Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq)
[2007] WASC 254 (S)
HEARTLINK LTD -v- JONES As Liquidator of HL DIAGNOSTICS PTY LTD (in liq) [2007] WASC 254 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 254 (S) | |
| Case No: | COR:34/2007 | 11 FEBRUARY 2007 | |
| Coram: | MARTIN CJ | 30/10/07 | |
| 10/02/08 | |||
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application granted Plaintiff to pay first defendant's costs to be taxed without regard to the limit imposed by item 11 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006 | ||
| B | |||
| PDF Version |
| Parties: | HEARTLINK LTD (ACN 101 733 920) MARTIN BRUCE JONES As Liquidator of HL DIAGNOSTICS PTY LTD (in liq) ANDREW JOHN SAKER As Liquidator of HL DIAGNOSTICS PTY LTD (in liq) DARREN GORDON WEAVER As Liquidator of HL DIAGNOSTICS PTY LTD (in liq) HL DIAGNOSTICS PTY LTD (in liq) (ACN 076 507 992) |
Catchwords: | Practice and procedure Special costs order Whether matter of 'unusual difficulty, complexity or importance' |
Legislation: | Legal Practice Act 2003 (WA), s 215(2) Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006 (WA) Rules of the Supreme Court 1971 (WA), O 66 r 1 |
Case References: | Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 11 FEBRUARY 2008 FILE NO/S : COR 34 of 2007 BETWEEN : HEARTLINK LTD (ACN 101 733 920)
- Plaintiff
AND
MARTIN BRUCE JONES As Liquidator of HL DIAGNOSTICS PTY LTD (in liq)
First-named First Defendant
ANDREW JOHN SAKER As Liquidator of HL DIAGNOSTICS PTY LTD (in liq)
Second-named First Defendant
DARREN GORDON WEAVER As Liquidator of HL DIAGNOSTICS PTY LTD (in liq)
Third-named First Defendant
HL DIAGNOSTICS PTY LTD (in liq) (ACN 076 507 992)
Second Defendant
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Catchwords:
Practice and procedure - Special costs order - Whether matter of 'unusual difficulty, complexity or importance'
Legislation:
Legal Practice Act 2003 (WA), s 215(2)
Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006 (WA)
Rules of the Supreme Court 1971 (WA), O 66 r 1
Result:
Application granted
Plaintiff to pay first defendant's costs to be taxed without regard to the limit imposed by item 11 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006
Category: B
Representation:
Counsel:
Plaintiff : Mr D J Garnsworthy
First-named First Defendant : Mr J C Vaughan
Second-named First Defendant : Mr J C Vaughan
Third-named First Defendant : Mr J C Vaughan
Second Defendant : No appearance
Solicitors:
Plaintiff : Blake Dawson
First-named First Defendant : Deacons
Second-named First Defendant : Deacons
Third-named First Defendant : Deacons
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Nil
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- MARTIN CJ:
(The following judgment was delivered extemporaneously and has been edited from the transcript.)
1 The three first defendants to these proceedings (the liquidators) apply for an order pursuant to s 215(2) of the Legal Practice Act 2003 (WA) removing a limit on the costs which they would be able to recover from the plaintiff. In order to set the context for that application, it is necessary and appropriate to say a little about the context and history of these proceedings.
2 By these proceedings, the plaintiff, Heartlink Ltd (Heartlink), sought orders removing the liquidators from the liquidation of HL Diagnostics Pty Ltd. That application was brought by originating summons. It was brought at a time when there were other proceedings between related parties, being action CIV 1133 of 2007. That action concerned a number of complicated commercial issues, the essence of which can be gleaned from previous decisions which I and Templeman J have given in those proceedings. It is sufficient to say that they involve a number of complex issues arising from commercial agreements that had been entered into between the parties to those proceedings.
3 As I have mentioned, these proceedings were brought in the context of those other commercial proceedings. The allegations made against the liquidators were extensive and overlapped with, but were not identical to, the issues that were raised in CIV 1133 of 2007. Lengthy affidavits were prepared and filed on behalf of the liquidators in opposition to the application that they be removed. Those affidavits dealt with the history of the liquidation, and set the context in which the allegations were made against the liquidators, and provided an attempted justification of their conduct.
4 I infer that as a result of the resolution of the commercial issues involved in CIV 1133 of 2007, the plaintiff sought leave to discontinue these proceedings. I granted that leave by consent on certain conditions. I also ordered that the liquidators have liberty to apply for a special costs order, and directed a timetable for the exchange of affidavits and submissions in relation to any such application. That timetable has been complied with, and the matter has come on for argument before me.
5 The application is brought pursuant to s 215(2) of the Legal Practice Act which provides:
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- Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a) order the payment of costs above those fixed by the determination;
(b) fix higher limits of costs than those fixed in the determination;
(c) remove limits on costs fixed in the determination;
(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed.
6 The application is supported by the affidavit of Christopher Francis McLeod who is a partner in the firm of solicitors acting on behalf of the liquidators. Mr McLeod points out that taxation of the costs to be paid by Heartlink to the liquidators will take place under item 11 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006 (WA). That item provides for motions and originating process, and includes an originating motion, originating summons or originating application. It allows for a maximum based on one day of hearing and getting up of 50 hours, providing a total limit of $27,456.
7 That amount is made up, it is apprehended, by an allowance for a senior practitioner which, under that same costs determination, would be allowed for at $363 per hour, and for counsel for three days at up to $3,102. Of course, item 11 potentially covers a very wide variety of proceedings in this court, from the very minor to the very substantial.
8 Mr McLeod goes on to depose that a printout of the time spent by members of the firm acting for the liquidators shows that that time recorded at the billable rate provided for in an agreement between the liquidators and their solicitors would total an amount of $106,279. He further deposes that the amount actually billed to the liquidators as at the date of the printout on 26 November 2007 was $96,345. He further deposes that up to 26 November 2007, senior counsel engaged to advise the liquidators, Mr Craig Colvin SC, had been paid the amount of $12,342 in respect of his advice in relation to the matter.
9 Mr McLeod goes on to depose to the fact that the time shown in the printout records the firm's work in relation to both of the matters to which I have referred; that is both CIV 1133 and these proceedings. It is not possible from the printout itself, or at least not without a lot more work than I have done, to attempt to isolate work done in relation to CIV 1133
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- of 2007 from the work done in relation to this matter. It is quite easily done in relation to certain time periods, as Mr McLeod points out, because these proceedings were not commenced until 12 March 2007, from which it may be reasonably concluded that all work done prior to 12 March 2007 was not work done in relation to these proceedings. However, thereafter the task of separation becomes much harder.
10 In respect of the work done after 12 March 2007, Mr McLeod estimates that about 75% of the time recorded was time spent on this action and expresses the view that that time was reasonably incurred.
11 In that factual context, I return to s 215(2) of the Legal Practice Act. The first question that arises for my consideration is the nature of the task performed by the court under that section, and, in particular, the question which the court is required to address. Before the court can make an order under the subsection, the court must form an opinion which has two components. The first is that 'the amount of costs allowable in respect of a matter under a legal costs determination is inadequate', and the second is that the inadequacy arises because of the 'unusual difficulty, complexity or importance of the matter'.
12 The question posed to the court under s 215(2) will almost always arise before taxation has occurred. It is of course the responsibility of the taxing officer to tax the bill and identify with precision the amount that should be allowed in respect of the particular claim for costs. Section 215(2) also falls to be construed in the context of the well-known principle that at least in respect of costs as between party and party, the principle is that the successful party should be compensated by the unsuccessful party for their costs (see O 66 r 1, Rules of the Supreme Court 1971 (WA)).
13 Those two considerations provide a guide to the proper approach to be taken to the question posed to a court when an application is made under s 215(2). The policy considerations that should guide a court when addressing an issue under s 215(2) are, firstly, that the court should not usurp the role of the taxing officer and, secondly, that at least where party and party costs are concerned, the court should make an order that would give effect to the general principle of allowing the successful party to be compensated for their costs by the unsuccessful party, where appropriate.
14 There are two alternative ways in which one might approach the question of inadequacy posed by s 215(2). The first would be to require an applicant for an order under that subsection to satisfy the court that the
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- bill to be taxed will, on the balance of probabilities, tax at an amount that is greater than the limit that would be imposed by the item in the relevant costs determination, which is therefore inadequate. The alternative approach would simply be to require an applicant for an order under the section to satisfy the court that there is a fairly arguable case to be put before a taxing officer to the effect that the bill to be taxed should tax out at more than the limit that would be imposed by the costs determination.
15 On this alternative view of the section, the court could arrive at the conclusion that the limit was inadequate because the maintenance of the limit would preclude the applicant from presenting a fairly arguable case to the taxing officer. The considerations to which I have referred, and in particular the view that the court should not, under this section, usurp or anticipate the role of the taxing officer, lead me to conclude that the latter of those two alternatives is the preferred approach to an application under s 215(2).
16 It therefore seems to me that the requirement of inadequacy will be demonstrated if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination. Of course, as I have pointed out, that is only the first question which the court must address. The second question is whether that inadequacy arises because of the unusual difficulty, complexity or importance of the matter.
17 It is common ground between the parties that the word 'unusual' qualifies only the expression 'difficulty' and does not qualify the words 'complexity' or 'importance'. Another issue was, however, raised in argument in relation to those words, and that concerns the meaning to be given to the word 'importance'. Heartlink submits that the criterion of importance cannot be met having regard to the interests of the parties only, but must, in order to be satisfied, import an element of importance to the community.
18 I cannot see any reason in policy or principle why the word 'importance' should be construed in this way. If it had been the intention of the legislature to require the court to give consideration to an issue of community or public importance, then I think it would have been reasonable to expect the legislature to use words that would connote that meaning, such as the well-known phrase 'public importance' which is found in a number of other legislative provisions.
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19 It seems to me that by reference to 'importance' in this context, the legislature is allowing the court to have regard to the question of whether the work done was appropriate to the significance of the issues that arose in the litigation. Significance can arise either because of the significance of the issues to the parties or because of the significance of the issues to other prospective parties or to the public or to the community generally. In this case, the issues raised were of considerable significance to the liquidators in the practice of their profession, and in respect of whom serious allegations were made.
20 Another consideration that appears to me to be significant to the construction and application of s 215(2) also arises from the time at which that determination is to be made. Because it is a determination which will ordinarily be made in advance of taxation, it should be made as a matter of impression rather than as a matter of detailed evaluation. An approach which would require an applicant to demonstrate that a limit is inadequate by reference to a detailed evaluation of a draft bill for taxation would carry the risk that what has elsewhere been described as 'satellite litigation' (and which I would describe as parasitic litigation), might assume a life and dimension of its own, disproportionate to its significance.
21 Such an approach should be discouraged, because it is in the interests of the parties and of the public for disputes with respect to costs to be resolved as quickly and as efficiently and as inexpensively as possible.
22 Accordingly, approaching the matter as one of impression, the question which I pose to myself is whether the limit of $27,456, which would be imposed if I do not grant the application sought, would be inadequate because it would preclude the liquidators from advancing to the taxing officer a fairly arguable case that their bill should tax at an amount greater than that. Approaching that question as a matter of impression, having regard to the affidavits which have been filed and which I have read, and having regard to the affidavit evidence of Mr McLeod to which I have referred, I am satisfied that the amount to which the liquidators would be limited under item 11 is inadequate in the sense that I have described.
23 I turn then to the second question for my determination under s 215(2), which is the question of whether that inadequacy arises because of the 'unusual difficulty, complexity or importance of the matter'. In this case it seems to me that all three descriptors used in the section are applicable. The issues that arose in the litigation were unusual in the
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- sense that they were more than ordinarily difficult, because they raised quite difficult issues in a context of an arcane set of commercial circumstances, and posed some unusually difficult questions as to the appropriate stance to be adopted by liquidators in those circumstances.
24 For the same reason, I think the requirement of complexity is satisfied because of the complexity of the issues, and the interrelationship of the issues that arose in these proceedings with the commercial issues that arose in CIV 1133 of 2007. I am also satisfied that the importance of the issues is another reason why the amount allowed under the legal costs determination would be inadequate. The seriousness of the allegations that were made against the liquidators arguably justified a thorough and detailed response to the allegations that were made.
25 Of course, nothing that a court does in determining an application under s 215(2), can in any way bind or impinge upon the decisions to be made by the taxing officer as to whether or not work was appropriately and reasonably done, or as to the proper amount to be allowed in respect of that work. In my view, the question for determination at this point of the proceedings is not whether the bill will, in fact, tax out at more than the limit, but rather whether there is a fairly arguable case that it may tax out at an amount above the limit.
26 It would be quite consistent with that approach for a taxing officer to conclude, after considering the bill in detail, that in fact the amount to be allowed on taxation is less than the limit. So it will be entirely for the taxing officer to determine whether or not the work was properly and appropriately done and, if so, the amount properly allowed. The only effect of the order which I propose to make will be to free the taxing officer of the constraint which would otherwise be imposed by item 11, which would effectively put a ceiling of $27,456 on the amount to be allowed.
27 For those reasons I propose to grant the application, and to order that the liquidator's costs be taxed without regard to the limit imposed by item 11.
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