Jorgensen v Wilson (No 3)
[2023] ACTSC 124
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Jorgensen v Wilson (No 3) |
| Citation: | [2023] ACTSC 124 |
| Hearing Date: | Decided on written submissions |
| Decision Date: | 26 May 2023 |
| Before: | Mossop J |
| Decision: | See [101] |
Catchwords: | PRACTICE AND PROCEDURE – COSTS – Application for gross sum costs order – proceedings permanently stayed and plaintiff declared a vexatious litigant – adjournment sought pending determination of appeal and application for judicial review – application for recusal on the grounds of apprehended bias – deficiencies in defendants’ evidence in support – whether an |
| appropriate case to make gross sum costs order – conservative | |
| approach adopted where evidence in support of application less than complete | |
| PRACTICE AND PROCEDURE – COSTS – Consideration of the “costs indemnity rule” – consideration of the principle expressed | |
| in Inglis v Moore (No 2) (1979) 25 ALR 453 – a successful party | |
| represented by the Crown Solicitor in litigation in which the relevant government has an interest is not disentitled to costs from an unsuccessful party merely because the successful party | |
| is not under a personal liability to the Crown Solicitor for costs – | |
| where defendants represented by private practitioners engaged | |
| to act for the government – costs recoverable even if the individual | |
| defendants have not been shown to be exposed to a risk of personal liability for costs | |
| Legislation Cited: | Court Procedures Act 2004 (ACT), s 5A Court Procedures Rules 2006 (ACT), rr 1620(4), 1720(2), 1720(3), 1752(3) Motor Vehicles (Third Party Insurance) Act 1942 (NSW) |
| Cases Cited: | Adams v London Improved Motor Coach Builders Limited [1921] 1 KB 495 Angor Pty Ltd v Ilich Motor Co Pty Ltd (1992) 37 FCR 65 Backhouse v Judd [1925] SASR 395 Blackall v Trotter (No 1) [1969] VR 939 Charisteas v Charisteas [2021] HCA 29; 273 CLR 289 Coshott v Woollahra Municipal Council [2008] NSWCA 176 Dahler v Australian Capital Territory [2016] FCA 257 Davies v Taylor (No 2) [1974] AC 225 Ditton v Gallagher (1992) 110 ACTR 12 Ex parte W A Grubb Pty Ltd; Re Johnston (1949) 66 WN (NSW) 224 Harold v Smith (1860) 5 H & N 381; 157 ER 1229 |
| Howard v Mechtler [2000] NSWSC 455 | |
| Inglis v Moore (No 2) (1979) 25 ALR 453 Inglis v Moore (1979) 24 ALR 411 Inglis v Moore (1981) 51 FLR 293 Inglis v Moore (Unreported, Supreme Court of the Australian Capital Territory, Connor J, 12 December 1977) Irving v Gagliardi (No 2) (1895) 6 QLJ 200 Johnson v Johnson [2000] HCA 48; 201 CLR 488 Johnson v Santa Teresa Housing Association (1992) 83 NTR 14 Jorgensen v Wilson (No 2) [2023] ACTSC 40 Lenthall v Hillson [1933] SASR 31 Lewis v Averay (No 2) [1973] 1 WLR 510 MacLaurin v Hall (1913) 13 SR (NSW) 114 Manny v Nissen (No 2) [2023] ACTCA 20 McCullum v Ifield [1969] 2 NSWR 329 Moore v Inglis (1976) 50 ALJR 589 Moore v Inglis (1976) 51 ALJR 207 | |
| New Pinnacle Group Silver Mining Co v Luhrig Coal and Ore | |
| Dressing Appliances Co (1902) 2 SR (NSW) 50 Nolan v George [1959] Qd R 315 North Australian Aboriginal Legal Aid Service Inc v Bradley [2004] HCA 31; 218 CLR 146 | |
| North Australian Aboriginal Legal Aid Service Inc v Bradley (No 2) | |
| [2002] FCA 564 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Polleycutt v Taylor [2020] ACTSC 158 R v Archbishop of Canterbury [1903] 1 KB 289 R v Barbaro (1992) 108 ACTR 1 R v Miller [1983] 3 All ER 186 Wilson v Richmond River Shire Council [2000] NSWSC 71 | |
| Texts Cited: | GE Dal Pont, Law of Costs (LexisNexis, 5th ed, 2021) |
| Parties: | Alan Jorgensen (Plaintiff) |
| Cheryl Wilson (First Defendant) | |
| Graham Ashworth (Second Defendant) Ailsa Wilson (Third Defendant) | |
| Graeme Donald (Fourth Defendant) | |
| Representation: | Solicitors |
| Self-represented (Plaintiff) | |
| Ashurst (Defendants) | |
| File Number: | SC 165 of 2022 |
| MOSSOP J: | |
| Introduction |
1. On 10 March 2023 the court made orders permanently staying the proceedings and
declaring Mr Jorgensen to be a vexatious litigant. Order 5 made on that day was that
Mr Jorgensen was required to pay the defendants’ costs of the proceedings on a solicitor
and client basis. Order 6 required that any application by a defendant for a gross sum
costs order be made within 28 days of the date of those orders.
2. By application in proceeding dated 6 April 2023 the defendants applied for orders which
included:
3. That the plaintiff pay the defendants’ costs of the proceeding (but not the costs of this
application), as a sum in gross in the amount of $80,000 (or such other amount as the Court deems fit) pursuant to rule 1720(3)(c) of the Court Procedures Rules 2006 (ACT).
4. Payment is to be made by the plaintiff within 28 days of the Court’s order.
5. Each party pays their own costs of this application.
3. The application was accompanied by an affidavit in support and written submissions.
4. The proceedings were listed for directions on 20 April 2023 and directions made about
the filing and service of submissions by Mr Jorgensen. I noted that Mr Jorgensen's email
of 18 April 2023, a proposed judicial review application and Notice of Appeal, were to be
treated as written submissions on the application. Mr Jorgensen was granted leave to
provide by email to chambers a further set of written submissions.
5. By email dated 18 April 2023 and repeated at the directions hearing, Mr Jorgensen
submitted that I should disqualify myself from the further hearing of the matter. He also
submitted that the defendants’ application should be adjourned pending the outcome of
an appeal and judicial review proceedings which he had filed, or sought to file, in relation
to the orders made on 10 March 2023. Further submissions in relation to disqualification
and adjournment were made by Mr Jorgensen in written submissions provided on
4 May 2023. The questions of disqualification and adjournment must be addressed first.
Disqualification
Mr Jorgensen’s submissions
6. Mr Jorgensen sought that I disqualify myself from the further hearing of the proceedings
and hence not determine the application for a gross sum costs order. That would leave
in place (unless and until set aside by the Court of Appeal) the order that the plaintiff pay
the defendants’ costs on a solicitor and client basis but require that it proceed by
assessment of those costs.
7. The nature of the application for disqualification is described in parts of an email of
18 April 2023 which Mr Jorgensen wished to have treated as one of his written
submissions. That included a variety of allegations about my conduct in the case. It
included the following:
Further, because it is clear that Mossop J and myself, despise each other, then Mossop J must Recuse himself from any further involvement in this case. I am not interested in being judged by such a civil servant who has violated his Judicial Oath at every step. He is way,
way beyond the HCA’s low bar of the Apprehended Bias Principal [sic], where just the
POSSIBILITY that the judge may not bring an impartial mind to determine the issues before the court. Mossop J violated every legal principle or right of a person there is, so cannot live
up to his Judicial Oath, because we despise each other so, and I couldn’t stomach the notion
that I have to be judged by a dishonest judge. Which I don’t have to do.8. He also asserted that by some means (which was not clear), having refused to permit
him to discontinue against the four defendants I would be liable to those defendants:
This is the reason Mossop J has a massive conflict of interest sitting on this case, because as I stated in my JR and Appeal Document, this massive liability against Mossop J personally, means that he will never ever allow me to win this case, as it would ruin his career
and expose him to a liability of $10,000,000 to these 4, used as “shark bait” by ASIC and
Mossop J.
9. There is a reference to a conspiracy between the Australian Securities and Investments
Commission (ASIC) and the Queensland State Recording Bureau to falsify a transcript
of proceedings before de Jersey CJ of the Queensland Supreme Court on 19 September
2008 and it is alleged that this was “presented” during the hearing before me.
Mr Jorgensen alleges that I “was totally focused on just declaring [him] a Vexatious
Litigant, [and] breached [my] Judicial Oath and looked the other way and totally ignored
that serious Fraud by ASIC, as a reason why [he] had been justified in suing ASIC and
these 4 Defendants all these years.” The submissions continue:
So Mossop J in his unprecedented protection of ASIC and Chairman Joe Longo and the 4
Defendants, exposed Mossop J’s serious dishonesty as a judge, where the ACT Bill of
Human Rights Act 2004, assured me of receiving a Fair Trial Sect 21.
10. Later in the email he says:
So in short, there is no sense in having this Costs hearing before the Judicial Review is
determined. And in any case, Mossop J can’t possibly sit on another case involving me,
where I insist he recuse himself in the interests of justice. Mossop J has sworn his Judicial
Oath to act with no ill will, nor fear or favour.11. He submitted that if I declined to recuse myself then he insisted that another judge rule
on that decision. The email concludes:
I agree with all my colleagues who declare that Mossop J is a dishonest judge.
I look forward to hearing from you as to Justice Mossop’s Recusal.
12. It was not made clear who Mr Jorgensen’s “colleagues” were.
13. The additional written submissions provided on 4 May 2023 made similar allegations.
The test
14. In Charisteas v Charisteas [2021] HCA 29; 273 CLR 289 [11]-[12], the High Court
articulated the general principles as follows:
Where, as here, a question arises as to the independence or impartiality of a judge, the applicable principles are well established, and they were not in dispute. The apprehension of bias principle is that "a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide". The principle gives effect to the requirement that justice should both be done and be seen to be done, reflecting a requirement fundamental to the
common law system of adversarial trial – that it is conducted by an independent and impartial
tribunal. Its application requires two steps: first, "it requires the identification of what it is said might lead a judge ... to decide a case other than on its legal and factual merits"; and, second, there must be articulated a "logical connection" between that matter and the feared departure from the judge deciding the case on its merits. Once those two steps are taken, the reasonableness of the asserted apprehension of bias can then ultimately be assessed.
As five judges of this Court said in Johnson v Johnson, while the fair-minded lay observer "is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice".
(Footnotes omitted.)
15. Kirby J observed in Johnson v Johnson [2000] HCA 48; 201 CLR 488 at [53] that “a
reasonable member of the public is neither complacent nor unduly sensitive or
suspicious.”
16. The ‘two mights’ test encapsulated in the formulation in Charisteas (“might reasonably
apprehend that the judge might not bring an impartial mind”) is to be interpreted in the
context of the ordinary judicial practice. That does not require a judicial officer to remain
on the bench in sphinx-like silence nor does it preclude a judicial officer from exercising
control over the proceedings in a manner consistent with s 5A of the Court Procedures
Act 2004 (ACT): Johnson v Johnson [2000] HCA 48; 201 CLR 488 at [13]; Manny v
Nissen (No 2) [2023] ACTCA 20.
Decision
17. The application for recusal must be determined in the context of the single issue that
remains to be determined in these proceedings: whether or not to make a gross sum
costs order. The issues in relation to such an order are quite narrow.
18. Mr Jorgensen asserts that I despise him and that such a feeling is mutual. That may well
reflect his state of mind but does not reflect my own. Nor is there, in my view, anything
about the conduct of the proceedings that would allow a fair-minded lay observer to reach
that conclusion. The mere fact that I made the orders that I did during the course of, and
at the end of the hearing which led to the judgment in Jorgensen v Wilson (No 2) [2023] ACTSC 40, are not matters which might indicate to a fair-minded lay observer any
personal animus directed towards Mr Jorgensen.
19. The other matters raised by Mr Jorgensen are not matters which could satisfy the two
mights test.
20. There was no articulated basis upon which a judge of the Supreme Court might become
civilly liable for the consequences of decisions made in those proceedings which would
provide a foundation for the submission made about the $10 million personal liability.
21. Further, I do not recall the allegations of a criminal conspiracy relating to the content of
the transcript of proceedings before the Chief Justice of Queensland in 2008 as being a
matter of significance for the determination of the vexatious litigant application. In the
event that this was a matter of substance which was overlooked by me during the course
of an application then the proper remedy is by way of an appeal.
22. Finally, the allegations of dishonesty and a breach of the judicial oath are ones which
lack a foundation in the evidence or conduct of the proceedings. The making of such
allegations does not create a situation where a judge is precluded from proceeding to
determine the case before the court.
23. In summary, none of the matters raised by Mr Jorgensen require that I recuse myself
from determining the present application and I decline to do so.
Adjournment
24. Mr Jorgensen also submitted that given that he has filed or sought to file an appeal from,
and an application for judicial review of, my earlier decisions it was inappropriate to
determine the application for a gross sum costs order. He submitted that it was only when
the outcome of those applications was known that any issue of costs should be dealt
with.
25. The submissions made by Mr Jorgensen cannot be accepted. The present application
only relates to whether or not a gross sum costs order should be made. A costs order is
already in effect.
26. It is generally undesirable to delay dealing with a discrete ancillary aspect of the
proceedings for an uncertain time until appeal or other proceedings are finally
determined. Rather, it is generally desirable that the whole of the proceedings should be
determined by a single judge allowing the parties, if they see fit, to address all aspects
of the matter on any appeal.
27. Those general principles apply in the circumstances of this case. It is in the interests of
justice that the proceedings be finally determined so that there are no outstanding issues
to be resolved at the level of a single judge. It is for that reason that the order made on
10 March 2023 required any application by the defendants for a gross sum costs order
to be made within 28 days of that date.
28. I therefore decline to adjourn the present application until the appeal or judicial review
proceedings are determined.
Application for gross sum costs order
29. The defendants applied for an order that the defendants’ costs of the proceedings be
fixed as a gross sum of $80,000 or such other amount as the court deems fit pursuant to
r 1720(3)(c) of the Court Procedures Rules 2006 (ACT) (the Rules). An order was also
sought that payment be made within 28 days of the court’s order. No order as to costs
of the application was sought. An order was sought that the application be determined
on the papers without a hearing.
30. I did not consider that it was appropriate to determine the matter without, at least, a
directions hearing and listed the matter for directions on 20 April 2023. On that occasion
Mr Jorgensen indicated that he wished for his email of 18 April 2023 to be treated as
written submissions and was provided with the opportunity to make further written
submissions. He provided those submissions on 4 May 2023.
Evidence in support
31. The evidence in support of the application was an affidavit of Thomas Gaffney sworn
6 April 2023. In that affidavit Mr Gaffney explained the relationship between the
defendants being ASIC, the Commonwealth government and the solicitors on the record
for the defendants as follows:
The defendants are former officers of ASIC, a Commonwealth Government agency.
Comcover is the Commonwealth Government’s insurer, including the insurer for ASIC.
Ashurst was engaged by Comcover, with the consent of ASIC and the defendants, to act for the defendants in this Proceeding.
32. The affidavit indicated that the defendants’ costs in the proceedings were invoiced
collectively to Comcover.
33. The affidavit described the identity and role of the various lawyers at Ashurst who were
involved in acting for the defendants.
34. While the affidavit does disclose a breakdown of the invoices sent to Comcover and also
a breakdown, by stage of proceedings, of the hours spent by the particular lawyers and the overall amount charged for that stage, the affidavit did not disclose the rates charged
by those lawyers. So far as that issue was concerned, the affidavit said:
The hourly rates at which Ashurst personnel were charged to Comcover were the same rates that are ordinarily charged to Comcover by Ashurst in litigated matters of this type, pursuant to the Whole of Australian Government Legal Panel arrangements established by the
Commonwealth Attorney-General’s Department. The rates are commercially sensitive (they
being competitive rates in the market for providing legal services to Comcover) and have not
been disclosed in this affidavit or Annexure A.35. The Annexure A referred to in this paragraph includes the first pages of invoices rendered
or draft invoices anticipated to be rendered by Ashurst for work up until 10 March 2023.
Those first pages show the total amount charged for a particular period and include
invoices relating to some travel. They do not include any disclosure of the detail of the
work done for the purposes of the proceedings by either the solicitors or counsel briefed
in the matter. They do not include disclosure of the rates charged by the solicitors or by
counsel briefed in the manner.
36. The affidavit explains that Mr Clark SC and Mr Kane, counsel who were briefed on the
substantive application but did not appear on the present application, had both acted for
the defendants or ASIC in earlier proceedings involving Mr Jorgensen. Senior and junior
counsel were retained because of the potential complexity of the application and having
regard to the fact that, so far as Mr Gaffney was aware, the declaration sought to be
made, and in fact made, in this case was the first made in the ACT Supreme Court.
37. The affidavit breaks down both counsel’s fees and solicitors’ fees by reference to dates
and stages of the litigation. In summary, the totals are:
(a) Ashurst fees: $136,598.76; (b) Ashurst disbursements: $2961.53; and (c) counsel fees: $35,276.06.
Mr Gaffney deposes that he considers that “the costs claimed by the defendants in the
Costs Application are reasonable and in direct connection with this Proceeding”.
39. Although the costs order was made on a solicitor and client basis, Mr Gaffney deposes
to the opinion that “party and party costs are usually between approximately 66% and
75% of solicitor and client costs.” Adopting the lowest end of his range (66 percent), he
estimates that party and party costs would be in the order of $115,392.
40. Mr Gaffney estimates the costs of the present application for a gross sum costs order as
being approximately $18,000 inclusive of GST and disbursements on a solicitor and
client basis if it was determined on the papers. Having regard to the fact that it was not solely determined in the papers, the costs would be somewhat higher than that. The
affidavit indicates that the defendants do not seek to recover the costs incurred in the
preparation of the costs application if they are successful in obtaining a gross sum costs
order.
Deficiencies in evidence in support
41. Under the Rules solicitor and client costs are to be assessed under r 1752(3) as follows:
(3) In assessing costs on a solicitor and client basis, the registrar must allow all costs reasonably incurred and of a reasonable amount, having regard to—
(a) the costs allowable under rule 1722 (Costs – solicitors’ costs generally); and
(b) charges ordinarily payable by a client to a solicitor for the work.
…
42. This makes it relevant to consider, in relation to any particular charge, whether it was
“reasonably incurred” and whether it was of “a reasonable amount”.
43. An affidavit in support of an application for a gross sum costs order should provide a
secure foundation for the court’s assessment of the reasonableness of the gross sum
sought. That requires the court to have sufficient information to assess, at a broad-brush
level, whether costs have been reasonably incurred and are of a reasonable amount.
That will usually involve disclosure of the actual bills rendered, even if they are time
costed rather than activity costed, and include the rates charged by particular lawyers.
44. In the present case, the defendants demonstrated an unfortunate reticence to properly
disclose details of the costs incurred. Specifically, details of the actual work done by the
lawyers at Ashurst were not disclosed. Instead, only the first pages of the invoices or
draft invoices were disclosed. That does not allow any assessment by the court of
whether, for example, there was any double handling or unreasonably incurred costs by
reference to the actual work done. Further, the rates charged by individual lawyers were
not disclosed. The passage from the affidavit quoted above indicates that this was done
in order to protect the commercial interests of Ashurst. One can only assume that the
decision to not disclose the rates charged by the lawyers so as to protect the commercial
interests of Ashurst was done on the specific instructions of the defendants, as the
nondisclosure tended to undermine the basis for the application for a gross sum costs
order and hence was prima facie contrary to the interests of the client. It is not clear why
the rates charged could not be disclosed so as to advance the defendants’ position in a
manner that protected any commercial sensitivity such as a non-publication order or a
limitation on access to the file.
45. These two aspects of the evidence put forward by the defendants, namely the absence
of details of work undertaken and the absence of rates charged, make it more difficult to
assess the merits of the application for a gross sum costs order.
46. As noted earlier, the affidavit of Mr Gaffney also estimated likely party and party costs.
Given that the court’s order was for solicitor and client costs, the purpose of this estimate
must have been to put in context the lesser amount sought by way of a gross sum costs
order and hence demonstrate its reasonableness. Given the purpose of the estimate,
any deficiencies in the making of the estimate were not of great significance.
47. Had the order been for party and party costs it would have been significant that the
affidavit does not disclose the extent of Mr Gaffney’s experience with taxation of costs in
this or any other jurisdiction. The affidavit, which identifies the deponent as a Senior
Associate employed by Ashurst, simply states “In my experience as a litigation solicitor
in superior courts in Australia, party and party costs are usually between 66% and 75%
of solicitor and client costs.” That statement does not disclose what experience he has
and in which courts. It is a statement at such a level of generality that it provides no
secure foundation for any estimate. In these days of specialisation and contracting out
of costs assessment it cannot be assumed that all litigation solicitors will have significant
experience with assessment of costs in a particular court. Further, the statement does
not provide a secure foundation for the estimate of recoverable amounts where a larger
legal practice has a team of solicitors working (and billing) on a matter as distinct from a
smaller practice where there is likely to be less room for contesting the reasonableness
of the incurring of fees.
48. The other significant deficiency in the affidavit is the failure to articulate, in any detail, the
relationship between the individual defendants, their former employer ASIC, and the
insurer Comcover. It is clear that Comcover has been paying the invoices. It is not clear
whether Comcover is an insurer (as described in the affidavit) or the administrative entity
managing a Commonwealth government self-insurance scheme. The terms of the policy
or coverage which led to the involvement of Comcover is not disclosed. It is not made
clear whether that policy or coverage directly covered the defendants or whether it only
covered ASIC and ASIC has agreed or is otherwise legally obliged to indemnify the
individual defendants. As will come to be of significance, the affidavit does not specifically
address whether or not individual defendants could in any circumstance become liable
for the costs of the solicitors engaged or whether there is an agreement that under no
circumstances would that be the case.
Submissions
49. The defendants’ submissions were, in summary, as follows:
(a) The plaintiff has caused the defendants to incur significant costs in responding to the originating application which has been permanently stayed as an abuse
of process.
(b) The plaintiff’s conduct in bringing vexatious proceedings against ASIC or the defendants necessitated the defendants seeking the order that he be declared
a vexatious litigant.
(c) The plaintiff has not made payment or otherwise discharged his costs liabilities in previous proceedings in the Supreme Court of New South Wales, the
Supreme Court of Tasmania or the ACT Supreme Court.
(d) In seeking a gross sum costs order of $80,000, the defendants have significantly compromised their entitlement to costs by seeking only 46 percent of the actual
costs incurred in the proceedings up until the delivery of judgment on 10 March
2023.
(e) The defendants are not seeking any costs of the current cost application. (f) As a result, the court can be confident that it would be doing justice between the parties and avoiding the further unnecessary costs of a costs assessment by
exercising its discretion to make a gross sum costs order of $80,000 for the
defendants’ costs in the proceedings.
50. At the forefront of Mr Jorgensen’s submissions was the proposition that no orders should
be made because the defendants themselves had not incurred any liability: “[A]s
conceded in Mr Gaffney’s submissions, the 4 Defendants costs were absolutely zero, so
how can they possibly seek costs?” Instead, he submitted that liability was incurred by
ASIC. Having regard to the evidence in Mr Gaffney’s affidavit, that submission must be
understood as being that the costs were incurred by ASIC or Comcover and not by the
defendants themselves.
51. On this issue the defendants’ submissions state that they have been indemnified by
Comcover. The submissions are then as follows:
In regard to the Court’s authority to award costs to a successful, indemnified party, the
defendants remain liable as principal for the costs in the Proceeding. That is to say, costs are not awarded to Comcover, as such, even though they have the benefit of the award due to their relationship with the defendants: Dal Ponte [sic] Law of Costs, 4th edition, 2018 at [7.16].
The fact that the defendants in the Proceeding are indemnified by Comcover, who is not a party to the Proceeding, does not disentitle the defendants to an order for costs: Johnson v Santa Teresa Housing Association (1992) 83 NTR 14 at [20].
In Coshott v Woollahra Municipal Council [2008] NSWCA 176 this position was explained
further by AJA Handley [sic] at [11]: “A litigant, liable to his own solicitor for the costs of
proceedings, who is indemnified in whole or in part for those costs, is entitled to recover his taxed or assessed costs for the benefit, in whole or in part, of the party providing that indemnity: Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154; (2004) 60 NSWLR 203 CA. The principle extends to all indemnity arrangements whether or not they are in the nature of insurance."
(Emphasis in original.)
Determination
Are any costs recoverable?
52. The question is whether, in light of the limited evidence available as to the relationship
between the defendants, ASIC and Comcover, any amount is recoverable by the
defendants for costs.
53. Courts have addressed the recoverability of costs in circumstances where the lawyers
acting for the relevant party have been paid for by other persons or entities in the context
of the “costs indemnity rule”. The costs indemnity rule is that in making a costs order
against a party, the court aims to provide the other party with some indemnity for the
legal costs the latter has been required to incur in vindicating his or her rights in court:
GE Dal Pont, Law of Costs (LexisNexis, 5th ed, 2021) at [7.5]. Because the purpose of
an award of costs is compensatory, if the successful party is not liable to meet his or her
own lawyers’ costs then there is no foundation upon which the indemnity rule can
operate.
54. The general principle is expressed in Harold v Smith (1860) 5 H & N 381; 157 ER 1229
at 1231 as follows:
Costs as between party and party are given by the law as an indemnity to the person entitled to them: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. Therefore, if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained. Of course, I do not say there are not exceptional cases, in which certain arbitrary rules of taxation have been
laid down; but, as a general rule, costs are an indemnity, and the principle is this, —find out
the damnification, and then you find out the costs which should be allowed.
55. However, as Dal Pont points out, authorities indicate a variety of circumstances where
this general principle has not been strictly applied.
56. The defendants rely upon the proposition that they remain liable as a principal for costs
of the proceedings. They rely upon a passage from Dal Pont in his fourth edition which
is repeated in the fifth edition (at [7.16]) as follows:
That a successful party to civil proceedings is indemnified, whether by insurance or some other express or implied agreement with a third party, against liability to pay costs to his or her own lawyer is not inconsistent with the operation of the indemnity rule. The same applies
where a party’s litigation is funded by a third party that is contractually entitled to recoup its
costs in the event that the party is awarded costs. The critical point is that the successful party in cases of this kind remains liable as principal for the costs and so there is subject matter over which a costs order in his or her favour can operate.
(Emphasis in original, footnotes omitted.)
57. The passage from Dal Pont relied upon by the defendants involved a line of authority
often taken as starting with Adams v London Improved Motor Coach Builders Limited
[1921] 1 KB 495. In that case the successful plaintiff had been represented by solicitors
retained by his trade union in an action for wrongful dismissal. There was no written
retainer between plaintiff and solicitors but also no agreement precluding his liability to
the solicitors for costs. The Court of Appeal reasoned that the solicitors were acting for
the plaintiff with his knowledge and consent and, as a result, he became liable for costs
and that liability was not excluded merely because the union also undertook to pay the
costs.
58. The authorities cited by Dal Pont in the passage relied upon by the defendants support
the proposition that so long as there is some chance that the party may be liable to the
solicitors on the record for the party then that is sufficient to permit recovery of costs
pursuant to a costs order. The cited authorities are as follows.
59. In New Pinnacle Group Silver Mining Co v Luhrig Coal and Ore Dressing Appliances Co
(1902) 2 SR (NSW) 50 proceedings had been brought by the respondent to set aside an
arbitration. Those proceedings were successful. It emerged at taxation that the
respondent was indemnified against costs by a Mr Lempriere who had an interest in
having the arbitrated award set aside. The contention was that because the respondent
had no liability for the costs incurred by Mr Lempriere and had been indemnified against
those costs, the compensatory principle expressed in Harold v Smith (1860) 5 H & N
381; 157 ER 1229 precluded an award of costs in its favour. In support of an award of
costs, reference was made to the position of an assignee bringing proceedings in the
name of an assignor after having given an indemnity in relation to costs to the assignor.
It was said that if costs were recoverable in that case, then they should also be
recoverable in the circumstances of the case at hand. Cohen J said (at 54): “Yet no case
has been cited with the plaintiff on the record, being a nominal plaintiff, with a complete
indemnity against any liability for costs, given by the real plaintiff, has been refused the
costs of the action, or even where his right to them has been questioned.”
60. Walker J confined the principle in Harold v Smith to one arising in the particular facts of
that case. He described the contention of the appellant in this case as:
[T]hat on an order that one party to the record shall pay the other party’s costs, only those
costs can be allowed for which such other party is personally liable to the attorney who
represents him on the record.61. Of that contention Walker J said (at 56-57):
I know of no authority for this proposition, and it is opposed to what I should have thought was daily practice. In the case of an assignor of a chose in action suing for the benefit, and
on the indemnity, of the assignee, to whom alone the plaintiff’s attorney on the record looks
for his costs, could it be contended that the defendant, on judgment going against him, could
escape paying the plaintiff’s costs of the action on the ground that the plaintiff on the record
was not liable for them to the attorney? That case is very analogous to the present, in which, as I understand the facts, Lempriere for his own purposes used the name of the Luhrig Co., and Messrs. Stephen, Jaques & Stephen, who appeared nominally as solicitors for the company, looked for their costs, not to the company, but to Messrs. Blake & Riggall, with an ultimate liability in Lempriere. The doctrine of costs being an indemnity was never intended, in my opinion, to be pressed to the length to which the Pinnacle Co. are seeking to press it. Only by torture could it be made to apply to the present case.
62. In McCullum v Ifield [1969] 2 NSWR 329 at 330 the Government Insurance Office (GIO)
undertook the defence of a motor vehicle claim. That defence was successful and a party
and party costs order was obtained by the defendant. The plaintiff submitted, amongst
other things, there was no right to recover costs against the plaintiff because the
defendant had not incurred any liability. Instead, the defence had been conducted by a
solicitor employed by the GIO. Taylor J found that the defendant was entitled to recover
party and party costs. His Honour said (at 330):
It is established that if a party to an action has an agreement with his solicitor that he will not have to pay any costs then he cannot recover party and party costs against the adversary. (Gundry v Sainsbury [1910] 1 KB 645). Equally it is clear that the fact that a party to civil proceedings is indemnified by insurance or other agreement against his liability to pay the costs does not prevent him recovering his party and party costs. (See New Pinnacle Group Silver Lead Mining v Luhrig Coal & Ore Dressing Appliances Co. (1902) 2 SR (NSW) 50; Adams v London Improved Motor Coach Builders [1921] 1 KB 495; [1920] All ER Rep 340.)
63. The court referred to the operation of s 18 of the Motor Vehicles (Third Party Insurance)
Act 1942 (NSW), which allowed an authorised insurer to conduct proceedings in the
name and on behalf of an insured person, and concluded that the GIO was not the
defendant but rather the solicitor employed by the GIO who appeared for the defendant.
The court rejected the argument which relied upon the fact that the defendant never
became liable to pay the costs of the solicitor because that solicitor would look only to
the GIO. However, the solicitor had not made any agreement with the defendant that he
would act for him for nothing. The court considered that this argument was concluded
against the plaintiff by R v Archbishop of Canterbury [1903] 1 KB 289 and Adams.
Particular reference was made to the example given by Romer LJ in Archbishop of
Canterbury at 295 which referred to a defendant represented by an insurer.
R v Miller [1983] 3 All ER 186 was a case in which costs of the defence of a criminal
charge were ordered to be paid out of a central fund. The successful defendant’s
employers had undertaken to pay the costs of the defence but the defendant was aware
that if they did not do so he would have to pay the cost himself. The taxing authority
refused to certify any part of the bill of costs because it was almost certain that the
defendant’s employers would pay those costs and it was never realistically anticipated
that the defendant would bear any of the costs. A taxing master upheld that ruling and
also held that the facts established that there was an agreement between the solicitors
and the employers that the employers would be primarily liable for the costs of the
defence.
65. On appeal Lloyd J held that costs had been “incurred by” the accused within the meaning
of the relevant statute, as he was responsible or liable to his solicitors for the costs of the
defence even if a third party had in fact undertaken or was liable to pay those costs. The
fact that the accused was the client of the solicitors representing him raised a
presumption that the accused was personally liable for the costs of his defence and it
was only where there was an express or implied agreement which was binding on the
accused solicitors to the effect that in no circumstances would they seek to recover the
costs from the accused that the costs ceased to be “incurred by him” for the purposes of
the relevant statute. The realistic expectation that the employers would pay the defence
costs was a factor to be taken into account in determining whether there was an implied
agreement that the accused would not be liable for the costs in any event. However, the
defendant was aware that he would be liable for the costs if his employers failed to pay
them and as a result such an agreement could not be implied. This meant that the costs
could be recovered from the central fund.
66. Lloyd J referred to the decision in Adams. The critical point from that case being that
there was a possibility of the client being liable notwithstanding that the union also
undertook to pay the costs. Davies v Taylor (No 2) [1974] AC 225 was also referred to.
That was a case in which it was contended, for the purposes of a statutory scheme which
allowed payment of “costs incurred by” another party, no costs had been so incurred
because the successful defendant was insured and the insurance company was bound
to pay his costs. Once again, the decision turned upon “the absence of proof of an
agreement between him and them or between them and the insurance company that he
would not pay their costs”: at 230. Lloyd J also referred to Lewis v Averay (No 2) [1973]
1 WLR 510 in which the Automobile Association undertook a defendant’s appeal to the
Court of Appeal after having made it clear that he was indemnified in all respects so that
no part of the costs of the appeal would have fallen on him. Notwithstanding this, the
successful defendant’s costs were held to be within the expression “costs incurred by him”. Lord Denning reasoned that Mr Averay was, in law, the party to the appeal and if
the appeal had failed he would be the person ordered to pay the costs. Without further
reasoning he said (at 513): “The truth is that the costs were incurred by Mr Averay, but
the Automobile Association indemnify him against the costs … That is sufficient to satisfy
the requirements that the costs were ‘incurred by him’”.
67. Following these cases Lloyd J said that he rejected the proposition that “costs incurred
by” means “costs paid by”. He summarised the principle (at 190) as follows:
I would hold, following Adams v London Improved Motor Coach Builders Ltd and the other cases I have mentioned, that costs are incurred by a party if he is responsible or liable for those costs, even though they are in fact paid by a third party, whether an employer, insurance company, motoring organisation or trade union, and even though the third party is liable for those costs. It is only if it has been agreed that the client shall in no circumstances be liable for the costs that they cease to be costs incurred by him, as happened in Gundry v Sainsbury [1910] 1 KB 645.
68. He referred to the discussion in a number of cases of whether or not the agreement to
relieve a client of costs must be made with the client or whether it is sufficient that it be
made with the third party. He expressed no concluded view on that issue.
69. Significantly, the case involved a discussion of the burden of proof, Lloyd J saying
(at 190-191):
There was also some discussion as to the burden of proof. The initial burden of proving that Richards Butler & Co were acting for Mr Glennie lay on Mr Glennie. But that burden could be discharged, as it was in the present case, by showing that Mr Glennie was the party to the proceedings, and Richards Butler & Co the solicitors on the record. Once it was shown, as is now conceded, that Mr Glennie was indeed the client, then a presumption arose that he was to be personally liable for the costs. That presumption could, however, be rebutted if it were established that there was an express or implied agreement, binding on the solicitors, that Mr Glennie would not have to pay those costs in any circumstances.
The judgment then refers to the fact that in a taxation the whole of the solicitor’s file will
be before the taxing officer and that if there was a doubt about the issue further evidence
could be called for.
71. Lloyd J said that the issue was not who would be primarily liable for the costs but whether
or not it was agreed that the client should not be liable for those costs under any
circumstances.
Johnson v Santa Teresa Housing Association (1992) 83 NTR 14 involved a motor
accident case where there were two defendants. The second defendant was entitled to
be indemnified by the first defendant, the second defendant’s employer, for any amount
payable to the plaintiff. The first defendant argued that because there was a statutory
obligation on the Territory Insurance Office to indemnify the second defendant against
all costs, the second defendant was not entitled to any further order for costs against the first defendant. In other words, because the second defendant was indemnified by an
insurer there were no costs which it could recover from the first defendant. Mildren J
rejected this contention (at 18):
Be that as it may, the fact that the second defendant is entitled to indemnity for his costs by an entity which is not a party to the suit ought not to preclude the second defendant from seeking an order for his costs against another party to the suit. It is true that there are authorities to the effect that, if a party is not liable to pay any costs to his own solicitor, no costs can be recovered from the other side: see e.g. Irving v Gagliardi; Ex parte Gagliardi (No 2) (1895) 6 QLJ 200 per Griffith CJ. However, more recent authorities show that that principle cannot be taken too far. One well-established exception is where a party is represented by a solicitor employed by the Crown, and the party really represented the Crown’s interests: see, for example, Lenthall v Hillson [1933] SASR 31. In that case the Full
Court (Napier and Angas Parsons JJ) said (at 36):
“We think that the principle that costs are given as an indemnity can be carried too far.
It comes from the unwritten law, and depends upon considerations of public policy and
convenience, and it follows that it must be reasonably understood and applied.”
Later (at 37) their Honours concluded:
“It is apparent that in the circumstances the rule that costs are an indemnity must have
been understood, as it was understood in Irving v Gagliardi i.e. as applying to the
liability of the real and not of the nominal plaintiff.”
There is no reason why any distinction should be made between plaintiff’s and defendants. In the instant case, the “real” defendants were the Territory insurance office and the first
defendant’s indemnity insurer, as they ultimately will bear the losses.
73. Reference was made to the decision in Backhouse v Judd [1925] SASR 395 which
followed the reasoning in Adams. Also referred to was Blackall v Trotter (No 1) [1969]
VR 939 where the Full Court of the Supreme Court of Victoria found that a defendant
who was represented by a solicitor employed by the Crown was entitled to costs. It
referred to the reasons of Walker J in New Pinnacle.
74. Mildren J concluded (at 19-20):
There is no evidence that the second defendant has an agreement with his solicitors that, come what may, only the Territory Insurance Office will be liable to meet his costs.
…
The authorities to which I have referred show that the mere fact that a party to litigation is entitled to indemnity from a person not a party to the proceedings does not disentitle that person to an order for costs. It could not therefore be argued that the second defendant is not entitled to his costs against the first defendant on the indemnity notice, and indeed the first defendant does not argue to the contrary. But if that is so, there is no reason in principle why the second defendant ought not to be able to obtain an indemnity for costs ordered to be paid by him to the plaintiff, merely because the second defendant is entitled to be indemnified by the office.
Wilson v Richmond River Shire Council [2000] NSWSC 71 was a decision (like Oshlack
v Richmond River Council [1998] HCA 11; 193 CLR 72) arising out of the “Iron Gates”
development at Evans Head in New South Wales. The plaintiff had commenced
proceedings against Iron Gates Pty Ltd and the Richmond River Shire Council. He
retained a solicitor. A representative of the New South Wales Aboriginal Land Council
indicated that if the solicitor accepted instructions from the plaintiff, then the Land Council
would meet his costs on a specified basis. The fees were in fact paid by the Land Council.
The costs assessor declined to find any amount payable, relying on the fact that the
solicitor could not recover any costs from the plaintiff because the plaintiff was under no
liability to pay them. On appeal from this decision, Adams, McCullum, Angor Pty Ltd v
Ilich Motor Co Pty Ltd (1992) 37 FCR 65 and Johnson were all relied upon. Having
reviewed the decisions in these cases, Harrison M concluded (at [15]):
It is my view that there was no agreement between the plaintiff and his solicitor that in no circumstances was he (the plaintiff) liable to pay the costs. In the absence of evidence of a bargain to that effect, the plaintiff became liable to his solicitor for costs and this liability is not excluded because the New South Wales Aboriginal Land Council undertook to pay his fees. [The plaintiff] was the person giving instructions to the solicitor. The solicitor was acting
with the plaintiff’s knowledge and assent. Thus the plaintiff was liable to pay his solicitor’s
costs and the fact that the New South Wales Aboriginal Land Council indemnified the plaintiff
does not prevent him from recovering his costs.
76. For that reason, the decision of the costs assessor was set aside and the matter remitted
for redetermination.
Howard v Mechtler [2000] NSWSC 455 was a case relating to control of a soccer club.
A resolution changing the directors of the club was challenged by a number of individual
plaintiffs. That challenge was successful. The solicitors who acted for the plaintiffs had
been retained by the club. On appeal from a costs assessment, the contention of the
defendants was that in the absence of retainers from the individual plaintiffs, the
individual plaintiffs were not liable to pay the solicitors and hence there was nothing
against which the defendants were liable to indemnify them. So far as the evidence was
concerned Malpass M said (at [9]):
There was material which revealed a relationship with the Club as to payment of the firm’s
costs. The material also established that the individual plaintiffs had a liability to the firm to pay its costs. It did not prove that the plaintiffs had no liability whatsoever to pay the firm its costs.
78. The court was referred to Angor and Adams and said (at [11]):
It suffices to make general reference to some of the principles which emerge from the cases. Under an order for costs, the paying party is only obliged to pay such costs as the receiving party was primarily and potentially legally obliged to pay to his solicitor. There is an indemnity only in respect of the costs covered by the order. A receiving party cannot recover a sum in excess of the liability to his own solicitor. There can be co-existing obligations. The liability of the client is not excluded merely because there may be a third person to indemnify the client. It is necessary to prove that under no circumstances does the client have any liability to pay costs to his solicitors.
79. The Master found that the finding that the individual plaintiffs had not retained the firm
was simply not open on the material before him and also that the assessor’s application
of the indemnity principle was erroneous. The determination was set aside.
North Australian Aboriginal Legal Aid Service Inc v Bradley (No 2) [2002] FCA 564 was
a costs decision following the first instance proceedings which were ultimately appealed
to the High Court in North Australian Aboriginal Legal Aid Service Inc v Bradley [2004]
HCA 31; 218 CLR 146. The applicant had unsuccessfully challenged the appointment of
the respondent as Chief Magistrate of the Northern Territory. In relation to costs, one of
the points raised was that the respondent was not entitled to any order for costs because
he had been completely indemnified by the Northern Territory. This was dealt with by
Weinberg J in emphatic terms (at [101]-[104]):
The contention that Mr Bradley is not entitled to costs because he was fully indemnified from
the outset by the Northern Territory is equally without merit …
The effect of this submission, if accepted, would be remarkable. Ministers of the Crown are frequently sued in this and other courts. When proceedings fail, they receive costs. There is no suggestion that they are personally liable for costs incurred in defending those proceedings. They are, by convention, fully indemnified by their governments.
…
Whatever arrangements there may in any given case be for the payment of fees, whether by government or by some benevolent third party, that is a matter between the parties to those arrangements. It is of no relevance when determining whether or not, as successful litigants, they are entitled to costs.
Coshott v Woollahra Municipal Council [2008] NSWCA 176 involved an appeal from a
costs assessment process. The assessed costs of the Council were approximately
$81,000. An amount of approximately $34,000 had been paid to the Council’s solicitors
under a mutual indemnity scheme maintained by a group of councils. The appellant, who
was liable to pay the Council’s costs submitted that the indemnity principle meant that
the Council could not recover more than it had paid or was liable to pay to its solicitors
and, having regard to the payment made by the mutual indemnity scheme, the amount
payable pursuant to the costs order should be reduced. Handley JA (with whom Tobias
and McColl JJA agreed) said (at [11]):
A litigant, liable to its own solicitor for the costs of proceedings, who is indemnified in whole or in part for those costs, is entitled to recover his taxed or assessed costs for the benefit, in
whole or in part, of the party providing that indemnity … The principle extends to all indemnity
arrangements whether or not they are in the nature of insurance.
82. The general principle that emerges from this line of cases is that unless it is specifically
established that as a result of an agreement the party with the benefit of the costs order
would never be liable for the solicitor’s costs, then the fact that another party has paid
those costs or indemnified the party in relation to costs is not a barrier to recovery of those costs pursuant to a costs order. A broader principle which might be seen to arise
from Averay is not supported by any clear reasoning and cannot be accepted. It is
notable that the decision of Weinberg J in Bradley is inconsistent with the principle as I
have articulated it but, as will become apparent, is supported by a different line of
authority. Although Coshott was specifically referred to in the defendant submissions,
that case is not supportive of those submissions because in that case there was no doubt
that the Council was liable to its own solicitors. The only issue related to the
consequences of payment of part of those solicitors’ costs by a third party. However, in
the present case there is, at the very least, doubt about the liability of the defendants to
the solicitors acting on their behalf.
83. Because of the lack of detail in the evidence about the relationship between the
defendants, Comcover, and ASIC, had it been necessary to determine the application
on the basis of the principles set out in the cases relied upon by the defendants and to
which I have referred, there would be difficult questions as to:
(a) what inferences could be drawn from the very limited circumstances disclosed in the affidavit of Mr Gaffney; and
(b) who bore the onus of proving that there were no circumstances in which the individual defendants could be liable for the costs incurred.
84. It is not necessary to determine those questions because, in my view, the issue is
resolved by a different line of authority. That is the line of authority which indicates that
a successful party represented by the Crown Solicitor in litigation in which the relevant
government has an interest is not disentitled to costs from an unsuccessful party merely
because the successful party is not under a personal liability to the Crown Solicitor for
costs. It is this line of authority which would explain the statements made by Weinberg J,
without reference to authority, in Bradley.
85. So far as the Territory is concerned, that line of authority is best represented by the
decision in Inglis v Moore (No 2) (1979) 25 ALR 453. That was one of many decisions
arising from litigation brought by Mrs Inglis who was dissatisfied with decisions made
about her employment at the Australian Parliamentary Library. The principal proceedings
were in the ACT Supreme Court: see the history of the proceedings in Inglis v Moore
(Unreported, Supreme Court of the Australian Capital Territory, Connor J, 12 December
1977) and the subsequent decisions in Inglis v Moore (1979) 24 ALR 411 and Inglis v
Moore (1981) 51 FLR 293. There were concurrent proceedings in the High Court which
were stayed by Mason J because they sought to agitate the same issues as the proceedings on foot in the Supreme Court: Moore v Inglis (1976) 50 ALJR 589; appeal
dismissed in Moore v Inglis (1976) 51 ALJR 207.
86. In Inglis v Moore (No 2) the underlying proceedings were in the Supreme Court and
involved Ms Inglis suing a number of public servants who worked at the Parliamentary
Library, from the Parliamentary Librarian down to a clerical assistant. The allegations in
the 50-page statement of claim are described in the decision at 461-462.
87. The decision of a Full Court of the Federal Court in Inglis v Moore (No 2) was on an
appeal from a decision of a judge of the ACT Supreme Court who was reviewing the
registrar’s decision on a taxation of the costs awarded in favour of the defendants. One
of the issues raised in the case was whether or not the defendants, who had successfully
struck out Mrs Inglis’s statement of claim, were entitled to recover costs in circumstances
where they were represented by the Crown Solicitor and not personally liable for the
costs of the Crown Solicitor. This aspect of the decision in the case is accurately captured
in the headnote which provides: “A successful party who is represented by the Crown
Solicitor in litigation in which the Crown has an interest is not disentitled to costs from an
unsuccessful party merely because he is not under a personal liability to the Crown
Solicitor for costs.” This principle was defined or illustrated by the cases to which the
court referred, namely, R v Archbishop of Canterbury [1903] 1 KB 289, Irving v Gagliardi
(1895) 6 QLJR 200, MacLaurin v Hall (1913) 13 SR (NSW) 114, Lenthall v Hillson [1933]
SASR 31, Ex parte W A Grubb Pty Ltd; Re Johnston (1949) 66 WN (NSW) 224, Nolan v
George [1959] Qd R 315, Blackall v Trotter (No 1) [1969] VR 939. St John and Brennan
JJ adopted what was said in Blackall at 941:
In our opinion, neither in that case nor in Lenthall v Hilson did the court base its decision on the ground that there was any liability of the party represented to the Crown-employed solicitor for costs. Both cases, in our opinion, decided that in the circumstances the Crown by virtue of its interest in the subject matter of the litigation, was entitled to make its solicitor available to act for the party on the record, and that as the Crown incurred the expense of his employment the party he represented was entitled to recover the costs awarded to him.
Since expense was incurred, albeit not by the party on the record, in the employment of the solicitor, the decisions are distinguishable from cases such as Gundry v Sainsbury [1910] 1
KB 645 … where no expense at all was incurred in the employment of the solicitor.
88. The separate reasons of Davies J (at 465-466) relied upon the same authorities, also
quoted from Blackall and reach the same result.
89. The court also dealt with a challenge to the capacity of the Crown Solicitor to act for the
defendants in that case, an issue which was not raised in the present proceedings. It is
notable, however, as a result of the similarity with the factual circumstances of the
present case that, in addressing whether or not the Crown Solicitor was entitled, without statutory authority, to act for the defendants, the judgment of St John and Brennan JJ
said (at 456-457):
The Commonwealth has an interest in protecting its employees against claims brought against them in respect of acts done within the scope of their employment. The Commonwealth has an interest in litigation of that kind, not only to protect the Commonwealth from claims made against it on the footing of its vicarious liability for the acts or torts of its
employees … But also to protect employees in performing the functions of their employment
from the risk of a personal liability for costs, if they should be sued in respect of what they
have done, or are alleged to have done, in performing those functions.
Inglis v Moore (No 2) was followed in R v Barbaro (1992) 108 ACTR 1 at 7 and Ditton v
Gallagher (1992) 110 ACTR 12 at 15 where the principle was applied in relation to legal
services provided by the Australian Government Solicitor. It was also followed in Dahler
v Australian Capital Territory [2016] FCA 257 where it was applied in relation to legal
services provided by the ACT Government Solicitor.
91. The principle articulated in Inglis v Moore (No 2) is applicable in the circumstances of the
present case. Even though, as indicated earlier, the relevant evidence is unsatisfactorily
limited, it is clear that the defendants are sued for their conduct as employees of ASIC,
an emanation of the Commonwealth. The Commonwealth, through Comcover, has
retained solicitors so as to protect its former employees from a personal liability for costs.
In those circumstances, the fact that the defendants themselves may not have any
personal liability for costs is not a basis for refusing to allow the recovery of costs incurred
on their behalf.
92. Although the principle articulated in Inglis v Moore (No 2) was expressed in the context
of a Crown Solicitor acting for the Commonwealth employee, in my view, the same
principle applies in circumstances where private sector lawyers are engaged by the
Commonwealth to act on behalf of current or former Commonwealth employees who are
sued upon allegations arising out of their conduct as such employees. The principle
operates as an exception to the general requirements of the indemnity principle
described above and there is no proper basis for distinguishing between legal services
provided by a Crown Solicitor and legal services provided by private practitioners
engaged to act for the Crown. That is because the exception to the general requirement
of the indemnity principle is one designed to recognise and protect the legitimate
interests of the government in defending its conduct even when only its employees or
former employees are joined in the proceedings. The recognition and protection of that
legitimate interest is not affected by a change in the identity of the solicitors engaged to
act for the government.
93. Because the principle applies in the present case, costs may be recoverable even if the
individual defendants have not been shown to be exposed to a risk of personal liability
for the costs incurred by the solicitors on the record for them.
Is the case an appropriate one for a gross sum costs order?
94. This is clearly a case in which it would be appropriate, if possible, to resolve the question
of costs in a summary way. A useful non-exhaustive list of five considerations relevant
to whether or not to make a gross sum costs order is set out in the reasons of McWilliam
AsJ in Polleycutt v Taylor [2020] ACTSC 158 at [8]. By reference to those matters, the
position is as follows:
(a) The purpose of the rule permitting such a procedure is to avoid the expense, delay and aggravation involved in protracted litigation arising out of an
assessment of costs. In the present case, there is clearly the potential for
considerable expense, delay and aggravation to arise if the ordinary costs
assessment process is required.
(b) There is clearly a strong case for assessing a fixed sum where the party required to pay costs is unlikely to do so and where a formal assessment will add to the
financial burden of the party entitled to the costs without the likelihood of
recovering the extra costs spent. In the present case, while the financial
circumstances of the plaintiff are not clear, there are costs orders arising out of
the earlier proceedings involving ASIC or its employees in New South Wales,
Tasmania and the Australian Capital Territory in relation to which either no
agreement has been reached or, where the relevant amounts fixed have not
been paid. Further, the plaintiff is currently resident outside Australia and there
is no evidence of an intention to return to Australia.
(c) The conduct of litigation by the party liable for costs may be a relevant factor. Where that party has caused trouble and expense in the proceedings, delayed
or failed to comply with court orders, or otherwise failed to ensure an expeditious
and efficient disposal of the litigation, that may indicate that a process of
assessment would be unfair or unreasonable to impose on the party entitled to
costs. That consideration is clearly applicable in a circumstance where the
proceedings themselves have been found to be an abuse of process and the
plaintiff found to be a vexatious litigant.
(d) The likelihood that the party liable for the costs will not attend the formal assessment is also a relevant factor. In the present case, it cannot be said at
this stage that Mr Jorgensen would not attend a formal assessment of costs. He has taken the opportunity to appear by audio-visual link for the purposes of
hearings even though he has been outside Australia.
(e) Where a matter is simple it may be entirely appropriate to save the parties the difficulties, inconvenience and expense of assessment. This consideration does
not apply in the present case. The matter cannot be considered to be a simple
one and the amount of costs incurred and sought are both substantial.
95. Having regard to my characterisation of the proceedings as an abuse of process, the
declaration of the plaintiff as a vexatious litigant and the cost and expense involved in
going through the formal processes of assessment, this case is an appropriate one for
the making of a gross sum costs order so long as, having regard to the deficiencies in
the evidence, it can be done without injustice to the plaintiff.
How much should be awarded?
96. I have pointed out above the deficiencies in the evidence in support of the application.
Having regard to the deficiencies in the evidence, one approach would be to simply
refuse to make a gross sum costs order and leave the defendants to disclose the
contents of their file for the purposes of an assessment. However, in the circumstances
of this case, in my view that would not be appropriate. That is for two reasons:
(a) It would, as a practical matter, condemn the defendants to either not pursuing the quantification of their costs entitlement at all or alternatively investing
significant amounts of time and money in that exercise in circumstances where
recovery of those costs is, at the very least, uncertain.
(b) The defendants have indicated a willingness to very significantly compromise their costs entitlement in order to achieve a gross sum costs order. They have
sought $80,000 or “such other amount as the Court deems fit”. By proposing
such a significant discount upon the actual legal costs incurred, and indicating
a willingness to accept such other amount as the court thinks appropriate, the
defendants have provided a means by which any injustice arising from the
defects in the evidence in support of their application may be able to be
overcome.
97. Given the nature of the proceedings, it is likely that on any assessment of the
disbursements comprising counsel’s fees would be substantially allowed. It is extremely
unlikely that the recoverable solicitors’ costs would not equal those fees. While the
likelihood is that the recoverable fees would be much greater than that, the evidentiary
problems referred to earlier in these reasons mean that a very conservative approach
should be adopted in relation to the fixing of a gross sum costs order. The approach that
I have identified, which is based upon almost the whole of counsel’s fees being
recoverable and at least mirrored by the solicitors’ costs, results in an order of $60,000.
Such a conservative approach to the quantification of costs for the purposes of a gross
sum order avoids the risk of injustice to the plaintiff even in circumstances where the
evidence in support of the application is less than complete.
Form of orders
98. Order 5 made on 10 March 2023 was: “The plaintiff is to pay the defendants’ costs of the
proceedings on a solicitor and client basis.” Pursuant to r 1720(2) those costs are to be
“assessed costs”. Rule 1720(3) provides that “instead of assessed costs, the court may
order a person liable for costs to pay to the party entitled to costs … an amount for costs
decided by the court.” Thus, an order which followed the language of the rule would be:
“For the purposes of order 5 made on 10 March 2023, instead of assessed costs the
plaintiff is to pay to the defendants an amount for costs of $60,000.”
99. The application in proceeding sought an order that “Payment is to be made by the plaintiff
within 28 days of the Court’s order.” Having regard to the terms of the order fixing the
amount of costs, this order does not appear to be necessary except insofar as it may
affect the accrual of interest. Rule 1620(4) provides that post-judgment interest accrues
on any unpaid amount “from the day the costs were assessed or another date decided
by the court.” In cases where the costs are determined by the court itself under
r 1720(3)(c), this rule would appear to require, in order that interest run, the court to
specify the date from which interest runs. Therefore, it is appropriate that an order be
made, consistent with that which was sought, that interest is payable under r 1620(4)
from the 29th day after the date of the court’s order.
100. The application sought a specific order that “Each party pays their own costs of this
application.” Such an order is unnecessary because the quantification of the defendants’
entitlement to costs for the purposes of the solicitor and client costs order necessarily
confines the costs recoverable to that gross amount. It thereby encompasses any costs
incurred for the purposes of the present application. Given that those costs have been
arrived at without reference to the costs of the present application, the intent of the
proposed order is met by simply making the gross sum costs order.
Orders
101. The orders of the Court are:
1. For the purposes of order 5 made on 10 March 2023, instead of assessed costs
the plaintiff is to pay to the defendants an amount for costs of $60,000.
2. For the purposes of r 1620(4) of the Court Procedures Rules 2006 (ACT)
interest is payable from the 29th day after the date of the court’s order.
I certify that the preceding one hundred and one [101] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop
Associate:
Date: 26 May 2023
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