coshott. On 7 May 2015, the solicitors for the plaintiff stated in correspondence to the Costs Assessor that “the documents enclosed confirmed that Ronald Coshott was the “third party payee” of the costs and that he had not been provided with the tax invoices as claimed.

34. If Mr Coshott was not a third party payer who had failed to be notified of the costs, his application would be as much out of time as that of the other parties who have initially sought the assessment of costs, and that would be the end of the matter. Accordingly, the Costs Assessor needed to make a preliminary finding as to whether or not the plaintiff was a third party payer. This was in fact what the Costs Assessor did.

The Costs Assessor’s decision that the plaintiff is a third party payer is challenged

35. As is set out in more detail below, the claim of lack of procedural fairness is based on the Costs Assessor’s changed finding that the plaintiff was not a third party payer. It is asserted that the failure to notify this change of view, and to invite further submissions from the parties before changing her view, is procedural unfairness.

36. Both parties did in fact respond to the Costs Assessor’s letter of 6 May 2015 and both parties made further submissions. It was after those further submissions that the Costs Assessor changed her opinion, and considered that Mr Coshott was not a third party payer. What further information did the parties provide?

37. The first such submission came from Spencer & Co Legal, strongly disputing the third party payer finding, in their letter of 3 June 2015 as follows:

“Dear Ms Dulhunty,

I refer to your letter of 6 May 2015.

Ronald Coshott, either personally or through his company Fewin Pty Ltd, loaned funds to members of his brother’s family, including his sister-in-law, to pay their legal costs of and incidental to these proceedings. The loans were the subject of an initial loan agreement and a supplementary loan agreement when further monies were loaned.

Ronald Coshott is not a party to the Costs Disclosure Agreement. Nor is Fewin Pty Ltd. No invoice has ever been issued to Ronald Coshott or to Fewin Pty Ltd in relation to the subject proceedings.

According [sic], with respect, neither Ronald Coshott nor Fewin Pty Limited is a “third party payer” within the meaning of section 318A of the Legal Profession Act 2004.”

38. Martin Place Lawyers responded to this letter the following day (p. 49), in dismissive terms:

“We have received by email a copy of the costs respondent’s letter to you of 3 June 2015.

…

Leaving aside the “inaccuracies” of the statements made in his letter, nothing in the letter assists him [sic]. In fact, he admits that he did not deliver any claim for payment to Ronald Coshott. Further he admits that there was no Costs Disclosure made to Ronald Coshott.

The Costs Applicant asks that the Costs Assessment be completed forthwith and awaits your advice that the Certificates of Determination are available to be uplifted from the Costs Assessment Manager upon payment of the fees.”

39. These letters contain essentially a restatement of the views that the parties had already expressed. The Costs Assessor was not provided with new documents or factual information by either party.

Mr Hocking’s additional documents

40. However, I am in a different position to the Costs Assessor, in that Mr Hocking now provides the relevant documents to the court. Annexed to the affidavit of Mr Hocking and marked “B” are copies of documents and what he calls (in paragraph 4 of his affidavit) “evidence going to the issue of third party payer”. These include:

1. Email from Mr Spencer to the plaintiff dated 8 July 2013 enclosing “the tax invoice” and saying, “Ron, as we also discussed, please also confirm by return email your authority to pay out the funds in trust as per the letter to Mr Meltz and to this firm.” Can this be the memorandum of costs the subject of the request for assessment, which also bears the date 8 July 2013? The “enclosed” document is not attached. I must assume that this cannot be the case, as the plaintiff denies ever receiving the 8 July 2013 memorandum of fees.

2. Letter from Spencer & Co Legal dated 10 October 2013 enclosing a Trust Account Statement dated 10 October 2013 and asking for a further $11,000 on account of costs. The trust account statement shows the client as Schlotzsky’s Nominee Company Pty Ltd.

3. Various Spencer & Co Legal’s financial records showing payments by Fewin Pty Ltd, a company of which the plaintiff is a director. It is clear that, while the requests are made to the plaintiff, the payments are made by Fewin Pty Ltd, a company which is not a party to this appeal, or to the litigation the subject of the memorandum of costs.

4. Two emails from Spencer & Co Legal to the plaintiff dated 12 October 2013 referring to counsel’s fees and asking for $44,000 for costs.

5. An apparently illegible handwritten document, signed by the plaintiff, authorising payment of funds.

6. A further 19 pages of emails and financial records passing between the plaintiff and Spencer & Co Legal of a similar nature and setting out payments from Fewin Pty Ltd (pages 70 – 89 of the bundle).

41. All of these documents confirm the financial arrangements between the plaintiff and Spencer & Co Legal are as set out in their letter of 9 April 2015, and in particular the financial arrangements set out on page 2. It is unclear to me how many of these documents would have been before the Costs Assessor, having regard to her complaints in paragraph 4.15 of her reasons, but it is likely that some must have been provided. No contracts or agreements between the plaintiff and any other person, or other documents evincing an obligation to pay of any kind, let alone a legally enforceable kind, is produced.

42. None of these documents demonstrate that the plaintiff is “liable to pay”, which is the applicable term for third party payers: Boyce v McIntyre [2009] NSWCA 185 at [26] per Ipp JA. As Ipp JA goes on to point out, whether the liability lies with an associated or non-associated third party payer, the obligation of the solicitor to make the necessary disclosures under the Act also apply.

43. Having read the additional documentation in Annexure B to Mr Hocking’s affidavit, I am satisfied that these do not reveal any additional basis for finding that the plaintiff is a third party payer.

44. This brings me to a consideration of the first ground of appeal, namely whether the Costs Assessor had the power to consider the issue of third party payer, or whether the Manager, either pursuant to s 357 (or s 367, as stated in Ground (a)) or by reason of having usurped (or taken) that role, was the person who should (or had) made that order.

Ground (a) of the appeal

45. The first question to determine is whether any decision was in fact made by the Manager. In order to determine the factual background, it is necessary to set out the correspondence the Manager had with Mr Coshott and the other applicants for assessment, as well as the parties’ subsequent submissions to the Costs Assessor on this issue.

46. When the correspondence is analysed in this fashion, a picture emerges of the Manager doing just that – managing – and of the Costs Assessor examining not only the issue of who the right parties were and whether the parties brought the application in time, but also the third party payer issue.

47. As set out above, the memorandum of costs which was the subject of this application was provided on 8 July 2013. It was not until 4 August 2014, the plaintiff in these proceedings (Ronald Coshott), together with James Coshott, Ljiljana Coshott and Schlotzsky’s Nominee Company Pty Ltd, forwarded an Application by Client for Assessment of Costs to the Manager, Costs Assessment. That application sought referral to a costs assessor on the basis that there was no costs agreement between the applicants and the law practice and that the costs were excessive.

48. It was clear, on the face of this application that the bill to be assessed was likely to have been given to one or all of the original costs applicants more than twelve months before the application was made. If that was the case (and the delay in question was relatively short), an application for extension of time would have to be made to the Supreme Court.

49. If the application was out of time, then there was no point in referring it to a costs assessor. As a result, on Monday 8 December 2014, the Manager, Costs Assessment, wrote to the parties as follows:

“Dear Parties

This matter was reached for assignment some weeks ago but was not sent off as, on the face of the application, it appears that the bill/request for payment to be assessed (dated 8 July 2013) was given to the costs applicant more than 12 months before the application was made (on 4 August 2014).

The provisions of s350 Legal Profession Act 2004 deal with this time limit and the matter can be assessed only if Supreme Court determines that it can be dealt with after the 12 months. To obtain such an order involves filing a Summons (in Common Law Division) with a hearing in due course. This involves a filing fee and hearing fee etc.

Subject to any further comments from the costs applicant – which can be provided by reply email, we will close this file at this stage. If any order is obtained from the Supreme Court in due course, please provide a copy and this costs assessment file can be reactivated and then referred to an assessor as appropriate.

Thank you

Jennifer Hedge, Manager Costs Assessment”

50. The solicitors for the parties seeking the costs assessment replied to Ms Hedge on 9 December 2014 in robust terms:

“Dear Ms Hedge,

We refer to your email of 8 December 2014.

There is a simple answer to the respondent’s objection re: out of time.

Taking the bill/request at face value, it is not addressed to Ronald Coshott, the first applicant. My instructions are that Ronald Coshott is the third party payer. He has not received any request for payment or bill from the respondent. Thus time has not begun to run.

We are also instructed that the respondent took from trust monies provided by Ronald Coshott amounts in October and November 2013 which is within 12 months prior to the filing of the Costs Assessment application and thus it is clear the application, at least as far as the first applicant was lodged within time and should be proceeded with without the need for leave of the court.

We are instructed by the other applicants that they will withdraw from the application leaving only the first applicant, Ronald Coshott, as the sole applicant.

We await your advices.”

51. On 31 December 2014, the Manager, Costs Assessment, noted that the matter had been assigned by letters to parties and to the Assessor on 19 December 2014 and that the Assessor would then write to the parties.

52. There is nothing in this correspondence amounting to any decision, or even acknowledgement, that the plaintiff was a third party payer. If the plaintiff’s submission is that the Manager somehow exceeded her role by determining that question herself, that is not made out on the facts.

53. Nor is it the case that the Costs Assessor did not determine this issue herself. After the file was allocated to Ms Dulhunty, she wrote to all the applicants (her letter being addressed to “Robert Coshott & 4 ors”) on 13 January 2015, inquiring about who would bring the application and noting the time limitation period:

“Dear Sir/Madam,

RE: ROBERT COSHOTT & 4 ORS. -V- KEITH ROBERT SPENCER T/AS SPENCER LEGAL & CO. – COSTS ASSESSMENT FILE NO. 2014/228663

I refer to the above matter which has been referred to me by the Supreme Court of NSW for assessment.

I have been provided with a letter dated 24 August 2014 stating that the costs have been paid in full and Ronald Coshott is not aware of the Application for assessment.

Please advise what the current situation is and who has made the application.

Please advise if it is intended to proceed with the application or to withdraw it. If the intention is to proceed then the application has been filed more than 12 months after the bill so the application would appear to be out of time: Section 350 Legal Profession Act 2004.

Please note that this letter is a notice pursuant to Section 358 of the LPA. You are required to provide the particulars and documents requested unless you have a reasonable excuse not to do so. Further particulars may be requested.

Please note that you must serve a copy of any correspondence that you send to me on the Respondent. Failure to comply with this direction will delay the assessment.

Similarly, the Respondent must serve on you a copy of any correspondence that she sends to me on you.

A copy of this letter will be sent to the Respondent.

I enclose a copy of a letter to be sent to the Respondent.

Please provide your replies by 28 January 2015.”

54. Ms Dulhunty sent a similar letter to the defendant on 13 January 2015 as follows, and also inquiring about the correct identity of the solicitors’ firm:

“Dear Sir/Madam,

RE: ROBERT COSHOTT & 4 ORS. -V- KEITH ROBERT SPENCER T/AS SPENCER LEGAL & CO. – COSTS ASSESSMENT FILE NO. 2014/228663

I refer to the above matter which has been referred to me by the Supreme Court of NSW for assessment.

I have been provided with your letter dated 24 August 2014 stating that the costs have been paid in full and Ronald Coshott is not aware of the Application for assessment.

You will see that I am seeking clarification of the status of the matter.

I note that the application is outside the time limit set in Section 350 Legal Profession Act 2004.

If the matter does proceed, then please advise what the correct legal entity is for your firm.

Also I will require an itemised bill to be prepared if the matter does actually proceed and I will require production of your costs agreement and disclosure document. I will most likely require the file as well.

Please note that this letter is a notice pursuant to Section 358 of the LPA. You are required to provide the particulars and documents requested unless you have a reasonable excuse not to do so. Further particulars may be requested.

Please note that you must serve a copy of any correspondence that you send to me on the Respondent. Failure to comply with this direction will delay the assessment.

Similarly, the Applicant must serve on you a copy of any correspondence that she [sic] sends to me on you.

A copy of this letter will be sent to the Applicant.

I enclose a copy of a letter to be sent to the Applicant.

Please provide your replies by 28 January 2015.”

55. Martin Place Lawyers replied on 11 February 2015, asserting that the decision that not only the plaintiff but Fewin Pty Ltd had been “accepted” by the Manager as being third party payers:

“Dear Ms Dulhunty,

Re: Fewin and anor v Spencer costs assessment No. 2014/228663

We act for the Applicants.

We have yesterday received in the mail your letters dated 13 January, 2015 to Ronald Coshott and to Mr Spencer.

Please note that Mr Spencer raised the “out of time” objection with Registrar Hedge prior to referral of the application to an assessor. Registrar Hedge accepted that the application was not out of time as regards Fewin Pty Limited and Ronald Coshott. The application is proceeding with the applicants being limited to those two applicants. Is there not a record of this with the papers forwarded to you?

Our client, Ronald Coshott, is aware of the application and it was filed with his instructions.

The costs have been “paid”. Mr Spencer took monies from trust which he applied to his costs. That is a matter which will be dealt with elsewhere.

Please proceed with the application.”

56. There is a letter from the defendant dated 20 February 2015 which is not contained in the affidavit of Mr Hocking, so I have to guess at its contents. However, the solicitors for the plaintiff wrote to the Assessor on 25 February 2015 repeating their assertions that “third party payer” had already been determined in favour of the plaintiff and his company (Fewin Pty Ltd) and objecting to any change to the name of the firm of solicitors:

“Dear Ms Dulhunty,

Re: Fewin and anor v Spencer costs assessment No. 2014/228663

We refer to the costs respondent’s letter to you dated 20 February, 2015.

The costs respondent took the objection that the application was out of time with Registrar Hedge before referral of the application. Registrar Hedge advised the costs applicant that unless the costs applicants could show her that the application was not out of time she would not refer the application to a costs assessor. Registrar Hedge accepted that the application was not out of time at least as regards Fewin Pty Limited and Ronald Coshott and on that basis Registrar hedge [sic] referred the application to you. If the costs respondent wished to challenge Registrar Hedge’s decision, he should have done so by an application to a judge of the Supreme Court. He did not. The application has been referred to you by the Costs Assessment Manager to assess the quantum of the costs and that is what should be done. It is not open to the costs respondent to seek to have you overturn Registrar Hedge’s decision. That is not a function of a costs assessor.

The costs respondent did not raise the “incorporated practice” point with Registrar Hedge before referral. It is not now open to him to raise it with you, even if it had some basis. Attched [sic] are copies of the results of Law Society searches conducted today regarding Mr Spencer and his firm, Spencer & Co Legal. There is no record of the costs respondent practising as an incorporated practice.

The costs applicants wish the assessment to proceed.

We await your advices.”

57. On 3 March 2015, Martin Place Lawyers wrote to the Costs Assessor enclosing copies of correspondence with the Manager, Costs Assessment, in December 2014 and again claiming that “it is accepted that Ronald Coshott is the applicant entitled to proceed with the application”. They also wrote to the defendant, care of “Spencer & Co Legal”, asking for an itemised bill of costs for the work claimed in the tax invoices (affidavit of Mr Hocking, p. 21).

58. Ms Dulhunty wrote again on 20 March 2015 as follows:

“Dear Sir,

RE: ROBERT COSHOTT & 4 ORS. -V- KEITH ROBERT SPENCER T/AS SPENCER LEGAL & CO. – COSTS ASSESSMENT FILE NO. 2014/228663

I refer to the above matter and your letter dated 13 March 2015. I note that one of the emails from Ms Hedge informs you that you need to get the leave of the Supreme Court of NSW pursuant to Section 350 of the Legal Profession Act 2004 (LPA).

As I have stated previously, Fewin Pty Ltd is not named as a party in this assessment so it is unclear why you keep referring to it. It has no part to play in this assessment.

Please confirm that James Coshott, Ljiljana Coshott and Schlotzsky’s Nominee Company Pty Ltd have withdrawn as parties to the application.

As to the correct legal identity of the Respondent I would not rely on the Law Society website. I note that a letter dated 26 August 2014 from the Respondent clearly names Kejus (NSW) Pty Ltd t/as Spencer & Co Legal. The name of the Respondent can be amended however.

Should documentation that I am seeking from the Respondent support its contentions then I will have to dismiss the application as being out of time.

This letter is a notice pursuant to Section 358 of the LPA. Pursuant to Section 358 of the LPA you are required to answer particulars sought and to produce any documents requested.

I enclose a copy of a letter sent to the Respondent for your information.

Please note that a copy of this letter has been sent to the Respondent.”

59. On the same day, Ms Dulhunty wrote to the “Kejus Pty Ltd T/as Spencer & Co. Legal” as follows:

“Dear Sir,

RE: ROBERT COSHOTT & 4 ORS. -V- KEITH ROBERT SPENCER T/AS SPENCER LEGAL & CO. – COSTS ASSESSMENT FILE NO. 2014/228663

I refer to the above matter.

Please provide the following:

1. a copy of any and all costs agreement between your firm and Ronald Coshott for this matter;

2. a copy of any costs agreement between your firm and any of the other parties named as Applicants in this assessment;

3. Any request for payment issued to Ronald Coshott;

4. Evidence of the authority from Ronald Coshott permitting you to transfer monies held in trust to pay the legal fees incurred.

Please confirm that you are agreeable to amending the named Respondent from Keith Spencer t/as Spencer & Co. Legal to Kejus (NSW) Pty Ltd t/as Spencer & Co. Legal. I note also that the bill issued on 8 July 2013 does in fact refer to Kejus (NSW) Pty Ltd not Keith Spencer.

This letter is a notice pursuant to Section 358 of the LPA. Pursuant to Section 358 of the LPA you are required to answer particulars sought and to produce any documents requested.

I enclose a copy of a letter sent to the Respondent for your information.

Please note that a copy of this letter has been sent to the Respondent.” (emphasis added)

60. The parties then proceeded with the assessment. Mr Spencer set out the history of the litigation, ending his letter with a complaint that the request for assessment of costs was “yet another ill-considered, pointless waste of time and money” (affidavit of Mr Hocking, p. 27). This is an indication of the general tenor of correspondence from both sides throughout the costs assessment. It was replied to in similarly robust terms, including a request that Mr Spencer be referred to “the appropriate regulatory authorities”, under cover of a letter dated 13 April 2015; a follow-up letter dated 17 April 2015 warned Mr Spencer that his conduct would be reported and proceedings would be commenced against him (apparently for defamation).

61. The third party payer has the same 12-month period in which to bring any such application. This means that, contrary to Mr Jones’ submissions, the plaintiff’s application was not acceptable as a “valid” claim for assessment simply because the Manager accepted that the plaintiff’s explanation that he was a third party payer. The plaintiff still had to satisfy the Costs Assessor not only that he was a third party payer, but that he had not received the memorandum of costs more than twelve months prior to the application for assessment.

62. Notwithstanding the argument that the Manager had already decided the issue, the plaintiff’s solicitors made submissions and provided documents to the Costs Assessor in support of the assertion that the plaintiff was a third party payer and, when the Costs Assessor indicated her determination that the plaintiff was a third party payer, asked her to proceed to the assessment. However, it is clear from the submissions made to the Costs Assessor that the primary submission – that the Manager had already made this determination – was never abandoned.

The Costs Assessor’s decision

63. The Costs Assessor dismissed the submission that the issue of third party payer had been determined by the Manager, for the following reasons. First, she noted the differences in roles of the Manager and costs assessors:

“4.23 As for the submission that I cannot override the decision of the Manager, Costs Assessment, the Manager, Costs Assessment, was told by the Applicant’s solicitor that the Applicant was a third Party [sic] payer. On the basis of this submission the Manager, Costs Assessment would permit the application to proceed. She initially refused the application as is apparent from her email dated 8 December 2014.

4.24 The Manager, Costs Assessment does not look in depth at these preliminary issues as it is the job of the Costs Assessor to whom the application is referred to determine finally the outcome of any such issue. As the Applicant’s solicitor represented that the Applicant was a third party payer, that representation was sufficient to allow the application to be referred to a costs assessor. The costs assessor then looks at the issue more closely to determine it finally.”

64. Second, she noted that she had made the relevant inquiries of all parties, not just the plaintiff, for the purpose of determining these issues:

“5.1 By notices dated 13 January 2015 I wrote to the parties querying whether the application was out of time under Section 350(4) of the LPA and noting that the costs had been fully paid.

5.2 The Respondent had already sent a letter to the Supreme Court submitting that the application was out of time, that the costs were fully paid and that Ronald Coshott was not aware of the application.

5.3 By letter dated 11 February 2015, the Applicant challenged the application being out of time, referred to correspondence with the Manager, Costs Assessment without producing it and disputing that the costs had been paid. He also referred to Fewin Pty Ltd as being an applicant even though it was not named as a party to the application for assessment. No mention is made of Fewin Pty Ltd in the correspondence with the Manager, Costs Assessment about the application.

5.4 By letter dated 18 February 2015, the Respondent disputed the Applicant’s claim that the Manager, Costs Assessment accepted that the application was not out of time. The Respondent submitted that the costs were paid from trust funds provided by the Applicant and he attached a trust ledger statement showing the movement of trust money for the matter.

5.5 By letter dated 20 February 2015, the Respondent provided the name of the correct legal entity behind the business name of the firm.

5.6 By letter dated 25 February 2015, the Applicant again took issue with question of whether the application was out of time or not. Again the Applicant erroneously referred to Fewin Pty Ltd even though it was not and is not a party to the application. In terms of applications being out of time, it is incumbent on the party who wants to bring the out of time application to apply to the Supreme Court for leave to bring the application out of time: Section 350(5) of the LPA. A respondent to such an application does not need to bring any application.

5.7 By letter dated 27 February 2015, I wrote to the Applicant informing him that I was making my own enquiries with the Manager, Costs Assessment and setting out the provisions of the LPA dealing with the time for making applications. I also pointed out to the Applicant that Fewin Pty Ltd was not a party to the application.

5.8 By letter dated 3 March 2015, the Applicant provided copies of correspondence with the Manager, Costs Assessment. She has simply referred the matter to me as the Costs Assessor on the basis of the representations made by the Applicant’s solicitor which, as an examination of the legislation and cases, are incorrect.

5.9 By letter dated 20 March 2015, I wrote to the Respondent seeking production of documents such as any costs agreements and the authority to transfer monies from trust in payment of legal costs.

5.10 By letter dated 20 March 2015 to the Applicant I drew the Applicant’s attention to Section 350 of the LPA again, I again pointed out that Fewin Pty Ltd was not a party to the Application and I sought confirmation to the withdrawal of James Coshott, Ljiljana Coshott and Schlotzsky’s Nominee Company Pty Ltd as Applicants.”

65. The Costs Assessor’s reasons are challenged on the basis that she erred in law in not accepting that she had no power to make a third party payer finding because the Manager had made this decision, in their client’s favour. This submission requires analysis of the provisions of the Act defining the roles of both the Manager and costs assessors.

Are costs assessors’ powers confined to assessing a costs application?

66. The plaintiff’s principal submission (relying upon Wentworth v Rogers [2006] NSWCA 145) is that the powers of the assessor do not extend to the question of third party payer, which is asserted to be Ground (a). The Manager’s power under s 357 is to refer only a “valid” application for assessment, which is asserted to involve the determination of mixed issues of fact and law such as time limits and third party payers; the costs assessor’s assessment is simply to “crunch the numbers”.

67. Counsel for the plaintiff submits that, empowered by s 357, for the Manager to refer the application for assessment, she must first have made a decision that the plaintiff was a third party payer (although not, curiously, that he has not received the bill more than twelve months ago).

68. Counsel for the defendant challenged these submissions, noting that the application is to be made to the Costs Assessor under s 350(2), and referring to Griffith v Australian Broadcasting Corporation [2013] NSWSC 750 and Colbron v Freeman [2014] NSWSC 1210.

The Manager’s powers

69. What statutory obligations does the Manager have in relation to the referral of applications?

70. First, as noted above, the Manager has to check that the applications (whether made by a third party payer or a client) are brought within time. Second, s 356 provides for the Manager, Costs Assessment to notify “any law practice or client concerned or any other person whom the Manager thinks it appropriate to notify” of an application for costs assessment.

71. However, the fact that the Manager has made such a notification does not amount to a finding that this person is bound by the outcome. As Mark Brabazon SC notes in “Legal Costs: Solicitors’ Relations with Counsel and Clients” (NSW Bar Association, 2010) at p. 26:

“The notified person then becomes a ‘party’ to the assessment and, if the costs assessor so determines, is bound by the outcome.” [Emphasis added]

72. This brings me to s 357, which sets out the manner of referral of matters to costs assessors. The Manager’s duties include avoiding problems which would prevent a costs assessment being successfully conducted, such as provisions about the distribution of work and avoidance of conflicts of interest:

“357 Referral of matters to costs assessors

(1) The Manager, Costs Assessment is to refer each application for costs assessment to a costs assessor to be dealt with under this Division.

(2) A costs assessor who has an interest in an application must, as soon as practicable after becoming aware of that fact, refer the application to the Manager, Costs Assessment for referral to another costs assessor.

(3) If the Manager, Costs Assessment is satisfied that it is inappropriate for a costs assessor to determine a particular application that has been referred to the costs assessor, the Manager, Costs Assessment may:

(a) revoke the referral of the application, and

(b) refer the application for assessment to another costs assessor.

(4) An application that has been referred to another costs assessor under this section is to be dealt with as a new assessment or, if the Manager, Costs Assessment so directs, by continuing the assessment.

(5) When a referral has been revoked, the costs assessor to whom the application was initially referred must return all documents relating to the assessment of the application to the Manager, Costs Assessment. This includes documents relating to any work done on the assessment and a statement of the amount calculated for costs in respect of any work done on the assessment.”

73. The Manager has the power (“may”) to revoke a referral, or to refer the application to another costs assessor only where it is “inappropriate for a costs assessor to determine a particular application” (for example, a conflict of interest, or a bias issue). Otherwise, the Manager “must” (Dal Pont, [18.15]) refer the costs for costs assessment. That is what s 357(1) means by use of the phrase “is to refer”. The Manager’s role is to refer, not to decide.

74. Are costs assessors just there to crunch the numbers? An examination of the powers of costs assessors in the following section shows that they are required to determine issues which include seeking documents for the purpose of determining issues (a power the Manager does not have), which would be an important part of any determination of a third party payer claim. Section 358 provides:

“358 Costs assessor may require documents or further particulars

(1) For the purposes of determining an application for a costs assessment, a costs assessor may, by notice in writing, require a person (including the applicant, the law practice concerned, or any other law practice or client) to do any one or more of the following:

(a) to produce, at a specified time and place, any specified document (or a copy of the document),

(b) to provide written information on or before a specified date (verified by statutory declaration if the requirement so states) including, for example:

(i) information as to the instructions given to, or work done by, any law practice in respect of the matter concerned, and

(ii) information as to the basis on which the costs concerned were calculated,

(c) to otherwise assist in, or co-operate with, the determination of the assessment in a specified manner.

(2) A person who is subject to a requirement under subsection (1) must comply with the requirement.

Maximum penalty: 50 penalty units.

(3) If a person fails, without reasonable excuse, to comply with a notice under this section, the costs assessor may decline to deal with the application or may continue to deal with the application on the basis of the information provided.

(4) A failure by an Australian legal practitioner to comply with a notice under this section without reasonable excuse is capable of being professional misconduct.”

75. Section 359 also sets out the requirement that the costs assessors (not the Manager) must not determine any issue without hearing from all relevant parties and giving due consideration to those submissions:

“359 Consideration of applications by costs assessors

(1) A costs assessor must not determine an application for assessment unless the costs assessor:

(a) has given both the applicant and any law practice or client or other person concerned a reasonable opportunity to make written submissions to the costs assessor in relation to the application, and

(b) has given due consideration to any submissions so made.

(2) In considering an application, a costs assessor is not bound by rules of evidence and may inform himself or herself on any matter in such manner as he or she thinks fit.

(3) For the purposes of determining an application for assessment or exercising any other function, a costs assessor may determine any of the following:

(a) whether or not disclosure has been made in accordance with Division 3 (Costs disclosure) and whether or not it was reasonably practicable to disclose any matter required to be disclosed under Division 3,

(b) whether a costs agreement exists, and its terms.”

76. There are no provisions for documents of this nature to be given to the Manager. Section 361 is in similar terms:

“361 Assessment of costs by reference to costs agreement

(1) A costs assessor must assess the amount of any disputed costs that are subject to a costs agreement by reference to the provisions of the costs agreement if:

(a) a relevant provision of the costs agreement specifies the amount, or a rate or other means for calculating the amount, of the costs, and

(b) the agreement has not been set aside under section 328 (Setting aside costs agreements),

unless the assessor is satisfied:

(c) that the agreement does not comply in a material respect with any applicable disclosure requirements of Division 3 (Costs disclosure), or

(d) that Division 5 (Costs agreements) precludes the law practice concerned from recovering the amount of the costs, or (e) that the parties otherwise agree.

(2) The costs assessor is not required to initiate an examination of the matters referred to in subsection (1) (c) and (d).”

77. Finally, these issues of law must be considered as part of the quantification of the costs assessment process, not by some bifurcated process of decisions by others as to entitlement to seek an assessment:

“367 Determinations of costs assessments

(1) A costs assessor is to determine an application for a costs assessment relating to a bill by confirming the bill or, if the assessor is satisfied that the disputed costs are unfair or unreasonable, by substituting for the amount of the costs an amount that, in the assessor’s opinion, is a fair and reasonable amount.

(2) The costs assessor may include an allowance for any fee paid or payable for the application by the applicant.

(3) A costs assessor may not determine that any part of a bill that is not the subject of an application is unfair or unreasonable.

(4) A costs assessor may determine that the amount of fair and reasonable costs is the amount agreed to by the parties if during the course of the assessment the parties notify the costs assessor that they have agreed on the amount of those costs.”

78. The provisions of the Act clearly intend the Manager’s role as being the efficient managing of costs assessment referrals. The only discretion given to the Manager occurs where there is a problem in relation to allocation to a particular costs assessor. Otherwise, the Manager has no discretion. In fact, if the other parties had insisted on remaining on the record and going to assessment, there would have been little the Manager could do.

79. As to the principles of construction of statutes generally in “no jurisdiction” applications, I note generally the comprehensive analysis of the relevant principles in Meads v Meads [2012] ABQB 571 and SAS Trustee Corporation v Woollard [2014] NSWCA 75 at [58]-[60].

80. There is nothing in the language of any of these sections to support the submission that the Manager (as opposed to the costs assessor or, if an application for extension of time were made to the court, the judge determining that application) has any power to determine whether a party is within time, let alone the status of that party (such as being a third party payer). The fact that the parties wrote to her about this issue does not confer jurisdiction upon the Manager.

81. The correspondence in the costs assessment confirms that the Costs Assessor considered all of these issues, including the entitlements of the parties who withdrew, in accordance with her statutory obligations.

82. Ground (a) of the appeal is not made out and is dismissed.

Grounds (b) and (c) of the appeal

83. Section 359(1)(a) requires the Costs Assessor to give the parties a “reasonable opportunity” to make written submissions. What is a “reasonable opportunity” in circumstances where a concluded view, of the kind expressed here, is given and then reconsidered?

84. The Costs Assessor explains the circumstances in which she came to change her mind as follows:

“5.11 By letter dated 9 April 2015, the Respondent provided copies of the documents sought other than the authorities to transfer money from trust. The Respondent also provided some information about the substantive matter and how he became involved in the matter as well as the Applicant’s contributions to costs.

5.12 By letter dated 13 April 2015, the Applicant challenges the authenticity of the documents produced thus far by the Respondent and offers, but does not provide, statutory declarations about the authenticity of various documents. The emails that were referred to in the letter were not enclosed. The Applicant’s submission about email addresses is rejected. People and businesses can and often do have more than one email address or the email address can be changed if there is a change in the internet provider.

5.13 By letter dated 30 April 2015, the Respondent provided written and executed authorities from the Applicant and from Ljiljana Coshott permitting it to transfer funds from the trust account to pay its legal costs claimed. Also enclosed was a letter dated 10 October 2013 to the Applicant enclosing a copy of the trust ledger and making a request for payment of further money on account of costs. The Applicant’s representation to the Manager, Costs Assessment that he never received a request for payment is not correct, therefore.

5.14 As at that time, it appeared that the Applicant may be a third party payer so by letter dated 6 May 2015, I directed the Respondent to provide an itemized bill of the lump sum bill dated 8 July 2013. No such bill has been provided and the Respondent is in breach of Section 358 of the LPA.

5.15 By letter dated 22 May 2015, the Applicant requested that the assessment be done and provided information about what he recalled was the work done for the matter and the hours spent on the matter.

5.16 By letter dated 3 June 2015, the Respondent referred to various loan agreements but did not provide copies of them. The Respondent also claimed that the Application was not a third party payer but his belief, although ultimately correct, is based on incorrect authority.

5.17 As noted earlier, the evidence suggests that the funds were actually provided by Fewin Pty Ltd who is not a party to the application so it cannot seek an assessment of the costs claimed.

5.18 Also, after examining the legislation and cases decided on Section 302A of the LPA, I changed my mind and I formed the view that the Applicant was not in fact a third party payer, even if he did personally pay some funds on account of costs, as I have determined [illegible]”

85. Much of the correspondence to which the Costs Assessor refers is set out elsewhere in this judgment, and I shall not repeat the contents.

86. What is the test? Counsel for the plaintiff referred me to Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 127 ALR 699 at 715:

“Where the exercise of a statutory power attracts the requirement for procedural fairness, a person likely to be affected by the decision is entitled to put information and submissions to the decision maker in support of an outcome that supports his or her interests. That entitlement extends to the right to rebut or qualify by further information, and comment by way of submission, upon adverse material from other sources which is put before the decision maker. It also extends to require the decision maker to identify to the person affected any issue critical to the decision which is not apparent from its nature or the terms of the statute under which it is made. The decision maker is required to advise of any adverse conclusion which has been arrived at which would not obviously be open on the known material. Subject to these qualifications however, a decision maker is not obliged to expose his or her mental processes or provisional views to comment before making the decision in question.”

87. However, this was not a decision which was arrived at without information and submissions being sought and considered by the decision-maker. This was a situation where the decision maker stated an interim decision necessary for the future conduct of the assessment but, after receiving further submissions, changed her mind.

88. A change of position in administrative proceedings is not uncommon, and is part of the paper-driven and non-adversarial process. In Clare v Australian Community Pharmacy Authority [2015] FCA 653, an Authority changed its position and withdrew a concession. Reeves J noted at [71] the differing procedures between adversarial and non-adversarial procedures:

“As to the first matter, the Tribunal is an administrative decision-maker and, subject to ensuring it affords the parties before it procedural fairness, it is not bound to determine the substantive issues raised for determination according to the way in which they are “pleaded” by the parties: see Grant v Repatriation Commission (1999) 57 ALD 1; [1999] FCA 1629 (Grant) at [17]–[18] per Merkel, Goldberg and Weinberg JJ. Ultimately, the Tribunal is required to make the decision it considers is appropriate in all the circumstances; its function is to arrive at the correct or preferable decision: see Bushell v Repatriation Commission (1992) 175 CLR 408at 424–5 per Brennan J.”

89. The Costs Assessor has made a frank admission of having revised her position after having consulted the legislation and relevant authority, in circumstances where she had previously been given submissions which she states were “incorrect”.

90. As previously noted, the Costs Assessor noted, at 4.14 – 4.15, that the parties had been “most unhelpful” in failing to provide documents, failing to comply with directions and dragging the matter out.

91. Whether a party has been given a “reasonable opportunity” also needs to be seen in the context of how the costs assessment was being conducted. If a party fails to provide essential information, or to follow directions, or is abusive, there must be consequences. When documents were sent to the Costs Assessor, they included statements of an intemperate nature, not only about the opposing party but at times towards the assessor herself. Examples include:

1. There are minatory warnings of the consequences of professional misconduct, such as taking money from trust (“a matter which will be dealt with elsewhere” – p. 18; see also p. 35 of the bundle of documents attached to Mr Hocking’s affidavit).

2. There are threats by Martin Place Lawyers to Mr Spencer to “report your conduct and commence proceedings against you” (p. 36) on the basis that material in his submissions was “demonstrably false and probably libellous.”

3. There are exchanges of disparaging remarks by the solicitors about each other’s clients (for example, pp. 25 – 26, responded to at p 35).

4. As noted in the reasons given by the Costs Assessor, a particular problem was the failure to produce documents requested by the Costs Assessor (p. 34 of Mr Hocking’s affidavit) and each other (p. 36, 44) and complaints about this (pp. 49, 50). For example, any documents supporting a third party payer liability to pay should have been provided to the Costs Assessor at the beginning of the assessment. If the documents in Annexure “B” to Mr Hocking’s affidavit were withheld from the Costs Assessor, that is not to the credit of a party who now complains that they were denied a reasonable opportunity to provide submissions.

5. There were complaints by the parties of failure to answer correspondence (p. 50).

6. Spencer & Co Legal failed to provide the itemised bill requested by the Costs Assessor on 6 May 2015 or indeed at all, which the Costs Assessor notes in her reasons (at 4.15) can amount to professional misconduct (s 358(4)). The Costs Assessor also complains of the failure of Spencer & Co Legal to provide the loan documents referred to in their 3 June 2015 letter. I interpolate that, if the loans referred to in any way imposed a liability to pay legal costs on the plaintiff, they should have been provided to the Costs Assessor by Martin Place Lawyers to demonstrate that the plaintiff was indeed a third party payer.

7. There were peremptory demands from Martin Place Lawyers that the Costs Assessor deal with the assessment “as soon as possible” (p. 43; see also pp. 49-50). However, for the reasons set out above, it was the fault of the parties, not the Costs Assessor, that the matter was not being completed in a quick and efficient manner.

92. Where the parties to proceedings, including administrative proceedings, are quarrelsome and difficult, does there come a stage when the decision-maker can say, as the Costs Assessor did, that the matter had been going on for long enough, and she was going to make up her mind “on the sparse information provided”? Was the Costs Assessor required to advise that she had reconsidered her decision after further submissions from both parties, or could she simply change her mind without offering them a chance to make further submissions?

93. On the facts of this case as set out above, and taking into account the Costs Assessor’s explanation for changing her mind, I am satisfied that the Costs Assessor gave both parties a reasonable opportunity to make submissions. Her initial decision was an error, and was recognised by her to be such when she considered the relevant legislation and authorities and the further correspondence she received from the third parties.

94. An important part of procedural fairness is that parties should, to adopt a maxim generally used in another context, put their cards on the table, or rather put their documents before the court or other tribunal of fact. I make this observation not only in relation to the application before the Costs Assessor, but also in relation to the proceedings before me. Counsel for the plaintiff’s request for an adjournment of the hearing in order to inquire if there are other documents (such as a loan agreement) evidencing liability to pay should be seen in that light.

95. Grounds (b) and (c) of the appeal are accordingly dismissed.

96. This brings me to the alternate findings that I make under s 384(2)(a) as to whether the plaintiff is a third party payer.

Reconsideration of the issue of “third party payer” under s 384(2)(a)

97. If I have erred in making this finding, and I were to proceed to re-determine the issue, taking into account the additional documents that Mr Hocking now provides, I would be satisfied, for the reasons set out above in the section of this judgment on the relevant principles relating to “third party payer”, that the additional documents fail to demonstrate any liability to pay of the kind defined in s 302A of the Act. I am satisfied that the plaintiff was not under a legal obligation to pay these costs. It appears to be acknowledged that he owes no obligation to Spencer and Co, he is clearly not an “associated third party payer”, and I am similarly satisfied that there is no legal obligation owed to “another person” as set out in s 302A(1)(c) (such as his brother) as there are no documents to support this. I note that it appears that the money paid appears to have come from Fewin Pty Ltd rather than the plaintiff in any event. I was not addressed on the subject of whether the illegible handwritten note from the plaintiff was a document of significance.

98. Accordingly, If Grounds (b) and (c) were made out, I would nevertheless dismiss the appeal, because I am satisfied that the plaintiff is not a third party payer.

99. Additionally, the circumstances of this case are a good example of the principles explained by Johnstone DCJ in Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2011] 12 DCLR (NSW) 304 at [16], namely that while there is an attack on the expression of the reasoning process, the determination itself is not erroneous, and should not be disturbed:

“[16] Not only must a party who is appealing under s 384(1) establish an error of law, that party must also demonstrate that the error made justifies disturbing the assessment: Gorczynski v AWM Dickinson & Son [2005] NSWSC 277 at [22]. Thus it has been said by Associate Justice Malpass:

The onus borne by the plaintiff is not merely to demonstrate error as to a matter of law arising in the proceedings to determine the application but also to demonstrate that any such error is material to the determination": Honest Remark Pty Ltd v Allstate Explorations NL [2008] NSWSC 439 at [24]. … [whilst there has been an attack on the expression of the reasoning process, it has not been shown that the determination itself was erroneous and should be disturbed … The onus borne by [the plaintiffs] has not been discharged": Skalkos v Assaf [2002] NSWSC 1221 at [17]–[18].”

100. The Costs Assessor’s finding that the plaintiff was not a non-associated third party payer was clearly correct. The plaintiff has failed to demonstrate that the finding of third party payer was erroneous and in those circumstances, the determination should not be disturbed.

The defendant’s application to dismiss the appeal

101. In the course of the hearing, counsel for the defendant submitted that the appeal was incompetent because it had been brought by the wrong party.

102. Spencer & Co Legal is a firm of personal and business lawyers carrying on business through their company Kejus Pty Ltd. The partner with carriage of the matter was Keith Robert Spencer (“Mr Spencer”), the defendant. The Costs Disclosure and Costs Agreement (“costs agreement”) is with Spencer & Co Legal, not Mr Spencer, although the solicitor responsible is identified in the costs agreement as Mr Spencer. The name Kejus Pty Ltd does not appear in the costs agreement.

103. The circumstances in which the Costs Assessor first raised this issue were as follows. On 20 March 2015 the Costs Assessor wrote to both parties advising that the proper name for the costs respondent was Kejus Pty Ltd t/as Spencer & Co Legal, not Mr Spencer. There does not appear to have been any response to this, so, at 4.5 of her Reasons for Determination of Costs and Disbursements dated 9 July 2015 the Costs Assessor noted Mr Spencer had been incorrectly named and that Kejus Pty Ltd trading as Spencer & Co Legal should replace it, and made that change in her assessment. The Costs Assessor noted that, as the amendment of the name did not involve the addition of a new party, she had the power to make such a correction: Thurai Rajah Lawyers v Villanueva [2001] NSWSC 596. I assume that she makes these observations because the parties did not attend to this step after she raised it.

104. Unfortunately, the plaintiff has brought the appeal against Mr Spencer, not Kejus Pty Ltd t/as Spencer & Co Legal, the party named in the costs assessment. There is no cross-appeal, but counsel for the defendant submits that this appeal, having been brought against the wrong party, should be dismissed on that basis alone.

101. The name of the defendant in fact had to be corrected in this fashion in the Costs Assessor’s reasons. The Costs Assessor noted the issues raised in Thuraj Rajah Lawyers v Villanueva, where the costs assessor amended the application “of his own motion” (at [18]) to determine each bill separately, and asked the parties to agree to this process, and the solicitor whose bills were assessed appealed, complaining that he had not agreed to this course. Master Malpass considered it was open to the costs assessor to assume, from the plaintiff’s failure to object, that he had in fact agreed, adding that, even if a different view were taken, it would not be of assistance in the appeal.

102. These are matters that should have been raised before the List Judge when these proceedings were before him for case management, so that leave to amend could have been sought, rather than at the hearing. As the defendant has been successful on the grounds of appeal, it is unnecessary for me to deal with this submission further.

Orders

1. Summons dismissed.

2. Plaintiff pay defendant’s costs.

3. Liberty to apply in relation to costs, such liberty to be exercised in 28 days.

4. Exhibits retained for 28 days.

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Decision last updated: 12 April 2016