eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd

[2015] NSWCA 284

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284

Hearing dates:

19 August 2015

Decision date:

18 September 2015

Before:

Beazley P at [1]; Basten JA at [11]; Simpson JA at [66]

Decision:

Application dismissed with costs.

Catchwords:

JUDICIAL REVIEW – application to quash decision of District Court – appeal to District Court from determination of costs review panel – Supreme Court Act 1970 (NSW), s 69

 

JUDICIAL REVIEW – whether primary judge erred in declining to permit appellant to amend Notice of Appeal – where solicitors’ invoice named only one of five defendants – whether costs review panel erred in awarding costs to unnamed defendants – all defendants jointly and severally liable for costs – legal liability not founded by invoice – no reviewable error of law demonstrated

 

JUDICIAL REVIEW – whether costs assessor and costs review panel erred in issuing single Certificate of Determination of Costs for two separate costs orders – Wende v Horwath (NSW) Pty Ltd [2014] NSWCA 170 – no reviewable error of law demonstrated

COSTS – whether s 60 of Civil Procedure Act 2005 (NSW) and s 364 of Legal Profession Act 2004 (NSW) required assessment of proportionality of costs – s 60 of Civil Procedure Act directed to courts – costs assessors not part of a “court” – s 364 of Legal Profession Act not expressed in terms of proportionality – “outcome” of matter not a mandatory consideration in costs assessment – Legal Profession Act s 364(2)

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 60
Evidence Act 1995 (NSW), ss 17, 190
Interpretation Act 1987 (NSW), ss 5, 8
Legal Profession Act 1987 (NSW), ss 208F, 208G
Legal Profession Act 2004 (NSW), ss 353, 359, 364, 365, 367, 367A, 368, 373, 374, 378, 384, 390
Legal Profession Regulation 2005 (NSW), cl 134
Legal Profession Uniform Law (NSW), s 172
Supreme Court Act 1970 (NSW), s 69

Cases Cited:

April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd [2009] NSWSC 867; 75 NSWLR 619
Brook v Reed (trustee in bankruptcy of Estate of Brook) [2011] EWCA Civ 331; [2011] 3 All ER 743
Cachia v Hanes [1994] HCA 14; 179 CLR 403
eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (NSWDC, 31 March 2015, unreported)
eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (NSWSC, 6 May 2013, unreported)
eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2013] NSWSC 410
House v The King [1936] HCA 40; 55 CLR 499
Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28
Skalkos v T & S Recoveries Pty Ltd [2004] NSWCA 281; 65 NSWLR 151
Wende v Horwath (NSW) Pty Ltd [2014] NSWCA 170; 86 NSWLR 674
Wentworth v Rogers (2006) 66 NSWLR 474; [2006] NSWCA 145

Category:

Principal judgment

Parties:

eInduct Systems Pty Ltd (Applicant)
3D Safety Services Pty Ltd (First Defendant)
Anthony Ian Conacher (Second Defendant)
Simon Paul Morrow (Third Defendant)
3D Safety Systems Pty Ltd (Fourth Defendant)
Wishbone Consulting Pty Ltd (Fifth Defendant)
District Court of NSW (Sixth Defendant)

Representation:

Counsel:
J T Johnson (Applicant)
M Castle/A Bailey (First to Fifth Defendants)
Submitting appearance (Sixth Defendant)

    Solicitors:
Russell Grant Phair (Applicant)
Henry Davis York (First to Fifth Defendants)
Crown Solicitors Office (Sixth Defendant)

File Number(s):

2015/128727

 Decision under appeal 

Court or tribunal:

District Court

Date of Decision:

31 March 2015

Before:

Bozic DCJ

File Number(s):

2014/313980

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant, eInduct Systems Pty Ltd (“eInduct”), commenced proceedings against the first respondent, 3D Safety Services Pty Ltd (“3D”) in the Supreme Court of NSW asserting: breach of contract, breach of equitable duties of confidence arising out of the alleged use, by 3D, of eInduct’s intellectual property, and claiming restraining orders, and an award of damages. Two further individuals and two additional corporations were later joined as defendants.

Following determination of two Notices of Motion, the first brought by 3D (claiming security for costs) and the second by eInduct (seeking separate trials on the issues of liability and damages), Stevenson J made two orders for costs in 3D’s favour. In respect of these costs orders the solicitors for 3D (and the other defendants) submitted a composite bill, of which part was attributable to disbursements.

Pursuant to s 353 of the Legal Profession Act 2004 (NSW) (“the LPA”), the defendants applied to have the costs assessed by a costs assessor. eInduct made detailed written submissions to the assessor asserting that the costs claimed were “excessive and unreasonable” for the services provided; these submissions were expansive and included a detailed individual examination of more than 70 of the items charged. The costs assessor issued a single Certificate of Determination of Costs in relation to both costs orders fixing a fair and reasonable amount of costs to be paid to 3D by eInduct. The assessor later issued his reasons and a Certificate of Determination of Costs of Costs Assessment.

Pursuant to s 373 of the LPA, eInduct applied for review of that determination by a costs review panel constituted under s 374 of the LPA. The review panel set aside the original Certificate of Determination of Costs and issued a new Certificate assessing the costs in relation to both costs orders, in a slightly higher amount than that fixed by the costs assessor. The panel also issued reasons and a Certificate for the costs of the review.

Pursuant to s 384(1) of the LPA eInduct appealed to the District Court against the determination of the costs review panel. At the hearing of the appeal counsel for eInduct sought leave to amend the Notice of Appeal by raising two additional grounds, neither of which had been raised before the costs assessor or the review panel. A version of the “indemnity principle” had been raised before the costs assessor, but on a completely different basis to that sought to be raised in the District Court. The District Court refused leave to amend the Notice of Appeal and dismissed the appeal.

eInduct sought judicial review in the Court of Appeal under s 69 of the Supreme Court Act 1970 (NSW). The principal issues on the review were:

(1)   Whether the primary judge erred in declining to permit amendment to the Notice of Appeal to raise an issue as to the liability of certain of the defendants for the costs (“the Indemnity Rule”);

(2)   Whether the primary judge erred in declining to permit amendment to the Notice of Appeal to raise an issue as to the form of the certificates issued by the review panel based on the judgments of this Court in Wende v Horwath (NSW) Pty Ltd (“Wende”);

(3)   Whether the primary judge failed to take into account the proportionality of the costs to the outcome of the proceedings.

Held, dismissing the summons with costs:

(1)   The decision of the primary judge to reject the application to amend was a discretionary one. As such, an error of principle must be identified to permit review of such a decision.

(2)   With respect to the proposed reliance on the “indemnity principle” – legal liability does not depend upon the rendering of an invoice, but upon the costs agreement between the parties and their solicitors. All defendants were jointly and severally liable for their solicitors’ fees; an invoice issued naming only one defendant did not affect the liability of the others: Basten JA at [24]-[26]; Simpson JA at [108] (Beazley P agreeing at [4]).

Wentworth v Rogers [2006] NSWCA 145; 66 NSWLR 474 considered.

(3)   With respect to the attempt to invoke the ruling in Wende that there should be separate certificates for each costs order the primary judge accepted that reading of the Act but concluded that, in the absence of prejudice, the amendment should not be allowed to raise a point to relied not before the assessors. No error of principle was shown in that approach: Beazley P at [5]; Basten JA at [47]-[49]; Simpson JA at [108] (Beazley P agreeing at [4]) and [112].

House v The King [1936] HCA 40; 55 CLR 499 referred to.

1. per Basten JA (distinguishing Wende): it is not clear that Wende required that a single certificate be issued in circumstances in which a single application is made for costs assessment, and in which separate costs orders have been made in favour of the same successful parties: at [42]. As neither of the two costs orders was to be assessed on a purely ordinary or purely indemnity basis, separate determinations would have resulted in no different result: at [52].

Wende v Horwath (NSW) Pty Ltd [2014] NSWCA 170; 86 NSWLR 674 considered.

(5)   per Simpson JA: a costs review panel is required to determine the issues presented to it for determination by the parties. The failure of eInduct to raise any issue as to the form of the certificate prior to the hearing in the District Court meant that neither the costs assessor nor the costs review panel had been obliged to determine this matter: at [114].

(6)   per curiam: with respect to proportionality – s 60 of the Civil Procedure Act is not directed to costs assessors or costs review panels under the LPA. Section 60 is expressed as a directive to the practice and procedure of courts and those practitioners who act before them. Costs assessors are not members of a court: Beazley P at [6]-[7]; Basten JA at [58]; Simpson JA at [118], [120].

Skalkos v T & S Recoveries Pty Ltd [2004] NSWCA 281; 65 NSWLR 151; April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd [2009] NSWSC 867; 79 NSWLR 619 discussed

(7) Section 364 of the LPA does not use the language of proportionality. The test is expressed in s 364(1)(c) as “fair and reasonable”; an assessment of which may, in some instances, involve some form of proportionality analysis: Beazley P at [8]; Basten JA at [63]. The “outcome” of a matter is one of only six considerations specified as non-mandatory considerations for a costs assessor under s 364(2). Failure to consider the proportionality of the costs against the outcome of the proceedings cannot be said to demonstrate error: Beazley P at [9]; Basten JA at [63]; Simpson JA at [124].

Judgment

1. BEAZLEY P: The applicant seeks relief pursuant to the Supreme Court Act 1970 (NSW), s 69 by way of judicial review of a decision of Bozic DCJ given on 31 March 2015, in which his Honour refused an application to amend the summons and dismissed the applicant’s appeal brought pursuant to the Legal Profession Act 2004 (NSW), s 384 from a determination of a costs review panel. An appeal under s 384 is as to a matter of law arising in the proceedings.

2. On the hearing in this Court, the applicant contended that the primary judge erred in law in the exercise of his discretion in refusing the amendment to the summons initiating the appeal and in failing to take into account a relevant mandatory consideration, namely, the requirement that costs be proportionate.

3. I agree with the reasons of Simpson JA and substantially with the reasons of Basten JA that the summons for judicial review be dismissed. I wish to add some short observations of my own.

4. By its proposed amendment to the summons initiating the appeal in the District Court the applicant sought to raise two issues not raised by the applicant in the costs assessment process before either the costs assessor or the review panel. The first issue was described as the indemnity principle. I do not wish to add to the observations of Basten JA at [25]-[26] and of Simpson JA at [108], with which I agree.

5. The second issue raised the question of the invalidity of the costs certificate, as only one costs certificate had been issued by the costs assessor, whereas there were two separate orders for costs made by Stevenson J in respect of which the assessment had been sought. This aspect of the proposed amendment was based upon the decision of this Court in Wende v Horwath (NSW) Pty Ltd [2014] NSWCA 170; 86 NSWLR 674. Again, I agree with Basten JA and Simpson JA that no reviewable error has been demonstrated in the trial judge refusing the amendment to the summons sought by the applicant. I should record, however, that in Wende v Horwath it was my opinion that a global certificate could not be issued under the Legal Profession Act. My own view was not one limited to the circumstances that arose in Wende v Horwath: cf Basten JA’s observations at [39].

6. That leaves the question of proportionality. To the extent that the applicant sought to rely upon the Civil Procedure Act 2005 (NSW), s 60, I join with the observations of Simpson JA that s 60 does not govern a costs assessment by a costs assessor or review panel under the Legal Profession Act. I note that Basten JA expresses significant doubt that s 60 has any application to a costs assessment.

7. The Civil Procedure Act, s 60 is contained within Pt 6: “Cost Management and interlocutory matters”; Div 1: “Guiding principles”. Sections 56-60 fall within Div 1. Those sections provide for the overriding purpose of the Act and rules: s 56; the objects of case management: s 57; the requirement for the court to follow the dictates of justice: s 58; the stated object for the practice and procedure of the court in any proceeding to be the elimination of delay: s 59; and the object of the practice and procedure of the court in any proceeding to be implemented “in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute”. Section 60, by its terms, does not purport to extend to any assessment of costs. It is a directive to the court and the parties as to their implementation of the practice and procedure of the court.

8. The Legal Profession Act, s 364 does not use the language of proportionality. Rather, the section specifies those matters that a costs assessor must consider: s 364(1); and those matters to which it may have regard: s 364(2), including the complexity, novelty or difficulty of the matter: subs (2)(b) and the outcome of the matter: subs (2)(f). The test, after determining whether it was reasonable to carry out the work: subs (1)(a); and whether the work was carried out in a reasonable manner: subs (1)(b); is what is a “fair and reasonable amount of costs for the work concerned”: subs (1)(c).

9. Given that the only reference to the ‘outcome’ of the proceedings, which would include, but not be confined to, any monetary award made by the Court, is a non-mandatory consideration under subs (2), it cannot be said that a costs assessor must have regard to “proportionality”. It is the text of the legislation to which regard must be had.

10. I agree with the orders proposed that the summons for judicial review be dismissed with costs.

11. BASTEN JA: In 2012 the applicant, eInduct Systems Pty Ltd, commenced proceedings in the Commercial List of the Supreme Court against the respondent, 3D Safety Services Pty Ltd and four other defendants. On 30 November 2012 the defendants sought an order for security for costs, to be provided by the plaintiff. On 1 March 2013 the plaintiff sought an order that issues of liability be determined separately and before questions of damages.

12. The respondents were successful in obtaining an order for security for costs; the plaintiff was unsuccessful in seeking a separate determination of the issues other than damages. In the result, the applicant was ordered to pay the costs of both motions. The relevant orders in respect of costs, both entered on 6 May 2013, were as follows:

Order with respect to defendant’s motion for security for the costs of the trial –

“The plaintiff pay the defendants’ costs of and in relation to the filing, service and determination of the defendants’ notice of motion dated 30 November 2012 …, such costs to be payable on the ordinary basis until 26 February 2013 and on an indemnity basis thereafter either as agreed or assessed.”

Order with respect to the separate trial motion –

“The plaintiff’s Notice of Motion of 1 March 2013 is dismissed with costs.”

13. The respondents sought an assessment of the costs of both motions, by an application under s 353 of the Legal Profession Act 2004 (NSW) (“the 2004 Act”) as then in force. The applicant filed a notice of objection with respect to the respondent’s bills, which were duly determined by a costs assessor, pursuant to s 367A of the 2004 Act. The determination substituted for the disputed costs the amount which, in his opinion, was a fair and reasonable amount. The costs assessor duly issued a certificate, pursuant to s 368, setting out his determination.

14. Being dissatisfied with the certificate, the applicant exercised its right of review by a panel of two costs assessors appointed by the Manager, Costs Assessment. [1] The panel in due course made its determination on the application for review and issued a certificate that set out the terms of the determination, pursuant to s 378.

    1. The 2004 Act, ss 373 and 374.

15. Pursuant to s 384 of the 2004 Act, a party dissatisfied with a decision of a costs assessor “as to a matter of law arising in the proceedings to determine the application” was entitled to appeal to the District Court “against the decision.” On 24 October 2014 the applicant filed a summons in the District Court exercising its right of appeal and identifying six grounds involving errors of law said to have occurred in respect of the determination by the review panel.

16. In a judgment delivered on 31 March 2015 Bozic DCJ dismissed the appeal. There is no right of appeal from that judgment, but the applicant sought judicial review in the supervisory jurisdiction of the Court, pursuant to s 69 of the Supreme Court Act 1970 (NSW).

17. Although the summons in this Court identified numerous grounds of review, the argument focused on three matters. Two involved fresh grounds sought to be relied on in the District Court appeal, but rejected by Bozic DCJ by refusing leave to amend the notice of appeal. The third matter concerned a ground raised and addressed in the District Court, but rejected, which alleged a failure on the part of the review panel to apply the “principle of proportionality.”

18. For the reasons which follow the summons must be dismissed with costs.

Transitional provisions

19. The 2004 Act was repealed and replaced from 1 July 2015 by the Legal Profession Uniform Law(NSW) (the “Uniform Law”), given effect by the Legal Profession Uniform Law Application Act 2014 (NSW). There are transitional provisions in Sch 4, cl 2 of the Uniform Law, the operation of which is not entirely straightforward:

2   General savings and transitional provision

(1)   Except where the contrary intention appears, this Schedule does not affect or take away from the Interpretation of Legislation Act 1984 of Victoria as applying under section 7(1) of this Law.

(2)   If anything of a kind required or permitted to be done under a provision of this Law as applied in this jurisdiction was done under a corresponding provision of the old legislation and still had effect immediately before the commencement day, the thing continues in effect on and after that day as if—

(a)   this Law as applied in this jurisdiction had been in force when it was done; and

(b)   it had been done under this Law as applied in this jurisdiction.

(3)   If subclause (2) applies in relation to the execution, lodgement, issue or publication of a written instrument, any reference in the instrument to a provision of the old legislation is, for the purposes of that subclause, to be read as a reference to the corresponding provision of this Law as applied in this jurisdiction.

(4) Without limiting subclauses (2) and (3), if a provision of the old legislation that corresponds to a provision of this Law as applied in this jurisdiction would, but for its repeal by the Legal Profession Uniform Law Act of this jurisdiction, have applied in relation to anything done or being done or in existence before the commencement day, the provision of this Law applies in relation to that thing, and so applies with any necessary adaptations.

(5)   If a provision of the old legislation continues to apply by force of this Schedule, the following provisions also continue to apply in relation to the provision—

(a)   any other provisions of the old legislation necessary to give effect to that continued provision;

(b)   any regulation made under the old legislation for the purposes of that continued provision.

(6)   This clause does not have effect to the extent that other provision is made by this Schedule or that the context or subject matter otherwise indicates or requires, and has effect subject to the local regulations.

(Notably, s 14 of the Victorian Interpretation of Legislation Act has its own transitional provisions.)

20. It is not necessary to explore the operation of this provision; it was common ground between the parties that the application for judicial review must address the provisions in force prior to 1 July 2015.

First proposed amendment – indemnity principle

21. The first proposed amendment to the notice of appeal sought to rely upon a ground which had not been relied upon before the review panel, namely what was described as the “indemnity rule”. The factual basis for the application was that the solicitors for the five defendants in the Commercial List proceedings had rendered fee invoices to only one of the defendants. The applicant submitted that only that defendant could claim to recover fees from the applicant under the costs orders, because an adverse costs order was only available by way of indemnity to a party which had paid the fees.

22. The nature of the applicant’s concern, although not clearly articulated, was presumably that once a certificate had issued in favour of all five defendants, the certificate could be registered in a court of competent jurisdiction and one of the defendants could then seek to recover the amount by way of a judgment debt from the applicant, even if not the person who had paid the solicitors’ invoices for the defendants.

23. The primary judge dismissed the proposed amendment on the basis that the point had not been raised before either the costs assessor or the review panel, that the defendants could have put before the review panel further evidence had they had notice of the point and that, in any event, there was no practical consequence for the applicant if the amendment were not allowed because there was no suggestion that the costs had not in fact been incurred.

24. These were sound reasons for refusing to permit the amendment and no reviewable error has been demonstrated in respect of them. Nevertheless, the matter should not be left on that basis alone: there were two other reasons why the proposed ground was misconceived. First, the rendering of the invoice was, if not immaterial, at least not determinative of the issue. As I sought to explain in Wentworth v Rogers [2] “the fundamental purpose of an order that one party to litigation pay the legal expenses or ‘costs’ of another party is to provide an indemnity in relation to the whole, or usually part, of the legal obligation incurred by the other party to his or her lawyers.”[3] After discussing the manner in which the principle had applied in the case law, the reasons continued at [126]:

“Accordingly, it is beyond dispute that the purpose of an adverse costs order is to compensate or partly indemnify one party to litigation (usually the successful party) for the legal costs incurred in the course of the proceedings. The principle does not require that the costs have been paid, but it does require that there be a legal liability to pay costs.”

2. (2006) 66 NSWLR 474; [2006] NSWCA 145.

3. Wentworth at [102].

25. The legal liability will not depend upon the rendering of an invoice (or not upon that alone) but primarily upon the costs agreement between the parties and their solicitor. There was evidence before the Court that each defendant was jointly and severally liable for their solicitors’ fees.

26. The second point arises from an assumption that the question of legal liability was within the matters conferred upon the costs assessor for determination. The situation in Wentworth v Rogers arose with respect to determinations made under the Legal Profession Act 1987 (NSW), being the predecessor to the 2004 Act. As I explained in relation to the equivalent provisions in that Act, it is doubtful that anything in ss 364 and 365 of the 2004 Act confers on a costs assessor (or review panel) the power to determine the extent of the contractual obligations as between a party and his or her solicitor, on a party and party assessment. [4] Looking at the matter from a different perspective, the costs assessment involves the carrying into effect of an order of a court requiring one party to pay the costs of the other. To assert that the other party has no entitlement to receive such a payment is to contradict the effect of the court order. Although the point was not argued, it is difficult to understand any basis in the Legal Profession Acts for a costs assessor to undertake such a course. The assessor would, in effect, be redetermining the very order upon which his or her jurisdiction depends.

    4. Wentworth at [159]-[160]; cf Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203; [2004] NSWCA 154 at [3] (Mason P).

27. For these further reasons as well as those given by the primary judge, the amendment was properly disallowed.

Second proposed amendment – failure to determine separately the two costs orders

28. This proposed challenge, also not raised before the review panel, was based upon the judgment of this Court in Wende v Horwath (NSW) Pty Ltd. [5] The proposed amendment was rejected by the primary judge on three grounds, in a passage which it is convenient to quote in part: [6]

“First, the point was not raised before either the costs assessor or the costs review panel. Secondly, while I accept that on the authority of Wende there should have been a separate costs assessment in relation to each of the two costs orders, it is difficult to see in the circumstances of this case that a separate assessment of each costs order would produce a significantly different result …. Thirdly, although as the plaintiff submitted there is no identifiable prejudice that would arise if the plaintiff were permitted to raise this issue, in the circumstances of this case the absence of prejudice is not determinative. … Put another way, there is no interest in granting leave to raise a legal error not previously raised, and which has not been shown would significantly affect the existing assessment.”

5. (2014) 86 NSWLR 674; [2014] NSWCA 170.

6.    eInduct, 31/03/15, p 8.

29. The applicant did not demonstrate error of law in the approach adopted by the primary judge in respect of this issue. Further, if there are infelicities in the manner in which the reasons are expressed, they readily find explanation in the applicant’s submissions in support of the proposed amendment, which were imprecise and failed to address the scheme of the legislation. This was (and is) a matter of some importance as the facts of the present case are significantly different from those in Wende and it was necessary for the applicant to demonstrate how the different reasons given in Wende should be extrapolated (if at all) to cover the present facts.

30. It is common ground that the present application is to be determined under the 2004 Act and not by reference to the Uniform Law, which came into operation after the judgment in the District Court. However, the existence of the Uniform Law makes it less important than might otherwise have been the case to determine the precise operation of the principles discussed in Wende. The language of the Uniform Law is not wholly in conformity with the language found in the 2004 Act.

31. The starting point for the consideration of how an assessment should be undertaken under the 2004 Act is the entitlement of a person entitled to receive costs as a result of a costs order to apply “for an assessment of the whole of, or any part of, those costs.” The entitlement to costs must be “as a result of an order for the payment of an unspecified amount of costs made by a court”. [7] As I noted in Wende at [38]-[41] the use of the singular word “order” is by no means conclusive as to whether an application can be made with respect to several orders, the Interpretation Act 1987 (NSW) providing that “a reference to a word or expression in the singular form includes a reference to the word or expression in the plural form”. [8] The relevant question is whether a contrary intention appears from the specific legislation. [9]

    7. 2004 Act, s 353(1).

    8. Interpretation Act, s 8(b).

    9. Interpretation Act, s 5(2).

32. The use of the singular continues through the three stages of the assessment process, namely in relation to an application (s 353), leading to a determination (s 367A) and the issue of a certificate (s 368(1)).

33. One factor militating against the view that a rigid approach should be taken to the use of the singular with respect to application and determination is the conferral of power on the costs assessor to issue more than one certificate in relation to “an application”. [10] However, in Wende there were two circumstances which suggested that the course taken in issuing a single certificate was unavailable. First, the determination and certificate related to separate costs orders made in three different jurisdictions, albeit in relation to proceedings between the same parties and ultimately dealing with the same subject matter. Secondly, the certificate when registered as a judgment resulted in a joint and several liability of all parties for the same debt, despite one not being liable for part of the costs. In my view, these considerations rendered the issue of the certificate in that case invalid.

    10. 2004 Act, s 368(2).

34. There are also circumstances in which one party may be liable to both receive its costs and pay another party’s costs, under different orders, where each costs order arose in the one proceeding. It is at least arguable that a single application in respect of a liability and an entitlement would not fall within the terms of s 353(1). It is also possible that a single application could not properly deal with two costs orders in the one proceeding, even if the same party were liable under each and in favour of a single opponent, because an appeal might lead to one costs order being set aside and the other remaining on foot. Any judgment based on a certificate combining an assessment of both sets of costs would then have to be set aside in full, because no part of it could stand alone. The conclusion of my reasoning was encapsulated in the following passage:[11]

“There is a final reason why, at least in the present circumstances, a global certificate of costs with respect to the three proceedings was legally inappropriate. Even assuming that such a single certificate may be appropriate in some circumstances, a precondition to the merger of different sets of liability in one judgment debt is that each debtor be liable under each order. No one would suggest that a person who was liable to the respondent for the costs of one proceeding only could be joined in a certificate relating to the liability of other persons in other proceedings. Yet that is the consequence of the determination of costs payable by the applicants to the respondent in a global amount.”

11. Wende at [47].

35. Although the possibility of a single certificate encompassing more than one costs order was not ruled out, the process of statutory construction by which such a result could be achieved was not addressed.

36. The President in Wende accepted that there might be an application for assessment which covered more than one costs order. [12] That reasoning was supported by Barrett JA, although he dissented as to the appropriate orders. [13] In a passage approved by the President, Barrett JA concluded:

“Under s 368(2), several certificates may be issued in relation to a single application for costs assessment. This reinforces the need for a separate determination and certificate for the costs the subject of each order, even though several orders and the costs referable to them may be included in a single application.”

12. Wende at [9].

13. Wende at [197].

37. Barrett JA then considered whether the composite determination contravened the requirements of s 367A to make a determination of the reasonable amount of the costs payable in respect of each order; he held that it did not. [14] On one view, that should have resulted in three separate applications for review under s 373(1). There was in terms a single application relating to a single determination. [15] Barrett JA nevertheless concluded that there were in substance three separate applications. He then asked whether there was a certificate in conformity with s 368. [16] That question was formulated by reference to the terms of s 373(1), dealing with the right of review of an initial determination. Having concluded that there was no proper certificate issued by the costs assessor, he nevertheless accepted that the review application was properly made. [17] What he did not do was consider whether there was a valid certificate which resulted from the review process, although the logic of his reasoning with respect to the certificate issued by the costs assessor should have led to the conclusion that there was not.

    14. Wende at [203].

    15. Wende at [207].

    16. Wende at [208].

    17.    Wende at [209]-[210].

38. The President agreed that there should be a separate determination in respect of each costs order but rejected the proposition that the global determination could be so characterised. [18] On that reasoning, it followed that a separate certificate was required for each determination and thus for each costs order. [19] The orders accepted by the President (being the orders of the Court) were that the certificates issued by the review panel and by the costs assessor should be set aside. [20]

    18.    Wende at [10] and [11].

    19. Wende at [13].

    20.    Wende at [14] and [102].

39. The conclusion reached in Wende on this issue (unanimously) was that the legislation required that the costs assessor must determine, in respect of each costs order, a fair and reasonable amount for the work undertaken, which it was reasonable to carry out in respect of that matter. At least by a majority, the same reasoning was applied to the determination by the review panel. Further, it was determined that, in the circumstances of the case, the issue of a global certificate which did not deal separately with each costs order was invalid.

40. In this case, the primary judge accepted “on the authority of Wende there should have been a separate costs assessment in relation to each of the two costs orders”. That statement should be taken as encompassing both separate determinations and separate certificates. The critical question is whether, given that conclusion, the judge was correct in refusing to allow the applicant to raise that point of appeal, it not having been raised before the costs assessor or the review panel. The answer to this question is by no means easy, although little was said in the course of argument as to how it should be approached.

41. Before addressing that question, it is necessary to inquire whether the reasoning in Wende in fact governed the facts before the primary judge. In other words, did Wende conclude (or require the conclusion) that the use of the singular in ss 367A and 368(1) required separate determinations and separate certificates in respect of each costs order? The possibility that it did not might flow from the fact that the difficulties identified in Wende did not arise in this case. However, that conclusion would require that the provisions be given a distributive operation, requiring individual determinations and certificates in some cases, but permitting composite determinations and certificates in others. While theoretically possible, such an approach to statutory construction is fraught with difficulties. I sought to leave that possibility open in Wende, stating at [91]:

“The conclusion that, in relation to orders made by different courts in separate proceedings, the scheme of Pt 3.2, Div 11 of the Legal Profession Act does not permit the issue of a global certificate of determination of costs, incorporating liabilities under the several and separate orders, the certificate issued by the review panel should have been set aside by the District Court.”

42. Nevertheless, no argument having been addressed to the possibility that some different result could be achieved in the circumstances of this case, the statutory construction adopted in Wende required application, as the primary judge accepted. Therefore there should have been separate determinations and certificates in respect of each costs order.

43. The next question is whether it was too late to raise the issue before the District Court on appeal. In the sentence following that just cited from Wende at [41] above, in a passage referred to by the primary judge, I said, “[a]t least that is so in circumstances where objection to an application in that form was taken and liability for such costs did not fall on the same parties with respect to each order.”[21] Again, little was said in argument in this matter as to the legal significance of the objection not being taken before the review panel.

    21. Wende at [91].

44. In Kirk v Industrial Court of New South Wales [22] the High Court held that there had been jurisdictional error in the trial court when one of the defendants (Mr Kirk) was called as a witness by the prosecution, a course agreed to by both sides. [23] Although this was a point first identified in the High Court (and by the Court) it provided a basis for setting aside the conviction in the Industrial Court. [24]

    22. (2010) 239 CLR 531; [2010] HCA 1.

    23. Kirk at [50].

    24. Kirk at [108].

45. The joint reasons in the High Court noted that the provision in the Evidence Act 1995 (NSW) rendering a defendant not competent to give evidence as a witness for the prosecution could not be waived, nor, by express terms, did the Act permit the parties to consent to dispensation. [25] The probable relevance of that statement is not that some jurisdictional errors can be waived, but that some errors which can be waived may not constitute jurisdictional error. The Court also noted that no party submitted that Mr Kirk could not rely upon the error in the High Court. [26]

    25. Kirk at [51]; Evidence Act, s 17(2) and s 190.

    26. Kirk at [52].

46. In Wende, I noted the possibility that concepts of waiver or acquiescence might arise in circumstances where, although the issue of separate determinations had been raised by the costs assessor, instead of challenging the failure of the costs assessor to provide separate determinations and certificates, the applicants sought review by a panel. [27] I concluded that no issue of waiver or acquiescence arose in that case, and therefore there was “no reason to refuse the applicants relief.”

    27.    Wende at [49]-[53].

47. Although submissions were made to the primary judge that relief could be refused because the point was not taken before the review panel (or the costs assessor) the judgment did not in terms rely on concepts of waiver or acquiescence. Rather, the primary judge considered the possibility of prejudice to the respondents (accepting there was none) and relied upon the pragmatic considerations that significant expenditure of time, resources and money had already been incurred; there was an interest in finality and that the applicant had no interest in raising a point which had not been shown to have any significant effect on the existing assessment. These were all legitimate considerations with respect to an application for leave to amend the notice of appeal.

48. Those factors might nevertheless have been outweighed if the applicant could demonstrate that there was a fundamental error on the part of the review panel and that, had the matter been raised in a timely fashion, relief would not have been refused.

42. The applicant failed to establish either of these propositions. The circumstances in which a single application will be made for assessment of costs of proceedings in which separate costs orders have been made in favour of the successful party, may readily, without unfairness, be dealt with by way of a single determination and certificate. While that procedure may not accord with the statutory language, as construed in Wende, it does not follow that Parliament intended that the resultant determination and certificate should be invalid and of no effect. Any such conclusion depends upon the ascertainment of the objective meaning of the statute, read in context. [28] The assessment of costs is a function essentially ancillary to the judicial determination of disputes, carried out by assessors who are not judicial officers. [29] No doubt they must accord the parties to an assessment an appropriate level of procedural fairness, but the procedure is essentially inquisitorial rather than adversarial, requiring the assessors to exercise a degree of expertise as to what constitutes fair and reasonable costs of litigation. Where the determination of an assessment is recorded in a manner consistent with the approach adopted by the parties, there is no reason to suppose that the legislation intended that the procedure would be invalidated because the form of the determination and the certificate did not accord with a fair reading of the statute. A functional and pragmatic approach to the statutory scheme would not lead to errors of the kind identified in the present case resulting in invalidity of the process. Accordingly, the errors were not of that fundamental kind which might demand relief despite the failure of a party to take timely objection.

    28. Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [91] (McHugh, Gummow, Kirby and Hayne JJ).

    29. 2004 Act, s 390(4).

43. That being so, there was no error in refusing to allow the amendment on the discretionary grounds noted by the primary judge.

44. It remains to refer to one other aspect of the applicant’s submissions, which appeared at one stage to suggest prejudice arising from the failure to make separate determinations in respect of each costs order. The applicant’s unreasonable resistance to the application for security for costs resulted in a costs order against it, with costs to be assessed on the indemnity basis, whereas the rejection of its own motion for separate trials on liability and quantum resulted in an adverse costs order, with costs to be assessed on the ordinary basis. As the primary judge noted, little was made in the objections before the costs assessor to that point of differentiation, although it was referred to as a factor to be borne in mind and was said to require different hourly rates to be applied to work undertaken by solicitors, when assessed on the ordinary basis and on the indemnity basis.

45. Furthermore, no different or more precise assessment would have been achieved by requiring separate determinations of each costs order. It was not the case that one was to be determined entirely on the ordinary basis and the other entirely on an indemnity basis. That was because the security motion involved assessment on the ordinary basis from the date of the notice of motion (30 November 2012) until 26 February 2013 and thereafter assessment on the indemnity basis. Thus, on any construction of the legislation, one determination was required to deal with different periods on different bases.

Principle of proportionality

53. The notice of appeal contained a number of grounds, but the principal focus of submissions before the primary judge was an alleged failure on the part of the review panel to apply the “principle of proportionality”. The judge rejected that ground, which constitutes the third and final issue relied on by the applicant in support of the present application for review.

54. The relevance of the principle to the assessment was said to be found in the language of s 364 which, so far as presently relevant provided:

364   Assessment of costs—costs ordered by court or tribunal

(1)   In conducting an assessment of legal costs payable as a result of an order made by a court or tribunal, the costs assessor must consider:

(a)   whether or not it was reasonable to carry out the work to which the costs relate, and

(b)   whether or not the work was carried out in a reasonable manner, and

(c)   what is a fair and reasonable amount of costs for the work concerned.

(2)   In considering what is a fair and reasonable amount of legal costs, a costs assessor may have regard to any or all of the following matters:

…

(b)   the complexity, novelty or difficulty of the matter,

…

(f)   the outcome of the matter.

55. Thus, the costs assessor was required to consider whether it was “reasonable to carry out the work” and was empowered to consider the “outcome” of the matter. From this combination of factors, the applicant derived a mandatory requirement to have regard to the “proportionality” between the costs incurred by undertaking certain work and the outcome.

56. At least before the primary judge, the applicant also placed reliance on s 60 of the Civil Procedure Act 2005 (NSW), which provides:

60   Proportionality of costs

In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.

57. The application of this provision to a costs assessment was said to follow from the judgment of White J in April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd. [30] After setting out a lengthy extract from an affidavit of Ms Nicole Armitage, a solicitor and costs consultant, White J stated:[31]

“I set this out in full in case Ms Armitage's opinion that a costs assessor cannot apply or rely on s 60 of the Civil Procedure Act in a costs assessment has any adherents or support in the profession or amongst costs assessors. That opinion is wrong. It is contrary to authority (Skalkos v T & S Recoveries Pty Ltd … at 153).”

30. (2010) 75 NSWLR 619; [2009] NSWSC 867.

31. April Fine Paper at [11].

58. Although the primary judge referred to s 60 of the Civil Procedure Act in summarising the applicant’s submissions, he did not expressly adopt that submission. In that regard he was correct. The proposition that s 60 of the Civil Procedure Act applies to a costs assessment is, to say the least, doubtful. It applies to the practice and procedure of “the court” in proceedings: as noted above, the costs assessors are not officers of the court. [32] Although part of the statement to which exception was taken in April Fine Paper alleged categorically that for a costs assessor to apply or rely upon s 60 would involve a failure to discharge his or her statutory function, it was correct to say that a test of proportionality arises from the terms of s 364. (There may well be overlap between the concepts contained in each provision.)

    32. Legal Profession Act, s 390(4).

59. Like White J, the primary judge did, however, rely on the approach adopted by Ipp JA in Skalkos v T & S Recoveries Pty Ltd. [33] There, after noting a complaint that a master carrying out a review of a costs assessment failed to have regard to the principle of proportionality, Ipp JA stated:

“[8]   In my opinion, in determining whether costs have been reasonably and properly incurred, it is relevant to consider whether those costs bear a reasonable relationship to the value and importance of the subject matter in issue. See in this regard Szlazko v Travini [2004] NSWSC 610; Moore v Moore [2004] NSWSC 587, Gallagher v CSR Limited (Supreme Court of Western Australia, Ipp J, 21 March 1994, unreported). This conclusion is supported by s 208G(f) of the Legal Profession Act.

[9]   The failure on the part of the costs assessor and the Master to have regard to the principle of proportionality does not, however, in the circumstances of this case, alone warrant granting the relief sought by the claimant.”

33. (2005) 65 NSWLR 151; [2004] NSWCA 281 (Ipp JA, Sheller JA and Grove J agreeing).

60. Skalkos applied the law as set out in the Legal Profession Act 1987 in which s 208F(1) was in similar (though not identical) terms to s 364(1) of the 2004 Act and s 208G(f) corresponded to s 364(2)(f) of the 2004 Act.

61. The applicant also sought to obtain assistance from principles stated with respect to costs incurred by a trustee in bankruptcy, referring to Brook v Reed (trustee in bankruptcy of Estate of Brook). [34] David Richards J (writing for the Court of Appeal) noted that the issue to be addressed concerned “the approach which has been adopted by the courts in relation to the remuneration of trustees in bankruptcy and other office-holders.”[35] He further noted that the development of law and practice in that area was to be seen against “a background of public concern as to the levels sometimes reached by office-holders’ fees and remuneration, together with a public interest in seeing that officer-holders’ duties are competently and properly carried out.” After indicating a number of developments, relevant to the approach to be adopted by the Court, David Richards J referred in some detail to a Practice Statement promulgated in 2004, setting out a number of principles to be applied in fixing the remuneration of trustees and other office-holders. In part that statement required that “the amount of remuneration to be fixed and approved by the court should be proportional to the nature, complexity and extent of the work to be completed ….” [36] The judge then noted that the ground of appeal asked whether the remuneration allowed in the particular case was “disproportionately high in relation to the circumstances of the bankruptcy”. [37]

    34. [2011] EWCA Civ 331; [2011] 3 All ER 743 (David Richards J, Black and Arden LJJ agreeing).

    35. Brook at [4].

    36.    Brook at [36], par (6)(ii).

    37. Brook at [50].

62. Instructive as the judgment is in its area of operation, it has little bearing on the matters before the primary judge and this Court. Both the context and the legal framework discussed in that case were far removed from the costs assessments undertaken with respect to the fees of solicitors acting for parties in private litigation. Indeed, in part it demonstrates the breadth of the considerations which may need to be taken into account in considering whether costs are proportionate to the matters in dispute. The outcome is clearly only one of those factors.

63. The statutory scheme under which the costs assessments were undertaken did not use the language of proportionality; on the other hand, it did use the language of reasonableness, a concept which may, depending on the circumstances, involve (and even require) some form of proportionality analysis. Accepting that to be so, no error was demonstrated in the manner in which the primary judge dealt with this ground of appeal.

64. Further comment as to proportionality in the context of the 2004 Act is unnecessary and may be apt to mislead. The current legislative regime, found in part in the Uniform Law expressly requires that legal costs be no more than such as are “proportionately and reasonably incurred” and “proportionate and reasonable in amount.”[38] Given the express adoption of such language in the Uniform Law, consideration of its meaning and effect should be left for a case in which the Uniform Law is applicable.

    38. Uniform Law at s 172(1).

Conclusions

65. Each of the three matters relied upon in the course of submissions before this Court having failed, the application must be dismissed and the applicant must pay the respondents’ costs of the proceedings in this Court.

66. SIMPSON JA: By Amended Summons filed on 22 May 2015, the applicant (eInduct Systems Pty Ltd) seeks, pursuant to s 69 of the Supreme Court Act 1970 (NSW), judicial review of a decision of Judge Bozic in the District Court delivered on 31 March 2015. The proceeding before Bozic DCJ (“the primary judge”) was an appeal against the decision of a costs review panel established under s 374 of the Legal Profession Act 2004 (NSW). It represented the second last (the present application being the last) in a series of proceedings concerning two separate awards of costs arising out of legal proceedings between the present parties. Having regard to the long litigation history, it will be convenient to refer to the parties, not by reference to their roles in the proceedings, but by their (abbreviated) corporate names. I will refer to the applicant as “eInduct” and to the respondent (3D Safety Services Pty Ltd) as “3D”.

67. The proceedings involved various provisions of the Legal Profession Act (“the LPA”) and the Legal Profession Regulation 2005 (NSW) (“the Regulation”). Although the LPA is no longer in force, it was not in issue that it is the legislation applicable to all relevant proceedings. What principally gives rise to the application for judicial review is the refusal of the primary judge to allow eInduct to amend its Summons commencing the appeal to the District Court in order to raise two issues that had not been raised in any of the preceding matters.

Procedural history

68. I begin with a recitation of the procedural history.

69. On 18 October 2012 eInduct commenced proceedings against 3D, in the Commercial List of the Supreme Court, asserting breach of contract, breach of equitable duties of confidence arising out of the alleged use, by 3D, of eInduct’s intellectual property, and claiming orders restraining the continuation thereof and an award of damages. eInduct named Anthony Ian Conacher and Simon Paul Morrow as second and third defendants. At some subsequent point two further defendants were added, in circumstances that do not appear from the papers before this Court. They were 3D Safety Systems Pty Ltd and Wishbone Pty Ltd.

70. On 30 November 2012, by Notice of Motion, 3D sought against eInduct an order for security for costs, and an order that in the event that security was not forthcoming, the proceedings be stayed. The amount in which 3D sought security was specified as $321,910 (or such other amount as the Court might determine). The application was strenuously opposed by eInduct.

71. On 1 March 2013, also by Notice of Motion, eInduct sought an order that questions of liability be heard separately from and in advance of questions of damages.

72. On 24 April 2013 Stevenson J ordered:

• that eInduct provide security for 3D’s costs in the sum of $250,000;

• that eInduct pay the costs of the defendants’ Notice of Motion;

• that the costs be payable on the ordinary basis until 26 February 2013, and thereafter on an indemnity basis. [39]

  39. eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2013] NSWSC 410.

73. On 6 May 2013 Stevenson J dismissed eInduct’s Notice of Motion and ordered eInduct to pay the costs incurred. [40] In the absence of any contrary order, it may be assumed that the costs to be paid under this order were to be assessed on the ordinary (party/party) basis.

    40. eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (NSWSC, unreported).

74. On a date not identified in the materials before this Court, the solicitors (Messrs Henry Davis York) who represented 3D (and the other defendants) submitted, with respect to both costs orders, a composite bill. The total charged (for the two proceedings) was $286,913.45, of which $102,731.45 was attributable to disbursements.

75. On 22 August 2013, pursuant to s 353 of the LPA, 3D (and the other defendants) applied to the Manager, Costs Assessment (an office in the Department of the Attorney General) to have the costs assessed by a costs assessor. The application was referred to a costs assessor appointed under s 390 of the LPA. The function of a costs assessor appointed to determine an application for an assessment of costs payable as a result of a costs order made by a court is to make a determination of the fair and reasonable amount of those costs (LPA, s 367A).

76. By s 364(1) a costs assessor is required to consider:

“(a)  whether or not it was reasonable to carry out the work to which the costs relate, and

(b)  whether or not the work was carried out in a reasonable manner, and

(c)  what is a fair and reasonable amount of costs for the work concerned.”

77. By s 364(2) a costs assessor may have regard to all or any of the following:

“(a)  the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter,

(b)  the complexity, novelty or difficulty of the matter,

(c)  the quality of the work done and whether the level of expertise was appropriate to the nature of the work done,

(d)  the place where and circumstances in which the legal services were provided,

(e)  the time within which the work was required to be done,

(f)  the outcome of the matter.”

78. On 9 December 2013, pursuant to s 359(1) of the LPA, eInduct made extremely detailed written submissions to the costs assessor in the form of a Notice of Objection to 3D’s bill of costs. eInduct asserted that the costs claimed were “excessive and unreasonable for the legal services provided”. It made reference to the “overriding purpose” provision (s 56) of the Civil Procedure Act 2005 (NSW), which provides that the overriding purpose of that Act is to facilitate the “just, quick and cheap” resolution of the real issues in proceedings.

79. eInduct made general submissions in respect of the assessment of party/party costs, and made specific submissions with respect to certain of the hourly rates claimed, (which it claimed to be unreasonable), to what it claimed were unreasonable times claimed for the work concerned, the involvement of three solicitors (which eInduct asserted was unreasonable), the counsel’s fees charged (also said to be unreasonable), and the fees of a cost consultant (also said to be unreasonable). eInduct complained that more than 70 items charged were insufficiently particularised. It referred to a passage in the decision of the High Court in Cachia v Hanes,[41] in which it was said:

“… it is to be borne in mind that party and party costs have never been regarded as a total indemnity to a successful litigant for costs incurred …”

41. [1994] HCA 14; 179 CLR 403.

80. eInduct also submitted that it could not be required to pay costs exceeding the costs that 3D was (or the other defendants were) liable to pay. It referred to this as “the indemnity principle”. It therefore requested that the costs assessor ascertain the costs actually paid by 3D to its solicitors, and to obtain any relevant documentation.

81. On 16 December 2013 3D replied to eInduct’s notice of objection. On 8 May 2014, pursuant to s 368 of the LPA, the costs assessor issued a Certificate of Determination of Costs. He assessed $210,060.12 as a fair and reasonable amount of costs to be paid to 3D by eInduct (s 367A). He also issued a separate Certificate of Determination of Costs of Costs Assessment (s 369). He assessed those costs to be $7,296.63. On 22 April 2014, in accordance with s 370 of the LPA, he delivered reasons for his assessment. Included in the assessment was an amount of $9,420.84 for a costs consultant.

82. On 2 June 2014, pursuant to s 373 of the LPA, eInduct applied for review of the determination. It specified its grounds as:

• errors of fact and law on the part of the costs assessor in determining a fair and reasonable amount of costs as $210,060.12;

• failure by the costs assessor “to uphold and give proper regard to [eInduct’s] objections” to the costs claimed by 3D;

• specific error in the costs assessor’s determination of the disbursements claimed;

• allowance of unreasonable hourly rates;

• unreasonable allowance of excessive time for the work concerned;

• unreasonable allowance for counsel’s fees;

• unreasonable allowance of costs consultant’s fees;

• errors in law and fact in determining the costs of the costs assessment;

• excessive allowance of time for the costs assessor.

83. The application for review was referred to a costs review panel constituted under s 374 of the LPA. By s 375(2) of the LPA, a costs review panel has all the functions of a costs assessor (as stated in s 367A) and (subject to the LPA and the Regulation) is to determine the application in the manner that a costs assessor would be required to determine a costs assessment (that is, in accordance with s 364). By s 378, a costs review panel is required, on making a determination with respect to a costs review, to issue a certificate setting out the determination. By s 380, the certificate under s 378 is to be accompanied by a statement of reasons (in accordance with any relevant regulations) for the determination. Clause 134 of the Regulation specifies information that is required to be included in the statement of reasons.

84. On 10 October 2014, pursuant to s 378 of the LPA, the costs review panel set aside the Certificate of Determination of Costs issued by the costs assessor, and determined that a fair and reasonable amount to allow for the costs was $217,164.29. It issued a Certificate of Determination to that effect. The costs review panel affirmed the determination of the cost of the costs assessment at $7,296.62. In accordance with s 380 of the LPA, the costs review panel gave reasons for its determination, and issued a further Certificate (in relation to the costs of the review) (s 379), allowing an amount of $2,656.50. In doing so, the costs review panel noted the apparent disproportion between the costs claimed, and the proceedings to which they related. The reasons of the costs review panel included the following:

“In this case, at first blush, the total of costs allowed by the Costs Assessor for two applications in the Supreme Court Commercial List heard over two days seem like an unreasonable amount. That assessment of the Costs Assessor however needs to be considered in the light of the context disclosed in these reasons and in the context of the explanation of the work made in the Application for Assessment.”

85. On 24 October 2014, pursuant to s 384(1) of the LPA, eInduct appealed to the District Court against the determination of the costs review panel. Such an appeal is limited to “a matter of law”.

86. eInduct stated as its grounds of appeal:

“1 The Costs Review Panel erred in law in failing to properly carry out its function under s 375 of the Legal Profession Act 2004 in respect of the review of the decisions of the Costs Assessor issued on 8 May 2014 referred to them.

2 The Costs Review Panel erred in law in failing to correctly apply s 364 of the Legal Profession Act 2004 to the review of the decisions of the Costs Assessor issued on 8 May 2014 conducted by them.

3 The Costs Review Panel erred in law in failing to take account failed to take into account [sic] relevant considerations when determining, under s 364 of the Legal Profession Act 2004, namely:

(a)  whether or not it was reasonable to carry out the work to which the costs relate, and

(b)  whether or not the work was carried out in a reasonable manner, and

(c)  what is a fair and reasonable amount of costs for the work concerned.

4 The Costs Review Panel erred in law in failing to properly assess costs which were appropriate having regard to the requirements of s 364 of the Legal Profession Act 2004, namely:

(a)  whether or not it was reasonable to carry out the work to which the costs relate, and

(b)  whether or not the work was carried out in a reasonable manner, and

(c)  what is a fair and reasonable amount of costs for the work concerned,

so as to be able to determine the proper amount of costs which were the subject of the assessment.

5  The Costs Review Panel erred in law in failing to consider and apply the principle of proportionality in undertaking the review.

6 The Costs Review Panel erred in law in failing to comply with s 380 of the Legal Profession Act 2004 and Regulation 134 of the Legal Profession Regulation 2005.”

87. On 19 March 2015 the appeal came before the primary judge. Counsel who appeared for eInduct sought leave to amend the Notice of Appeal by raising two additional grounds. The first proposed new ground concerned “the Indemnity Rule” (although not that aspect of “the Indemnity Rule” that had been raised before the costs assessor); the second proposed new ground concerned the form of the Certificates of Determination by the costs assessor and by the costs review panel. Neither issue had been raised either in the proceedings before the costs assessor, or in the proceedings before the costs review panel.

88. Put shortly, the point sought to be raised under “the Indemnity Rule” was this. The bills that had been submitted by 3D’s solicitors had all been addressed to 3D, to the exclusion of the other named defendants. The Certificate of Determination issued by the costs review panel, on the other hand, named all five defendants as applicants (and therefore as the beneficiaries of the determinations). Since no bills had been rendered to the second to fifth defendants, they were not, within the meaning of s 353, persons liable to pay costs, and “the Indemnity Rule” precluded the issue of certificates in their favour.

89. The point sought to be raised in respect of the form of the certificates may also be put shortly. It was that the certificates were issued in respect of two quite separate costs orders, both made by Stevenson J, the first on 24 April 2013, and the second on 6 May 2013. There was an important distinction between them. The first order specified that part of the costs were to be assessed on an indemnity basis. The second, being silent as to the manner of assessment, is taken to mean that the costs are to be assessed on the ordinary, or party/party basis. Without differentiation between the two, it could not be assumed that the assessments were undertaken correctly.

90. eInduct also relied upon a decision of this Court[42] in which it was held that assessments of costs in respect of separate costs orders are to be undertaken separately, and the subject of separate certificates. That decision was delivered on 2 June 2014, after the assessment by the costs assessor, but before (by five months) the costs review panel’s assessment. (For a discussion of the separate judgments in Wende, see the judgment of Basten JA, which I have, since preparing these reasons, had the opportunity to read in draft.)

    42. Wende v Howarth (NSW) Pty Ltd [2014] NSWCA 170; 86 NSWLR 674.

91. The primary judge declined to grant leave to eInduct to amend its appeal. [43] He gave reasons for doing so. Essentially, his reasons with respect to the “Indemnity Issue” were:

1. the point now sought to be taken had not been raised either before the costs assessor or before the costs review panel;

2. had the matter been raised, “the plaintiff” (sic - 3D) could have put further material before the costs assessor and the costs review panel, and therefore had, or may have, suffered actual prejudice;

3. the issue was unlikely to have any real practical consequence because the same firm of solicitors had acted for all defendants, and there was no suggestion that the costs had not in fact been incurred.

   43. eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (NSWDC, 31 March 2015, unreported).

92. The primary judge’s reasons for declining to allow the amendment related to the form of the certificates were:

1. the point was not raised before either the costs assessor or the costs review panel;

2. notwithstanding the authority of Wende that there should have been a separate costs assessment in relation to each of the two costs orders, it was difficult to see that separate assessments would have produced significantly different results, given the terms of s 364 of the LPA, and Pt 42.5(b) of the Uniform Civil Procedure Rules2005 (NSW);

3. although 3D could point to no identifiable prejudice if eInduct were permitted to raise the issue:

“[t]he costs assessment has been fought in much the same matter [sic - manner] as the two notices of motion before Stevenson J, namely in a very determined manner requiring the expenditure of time, resources and money. In such circumstances there is an interest in finality. Put another way, there is no interest in granting leave to raise a legal error not previously raised, and which has not been shown would significantly affect the existing assessment.”

93. The primary judge had firmly in mind that the appeal lay only on “a matter of law”. He extracted two paragraphs from the judgment in Wende as follows:

“161 The function of the review panel will vary according to the way in which the applicant for review chooses to frame the application. If specific objections are stated, the panel will, of necessity, deal with them. If no objections are stated and the implicitly indicated desire of the applicant is merely to have the review panel conduct a general review, no specific matters will call for attention. In either such case, however, the function of the review panel is, as stated in s 375(1), to ‘review the determination of the costs assessor’ and to decide whether the assessment should be affirmed or altered.

162 Because the s 375(2) obligation to emulate a costs assessor is subordinate to the duty to ‘review’ arising from s 375(1), a review panel is not required to make a new assessment as if the original assessment had never been made. The starting point will generally be the original determination of the costs assessor. The review panel will take into account not only the material specified in s 375(3) but also the application for review made under s 373(1) and referred by the Manager, Costs Assessment to the review panel pursuant to s 374(1). That application must, for these purposes, be regarded as including the documents that accompany it in conformity with clause 132 of the regulation. A panel does not exist (or, more precisely, is not ‘constituted’) unless and until the Manager, Costs Assessment ‘refers’ an application for review to it.”

94. Having rejected the amendment application, the primary judge began by dealing with an issue of “proportionality” that had been raised on behalf of eInduct. I will return to this.

95. He then dealt with grounds of appeal that asserted error on the part of the costs review panel in dealing with the review. Essentially, the ground was that the costs review panel erred in its treatment of the review in failing properly to apply s 364 of the LPA. The considerations that a costs review panel is required, and those it is specifically entitled, to take into account by s 364, are set out above.

96. The essence of eInduct’s argument was not that the costs review panel failed to consider and deal with any of the objections it had raised to the bill. It was that the costs review panel was obliged to go further than that - its obligation was to consider, in the light of the three mandatory considerations stated in s 364(1), the fairness and reasonableness of each item charged, whether or not it was the subject of objection.

97. The primary judge rejected that submission. He said:

“The costs review panel dealt with s 364 questions in the context of the issues that it was required to consider. In s 6 of its reasons the panel indicated that grounds 1 to 5 were simply general grounds which did not identify with any specificity how it was alleged that the costs assessor had made an error, and the panel assumed that what those general grounds were saying was that the costs assessor had allowed costs that were not fair and reasonable for work reasonably performed. The costs review panel then went on to deal with each of grounds 6, 7, 8, 9, 10 and 11, and gave reasons for them. In my view there is no error of law disclosed, but rather the panel has, to use the words at para 166 of Wende v Howarth, adequately performed its function by dealing with the express grounds of objection and giving each of them separate and distinct consideration.”

98. Another ground raised before the primary judge was that the costs review panel failed to comply with s 380 of the LPA, which requires that the issue of certificate under s 368 be accompanied by a statement of reasons for the determination, and any supplementary information that may be required by the Regulation to the LPA. Clause 134 of the Regulation amplifies what is required in a statement of reasons. The primary judge found that such a failure, relating to disbursements, on the part of the costs assessor had been advanced to the costs review panel. The costs review panel had dealt with the deficiency, and had not fallen into the same error. There was then no error of law, in this respect, in what the costs review panel did.

99. The primary judge dealt compendiously with various minor matters asserted on behalf of eInduct, by observing, in accordance with those paragraphs of Wende that he had extracted, that, since no issue had been raised before the costs review panel, there could be, and was, no error in law.

100. I return now to the argument advanced to the primary judge concerning “proportionality”.

101. The primary judge observed that this, too, was an issue that had not been expressly raised before the costs review panel. He recorded the submission made on behalf of eInduct, notwithstanding that, that s 364 of the LPA imposed an overriding obligation on the costs review panel to consider proportionality in the way that the costs were incurred, regardless of whether any relevant issue had been raised by the applicant for review.

102. The foundation of the argument put was s 60 of the Civil Procedure Act, which is in the following terms:

“In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.”

103. On the assumption (that, in my view, is highly questionable, if not simply wrong) that s 60 is relevant to the task undertaken by costs assessors and costs review panels, the primary judge dealt with the submissions that were put to him. These were, essentially, that the assessment of costs in the sum of $217,164.29 in relation to an order for costs made after an order that eInduct provide security for costs in the amount of $250,000 was simply disproportionate to the importance and complexity of the subject matter in dispute, and that the costs review panel ought to have taken note of this disproportion and reduced the amount of the assessment accordingly. He referred to the observation made by the costs review panel that “at first blush” the total costs seemed unreasonable.

104. The primary judge concluded that, although it did not use the word “proportionality”, the costs review panel had in fact considered the concept of proportionality. Its explanation for the seeming disproportion in costs to the subject matter of the orders in respect of which eInduct was liable to pay 3D’s costs lay in the manner in which the litigation had been conducted, particularly on the part of eInduct. The primary judge found no error of law in this respect on the part of the costs review panel.

105. Having found no error, the primary judge dismissed the appeal.

The application to this Court

106. In a highly detailed Amended Summons, eInduct asserted error of law in virtually every ruling made by the primary judge. These included the issues in respect of which the primary judge declined to permit amendment to the appeal as filed - that is, “the Indemnity Rule”, and the form of the certificate. As mentioned above, although eInduct had raised an “indemnity principle issue” before the costs review panel, it was not the same indemnity issue as it sought to raise on appeal. The latter was an argument that, since an award of costs is intended to provide indemnity against a liability to pay costs, a determination cannot be made (and a certificate cannot validly issue) unless and until the person in whose name the determination has been made or the certificate issued has actually incurred such a liability. Since the invoices rendered by Henry Davis York were to 3D only, and not to the remaining four defendants, the second to fifth defendants had incurred no liability to pay, and the certificates issued in their favour were invalid.

Resolution of “the Indemnity Issue”

107. The decision of the primary judge to reject the application to amend so as to include this ground was a discretionary one. To show that that decision was affected by error of law, eInduct must point to some error of the kind identified in House v The King. [44] eInduct has made no attempt to identify any such error, instead focussing on what it asserts to be the merits of the ground, if permitted to be argued. There is no error shown in the primary judge’s discretionary decision not to allow the amendment. That is the end of this ground of the present application.

     44. [1936] HCA 40; 55 CLR 499.

108. In any event, it is perfectly clear that the ground itself, if argued, is without merit. As the primary judge pointed out, there could be no practical consequences of a finding that the second to fifth defendants were not entitled to a certificate; the evidence showed that all defendants were jointly and severally liable for the costs of the proceedings, the certificate was validly issued in favour of 3D, and there was no differentiation in the liability of the five defendants. Moreover, the order that eInduct pay the costs was made by Stevenson J, in favour of all defendants; the costs assessor and the costs review panel were doing no more than quantifying the costs payable pursuant to that order.

109. The ground of the appeal concerning the indemnity rule should be rejected.

The “form of certificate” issue

110. The second issue in the application concerned the primary judge’s refusal to allow amendment to raise as an issue the form of the certificate.

111. The argument in support of this proposed ground depended upon the decision of this Court in Wende, to the effect that separate costs orders call for separate determinations, and the issue of separate certificates.

Resolution of the form of the certificate issue

112. As with the indemnity issue, no attempt was made to identify any House v The King error in the primary judge’s approach to the question of amendment. This ground should be rejected for that reason alone.

113. Also as with the indemnity issue, this ground can be seen to be devoid of merit. It is true that the judgments in Wende appear to support the proposition that separate certificates should issue in respect of separate orders for costs. But it is also true that, in the passages extracted in the primary judgment from Wende, it was recognised that a costs review panel is required to determine the issues presented to it for determination by the parties. In this case, eInduct chose to advance, both to the costs assessor and the costs review panel, detailed objections to the bills of costs. It did not (even five months after delivery of the judgments in Wende) choose to take any point about the form of the certificate issued by the costs assessor, the manner of determination of the assessment or the review, or the form which the certificate (or certificates) to be issued by the costs review panel ought to take.

114. Notwithstanding the (somewhat extreme) position adopted on behalf of eInduct, that the costs assessor and the costs review panel were obliged to explore every item on the bill, and make a determination as to the reasonableness of each item, (even in the absence of specific objection) it remains a fundamental principle that decision makers make decisions based upon the issues presented to them for determination. That principle was found, in Wende, to be applicable to costs assessment. The costs assessor and the costs review panel were under no obligation to go beyond the issues that were presented to them for determination. There was no error identifiable in the approach taken by the costs review panel.

112. There was, accordingly, no error in the treatment of the issues by the primary judge.

The proportionality principle

116. The final matter raised was what was called the issue of “proportionality”. This was raised, for the first time, before the primary judge, it not having been alluded to before the costs assessor or the costs review panel.

Resolution of the proportionality issue

117. The argument depended on what is, in my view, an erroneous interpretation of s 60 of the Civil Procedure Act, which is set out above.

118. On its face, s 60 is directed to the conduct of litigation by courts. It is not directed to the assessment of costs of litigation by cost assessors or costs review panels. There are, however, authorities to the contrary of that view.

119. In April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd [45] White J rejected, in strong terms, an opinion expressed by a costs assessor that s 60 is not applicable to the function of a costs assessor. In doing so, his Honour relied upon an earlier decision of this Court, Skalkos v T & S Recoveries Pty Ltd. [46] Skalkos, however, was decided before the enactment of the Civil Procedure Act and had nothing to do with s 60.

     45. [2009] NSWSC 867; 75 NSWLR 619.

     46. [2004] NSWCA 281; 65 NSWLR 151.

120. In my opinion, s 60 is directed to control of the proportionality of costs of litigation by the court in which the litigation is conducted.

121. Further, in s 60, the requirement of proportionality is not tied to the quantum or value of the subject matter of the litigation. It is tied to the importance and complexity of the subject matter in dispute. Litigation that involves relatively small amounts of monetary value may nevertheless be important and highly complex.

122. It is correct that, in Skalkos, it was accepted that the concept of proportionality is relevant in a costs assessment. That was because the predecessor of s 364 of the LPA (s 208G of the Legal Profession Act 1987 (NSW)) provided, similarly to s 364(2), that, in assessing what is a fair and reasonable amount of costs, a costs assessor may have regard to specified matters, of which (again similarly to s 364(2)) one was “the outcome of the matter”.

123. That was the basis on which Ipp JA (with whom Sheller JA and Grove J agreed) held that:[47]

“… in determining whether costs have been reasonably and properly incurred, it is relevant to consider whether those costs bear a reasonable relationship to the value and importance of the subject matter in issue.”

47. Skalkos v T & S Recoveries Pty Ltd at [8].

124. One thing that is noticeable is that “the outcome of the matter” is one of only six considerations specified as potentially relevant in s 364(2) (and s 208G), none of which is mandatory. Moreover, other circumstances besides the six specified are not excluded. One other relevant circumstance, depending on the facts of the case, is the reason that costs may have become disproportionate to the importance and complexity of the subject matter. In this case, counsel accepted that the costs had escalated by reason of the manner in which eInduct chose to conduct the litigation. Nevertheless, he submitted, the costs review panel ought to have limited the amount determined to be reasonable simply because the costs charged exceeded the amount ordered by way of security.

125. In considering this submission, it is relevant to have regard to its potential consequences. If it were accepted, there would be no disincentive to a litigant adopting an attitude to the litigation that unnecessarily increased the costs incurred by the other party. Such a litigant, in counsel’s submission, would not be at risk of bearing those costs, simply because the amount in issue was relatively small.

126. Not only would there be no disincentive to conduct of the kind I have suggested, it may be seen by some as a positive invitation to engage in conduct that would increase the burden of costs on the opposing party. The possibility of an adverse costs order does (or ought to) operate as some kind of brake on excessive costs.

127. The applicant’s argument as to proportionality cannot be accepted.

128. In my opinion the application should be dismissed - with costs.

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Endnotes

Amendments

20 May 2016 - citation corrected - endnote 4

18 September 2015 - typographical error [30], [43]

Decision last updated: 20 May 2016