Fletcher Constructions Australia Ltd v Newman as trustee of the property of Edward Alexander Littlejohn and Jennifer Lillian Littlejohn
[2002] WASC 162
FLETCHER CONSTRUCTIONS AUSTRALIA LTD -v- NEWMAN as trustee of the property of EDWARD ALEXANDER LITTLEJOHN and JENNIFER LILLIAN LITTLEJOHN [2002] WASC 162
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 162 | |
| Case No: | ARB:17/2000 | 5 JUNE 2002 | |
| Coram: | PARKER J | 26/06/02 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Bill of Costs to be taxed by Taxing Officer in accordance with these reasons | ||
| A | |||
| PDF Version |
| Parties: | FLETCHER CONSTRUCTIONS AUSTRALIA LTD DIANA DENISE NEWMAN as trustee of the property of EDWARD ALEXANDER LITTLEJOHN and JENNIFER LILLIAN LITTLEJOHN |
Catchwords: | Procedure Costs Arbitration proceedings Costs awarded by Arbitrator Taxation Taxing Officer delegate of Arbitrator Arbitrator may give special directions for taxation Costs Determination of Scale of Costs Legal Practitioners Act, s 58W Arbitration proceedings not declared a "court" Item in Scale invalid |
Legislation: | Commercial Arbitration Act 1985 (WA), s 34, s 61 Legal Practitioners Act 1893 (WA), s 58W, s 58ZB Rules of the Supreme Court (WA), O 81D r 16(1) |
Case References: | Afkos Industries Pty Ltd v Pullinger Stewart (a firm) [2001] WASCA 372 Cachia v Hanes (1994) 179 CLR 403 Cope v United (London) Dairies Ltd [1963] 2 All ER 194 Dobree v Hoffman (1996) 18 WAR 36 H G Perkins Ltd v Best-Shaw [1973] 2 All ER 924 Minister for Home and Territories v Teesdale Smith & Ors (1924) 35 CLR 120 Minister for Works (WA) v Australian Dredging & General Works Pty Ltd [1986] WAR 235 Pryles & Defteros (a firm) v Green (1999) 20 WAR 541 Birch v The Australian Mutual Provident Society (1906) 4 CLR 324 Consolidated Constructions Pty Ltd v Saipem Australia Pty Ltd, unreported; SCt of WA; Library No 970507; 3 October 1997 Gibson v Mitchell (1928) 41 CLR 275 James Aris & Associates v Minister for Works (1994) 11 WAR 390 Klahn v Talbot (1995) 83 A Crim R 535 R J Davies Pty Ltd v Keath Earthmoving Co Pty Ltd [1965] WAR 189 Widgee Shire Council v Bonney (1907) 4 CLR 977 Young v Tockassie (1905) 2 CLR 470 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Claimant
AND
DIANA DENISE NEWMAN as trustee of the property of EDWARD ALEXANDER LITTLEJOHN and JENNIFER LILLIAN LITTLEJOHN
Respondent
Catchwords:
Procedure - Costs - Arbitration proceedings - Costs awarded by Arbitrator - Taxation - Taxing Officer delegate of Arbitrator - Arbitrator may give special directions for taxation
Costs - Determination of Scale of Costs - Legal Practitioners Act, s 58W - Arbitration proceedings not declared a "court" Item in Scale invalid
Legislation:
Commercial Arbitration Act 1985 (WA), s 34, s 61
(Page 2)
Legal Practitioners Act 1893 (WA), s 58W, s 58ZB
Rules of the Supreme Court (WA), O 81D r 16(1)
Result:
Bill of Costs to be taxed by Taxing Officer in accordance with these reasons
Category: A
Representation:
Counsel:
Claimant : Mr S G Leslie
Respondent : Mr D J Garnsworthy
Solicitors:
Claimant : Wilson & Atkinson
Respondent : Mallesons Stephen Jaques
Case(s) referred to in judgment(s):
Afkos Industries Pty Ltd v Pullinger Stewart (a firm) [2001] WASCA 372
Cachia v Hanes (1994) 179 CLR 403
Cope v United (London) Dairies Ltd [1963] 2 All ER 194
Dobree v Hoffman (1996) 18 WAR 36
H G Perkins Ltd v Best-Shaw [1973] 2 All ER 924
Minister for Home and Territories v Teesdale Smith & Ors (1924) 35 CLR 120
Minister for Works (WA) v Australian Dredging & General Works Pty Ltd [1986] WAR 235
Pryles & Defteros (a firm) v Green (1999) 20 WAR 541
Case(s) also cited:
Birch v The Australian Mutual Provident Society (1906) 4 CLR 324
Consolidated Constructions Pty Ltd v Saipem Australia Pty Ltd, unreported; SCt of WA; Library No 970507; 3 October 1997
(Page 3)
Gibson v Mitchell (1928) 41 CLR 275
James Aris & Associates v Minister for Works (1994) 11 WAR 390
Klahn v Talbot (1995) 83 A Crim R 535
R J Davies Pty Ltd v Keath Earthmoving Co Pty Ltd [1965] WAR 189
Widgee Shire Council v Bonney (1907) 4 CLR 977
Young v Tockassie (1905) 2 CLR 470
(Page 4)
1 PARKER J: A taxing officer of the Court has referred to a Judge questions arising in the course of a taxation before the taxing officer. The reference is made pursuant to RSC O 66 r 45. The taxation is in respect of an arbitration conducted before an Arbitrator, Mr A Swann, pursuant to the Commercial Arbitration Act 1985.
2 The dispute between the parties arose out of a building construction contract. The contract was substantial and the matters in dispute lengthy and detailed. The arbitration proceedings extended over some weeks. Both parties were represented by legal practitioners before the Arbitrator. Having reserved and considered his decision in the arbitration, an interim award was published by the Arbitrator on 27 March 2000. By this award the question of the main costs of the arbitration were the subject of a grant of liberty to apply, although a specific order was made for the respondent to pay the claimant's costs on a counterclaim.
3 The question of the main costs of the arbitration were considered at a later date by the Arbitrator, the parties having exercised the liberty to apply. By a second interim award made on 11 July 2000 the Arbitrator made orders for costs in favour of the claimant in the following terms:
"1. Costs thrown away by cause of the amendments to the defence and counterclaim [When this is read with the introduction in the award it clearly means that the claimant should have those costs].
2. The value of the subject matter of the claim is fixed at $17,985,050.00.
3. Costs in the matter with respect to Discovery, Inspection, Getting Up and Counsel Fees shall be taxed without regard to the scale.
4. Certificates for the following expenses:
(a) Second counsel but taking into account that the second counsel is also the solicitor on the record.
(b) Qualification of witnesses.
(c) Conferences with counsel, where inadequately remunerated by any item in the scale.
With respect to:
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- (d) Attendance of the party at the hearing:
(e) Consultant to manage the action:
(f) Attendance of witnesses at the hearing.
I award a certificate for the time Mr Lowe-Guest and Mr Pohlman were present at the hearing.
- 5. Pursuant to section 34 of the Commercial Arbitration Act 1985 (as amended 1997) I direct that the Respondent shall pay the costs of the arbitration to the Claimant as between party and party and as agreed between the parties or in the event that agreement cannot be reached, to be taxed and settled by the Taxing Officer of the Supreme Court."
- The Arbitrator provided reasons which were incorporated by express reference in the interim award.
4 By RSC O 81D r 16(1) it is provided that RSC O 66 "shall, with such modifications as are necessary, apply in relation to proceedings in the Court for taxation of the costs of an arbitration including the fees and expenses of an arbitrator or umpire". In the second interim award there were references to the scale. By virtue of the recital to the second interim award and the reasons for it, both of which refer expressly to O 66, it is clear that the Arbitrator was conscious of the effect of O 81B r 16(1).
5 Order 66 r 11 has the effect that solicitors are entitled to be allowed fees set forth "in any relevant scale" and that the fees allowed under any relevant scale shall apply inter alia as between party and party. Further O 66 r 12 allows for special costs orders to be made by "the Court" including orders that allowances in any relevant scale be raised on taxation or that a limit provided by the scale be removed.
6 Order 66 r 11(i) defines "any relevant scale" to mean "any scale regulating the remuneration of practitioners admitted to practice under the Legal Practitioners Act 1893 in or for the purposes of proceedings before the Court".
7 In the present case it is common ground that the relevant scale in respect of the majority of the work performed by the legal practitioners engaged in the arbitration was the Legal Practitioners (Supreme Court) (Contentious Business) Determination 1999 made by the Legal Costs Committee pursuant to s 58W of the Legal Practitioners Act 1893 ("the
(Page 6)
- LP Act"). This Determination prescribes what is commonly referred to as the Supreme Court Scale of Costs. In fact, for some of the work performed in the arbitration the Scale of Costs provided by the earlier 1996 Determination of the Legal Costs Committee was applicable. There is no relevant distinction for present purposes between the 1996 and the 1999 Determinations, or their respective Scales of Costs, so that, for convenience, I will often refer only to the 1999 Determination and its Scale of Costs.
8 The 1999 Scale, and the similar 1996 Scale, were clearly in the contemplation of the Arbitrator. The references in the second interim award to matters such as the value of the subject matter, discovery, inspection, getting up and counsel fees, and certificates for second counsel and for the qualification of witnesses are all related to specific items for which the Scale makes provision. There was, however, some immaterial inaccuracy in the second interim award as items 4(c) and following of the award are not strictly the subject of certificates under the Scale but may be the subject of special orders.
9 By item 25 of the 1999 Scale (as in the 1996 Scale) it is provided that for "Arbitration proceedings" the scale costs shall be "The same costs as in an action". The main body of the other items of the Scale, of course, provide for the costs in an action.
10 There not having been agreement between the parties as to the costs of the arbitration the claimant has presented its bill of costs for taxation to a taxing officer of this Court. The bill is substantial indeed and in respect of costs and disbursements it totals some $637,685. That is the bill which the taxing officer is now to consider.
11 The bill seeks to take advantage of the certificates and other special costs orders reflected in the second interim award.
12 Section 34 of the Commercial Arbitration Act 1984 makes express provision in respect to the costs of proceedings before an arbitrator. It provides as follows:
"34(1) Unless a contrary intention is expressed in the arbitration agreement, the costs of the arbitration (including the fees and expenses of the arbitrator or umpire) shall be in the discretion of the arbitrator or umpire, who may –
(Page 7)
- (a) direct to and by whom and in what manner the whole or any part of those costs shall be paid;
(b) tax or settle the amount of costs to be so paid or any part of those costs; and
(c) award costs to be taxed or settled as between party and party or as between solicitor and client.
- (2) Any costs of the arbitration (other than the fees or expenses of the arbitrator or umpire) that are directed to be paid by an award shall, except so far as taxed or settled by the arbitrator or umpire, be taxable in the Court."
13 Section 61 of the Commercial Arbitration Act further provides as follows:
"61(1) Rules of court may be made under the Supreme Court Act 1935, for carrying the purposes of this Act into effect and, in particular, for or with respect to –
…
(d) any other matter or thing for or with respect to which rules are by this Act authorised or required to be made by the Court.
(2) Subsection (1) does not limit the rule-making powers conferred by the Supreme Court Act 1935."
14 It is clearly expressly contemplated by the Commercial Arbitration Act that the costs of an arbitration, if not taxed or settled by the arbitrator under s 34(1)(b), may be taxed or settled as between party and party by a taxing officer of this Court. Further, the Commercial Arbitration Act expressly contemplates that provision may be made in the Rules of this Court with respect to the taxation of such costs. It is pursuant to these provisions that O 81D r 16(i) is made. By this rule the provisions of O 66 shall "with such modifications as are necessary" apply in relation to the taxation of costs of an arbitration.
15 On this reference it is objected by the respondent that it was not competent for the Arbitrator to make the special costs orders. The respondent points to the terms of O 66 r 12 which provides relevantly only for "the Court" to make orders of this nature and this may only be done where "the Court is of opinion". It follows, in the submission of the
(Page 8)
- respondent, that there is no power under o 66 r 12 for an arbitrator to make these orders and that any application of this nature must be made to a Judge or Master of this Court.
16 This submission, in my view, overlooks the provision of O 81D r 16(i) by which O 66 shall "with such modifications as are necessary" apply in relation to the taxation of costs of an arbitration. The Court did not exercise jurisdiction in the building dispute. That was the role of the arbitrator. It appears to me to have been intended, as a necessary modification of O 66 in its application to proceedings before an Arbitrator, that the powers of the Court in respect of the costs of proceedings before the Court should be exercised by the arbitrator in respect of the costs of proceedings before that arbitrator.
17 The respondent submitted that this really involves transfer of power from the Court without legislative authority. I do not find this persuasive. The question is no greater than what is the intended operation of a rule of this Court with respect to the taxation of the costs of proceedings before an arbitrator. By s 61(1) of the Commercial Arbitration Act this Court has express power, by rule, to provide for the taxation of costs of proceedings before an arbitrator. Order 81D r 16(i) is made pursuant to that power. Had O 81D spelt out in full the equivalent of O 66 r 12, but providing for the arbitrator rather than the Court to make the special orders, it would be clear there was no question of want of power to make such a rule. Instead, O 81D r 16(i) seeks to achieve the same result by the shorthand drafting device of applying O 66 "with such modification as are necessary". It is not a matter of power, but of how O 81D r 16(1) is intended to operate, when it applies O 66 with necessary modifications to the taxation of costs of proceedings before an arbitrator.
18 The respondent further submits, as I understand it, that the effect of s 34(2) of the Commercial Arbitration Act is to confer on this Court, as a matter of power and jurisdiction, the taxation of the costs of an arbitration. The effect and consequence of this, it is submitted, is that the costs of the arbitration are, by virtue of this conferral of power and jurisdiction, deemed to be costs of proceedings which had been taken in the Supreme Court. On this argument the costs taxed pursuant to s 34(2) are costs of deemed proceedings before the Court. It is submitted that support for this view is to be found in O 81D r 16(1) itself, as it applies O 66 "in relation to proceedings in the Court for taxation of the costs of an arbitration". On this argument, as I understand it, the reference to proceedings in the Court in the subrule is a reference to the arbitration, they being deemed proceedings in the Court.
(Page 9)
19 One relevance of this line of submission was to contend that as the proceedings before the arbitrator are deemed to be proceedings before this Court it would follow, on the argument, that only this Court could make special costs orders or give directions in respect of the taxation.
20 It appears to me that s 34(2) provides, relevantly, that where an arbitrator in an award directs the payment of costs, which the arbitrator does not personally tax or settle, then those costs shall be taxable in this Court. As has been noted, s 61 then expressly contemplates that rules of court may be made to facilitate the taxation of such costs. In so far as there is a taxation in the court it may be said that there are proceedings, but these are the proceedings for that taxation. It is not the case that by express language, or by implication, the arbitration proceedings themselves are deemed to be proceedings in this Court. They are and remain proceedings before an arbitrator pursuant to the Commercial Arbitration Act. The only proceedings contemplated in this Court are in respect of the taxation of costs. As I read O 81D r 16(1) that is precisely what is said and intended by the rule. Hence, in my view, it is not the effect of s 34(2) that the arbitration is deemed to be a proceeding before this Court.
21 The respondent further submits that as, by virtue of O 66 r 11(1), a relevant scale for the purposes of O 66 means only a scale regulating the remuneration of practitioners "in or for the purposes of proceedings before the Court", the costs the subject of the taxation must be costs "in or for the purposes of proceedings before the Court". If that be correct, it is submitted, the power to make special costs orders or give directions as to taxation pursuant to O 66 r 12 can only be "in or for the purposes of proceedings before the Court" and must, therefore, only be exercisable by the Court. On this argument, as I understand it, it seems to follow that while, by O 81D r 16(1) the scale contemplated by O 66 r 11 may be applied in the taxation of costs relating to an arbitration, that scale can only be applied according to its ordinary provisions. There is no scope for an order to be made by virtue of O 66 r 12, at least by the arbitrator, varying the terms of the scale by special costs orders or by directions. It is submitted that the scope of s 34 of the Commercial Arbitration Act is not wide enough to incorporate the powers contained in O 66 as they are powers of the Court, exercisable only by the Court, and only in or for the purposes of proceedings before the Court.
22 In support of this line of argument reference was made by observations of Murray J in Afkos Industries Pty Ltd v Pullinger Stewart (a firm) [2001] WASCA 372 at [27] where his Honour said:
(Page 10)
- "The conclusion to which I have come, therefore, is that the statutory scheme has the effect that the costs of an arbitration rest in the discretion of the arbitrator. If, as in this case, that discretion is exercised by an award of costs made in a form which provides for their taxation by the court, then by virtue of O 81D r 16 and the relevant Costs Determination itself, the taxation will proceed in accordance with and subject to the provisions of O 66 and subject to the limits as to quantum incorporated in the scale provided under the Determination, the applicability of which is secured by O 66 r 11, subject to any special order made under O 66 r 12. Those limits therefore would govern the taxation in the case of this arbitration unless, upon the application of the appellant, particular limits were raised or removed: James Aris & Associates v Minister for Works (1994) 11 WAR 390, 393 - 4 per Rowland J, with whom Pidgeon and Wallwork JJ agreed."
- In this passage Murray J does indicate that a taxation of the cost of an arbitration which are to be taxed in this Court will, by virtue of O 81D r 16, be subject to the limits as to quantum incorporated in the relevant scale provided under the Determination. His Honour expressly recognises, however, that this is "subject to any special order made under O 66 r 12". The limits in the scale govern the taxation unless those limits are raised or removed by special order. His Honour is not negating the possibility of a special order or directions, nor is his Honour dealing with the question whether a special order or directions may be made or given by the arbitrator, or only by the Court. The reference by Murray J to the decision in James Aris & Associates v Minister for Works does not take the matter any further. In that case the Full Court was concerned with an application to apply the then relevant costs scale to the costs of a lay advocate who appeared before an arbitrator. It was argued that the words in O 81D r 16(1) "with such modifications as are necessary", extended to modifying O 66 and the scale to which it referred so that they applied to the costs of persons who were not legal practitioners but who appeared as an advocate before an arbitrator. As Rowland J concluded at p 393-4 the relevant rule-making power of this Court and the power of the Legal Costs Committee to make determinations under s 58W of the LP Actare in respect of the costs of legal practitioners admitted to practise law in this State, and do not extend to the costs of persons who are not certificated legal practitioners. In view of some submissions made in the course of the hearing I would observe that, in my view, in the passages referred to Rowland J is dealing with the question of profit costs and not with the out
(Page 11)
- of pocket expenses or disbursements of a party to an arbitration who was not represented by a certificated legal practitioner. In my view, neither the decision in Afkos Industries Pty Ltd nor in James Aris and Associates assists the respondent's submissions in this regard.
23 Indeed, in so far as it is the submission of the respondent that special costs orders or special directions may not be made in respect of the costs of an arbitration, the decision in both cases supports the contrary proposition. In neither case, however, was the question addressed whether special costs orders and directions may be made by the Arbitrator or may only be made by the Court. There is, in my view, nothing in either of those cases to suggest that the reference in O 81D r 16(1) to O 66 applying to costs of an arbitration "with such modifications as are necessary" may not extend to the modification that it is the arbitrator rather than the Court which should make any special costs orders and give any directions for the purposes of a taxation of costs in an arbitration.
24 The decision of the Full Court in Minister for Works (WA) v Australian Dredging & General Works Pty Ltd [1986] WAR 235 is of relevance in this regard. In that case, costs in an arbitration had been awarded to the Australian Dredging and General Works Pty Ltd. It was the award of the arbitrator that the costs should be taxed on a party and party basis in default of agreement. There having been no agreement as to the costs, a bill of costs was lodged for taxation in this Court in which the costs claimed far exceeded what was the limit provided under the then scale. The Minister took that point. This caused the company to apply to the arbitrator to make an order that the cost be taxed irrespective of the scale limit. The arbitrator declined to do so on the basis that it was no longer open to him to deal with this matter as he had made his award. An application was then made to Pidgeon J for the award to be remitted to the arbitrator so that he could "receive submissions in respect to the making by him of a special order with respect to the plaintiff's costs pursuant to O 66 r 12 …". That order was made by Pidgeon J. An appeal was taken from that decision. The case on appeal went off on the basis that the costs claimed were not in respect of the costs of certificated legal practitioners. It appeared that although the parties were represented by legal practitioners they had not been admitted to practise in this State. They were therefore not certificated legal practitioners. There is no question anywhere in the reasons of the Full Court, however, of the proprietary or appropriateness of the order made by Pidgeon J which clearly reflected the view that it was for the arbitrator to consider special costs orders pursuant to O 66 r 12, and not for the court. Indeed, Kennedy J at 241 of the report observed:
(Page 12)
- "It was subsequently appreciated by the respondent's advisers that O 66 r 16 imposes a limit on the costs recoverable by one party from another party, and it was then sought by it to have the arbitrator amend his award, in the exercise of his power under s 9 of the Arbitration Act 1895 (WA) to correct in the award 'any clerical mistake or error arising from any accidental slip or omission', by removing that limit. Subject to the major issue which arose during the course of the hearing of this appeal, there would appear to be some substance in this contention, the situation having arisen as a result of oversight by the legal representative …"
25 The reference to s 9 of the Arbitration Act 1895 is to the provision which gave power to correct an award. What is material in this case is that Kennedy J, like Pidgeon J, appears to have accepted without question that the correction required to raise the limit provided by the scale was a matter for the arbitrator and not for this Court.
26 The submissions for the respondents also seem to involve the proposition that a taxation of costs pursuant to s 34(2) is in the nature of the taxation of a statutory entitlement contemplated by s 34(1)(c). In support of this it is submitted that while s 34 makes provision for the arbitrator to exercise powers, these powers are limited to directing which party is to be the recipient of costs, by whom those costs are to be paid, and in what manner they are to be paid (s 34(1)(a)). Secondly, it is submitted the arbitrator may personally tax or settle those costs (s 34(1)(b)). Thirdly, it is submitted that the arbitrator may direct costs to be taxed or settled between party and party or solicitor and client (s 34(1)(c)). The submission is that as the costs are to be taxed in accordance with the Rules of this Court, as contemplated by s 61 of the Act, the statutory scheme contemplates a taxation in accordance with the applicable scale and according to its terms including its limits as to quantum. On this view, it would be contrary to the statutory scheme for the arbitrator to purport to vary the terms and effect of the scale by special costs orders or directions.
27 It is important to notice, however, that by the introductory words to s 34(1) the costs of an arbitration "shall be in the discretion of the arbitrator". In a case such as the present, where there is no contrary intention expressed in the arbitration agreement, it follows from this primary provision of s 34(1) that the costs of an arbitration are at large in the discretion of the arbitrator. The arbitrator must act judicially in the exercise of that discretion; Cope v United Dairies (London) Ltd [1963] 2
(Page 13)
- All ER 194. Subject to an appropriate exercise of the discretion, the nature of the discretion of the arbitrator is not limited by what follows in the section. It is expressly provided, however, that in the exercise of the discretion the arbitrator "may" act in accordance with (a), (b) and (c).
28 It follows that s 34(1)(c) is not intended as a statutory scheme which supplants an exercise of discretion by the arbitrator or limits the discretion of the Arbitrator as to costs. It is a provision of which the arbitrator may take advantage, in the exercise of his discretion, the clear object of which is to enable the arbitrator to have the costs taxed by a taxing officer of this Court. This is a procedure that may relieve the arbitrator of a considerable and lengthy burden and could be advantageous for the parties by virtue of the familiarity of taxing officers with the process of taxation.
29 The submission of the respondent in this respect also overlooks the opening words of s 34(1)(c) which are that the arbitrator may "award costs to be taxed". It is an inherent element of the scheme of taxation of costs pursuant to s 34(1)(c) and (2) that what is being taxed is an award of costs made in the discretion of the arbitrator. In my view, what is clearly contemplated is that the taxation is the means by which the quantum of the costs awarded may be conveniently and reliably determined by a taxing officer and so to relieve the arbitrator of the task of personally taxing or settling the amount of costs which the arbitrator awards. Rather than creating a statutory right to costs pursuant to an applicable scale, as the respondent would see it, in my view, the scheme of s 34(1) and (2) in respect of taxations is to facilitate the process by which the amount of costs to be awarded by an arbitrator may be conveniently determined.
30 It is also of some relevance to note that the opening primary provision of s 34(1), by which the costs of the arbitration shall be in the discretion of the arbitrator, echoes closely the provision of s 37(1) of the Supreme Court Act 1935 which relevantly provides that "… the costs of and incidental to all proceedings in the Supreme Court … shall be in the discretion of the Court or Judge …". It is not unusual in the exercise of that discretion for the Court or Judge to make orders of the nature contemplated by s 34(1)(a), (b) and (c), save that rarely if ever is a Judge persuaded to tax costs rather than to leave them to be taxed by a taxing officer.
31 In this connection, the claimant referred to the Minister for Home and Territories v Teesdale Smith & Ors (1924) 35 CLR 120. By s 33A of the Judiciary Act 1903 - 1920 it was provided that the High Court may
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- direct that an award in an arbitration, in a matter over which the Court had original jurisdiction, shall be a rule of the High Court. An application was made to the Court to make an award, in an arbitration in respect of compensation for land compulsorily acquired by the Commonwealth, a rule of Court. The application was granted. The arbitration was conducted pursuant to an agreement which provided that:
"The costs of the arbitration and award shall be in the discretion of the arbitrator, who may direct to and by whom and in what manner those costs or any part hereof shall be paid, and may … direct the taxation thereof by the proper taxing officer of the said High Court."
33 It is to be noted that the land the subject of the arbitration was in South Australia so that, by virtue of the Judiciary Act 1903 (Cth) the provisions of the Rules of the Supreme Court of South Australia would normally have been applied in the taxation of those costs in the High Court. The effect of the direction made by the arbitrator was that certain of those rules should not be applied by the taxing officer on the taxation. At p 130 – 131, Isaacs ACJ and Stark J, Gavan Duffy J concurring, said:
"The real point made was that, if pursuant to the discretion conferred by the 20th clause the arbitrator delegated taxation of costs to the taxing officer, the delegation should not be fettered. That, however, cannot be sustained. The arbitrator was given full discretion as to costs, as to who should pay them, and the manner of payment and apportionment. He was also empowered to tax or settle them himself – which, of course, would be a ministerial act following the lines laid down by the exercise of his discretionary powers. Or he could direct that this ministerial duty (see R v Goff (1905) 2 IR 121 and Simpson v Inland Revenue Commissioners (1914) 2 KB, at 845) should be performed by the proper taxing officer; and in that case, the duty would necessarily be subject to the declared discretion of the arbitrator. It was within his discretion to exclude the rules
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- referred to and leave the taxing officer to act on general principles of fairness as if those rules were non-existent."
34 There is a very clear similarity between the language of s 34(1) and the terms of the arbitration agreement which were considered in that decision. It is the case, obviously, as the respondent submits, that the decision concerned language in an arbitration agreement, whereas we are presently concerned with the provisions of a statute. That distinction, however, does not appear to be of material relevance to the effect of the words. The passage quoted from the decision serves to underline and confirm the controlling significance of the circumstance that pursuant to s 34(1) the question of costs is in the discretion of the arbitrator. While in the exercise of that discretion the arbitrator may direct the costs to be taxed by a taxing officer, that taxation is to be conducted subject to the declared discretion of the arbitrator. I see no reason to distinguish the position determined by the High Court in that case from an award of costs in the discretion of the arbitrator pursuant to s 34(1)(c) of the Commercial Arbitration Act, where those costs are to be taxed as between party and party in this Court. In my view, it is entirely consistent with the legislative scheme of s 34(1) and (2) that, where the arbitrator awards costs to be taxed, it is open to the arbitrator to give specific directions to the taxing officer, or to make special orders as to the carrying out of the taxation, in the exercise of the discretion of the arbitrator.
35 The decision in Minister for Home and Territories v Smith does not stand alone in this field and is not unique to Australia. In H G Perkins Ltd v Best-Shaw [1973] 2 All ER 924 a question as to the taxation in the English High Court of the costs of an arbitration had to be considered. The legislative scheme under which this occurred was provided by the Arbitration Act 1950 (UK) which provided:
"18(1) Unless a contrary intention is expressed therein, every arbitration agreement shall be deemed to include a provision that the costs of the reference and award shall be in the discretion of the arbitrator or umpire, who may direct to and by whom and in what manner those costs or any part thereof shall be paid, and may tax or settle the amount of costs to be so paid or any part thereof, and may award costs to be paid as between solicitor and client.
(2) Any costs directed by an award to be paid shall, unless the award otherwise directs, be taxable in the High Court."
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36 It does not seem to be a material point of distinction that the precise operation of s 18(1) was to deem the relevant provisions to be terms of the arbitration agreement, rather than to enact them directly as in s 34. It appears to me this distinction is one of form and not substance, the effect of both legislative schemes being identical.
37 As a matter of interest as to the historical derivation of this legislative scheme, which of course bears a good deal of similarity to that of s 34 of the Commercial Arbitration Act, is to be found in the reasons of Kerr J at 926 where it is said:
"The words in sub-s (2) 'unless the award otherwise directs' can, I think, only refer to a taxation in a county court, and this appeared to be common ground between counsel. It was held as long ago as 1735, in Knott v Long (1735) 2 Stra 1025), that if an arbitrator does not himself tax the costs, he can only delegate the taxation to an officer of the court and not to some third party. The report of Knott v Long consists only of one sentence and deserves to be quoted in full. It reads as follows:
'An award that the defendant should pay what costs two persons named in the award (who were not officers of any Court) should appoint for costs; provided they are such as a Master in Chancery would allow; was held ill, for they can only delegate their authority in that instance to one who, the Court will take notice, understands it better than themselves.'"
- The primary issue in that case concerned the question whether by virtue of the UK statutory scheme taxation might be conducted on the basis of the County Court scale or whether it should be on the High Court scale. Of relevance to the questions on this reference, however, are the observations of Kerr J at 929:
"It must always be borne in mind that under s 18(1) and (2) of the 1950 Act the costs are in the sole discretion of the arbitrator and that subject to acting judicially he can award costs on any basis which he regards as proper. The only question in the present case is therefore: what basis has been selected by the arbitrator on the true construction of the award? This question is not answered by referring to s 47 of the 1959 Act or CCR ord 47 which have nothing to do with the discretion as to costs vested in arbitrators by s 18 of the 1950 Act."
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- His Honour further observed at 930:
"In this connection it is also worth bearing in mind that the function performed by a taxing master, when taxing costs under an award made by some outside tribunal, has been authoritatively described as a ministerial function in settling or taxing the amount of the costs awarded by the arbitrator or other tribunal: see Erle CJ in Holdsworth v Wilson (1863) 4 B & S 1 at 8, and Scrutton J in Simpson v Inland Revenue Comrs [1914] 2 KB 842, and Matthews v Inland Revenue Comrs [1914] 3 KB 192. These cases show that the taxing master is merely the delegate of the arbitrator or other tribunal in assessing the amount. It would therefore be very surprising if he had what would in effect be a total discretion without reference to any scale."
39 Subject to an issue to which I shall turn shortly, it follows that in the absence of any specific direction or contrary intention being evident in the arbitrator's award of costs to be taxed, a taxing officer of this Court would proceed to tax in accordance with the Rules of Court in so far as they have made provision for taxation of costs in arbitration proceedings. That is the position where no particular direction is given by the arbitrator. It appears to me, however, to be entirely consistent with this legislative scheme that the arbitrator may give specific directions in the award as to the manner by which a taxation of costs which he orders is to proceed, which directions may go so far as to direct taxation on a basis other than the scale of costs which would normally be applicable under the Rules of Court, eg in an appropriate case an arbitrator might direct taxation on the basis of the Local Court scale, or give directions specifically varying the
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- application of the ordinary scale as in Minister for Home Territories v Smith. In my view, the statutory scheme of the Commercial Arbitration Act in respect of the awarding of costs of an arbitration reflects the general tenor of those decided authorities.
40 This brings me to a very significant issue which is of particular concern to the learned taxing officer in this case. The issue is whether item 25 of the Supreme Court Scale of Costs as prescribed in the 1999 Determination is valid and of legal force and effect. As indicated earlier, item 25 makes provision in respect of the costs of arbitration proceedings and provides that they shall be the same costs as in an action.
41 The 1999 Determination of the Legal Costs Committee is a creature of Pt VI of the LP Act. By s 58W, which is within Pt VI, it is provided that the Committee:
" … may make determinations regulating the remuneration of practitioners in respect of –
(a) non-contentious business carried out by practitioners;
(b) contentious business carried out by practitioners in or for the purposes of proceedings before –
(i) the Supreme Court;
(ii) the District Court;
(iii) a Local Court;
(iv) a court of petty sessions;
(v) a review officer or compensation magistrate's court within the meaning of the Workers' Compensation and Rehabilitation Act 1981;
(vi) such other court as the Attorney General may by order under subsection (3) declare to be a court to which this section applies."
"For the purposes of subsection (1)(b)(vi), the Attorney General may, by order published in the Gazette, declare any court to be
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- a court in respect of which the Legal Costs Committee may make a determination under this section and may, by subsequent order so published, vary or revoke that declaration."
43 By s 58ZB, which is also within Pt VI, it is provided:
"(1) Subject to sections 59 and 70(2) of this Act and s 14 of the Legal Aid Commission Act 1976 –
(a) the taxation of bills of costs of practitioners, as between practitioner and client or party and party; and
(b) any other aspects of the remuneration of practitioners the subject of a determination,
shall be regulated by a determination in force under s 58W.
(3) Nothing in subsection (1) shall be construed as limiting any power of a court, a judicial officer or a taxing officer of a court to determine in any particular case before that court or judicial officer the amount of costs allowed."
44 In understanding the effect of these provisions it is critical to bear in mind that they relate only to the remuneration of practitioners. That is the clear effect of s 58W(1). "Practitioner" is a term defined by s 3 of the LP Act to mean "a person admitted and entitled to practice as a barrister and solicitor of the Supreme Court of Western Australia …". Neither the scheme of Pt VI of the LP Act nor any determination made pursuant to Pt VI is concerned with the costs which may be awarded on taxation of persons who are not legal practitioners. The entitlements of persons who are not legal practitioners to be awarded costs and their taxation has received some consideration in cases such as Cachia v Hanes (1994) 179 CLR 403 and Dobree v Hoffman (1996) 18 WAR 36. We are not concerned with costs of that nature on this present reference.
45 It is also important to bear in mind that by s 58ZB the legislative scheme of Pt VI only applies to the remuneration of practitioners and the taxation of bills of costs for that purpose in so far as a determination under Pt VI was in force at the time the work was undertaken by the legal practitioner. If no determination was in force in respect of the work the
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- subject of a bill of costs at the time that work was undertaken then any other rule of court or scale of costs that would have applied, were it not for a determination, continues to have force by virtue of s 58ZB(2). If there is no such rule or scale then the taxation of such costs is at large in the discretion of the taxing officer. In such a situation the taxing officer would normally allow what the taxing officer considered to be reasonable charges in respect of work reasonably undertaken. In this respect see Pryles & Defteros (a firm) v Green (1999) 20 WAR 541.
46 In the present case, however, the work was undertaken by legal practitioners and at the relevant time there were determinations in force pursuant to Pt VI of the LP Act, the 1996 and the 1999 Determinations to which I have referred, and each of these included scales of costs which contained an item 25 dealing with the costs of an arbitration.
47 The short point in issue is whether item 25 is valid. The power to make a determination in respect of the costs of legal practitioners which is exercisable by the Legal Costs Committee for the purposes of Pt VI of the LP Act is in respect of those costs which are set out in s 58W(1). Relevantly, by virtue of the definition of "court" the power to make a determination in respect of the costs of proceedings before an arbitrator will arise only where, by virtue of s 58W(1)(b)(vi) and (3), the Attorney General has by order declared such proceedings before an arbitrator to be a "court". It is common ground between the parties that there has not been a determination by the Attorney General to declare an arbitrator conducting an arbitration under the Commercial Arbitration Act to be a "court" for the purposes of Pt VI. That being the position the inevitable consequence, it appears to me, is that the Legal Costs Committee has no power to include in any determination which it makes, including the 1996 and 1999 Determinations, any provision regulating the remuneration of legal practitioners in respect of such proceedings before an arbitrator. It follows that item 25 in the 1996 and 1999 Determinations is not valid and is of no force or effect.
48 It is quite likely that this has occurred by oversight. There had long been an item in earlier scales of costs in this Court dealing with costs in arbitrations. Before the enactment of Pt VI of the LP Act in 1987, the scales of costs were promulgated as rules of court made by the Judges of this Court. In that situation there was no question as to the validity of an item dealing with costs in arbitration proceedings. The Legal Costs Committee may well have carried over that provision from the earlier scales without giving specific consideration to the question of the Committee's power to deal with the subject matter of the item. Whatever
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- be the reason, it remains the case that item 25 has no legally binding force deriving from the LP Act.
49 The consequence of this invalidity for the taxation of costs in an arbitration pursuant to the Commercial Arbitration Act by a taxing officer of this Court, would appear to be that, as there is no binding scale, the costs to be allowed are in the discretion of the taxing officer. Accordingly, on a party and party taxation, the taxing officer will no doubt allow what the taxing officer considers to be reasonable charges in respect of work reasonably undertaken, subject of course to any particular directions of the arbitrator. On such a taxation the taxing officer in the exercise of discretion may well find it convenient in respect of some or all items in the bill of costs to tax by way of analogy with a scale such as the Supreme Court Scale of Costs.
50 In the present case, however, it is apparent from the terms of the second interim award of the Arbitrator that his clear intention was, and the effect of his award is, that the taxation should be conducted in accordance with the 1996 and 1999 Scales (according to when the work was undertaken), subject to the special cost orders and directions as to taxation given by the Arbitrator in the second interim award. As that is the clear intention and direction of the Arbitrator it follows that in this particular case the taxing officer is required by the second interim award of the Arbitrator to tax as if these scales applied, subject to the special orders and directions given by the Arbitrator. In this case it is only on this basis that the taxing officer, as the delegate of the Arbitrator, could give effect to the decision of the Arbitrator in assessing by taxation the quantum of the costs awarded by the Arbitrator.
Conclusion
51 These reasons have sought to deal with the questions raised by the learned taxing officer on this reference. The submissions of the parties before me canvassed further matters but it is unnecessary to deal with them.
52 In my view, it is an adequate order that the bill of costs should be returned to the taxing officer so that the taxation of costs on the claimant's bill may proceed in accordance with these reasons.
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