Demlakian v Vilkev Pty Limited

[2012] NSWDC 234

District Court

New South Wales

Medium Neutral Citation:

Demlakian v Vilkev Pty Limited [2012] NSWDC 234

Hearing dates:

29 November 2012

Decision date:

29 November 2012

Jurisdiction:

Civil

Before:

Gibson DCJ

Decision:

(1) Appeal allowed in part.

(2) Each party pay his or its own costs.

Catchwords:

COSTS - Appeal from CTTT costs order in favour of litigant in person - nature and extent of costs which can be claimed by litigants in person - appeal allowed in part

Legislation Cited:

Consumer, Trade & Tenancy Tribunal Act 2001 (NSW), ss 36(5), 53 and 67(3)(a)
Consumer, Trade & Tenancy Tribunal Regulation 2009 (NSW), cl 20(4)
Legal Profession Act 2004 (NSW)

Cases Cited:

Cachia v Hanes (1994) 179 CLR 403
Kostas v HIA Insurance Services Pty Ltd t/as Home Owners Warranty (2010) 241 CLR 390
Patel v Consumer, Trader and Tenancy Tribunal (NSW) and Malaysian Airlines Australia [2011] NSWDC 4
Thomas v Hills Motorsport (Motor Vehicle) [2010] NSWCTTT 296
Tsu v Nemeth [2012] NSWCA 29
Williams v NSW Land and Housing Corporation [2012] NSWSC 1022

Texts Cited:

-

Category:

Principal judgment

Parties:

Plaintiff: Josie Demlakian
Defendant: Vilkev Pty Limited

Representation:

Plaintiff: Mr N W Eastman
Defendant: Mr K Weston (in person)
Plaintiff: Malcolm John Wright Lawyer
Defendant: Mr K Weston (in person)

File Number(s):

2012/276823

Publication restriction:

None

Judgment

1. This is an appeal from the Consumer, Trade & Tenancy Tribunal ("CTTT") on 15 August 2012 awarding the defendant $6,016.18 in costs following the withdrawal of a claim by the respondent in March 2012 which had first been foreshadowed against it some three years earlier, in February 2009. These are reasons for my ruling allowing the appeal in part.

1. Following the withdrawal of the claim by the respondent, the matter was listed for hearing on costs on 15 August 2012. Both parties provided submissions in writing which, in the case of the plaintiff, consisted of a letter from the plaintiff's solicitor objecting to the award of any costs on the basis that "costs" as used in s 53 Consumer, Trade & Tenancy Tribunal Act 2001 (NSW) was capable only of meaning "remuneration of a lawyer for professional services rendered to a client". The solicitor for the plaintiff drew the attention of the Tribunal Member to Cachia v Hanes (1994) 179 CLR 403. The submission was made that as the defendant was never represented by lawyers, it was not entitled to any disbursements whatsoever, including filing fees, CTTT costs or costs of consulting a solicitor who did not represent him at the Tribunal. As a secondary submission, it was claimed that a portion of the costs and disbursements relating to the defendant's inability to deregister and close the company was not costs but a form of compensation.

1. The Tribunal Member heard the application on 15 August 2012. He found as follows:

"The applicant's submissions contain three main issues. First, there is the statutory regime governing the Tribunal and its power to award costs, pursuant to section 53 of the Consumer Trader and Tenancy Tribunal Act 2001 and Regulation 20 of the Consumer Trader and Tenancy Tribunal Regulation 2009. There is nothing controversial about those provisions in relation to this application. Given that the application was maintained for several years, against a respondent which had ceased to trade and in fact had been sold and which the respondent wished to de-register but the applicant did not withdraw the claim in a timely fashion, then, subject to what follows, in my opinion exceptional circumstances exist that would warrant the awarding of costs.

Secondly, relying ultimately on the authority of Cachie [sic] v Hanes, the applicant submits that "costs" means only legal professional costs and does not include, for example, an unrepresented litigant's own costs of conducting the litigation, such as travelling costs, lost time and so forth. I agree with that submissions.

Finally, the applicant submits that the costs otherwise sought by the respondent are not in fact legal costs at all. I do not agree with that submission. Costs incidental to conducting and maintaining litigation are included in awards of legal costs, including for example the costs of issuing summonses, filing fees, photocopying fees and the like. In addition, professional costs of building consultants and similar are also awarded.

In relation to the costs sought by the respondent, I do not include the travelling fees etc. but I allow the costs of legal advice, summonses and photocopying fees to the CTTT. I also allow the professional accounting costs associated with the need to report as required under corporations law to ASIC and other accountancy fees, as the company was maintained for several additional years only because the applicant maintained this claim.

Ordered accordingly."

1. The summons commencing an appeal (Part 50) sought to appeal from that ruling and seeks orders pursuant to s 67(3)(a) of the Act that the defendant's application for costs be dismissed, or that the items for "professional accounting costs" in relation to the continued existence of the defendant to be disallowed in terms of the costs orders made. In the alternative, an order was sought remitting the matter to the CTTT. An order for costs was also sought.

1. The basis upon which the appeal was brought and argued (for the bulk of the hearing time before me) was that the claim for costs included disbursements which were "not legal professional costs" and claims that the tribunal had erred in law in accepting, without evidence, that the accountancy and ASIC fees were incurred only because of the principal tribunal proceedings. An alternative claim is that reliance should not have been placed upon the length of time of the proceedings and that the finding that the plaintiff did not withdraw the claim in a timely fashion should not have been accepting without evidence.

1. The plaintiff commenced these proceedings in 2008. The defendant in these proceedings was joined, together with another respondent, following an application made in February 2009. The defendant supplied heated flooring; the other respondents were the waterproofer and the tile and stonemason. The compensation sought was substantial; the claim of $420,000 was not apportioned in quantified amounts as against each respondent. The proceedings as against the other respondents settled; the proceedings against the defendant were withdrawn pursuant to s 28(5)(h) and it was following this step that the defendant made an application for its costs.

1. The costs sought by the defendant were as follows:

"10. The claim made by Vilkev in relation to costs was for a total of $8180.18 which included ten items, split into two categories, as appearing in the 2 July 2012 Vilkev evidence:

"In response to you [sic] letter dated June 18, 2012, following is a list of costs incurred by Vilkev Pty Limited in the above action, beginning in March 2009 until the time that the application against us was withdrawn on March 28, 2012"

(1)   Legal costs (advice from Bundock Palmer Lawyers) - $328.68;

(2)   Costs to issue Summons - $154.00;

(3)   CTTT charges for photocopies - $105.00;

(4)   Parking fees - $557.00;

(5)   Bridge Tolls - $52.00;

(6)   Car Allowance from ATO website @ 481km - $355.00;

(7)   My time @ 80 hours - $1,200.00;

"The costs listed below were incurred due to the ongoing legal action, as we were unable to de-register and close Vilkev Pty Limited, after sale of the business"

(1)   Costs to submit annual returns to ASIC for the years 2009, 2010, 2011 and 2012 - $868.50;

(2)   Accountants charges to submit ASIC reports between 2009-2012 - $1,210.00;

(3)   Accountancy costs for Vilkev P/L between 2009-2012 - $3,350.00.

11. The items emboldened in the table above were awarded as "costs" by the Tribunal."

1. This is an appeal with respect to a question of law: Kostas v HIA Insurance Services Pty Ltd t/as Home Owners Warranty (2010) 241 CLR 390. The basis upon which the appeal is brought is that the Tribunal deals with legal representation in such a way that a litigant in person cannot recover even disbursements by reason of the wording of the CTTT Act. The relevant sections are as follows:

(1)   Section 36(5) provides:

"(5) Except as otherwise provided by the regulations, a person is not entitled to demand or receive any fee or reward for representing a party in any proceedings. This subsection does not apply to or in respect of an Australian legal practitioner."

(2)   Section 53 provides:

"53 Costs

(1) Subject to this section and the regulations, the parties in any proceedings are to pay their own costs.

(2) The Tribunal may, in accordance with the regulations, award costs in relation to any proceedings.

(3) If costs are to be awarded by the Tribunal in accordance with the regulations, the Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.

(4) In this section, "costs" includes the costs of, or incidental to, proceedings.

(5) This section does not apply in relation to proceedings under the Strata Schemes Management Act 1996 or the Community Land Management Act 1989."

(3)   Clause 20(4) of the CTTT Regulation 2009 provides:

"(4) In any proceedings in respect of which the amount claimed or in dispute is more than $30,000, the Tribunal may award costs in relation to the proceedings in such circumstances as it thinks fit."

1. The argument put on behalf of the plaintiff was that as "costs" is not defined by the CTTT Act, and is essentially only employed in s 53 of the Act, it falls to be interpreted in the same way as the reference to "legal costs" in the Legal Profession Act 2004 (NSW), an Act which is referred to in s 53(5) in relation to how costs may be assessed. The plaintiff submitted that this was an express indication that the term "costs" should be construed as having the same meaning that it has in the Legal Profession Act where the reference is to "legal costs" and where this is defined in s 4 as being "amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services including disbursements but not including interest".

1. It is submitted that this provision should be read with s 36(5), the text of which is set out above. When these two provisions are read together, it is contended that the legislature has made clear that costs referred to in s 53 are those incurred by a legal practitioner in the course of the representation of a party in proceedings.

1. The practical effect of this would be that litigants in person in the CTTT would be unable to claim even disbursements such as the filing fee or the costs charged by an expert for preparation of a report. In addition, it was submitted that unless an order had been made for representation of a party by a legal practitioner, legal advice about the conduct of the claim by a litigant in person could not be the subject of any claim. There is no authority to support such an interpretation. Unrepresented litigants in the CTTT have been permitted to recover limited disbursements. For example, in the CTTT in Thomas v Hills Motorsport (Motor Vehicle) [2010] NSWCTTT 296, a witness fee for two days was permitted. This court in Patel v Consumer, Trader and Tenancy Tribunal (NSW) and Malaysian Airlines Australia [2011] NSWDC 4 at [197] costs incurred in bringing the proceedings excluding the personal expenses of the litigant in person were awarded. Further, in the Supreme Court in Williams v NSW Land and Housing Corporation [2012] NSWSC 1022 at [80], an order was made in favour of the litigant in person's expenses.

1. Following a short adjournment in which counsel for the plaintiff carried out further research, the plaintiff withdraw the challenge to the three items for legal costs, the costs of the summons and the CTTT charges. The basis upon which the challenge was made to the more substantial claims of the costs of annual returns, the accountancy charges to submit ASIC reports and the accountancy costs was brought on a slightly different basis, namely that these amounted to "compensation" for a loss suffered by a litigant (Cachia v Hanes, supra, at 11). These were analogous to claims for loss of time of the kind that were disallowed by the CTTT in Thomas v Hills Motorsport, supra. The plaintiff submits that any costs incurred in maintaining the defendant's registration as a company would at best be damages (Tsu v Nemeth [2012] NSWCA 29). There was no claim for damages. The defendant should not be entitled to make these claims as being disbursements in such circumstances. In addition, it was submitted that there was no evidence to satisfy the Tribunal that the defendant had been "unable" to deregister the company because of the proceedings, or of the sale of the business. There was also a challenge to the circumstances in which the $3,350 in accountancy costs were incurred.

The ASIC and accountancy costs

1. The first problem which arises in relation to the claims for accountancy charges and costs, as well as annual return fees, is the question of whether these are in fact costs, as opposed to a claim for damages. In Tsu v Nemeth, supra, the Court of Appeal explained at [51]:

"[51] The distinction between damages and costs is well known and the plaintiffs' costs of the present proceedings could not have been recovered as part of their damages. Costs are awarded as a partial indemnity to the successful party for legal expenses incurred in the proceedings: Gundry v Sainsbury [1910] 1 KB 645 CA, 649; Cachia v Hanes [1994] HCA 14; 179 CLR 403, 410-411."

1. As the Court stated in Cachia v Hanes, supra, at [11], costs were "never intended to be a comprehensive compensation for any loss suffered by a litigant". I note the helpful discussion of the very limited costs available to a lay litigant as discussed in Dal Pont, Law of Costs, 2nd ed 2009 at [7.21]-[7.32], and the need to differentiate between work of a "legal" nature, such as preparation, disbursements and claims for incidental expenses.

1. This is a classic example of a claim for compensation for a loss suffered by a litigant rather than a claimable disbursement.

1. Counsel for the plaintiff draws my attention to the CTTT decision of Thomas v Hills Motorsport (Motor Vehicle), supra, where a litigant in person made a claim for fees for his own services. He was allowed expenses of $77.60 for each of the two days hearing, but other claims were not allowed. Those fees were at least directly related to the conduct of the hearing, but in the present case they are so far removed from the CTTT hearing as to be not only claims for compensation but claims which arguably do not relate to the CTTT hearing. Although the defendant says that he was told by a solicitor that he needed to keep the company a going concern while the litigation was on foot, there is no evidence to support this contention. In addition, the circumstances in which the $3,350 in accountancy costs were incurred are uncertain, and it would appear that a bill for this amount was not put before the Tribunal Member making the decision.

1. The Tribunal Member was rightly concerned about the circumstances in which the defendant had remained a party to CTTT proceedings for a very lengthy period of time. Clearly he was entitled to the disbursements relating to his legal costs, the issue of a summon and for photocopying. However, fees such as the costs of ASIC annual returns and reports and accountancy costs for maintaining the company are unrelated to the conduct of the case, and should not have been awarded as "costs" whether the defendant was legally represented or not.

1. Accordingly, while I have allowed the first three disbursements as appropriate for a litigant in person, I have not allowed the accountancy and ASIC costs, which are a form of compensation.

1. Each of the parties has enjoyed a degree of success, and after hearing from counsel for the plaintiff and from the defendant in person, the order I make is that each party pay his or its own costs.

Orders

(1)   Appeal allowed in part.

(2)   Each party to pay his or its own costs.

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Decision last updated: 22 January 2013