Hayward v A & T Goldman Pty Ltd (Costs)
[2024] VSC 13
•31 January 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
CIRCUIT LIST
S ECI 2021 01719
| GREGORY ALLAN HAYWARD | Plaintiff |
| v | |
| A & T GOLDMAN PTY LTD (ACN 100 946 316) | Defendant |
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JUDGE: | Forbes J |
WHERE HELD: | Wodonga |
DATE OF HEARING: | 5 December 2023 |
DATE OF RULING: | 31 January 2024 |
CASE MAY BE CITED AS: | Hayward v A & T Goldman Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 13 |
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COSTS – Certification of counsel’s fees – Circuit fees – Whether GST payable on circuit fee.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | F Spencer SC with K Karadimas | Harris Lieberman Solicitors |
| For the Defendant | P Jens KC with V Katotas | Solicitor for TAC |
HER HONOUR:
At the conclusion of the evidence in this jury trial at Wodonga, the parties informed the Court that the matter had resolved. After I discharged the jury without verdict, the parties sought orders including as to costs. The amount of Counsels’ fees, which took account of GST, was by consent certified at $8,800 for senior counsel and $4,400 for junior counsel exclusive of circuit fees. The issue that was argued was whether or not an amount should be added to the figure for circuit fees provided by Schedule 1 of the County Court Civil Procedure Rules2018[1] (Schedule 1) to account for GST.
[1]The County Court Civil Procedure Rules 2018 are Chapter 1 of the Rules of the County Court.
The parties addressed me briefly on the issue of the quantum of circuit fees and subsequently provided written submissions dated 12 December 2023. Both parties were content that the matter then be decided on the papers.
The starting point for fixing legal costs is Appendix A to the Supreme Court (General Civil Procedure) Rules 2015 (Supreme Court Rules), which contains the Supreme Court Scale of Costs (Scale of Costs). The preamble to the Appendix describes it as:
Scale of fees and charges to be paid to legal practitioners, other than Counsel, and Scale of Counsel’s Fees for work done on and after 1 January 2023 in relation to matters in the Supreme Court.
The charges in this Scale are exclusive of any GST chargeable.
Item 19 of Appendix A deals with Counsel’s fees. The version of Appendix A at the relevant time period provides:
(1)Subject to paragraphs (2), (3) and (4), such fees as are allowed up to a maximum of -
(a) appearances –
(i) on trial or appeal (daily fee)
Junior Counsel Senior Counsel
$6,534 $9,800
...
(2)Circuit fees are additional and are to be based on current allowances as provided for in Schedule 1 to Chapter 1 of the Rules of the County Court.
(3)In allowing a fee to Counsel, the Costs Court shall have regard to the following criteria –
(a) all criteria in item 17[2]
(b) the other fees and allowances to Counsel in the matter; and
...
(4)Where costs are taxed pursuant to an order of the Supreme Court, Counsel’s fees in excess of scale are not to be allowed unless the Supreme Court otherwise orders, but in any other case the Costs Court has a discretion to allow fees in excess of scale.
[2]Item 17 is a discretionary allowance for skill, care and responsibility.
The County Court (Civil Procedure Rules) 2018 (County Court Rules) adopt a costs scale by reference to 80% of the applicable rate set out in Appendix A to Chapter 1 of the Supreme Court Rules (save for the circuit fee, which is set by reference to Schedule 1).[3] The County Court Rules therefore also adopt a scale exclusive of GST. Schedule 1 sets out circuit fees for 13 circuit towns throughout Victoria. The amounts for each town vary. The circuit fee for the first day in Wodonga is $710.00 and the further fee for each subsequent day is $474.00. There is no mention of GST in Schedule 1.
[3]County Court (Civil Procedure Rules) 2018 r 1.13.
In the previous version of the County Court Rules, the County Court (Civil Procedure) Rules 2008, items 31(h) and (i) of Appendix A in relation to Counsel’s fees further elaborated circuit fees:
In circuit cases, a circuit fee may be allowed and the amount thereof fixed by order of the Judge, in accordance with Schedule 1, if, in his or her opinion (having regard to all the circumstances, including travelling expenses, living expenses and absence from Chambers) the scale fee is insufficient but the total amount of the scale fee and the circuit fee shall not exceed the fee marked on the brief.[4]
The plaintiff submits that the circuit fee amount is exclusive of GST and so seeks that I fix amounts to incorporate an additional 10% for GST to the amount in Schedule 1. With the addition of 10%, the circuit fee would amount to $781.00 for the first day and $521.40 for each subsequent day.
The plaintiff submits that a circuit fee is a fee chargeable to the client in connection with the supply of professional services by Counsel, in the same way as the brief fee. The plaintiff says that Counsel is liable to pay GST on the supply of professional legal services and that liability is passed to the plaintiff who is not entitled to any input tax credit in respect of Counsel’s fees. Therefore, the plaintiff says there ought be no reduction of the scale amount of a circuit fee fixed by Schedule 1 to account for a GST component. Consistent with the certification of Counsel’s fee on brief at a figure inclusive of GST ($8,800 and $4,400), the plaintiff submits that I should certify the circuit fee amount by adding a GST amount to the scheduled fee. There is no suggestion that the Schedule 1 circuit fees include GST.
In support of the submissions the plaintiff relies on two published decisions of this Court where Counsel’s fees were certified inclusive of GST and included a circuit fee to which an amount for GST was applied. The two published cases are Wadley v Ron Finemore Bulk Haulage (No 3) (‘Wadley’),[5] and Clarke v Greater Shepparton City Council (Costs) (‘Clarke’).[6] The plaintiff also provided a number of County Court orders as examples where a circuit fee was fixed with an addition for GST to the Schedule 1 figure.
[5][2013] VSC 181.
[6][2016] VSC 593.
The defendant submits that the circuit fee as provided by Schedule 1 is an amount separate to Counsel’s fee on brief. The defendant says the circuit fee is an allowance claimable as a fixed amount, irrespective of expense incurred in appearing in a circuit town. The defendant points to a distinction between Schedule 1 on the one hand, and Schedule 2 of the County Court Rules and the Supreme Court Rules Appendix B on the other. Schedule 2 and Appendix B deal with witness expenses and interpreter allowances, and state that the Scale amounts are exclusive of GST. Schedule 1 does not make reference to the Scale amounts being exclusive of GST. The defendant submits that this distinction points to a construction that Schedule 1 amounts include GST.
The defendant refers to Lujerdean v G C Corrigan & Co Pty Ltd (‘Lujerdean’),[7] in which Wood AsJ affirmed a decision at first instance by a judicial registrar that there was no GST payable on party/party costs ordered to be paid where the costs were specifically referable to scale items. The defendant submits that an order for party/party costs payable by one party to another does not attract GST and by analogy the reasoning in Lujerdean would apply such that no GST allowance should be added to the scale circuit fee.
[7][2014] VSC 682.
Consideration
The parties accept that the recovery of costs pursuant to a Court order is not considered a taxable supply that itself attracts GST. This is the position of the Commissioner for Taxation who has said that the costs incurred by parties during litigation concern the supply of legal services and attract GST but that the recovery of costs by a successful party from an unsuccessful party by court order lacks a supply for consideration.[8] This is consistent with the principle that an award of costs in favour of a successful party is generally made to compensate for the expense incurred in enforcing or defending their legal entitlements.[9]
[8]Goods and Services Tax Ruling GSTR 2001/4 Goods and Services Tax: GST consequences of court orders and out-of-court settlements.
[9]Merringtons Pty Ltd v Luxottica Retail Australia Pty Ltd & Anor [2006] VSC 525 [38] (‘Merringtons’), citing Russo v Russo (1953) VR 57; Latoudis v Casey (1901) 170 CLR 534.
In Merringtons Pty Ltd v Luxottica Retail Australia Pty Ltd & Anor (‘Merringtons’),[10] Master Wood, as he then was, dealt with whether or not a party who is registered for GST and entitled to an input tax credit for GST on professional costs payable to its legal advisors was able to recover on taxation from another party the GST amount. At the time Merringtons was decided, the Scale of Costs was inclusive of GST and the plaintiff argued that a reduction of 10% on the scale costs it was required to pay was necessary because the parties in whose favour the costs orders were made were entitled to claim input tax credits.
[10]Merringtons (n 9).
Master Wood concluded that the Supreme Court Rules applicable at the time had few matters in the Scale of Costs that contained a discretion to reduce the scale amount, and that there was no discretion to reduce scale amounts in order to account for the impact of GST. He said:
the Scale is the Scale and although it was adjusted at the relevant time to include a component for GST, it does not take into account of the impact upon the individual in the sense that Scale items are not capable of reduction due to any entitlement that the recipient may have in relation to input tax credit unless the Scale or Rules outline a discretion or power to do so.[11]
[11]Ibid [67].
However, he distinguished the position of costs from that of disbursements. He said that:
There is no doubt if the party favoured by a costs order does not have the ability to claim an input tax credit, then the GST component in the disbursement should remain. For example, in an action for personal injuries, there ought to be no reduction of the amount referable to GST from the disbursement. If however the litigation arises out of commercial dealings and the recipient is able to claim an input tax credit for the component then it ought be deducted from the disbursement.[12]
[12]Ibid [71].
In Lujerdean, the applicant was entitled to recover costs incurred in an action for damages arising from an industrial accident. On taxation his solicitors claimed an additional 10% on Scale amounts for work done after GST was introduced. A costs registrar and then a judicial registrar had ruled that Lujerdean was not entitled to recover an amount that added GST to the Scale of Costs. Wood AsJ affirmed the decisions on appeal.
Lujerdean turned on the applicable County Court Rules at the time and in particular the limited discretion to increase scale amounts pursuant to r 63A.72. The discretion did not apply to all scale amounts so the costs registrar and then judicial registrar reduced those items to the scale amount, consistent with the reasoning in Merringtons – that is that ‘the Scale is the Scale’. Associate Justice Wood held that the Registrars were right to do so because an order for recovery of costs does not give an entitlement to recover what a person is charged by their own solicitor but only assessed upon the scale subject to the exercise of discretion at taxation. He concluded that the reference to the scale being exclusive of GST ‘chargeable’ (his emphasis) contemplated circumstances where GST might not be chargeable, otherwise the scale amounts would be set excluding GST recoverable (my emphasis) because it would be relevant in all circumstances. He said of the change in scale to exclude GST:
The change in the scale makes sense if it was undertaken to address some issue or vice. As a matter of logic the change is understandable if adding GST in one scenario was correct (that is between practitioner and client) but not in another scenario (that is between parties pursuant to an order). The latter scenario accords with the ATO position …reproduced above.[13]
[13]Lujerdean (n 7) [25].
The Court has an overriding discretion in relation to the fixing of brief fees pursuant to r 63.07 of the Supreme Court Rules. The discretion is not concerned with the contractual arrangements between the parties and their legal practitioners, which are governed by fee agreements. It is concerned with the recovery of costs by one party from another by order of the Court. The recovery of costs by a successful party through an order of the Court is for the purpose of providing that party with a partial indemnity for the cost necessary for achieving the outcome. The question is whether certification of a circuit fee ought to allow for GST which is chargeable by Counsel to their client.
The fixing of Counsel’s fees within the maximum amount provided by the Supreme Court Scale of Costs (and any circuit amount additional to that fee) is clearly a discretionary matter in which the impact of GST is relevant. That discretion may be exercised first in fixing an amount up to the maximum allowed by the Scale. Second, where the Scale provides fixed amounts, this Court has a discretion to increase or decrease the scale amount.[14] The total amounts sought by way of certification are within the maximum amounts allowed by Scale. There is in this case no cause to consider any discretion to fix fees above the scale.
[14]See Supreme Court (General Civil Procedure) Rules 2015 r 63.72.
It is common ground that the plaintiff is not entitled to claim an input tax credit in respect of his payment of legal costs and disbursements including GST that is chargeable on those expenses.
As part of Item 19 of the Scale of Costs, the fixing of a circuit fee forms part of the discretionary exercise in allowing an appropriate amount for Counsel’s fees under the Scale.
Whatever the rationale for the provision of a circuit fee, and notwithstanding its description as an allowance in Item 19(2), it is nevertheless an amount that contributes to this discretionary fixing of the amount for Counsel’s fees under the Scale of Costs. Item 19(2) in its present form provides that a circuit fee is ‘additional’. I take this to mean that it is an amount allowed additional to the brief fee that would otherwise be appropriate for Counsel because the matter involves a hearing in a circuit town. On this basis, the circuit fee would ordinarily form part of Counsel’s fees as certified or as allowed on taxation before the calculation of GST. The fact that it may have as its rationale the expense and inconvenience in being absent from chambers while on circuit does not detract from the fact that it is a fee chargeable for providing legal services on circuit.
The inclusion of circuit fees as provided for by Item 19(2) of the Scale is exclusive of GST. The fact that Schedule 1 is silent as to GST can be explained on the basis that the appropriate circuit fee is determined as part of the exercise of fixing fees under the Scale. Schedule 1 is relevant because of Item 19(2). By contrast the schedule or appendix dealing with witness expenses and interpreters’ fees address matters not elsewhere referenced in the Scale of Costs and for this reason it is necessary to state whether the amounts provided allow for GST.
Thus, if an appropriate fee for counsel in a Melbourne matter under the Scale of Costs is $8,000, then for a similar matter heard in Wodonga the Schedule 1 circuit fee is added to form the scale fee amount of $8,710 for the first day and $8,474 for subsequent days. This scale fee amount is inclusive of a circuit fee but exclusive of GST.
This is the approach that Beach J[15] took in Wadley. The plaintiff’s Counsel in that case had sought certification of fees at $8,800 and $4,400 inclusive of circuit fee and GST. The maximum scale daily fees for Counsel at the relevant time were $6,000 and $4,000 respectively.[16] Beach J concluded that, inclusive of circuit fee (which was $460 as provided for by Schedule 1), he was not satisfied that he should fix an amount in excess of the scale. He allowed fees at $6,000 and $3,000, the maximum under the scale and added an allowance for GST to certify at $6,600 and $3,300 respectively. The effect was to include the circuit fee in calculating an allowance for GST.
[15]As he was before his elevation to the Court of Appeal.
[16]These figures were the scale amounts reduced by 20%.
Keogh J took a slightly different approach when certifying Counsels’ fees in Clarke. The plaintiff was entitled to costs on an indemnity basis. The plaintiff sought a daily fee of $9,000, which his Honour assumed to be exclusive of GST and circuit fee.[17] The defendant proposed $7,700 inclusive of GST plus the appropriate circuit fee. His Honour allowed a fee on brief at $8,250 inclusive of GST, and he separately allowed circuit fees adding an amount to the Schedule 1 figures to allow for GST.
[17]Clarke (n 6) [13].
His Honour did not provide any reasons for his approach in dealing with GST. He had regard to Item 19 and to the criteria set out in Item 17 in the Scale of Costs. It does not appear that the particular question of GST on the circuit fee was disputed between the parties.
Whether the circuit fee is added to the daily fees before any adjustment to allow for GST or is certified separately with the addition of GST generally provides the same mathematical result. The Court is not concerned with the actual liability for GST. It is concerned to fix an appropriate fee to Counsel in accordance with the Scale of Costs and in particular with Item 19 for the purpose of recovery of those costs. Where a party has no entitlement to claim an input tax credit, then the inclusion of an allowance for the GST liability charged is permitted where appropriate on Counsel’s fees including circuit fees that are recoverable by Court order.
Accordingly, I would certify for the first day at $8,710 inclusive of a first day circuit fee, plus the amount representing the GST chargeable on that sum. For the second and subsequent days, I would certify $8,474 for the subsequent days including circuit fees together with the amount representing GST chargeable on that sum. As I have already made orders certifying at $8,800 per day (exclusive of the circuit fee amounts), I propose certifying the circuit fee allowances separately in this case: for the first day at $781 and for each subsequent day at $521.40.
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