Dubey v Robert Chrzaszcz & Associates Pty Ltd (No 3)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
DUBEY v ROBERT CHRZASZCZ & ASSOCIATES PTY LTD (No 3)
[2024] SASC 65
Judgment of Judge Dart a Master of the Supreme Court
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT
The respondent acted for the applicant in family law proceedings - applicant sought taxation of costs - applicant pursued two preliminary points - applicant unsuccessful on those points - applicant does not wish to proceed further with the taxation - respondent seeks costs - matter was complex - costs awarded on a standard costs basis - fit for senior counsel.
Held:
1. The applicant is to pay the respondent's costs of and incidental to the application on a standard costs basis.
2. The matter is certified fit for counsel including senior counsel.
Evidence Act 1929 (SA) s 67C; Legal Practitioners Act 1981 (SA) Schedule 3 clause 49; Supreme Court Act 1935 (SA) s 40, referred to.
Apotex Pty Ltd v Les Laboratoires Servier (No 5) [2011] FCA 1282; Dubey v Robert Chrzaszcz & Associates Pty Ltd (No 2) unreported decision of Judge Dart delivered on 28 September 2023; Walker v Wilsher (1889) 23 QBD 335, considered.

DUBEY v ROBERT CHRZASZCZ & ASSOCIATES PTY LTD (No 3)
[2024] SASC 65

In this action the applicant sought a taxation of the legal costs charged to her by the respondent in a family law dispute. The applicant is herself a legal practitioner and was, at one time, employed by the respondent.
A final order was made on 2 November 2023 fixing the amount of costs due to the respondent. Earlier this year the respondent asked for a more detailed order to be made. The parties agreed a form of the order which was made on 10 April 2024. Dealing with that issue delayed the delivery of this judgment.
The applicant was a party to family law proceedings in the Federal Circuit Court in Sydney. It was because of the previous relationship that the applicant asked the respondent to act for her, notwithstanding the proceedings were being conducted in Sydney.
In the result, the application turned on two preliminary points. The first point related to the consensual taking of monies from trust by the respondent on account of legal fees. There is no dispute that the applicant authorised the respondent to take the monies out of trust. The dispute related to the question of whether the payment was intended to relate to all costs incurred up to the date the money was taken from the trust, or whether it was simply a part payment.
The second issue related to discussions that took place between the applicant and the principal of the respondent after the litigation had resolved. The respondent sent a final account. The applicant says she was surprised at the amount. Over several days there was a discussion about the amount. The principal of the respondent says that he agreed with the applicant to discount the bill by 30%. He then took from trust an amount sufficient to satisfy the discounted claim for costs. The applicant says whilst the matter was discussed, no agreement was reached.
The resolution of both issues turns, to a significant degree, on the credit of the witnesses. Those issues are discussed at length in a previous judgment.[1] The issues need not be recanvassed other than to note that the evidence of the applicant was largely not accepted and the two issues were resolved in favour of the respondent.
[1] Dubey v Robert Chrzaszcz & Associates Pty Ltd (No 2), unreported decision of Judge Dart delivered 28 September 2023.
All that remains to be determined is the question of costs as the applicant does not seek to pursue the taxation any further. Costs are, of course, in the discretion of the Court.[2] A taxation of costs between solicitor and client is governed by Schedule 3 of the Legal Practitioners Act 1981. The relevant provision is as follows:
[2]    Supreme Court Act 1935 s 40.
49—Costs of adjudication
(1) The Supreme Court must determine the costs of an adjudication of costs.
(2) Unless the Supreme Court otherwise orders, the law practice to which the legal costs are payable or were paid must pay the costs of the adjudication if—
(a)     on the adjudication the legal costs are reduced by 15% or more; or
(b)     the Court is satisfied that the law practice failed to comply with Part 3.
(3) Unless the Supreme Court otherwise orders, if the law practice is not, under subclause (2), liable to pay the costs of the adjudication, the costs of the adjudication must be paid by the applicant for the adjudication.
(4) However, if an application for an adjudication of costs is made following the making of a determination by the Commissioner in relation to the costs under section 77N, the applicant is required to pay the costs of the adjudication unless the Supreme Court orders otherwise.
(5) In determining whether to make an order under subclause (4), the Supreme Court must have regard to the extent (if any) to which the result of the adjudication is more favourable for the applicant than the Commissioner's determination.
The reference in clause 49(2)(b) to Part 3 of the Schedule relates to a matter that does not arise. Part 3 is an important part of the Schedule and imposes obligations on a legal practitioner to make detailed costs disclosures to a client. The obligation does not extend to making such disclosure to a sophisticated client. A sophisticated client includes a client who is a legal practitioner.[3] The applicant is, and has been for a long time, a legal practitioner. She conceded early on in this proceeding that she was a sophisticated client. That was an appropriate concession. Notwithstanding that, there have been muted attempts, from time to time, to resile from that position. There is no evidentiary basis on which it would be appropriate to determine that the applicant was not a sophisticated client.
[3] Section 13(1)(c).
The applicant lost on both preliminary points. Once they were determined, the applicant did not press a further taxation of the costs. The provisions in clause 49 are a guide and do not affect the overall discretion of the Court. However, they are specific to taxation proceedings and should be applied unless there is good reason to do otherwise.
It is necessary to consider the provision in clause 49(2)(a) in context so as to properly consider how it should be applied in a given case. On a normal taxation there will usually be small wins and losses in respect of individual items of costs. It is possible, in those circumstances, for a party, who has only succeeded to a very small degree, to claim that the application was necessary and that they have been vindicated. That will be the case even when the time and cost involved is much greater than the amount of reduction in costs payable. In civil litigation the usual starting point for costs is that they follow the event. That starting point allows parties who may have succeeded to a small degree to still say that the event falls in their favour. The provision in clause 49(2)(a) should be regarded as the event for the purpose of making an award of costs in a taxation. That is, a party will be held to have succeeded or failed on the taxation depending on whether or not a reduction in costs of at least 15% was obtained.
The applicant faintly argues that the legal costs were reduced by 30%. That is true but that was always the respondent’s position. It was not because of anything that happened on the taxation. The respondent accepted that position on the day this proceeding commenced. It was the applicant who did not accept that position. The costs were not reduced at all and the respondent obtained on the taxation the amount it always said was appropriate. It follows that the respondent should have the costs of the application.
It should be noted that the hearing was unduly complicated and complex. The credit of both the applicant and respondent were tested in cross examination. There was a separate hearing about the Harman undertaking. The applicant suggested it was not appropriate for the Court to receive material from the Family Court proceedings which related to the applicant’s credit. In the circumstances I am satisfied the matter was fit for senior counsel.
Should the respondent have costs on an indemnity basis?
The respondent seeks costs on an indemnity basis. In aid of that contention it filed an affidavit.[4] It is not appropriate to rely on that affidavit. The affidavit recounts the history of settlement discussions between the parties. That is generally not appropriate without the consent of both parties. Eventually the applicant advised the Court that she did not consent to the Court receiving the affidavit as evidence.
[4] Affidavit of Ian Roberts sworn 30 January 2024 (FDN 67).
The common law has always encouraged settlement discussions between parties. To assist the conduct of frank discussions, such discussions are said to be confidential. The term used by lawyers is that such discussions are “without prejudice”. That approach is of long standing. In Walker v Wilsher[5] the Court of Appeal was deciding whether a judge could have evidence of settlement discussions. Lord Esher, M.R. said:
… It is, I think, a good rule to say that nothing which is written or said without prejudice should be looked at without the consent of both parties, otherwise the whole object of the limitation would be destroyed. …
[5] (1889) 23 QBD 335.
It is a communication for the purpose of attempting to negotiate a settlement that attracts the privilege. That is the case whether or not the words “without prejudice” are used. It is the character of the communication that is relevant. In Apotex Pty Ltd v Les Laboratoires Servier (No 5)[6] Flick J said:
It may readily be accepted that the mere insertion of the words “without prejudice” does not of itself necessarily clothe correspondence with the character asserted (Bhagat v Global Custodians Ltd [2002] NSWCA 160 at [28] per Spigelman CJ (Ipp AJA and Brownie AJA agreeing)) any more than the absence of those words would deny a privilege attaching to correspondence which is truly engaged in for the purpose of effecting a settlement or compromise (Rodgers v Rodgers (1964) 114 CLR 608 at 614 per McTiernan, Taylor and Owen JJ; In the Marriage of Bradford (1995) 120 FLR 75 at 78 to 79 per Mushin J).
[6] [2011] FCA 1282 at [25].
I am satisfied that the communications between the parties referred to in the affidavit were legitimate attempts to reach a resolution of the dispute between the parties. It does not matter whether on any particular occasion the words “without prejudice” were used. The privilege arises and is the privilege of both parties jointly and can only be waived with the consent of both parties. The applicant does not consent and that is the end of the matter.
Also relevant is the following from the Evidence Act 1929:
67C—Exclusion of evidence of settlement negotiations
(1) Subject to this section, evidence of a communication made in connection with an attempt to negotiate the settlement of a civil dispute, or of a document prepared in connection with such an attempt, is not admissible in any civil or criminal proceedings.
(2) Such evidence is, however, admissible if—
(a)     the parties to the dispute consent; or
(b)     the substance of the evidence has been disclosed with the express or implied consent of the parties to the dispute; or
(c)     the substance of the evidence has been partly disclosed with the express or implied consent of the parties to the dispute, and full disclosure of the evidence is reasonably necessary to—
(i) enable a proper understanding of the other evidence that has already been adduced; or
(ii) avoid unfairness to any of the parties to the dispute; or
(d)     the communication or document included a statement to the effect that it was not to be treated as confidential; or
(e)     the proceeding in which the evidence is to be adduced is a proceeding to enforce an agreement for the settlement of the dispute or a proceeding in which the making of such an agreement is in issue; or
(f)      the evidence tends to contradict or to qualify evidence that has already been admitted about the course of an attempt to settle the dispute; or
(g)     the making of the communication, or the preparation of the document, affects the rights of a party to the dispute; or
(h)     the communication was made, or the document was prepared, in furtherance of—
(i) the commission of a fraud or an offence; or
(ii) the doing of an act that renders a person liable to a civil penalty; or
(iii) the abuse of a statutory power.
(3) Subsection (1) does not apply to parts of a document that do not concern attempts to negotiate a settlement of a dispute, if it would not be misleading to adduce evidence of only those parts of the document
The provisions of s 67C provide some exceptions to the usual rule. None of the exceptions arise on the facts of this matter. I therefore will not accept the affidavit evidence and will not rely on its contents for the purpose of deciding the costs of the application.
Conclusion
This matter can be resolved by simply ordering that costs follow the event. The applicant pursued two preliminary points in relation to which she was unsuccessful. She no longer requires the taxation to proceed at all. In the circumstances, the respondent has been successful and should have its costs.
The following orders are made:
1.The applicant is to pay the respondent’s costs of and incidental to the application on a standard costs basis.
2.The matter is certified fit for counsel including senior counsel.

[2024] SASC 65

14 May 2024