Diploma Constructions (WA) Pty Ltd v kPa Architect Pty Ltd - [2014] WADC 130

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: DIPLOMA CONSTRUCTIONS (WA) PTY LTD -v- KPA ARCHITECT PTY LTD [2014] WADC 130

CORAM: DEPUTY REGISTRAR HARMAN

HEARD: 13 AUGUST 2014

DELIVERED : 23 SEPTEMBER 2014

FILE NO/S: CIV 403 of 2013

BETWEEN: DIPLOMA CONSTRUCTIONS (WA) PTY LTD
Plaintiff
AND
KPA ARCHITECT PTY LTD
Defendant

Catchwords:

Practice - Practice under the Rules of the Supreme Court 1971 (WA) - Costs - Special Costs order - Legal Profession Act (2008) (WA), s 280(2) - Inadequacy of the applicable costs determinations

Legislation:

Legal Profession Act 2008

Result:

Defendant unsuccessful in application for special order

Representation:

Counsel:

Plaintiff: Ms T McAulay
Defendant: Ms B Watroba

Solicitors:

Plaintiff: Hopgood Ganim
Defendant: DLA Piper

Case(s) referred to in judgment(s):

Nil

DEPUTY REGISTRAR HARMAN: The writ issued with an indorsed pleading. The plaintiff then sought damages for breach of contract alternatively damages for loss arising from breach of duty of care.
By amended statement of claim filed 14 June 2013 the plaintiff pleaded facts upon which adjudication had been made under the Construction Contracts Act 2004 (WA) by which the defendant had become entitled to recover judgment against the plaintiff. It sought a declaration that the amount was not due and payable to the defendant. The status of that pleading is unclear but for present purposes, it is not significant.
On 28 August 2013 the plaintiff filed a substituted statement of claim which in broad terms projected the cases that it had previously pleaded. It then sought leave to file and serve a substituted writ and substituted statement of claim and proposed that it pay the defendant's costs thrown away. That application was listed before me on six occasions two of which were for extended periods of time as special appointments. At the last by consent an order was made for leave to file and serve a substituted writ and a statement of claim in the terms proposed by minute filed on 6 June 2014. The significant difference between it and others that had been filed in the context of the application is that it reflected the fact that the judgment sum had then recently been paid to the defendant as to which the plaintiff put a case for recovery. The question of costs was adjourned for later determination. Each party has now applied for particular terms.
The defendant seeks the following:
1.That the plaintiff pay the defendant's costs of and incidental to the application together with any costs thrown away including costs in relation to the proposed substituted writ and statement of claim 14 June 2013, 28 August 2013, October 2013, January 2014, March 2014 and 6 June 2014.
2.That the limits on costs fixed in item 10(A) of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 be removed pursuant to s 280(2)(c) of the Legal Profession Act 2008.
3.That the costs be taxed if not agreed and be payable forthwith.
The plaintiff proposes:
1.The plaintiff pay the defendant's costs thrown away of the application dated 3 October 2013 in any event.
2.The defendant pay the plaintiff's costs of the defendant's costs application for a special order to be taxed if not agreed.
I take it from the discussion that took place in the course of oral submissions that the plaintiff would amend par 2 of its proposal to read '… a special costs order in any event'.
It emerged late in the course of the plaintiff's submissions that the reason par 1 departed from what is usual in circumstances where a party seeks leave to amend was reliance on O 66 r 48(2). It is as follows:
When the motion or application is unopposed the costs of both parties shall be deemed be part of their costs of the action unless the court otherwise orders.
That feature of the plaintiff's case can be dealt with immediately. In light of the observations that I have made in relation to the hearings; what is evident upon what I have outlined of the history; and the defendant has outlined in par 1 of the order it seeks, the rule does not apply. In any event, the defendant has called for a determination of its proposal.
Turning to par 1 of that proposal, there could be no doubt as to the extent of benefit conferred by the usual order for the costs of an interlocutory application. What is proposed is less certain but inevitably the scope for recovery would be more extensive. More significant is that upon any taxation the order would impact upon discharge of the onus of the first feature of the test of recovery.
The defendant has not presented a case for a greater scope of recovery than would be provided by the usual order.
It follows that there is no reason to justify dispensing with the need of the beneficial party to establish that particular activity was part of the relevant service.
As for the proposition that the terms would include a reference to discrete proposed pleadings; because I have no doubt that both of the court and the taxing officer would arrive at the same conclusion on what constitutes the parts of the service, there is no need to specify those parts. I note that the date of the first proposed pleading precedes the minute the subject of the application. Any activity undertaken by the defendant that was generated by that minute is beyond the scope of the application.
Moving on to the proposal for the removal of the limit on recovery under item 10(A) of the scale, s 280(2) of the Legal Profession Act provides:
(2)… if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
The maximum amount allowable under item 10(A) of the relevant costs determination for an interlocutory application is $10,560. I am well aware that some regard the Legal Costs Committee's methodology and its justification for that amount more significant than its status and effect. In my opinion all that is significant is that the Committee has nominated an amount as the maximum recoverable. By s 280(2) the Legislature has provided a pathway to recovery beyond that limit.
In seeking to discharge the onus of persuasion presented by the first statutory consideration: that recovery under the scale would be inadequate; the defendant relies on the affidavit of its solicitor. In broad terms between pars 8 and 28 she deals with the history of the action and features of services provided to the defendant during the period prior to the date of the application, thereafter to par 59; with the period to date. After that point she deposes under the heading 'Costs thrown away' as follows:
60I have reviewed the account summited to the defendant in this matter and verily believe that the defendant's solicitors have spent about 130 hours and approximately $37,000 in legal fees for work required on the plaintiff's substituted statement of claim which resulted in the final substituted writ and statement of claim filed on 6 June 2014, including the preparation for the chamber summons heard on 14 April 2014 and 20 May 2014 and the chamber summons to be heard on 13 August 2014. This work was performed over the course of the year between 14 June 2013 and 22 July 2014.
61These figures are made up of approximately:
61.135 hours considering the six statement of claims (approximately 80 paragraphs in dispute) and other court documents filed by the plaintiff;
61.240 hours drafting applications, notice of objections, submissions and other court documents;
61.326 hours conferring and corresponding with the plaintiff's solicitors;
61.413 hours attending court and undertaking related work necessary for the purposes of preparing for this chamber summons; and
61.516 hours preparing for the chamber summons on costs to be heard on 13 August 2014 including preparation of documents.
There is a distinction to be drawn between party costs and solicitor fees. Under an order for party costs the test of recovery for a service is the necessity for its provision. That which applies to fees is whether the service was properly provided. The issue before me does not engage with fees yet the case is put exclusively on evidence of fees.
There is authority that suggests that an applicant would make a commitment to the extent of party costs in the terms of a draft bill of costs. In my opinion commitment in the form of evidence of an assessment of party costs is fundamental to an application countenanced by the legislation.
There are four other considerations that arise from the evidence that would permit the perception that the figures at pars 60 and 61 are unreliable.
I have already mentioned that one of the minutes referred to in par 60 is beyond the scope of the application. It is inconceivable that any service related to it could be recovered under an order for the costs of the application. That minute probably accounts for part of what is described at par 61.1. Paragraph 61.2 refers to applications one of which I take to be that proposed by the defendant prior to the date of the application before me. I make the same observation and reach the same conclusion. I do not know to what extent those services inform what is otherwise expressed at pars 60 and 61.
Because the scope of par 1 of the defendant's proposal is wider than that under the usual order it is open to consider that there is activity accounted for at pars 60 and 61 for which recovery would be dependent upon the discharge of the onus that particular peripheral activity ought to be allowed.
At the hearing the defendant conceded that contrary to the context of its presentation as costs thrown away, the evidence at pars 60 and 61was not confined to costs thrown away. That is no surprise as the detail provided suggests work that resonates with features of the process of dealing with an interlocutory application. Accepting the concession, what remains to consider is the extent to which costs thrown away may have contributed to the figures expressed in the evidence. I cannot exclude the impression that part of the activity that accounts for the hours spent and the fees charged relates to costs thrown away.
It is likely that any costs thrown away would self-identify as parts of services such as pleadings, discovery, inspection, applications in chambers and preparation for trial and be recoverable as such. As costs thrown away have not been distinguished there is scope for the perception that the evidence upon which the application depends is thereby inflated. Without the benefit of better evidence it is difficult to make any evaluation sufficient to alleviate doubt.
Finally I would add that some of the work canvassed in pars 60 and 61 relates to what is presently before the court for determination I am uncomfortable with the prospect that the defendant would seek to justify above scale recovery by drawing upon parts of the service devoted to obtaining the result it now seeks. I perceive that the cost of that part of the service would be significant.
Apart from those considerations that emerge upon an analysis of the evidence its quality as evidence is diminished as it is not the best evidence and at that at each critical point it is qualified.
In my opinion the significant deficiency in the applicant's case is that there is no evidence to explain either the basis on which the account issued or how the fee was generated. It does not establish the nature of the solicitor's retainer. Having made that observation I am confident that it would not be the common law variety as the solicitor would not now have been entitled to render an account. It does not establish that there is an agreement in place to the effect that the solicitor is entitled to charge for activity at hourly rates. By what is disclosed of the fee accounted for I am confident that such is the case as absent such an agreement the solicitor would have been constrained by the maximum recoverable for the service expressed in the scale.
Authority to which the defendant referred suggests that a court may consider that the first statutory consideration would be satisfied upon an appreciation that the bill presented alternatively the taxing officer's determination would exceed the maximum.
In the event that the account had been generated under a regime of time costing there is no reason to consider that there would be any expectation on the part of the party that it could recover to the extent of the fees so generated. Regardless how fees are generated party recovery is limited to what is reasonable for the provision of the particular service. The standard that would inform the test of reasonableness is that the service had been provided by a competent practitioner acting efficiently. The relative freedom provided under a costs agreement that provides for recovery at hourly rates does not respond to that standard. In reflecting upon those considerations, that the solicitor acting for a beneficial party had generated fees at a particular level may amount to no more than a point of interest.
At the very least the prospect that the defendant has been charged for activity at hourly rates generates doubts as to the significance of the evidence for the purpose of establishing insufficient recovery.
There is nothing in the relevant determination of the Legal Costs Committee that requires the taxing officer to apply a regime that would permit recovery above the maximum. By specifying the basis upon which it made its determination the Committee has done no more than provide transparency. There is no reason to consider that the process that it followed in undertaking its task carried with it any intention to modify any feature of the common law or its various impacts within the scope of the costs of litigation. Accordingly it remains the case that the extent to which recovery is available under an order for the costs of an interlocutory application is what is reasonable for the provision of the sum of the parts of the service.
In my opinion that the defendant may present a claim for the service that exceeded the maximum would have no significance. That the taxing officer could determine more than the maximum as being recoverable is a difficult proposition to countenance.
In my opinion the first consideration under the statutory provision would usefully be addressed along the lines that if above scale recovery was facilitated then there would be an expectation that the taxing officer applying the test of reasonableness would allow more than otherwise would have been permitted.
In this case the failure of the defendant to satisfy me in that regard is due to significant defects and deficiencies in its case.
It is unnecessary to proceed further but I will deal shortly with the second statutory consideration.
Its satisfaction depends upon an assessment by the court of the unusual difficulty of the case, its complexity or importance. Apart from the prospect that the court would consider that on all of the relevant evidence one or more of those conditions was satisfied, the defendant puts no particular case other than by way of projection of the number of pleading points to which consideration was given. In my opinion, for present purposes there is nothing significant in the number of pleading points. What is significant is that I did not discern any real complexity. In my opinion the only difficulty in the case was the fact that the defendant was required to keep track of its objections over the course of the plaintiff's process of amendment. There is no reason to consider that the case is important. I accept that in reflecting upon those assessments the defendant may be at some disadvantage as on each occasion that the matter was before me I do not recall that it ever had the opportunity to develop its submissions.
I have no difficulty with the proposition that independent of the evidence provided there is scope to consider that meeting the plaintiff's application and the terms of its various proposals would have utilised some considerable time and generated considerable expense to the defendant. However no matter how much time I have devoted to consideration of the case and the number of times I have had recourse to the materials I am drawn back to what I would characterise as my surprise when it first emerged that the defendant would be seeking an unusual order. I had not then previously contemplated that any such result would have been warranted. Having reviewed the material but for being exposed to the extent of the pleading intricacies and tasks undertaken that remains my view.
Turning to the third feature of the defendant's proposal; that costs be taxed and paid forthwith. According to common law costs are payable at the conclusion of the retainer. Any departure from that standard would engage with the proposition that some form of penalty was warranted. No case was put in that regard.
But for what I consider would be straightforward: that the defendant have the costs of the application together with any costs thrown away in any event, each proposition put by the defendant is rejected.
In my opinion the plaintiff should have the costs of the question of the costs of the application in any event.