Kowalski v Sim

[2007] SADC 30

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil: Application for Review)

KOWALSKI v SIM & ORS

[2007] SADC 30

Judgment of Her Honour Judge Shaw

21 March 2007

PROCEDURE - COSTS - TAXATION - REVIEW - PRINCIPLES APPLICABLE

Review of a reconsideration by a taxing Master of a Bill of Costs pursuant to Rule 101.21 of the District Court Rules.  Application to set aside judgment - application dismissed.

Supreme Court Act s39; Legal Practitioners Act 1981 s42; District Court Rules 101.19, 101.20 and 101.21, referred to.
Wentworth v Rogers [2006] NSWCA 145; Johnson v Santa Teresa Housing Association (1992) 83 NTR 14, considered.

KOWALSKI v SIM & ORS
[2007] SADC 30

Judge Shaw
Civil

1. This is an application in chambers for review by a judge pursuant to Rule 101.21 of the District Court Rules of the taxation by a master as to a Bill of Costs lodged pursuant to section 42 of the Legal Practitioners Act.

2. The plaintiff asks the court to determine three matters.

3. Firstly, the plaintiff applies for a review of the reconsideration by Master Norman of the taxation of the Bill of Costs of the defendants delivered on 19 August 2005.  The defendants are a firm of solicitors.

4. Secondly, pursuant to Rule 3.04 of the District Court Rules, the plaintiff seeks an order to set aside or revoke the judgment and all of the orders that have been made by His Honour Judge Anderson in this action.

5. Thirdly, pursuant to Rule 84.12 of the District Court Rules, the plaintiff seeks an order for costs in this action against a non-party Mitsubishi Motors Australia Limited (“MMAL”).

6. The plaintiff is unrepresented.  Therefore, he has been granted considerable latitude in the conduct of this hearing.

   Background

7. The plaintiff is a former employee of MMAL.  There is a history of extensive litigation between the plaintiff and MMAL.

8. In July 1996, the plaintiff issued proceedings for negligence against the defendants. Prior to the hearing before Judge Anderson, the plaintiff sought non-party discovery from MMAL.  MMAL consented to the provision of that discovery.

9. On 21 March 2002, His Honour Judge Anderson found that the plaintiff had failed to prove that the defendants were negligent and entered judgment for the defendants.  He ordered costs against the plaintiff[1].  That costs order was the subject of taxation by Master Norman.  On 6 July 2005, Master Norman published his Rulings on the taxation.  The plaintiff sought a reconsideration of those Rulings.

   [1] [2002] SADC 30

10. On 19 August 2006, Master Norman published his Reasons for Decision for reconsideration of taxation of the Bill of Costs.

11. In March 2004, MMAL issued proceedings against the plaintiff in the Supreme Court of South Australia pursuant to section 39 of the Supreme Court Act 1935 in action 297 of 2004, seeking an order declaring the plaintiff a vexatious litigant.

12. On 19 April 2005, His Honour Justice Bleby granted the relief sought and determined that the plaintiff had persistently instituted vexatious proceedings[2]. 

    [2] [2005] SASC 433

13. His Honour ordered that the plaintiff was prohibited from instituting further proceedings against MMAL without leave of the Supreme Court.

14. The Full Court dismissed the appeal from the orders of Bleby J[3].

    A.     Reconsideration of Taxation of Costs

    [3] [2005] SASC 433

15. The plaintiff applied pursuant to Rule 101.21(1) of the District Court Rules, to review Master Norman’s interim taxation of costs dated 19 August 2005, as to the items or part of an item as set forth in his application, and in letters to the District Court Registrar dated 22 August 2005 and 30 August 2006.

16. The plaintiff sought a review of the Deputy Registrar’s decision to issue the interim allocatur dated 28 July 2006.

17. The plaintiff submitted that upon a review of Master Norman’s reconsideration of the Bill of Costs, I was required to determine whether any of the costs were correct and awarded according to law.

18. The plaintiff contends that he is not liable to pay the legal costs of the defendants, which are the subject of the order of Judge Anderson.

19. I note the terms of Rule 101.21.

20. Rule 101.21(1) provides that after the reconsideration procedures have been completed, the plaintiff may within 14 days, apply to a judge in chambers for an order to review the taxation as to the item or items about which he is dissatisfied.

21. Rule 101.21 provides that the application is to be determined upon the evidence before the Master unless the Judge orders otherwise.

22. The defendants take no point in relation to the fourteen day time frame for the plaintiff to bring this application.

23. The plaintiff did not appeal against the judgment or the order for costs made by Judge Anderson.  I am not convinced that a claim by the plaintiff that he has no liability to pay the costs in this action, is a claim that is able to be determined by a judge upon a review of a master’s reconsideration of a taxation of costs.

24. Nevertheless, I will proceed to determine the plaintiff’s application for a review of the Master’s reconsideration of taxation on its merits.

    Bankruptcy Issue

25. The plaintiff submitted that the solicitors acting for the defendants, had a legal obligation, pursuant to section 58(3)(b) of the Bankruptcy Act 1966 (Cth), to apply to the Federal Court for the leave of the Court to commence the taxation of the costs of one of the defendants, namely, Stephen Dowd, because Mr Dowd was a bankrupt.

26. He submitted that it was not competent for Mr Dowd’s solicitors to enforce any legal costs or disbursements of Mr Dowd in respect of any provable debt except with the leave of the Federal Court.

27. He submitted that Master Norman did not have jurisdiction or the power to tax Mr Dowd’s costs.  He relied upon the decisions in Gertig v Davies[4] and Green v Schneller[5].

    [4] [2003] SASC 86 (25 March 2004)

    [5] (2001) WSWSC 897 (16/10/2001)

28. The defendants submitted that the defendant Mr Dowd, was declared bankrupt on 2 November 1995.  He was discharged on 3 November 1998.  Therefore, at the time that the plaintiff commenced these proceedings in July 1996, Mr Dowd was a bankrupt.

29. In my view, the provisions of section 58(3) of the Bankruptcy Act relate only to remedies in respect of a provable debt.

30. Pursuant to section 82(1) of the Bankruptcy Act, a provable debt is one to which the bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject by reason of an obligation incurred before the date of bankruptcy.

31. A debt incurred after the date of bankruptcy, which does not arise by reason of an obligation incurred before the date of bankruptcy, is not a provable debt and therefore action to enforce payment is not restricted in any way.

32. The solicitors for the defendants were instructed after the date of bankruptcy.  As an undischarged bankrupt, Mr Dowd is not prohibited from entering into contractual relations.

33. Mr Dowd was discharged from bankruptcy in 1998.  The order for costs was made after that date on 21 March 2002.

34. Mr Dowd’s liability to the solicitors for the defendants was not subject to the provisions of the Bankruptcy Act.

35. Therefore, I conclude that the Bankruptcy Act does not impact upon Mr Dowd’s liability for costs, nor upon his entitlement to indemnity in respect of those costs.

36. Therefore, the solicitors for the defendants, Rowell Forrest & Co are not precluded for any reason, from enforcing payment of their legal costs.

    Law Claims Issue

37. The plaintiff submitted that he was not liable to pay the defendants’ costs because the defendants’ costs have been paid by a third party, namely by Law Claims out of a Legal Practitioners Guarantee Fund.

38. He submitted that it was acknowledged in the Bill of Costs that one of the defendants was indemnified.  Therefore, the defendants did not have a legal obligation to pay any monies to their solicitors.

39. He relied on Rigney v Prestwood[6].

    [6] (1985) 122 LSJS 224

40. The plaintiff submitted that the taxing master based his taxation on the wrong principle.

41. He submitted that the Master was fully aware that the defendants had no liability to pay their solicitors’ costs.  He submitted that Law Claims, rather than the insurer, were representing the defendants.  Therefore, the defendants were not liable to pay their solicitors’ costs.  Therefore, the plaintiff was not liable to pay the defendants’ solicitors’ costs because costs were in the nature of an indemnity.

42. He contended that the Master erred in principle by ignoring this absence of liability.

43. During oral argument, the plaintiff sought to rely upon alleged statements made to him by the defendant Russel Cole.

44. I informed the plaintiff that I was unable to have regard to those alleged statements in the absence of affidavit evidence or other evidence from Mr Cole.  The plaintiff did not file an affidavit of Mr Cole.

45. Counsel for the defendants submitted that the fact that the defendants’ costs may have been paid by a third party was not decisive.  In the absence of evidence that there was an agreement releasing the defendants from paying their solicitors’ fees, the defendants remained liable to pay their solicitors’ legal costs pursuant to a deemed retainer.

46. The plaintiff also submitted that there was no written cost agreement or retainer agreement between the defendants and their solicitors. He submitted that a written retainer agreement was required by section 42(6) of the Legal Practitioners Act 1981. Therefore, the defendants were not liable to pay their solicitors’ costs for work done by them.

47. He relied upon Pirone v Craig J Roberts[7].

    [7] (2006) SASC 134

48. Counsel for the defendants submitted that a written retainer is not necessary.  However, the absence of a written retainer means that the solicitors for the defendants are limited to charging their costs according to the Supreme Court scale.

    The Law

49. Costs are in the nature of an indemnity.  Therefore, if a successful party is not bound to pay any costs to its solicitors, it cannot recover costs from the unsuccessful party[8].

    [8] Gundry v Sainsbury [1910] 1KB 645

50. In Wentworth v Rogers [2006] NSWCA 145, Basten JA expressed the principle as follows:

    The substantive issue at the heart of the Appellants’ case was the principle that the fundamental purpose of an order that one party to litigation pay the legal expenses or ‘costs’ of another party is to provide an indemnity in relation to the whole, or usually part, of the legal obligation incurred by the other party to his or her lawyers. If that party is under no legal obligation to pay lawyers’ fees, no amount can be recovered from the unsuccessful party.

51. Section 42(6) of the Legal Practitioners Act 1981 provides:

    “A legal practitioner may make an agreement in writing with a client for –

    (a)payment of a specified amount by way of legal costs (which may – but need not – consist of a daily, hourly or other time-related rate for professional work carried out by the legal practitioner on the client’s behalf); or

    (b)payment of legal costs in accordance with specified scale; or

    (c)subject to any limitations imposed by the Society’s professional conduct rules or the regulations – payment of a contingency fee to be calculated on a basis set out in the agreement on fulfilment of a condition stated in the agreement.”

52. Section 42(6) of the Act identifies a number of matters which may be the subject of a written agreement.

53. A written retainer is not required in every case.  The law recognises a deemed retainer.  However, a written retainer is required where the solicitors’ charges depart from the Supreme Court Scale[9].

    [9] Kasmeridis v McNamara Business and Property Law [2006] SASC 200

54. The purpose of an agreement under section 42(6) of the Act is to provide a mechanism whereby a solicitor may charge on a basis other than the scale set by the Supreme Court Rules. The effect of the former Supreme Court Rules, which applied at the time of these proceedings, was that in the absence of an agreement under section 42(6) of the Act, a practitioner was limited to charging according to the scale.

55. Master Norman concluded that it had not been established that because of any bargain between the insurers and the defendants or any of their representatives, the defendants would not be liable for costs under any circumstances. 

    Conclusion

56. Having considered the oral and written submissions of the plaintiff, including his letters and faxes, I agree with Master Norman’s conclusion.

57. The mere fact that the defendants are indemnified by a third party in relation to their legal costs, does not disentitle the defendants, or any one of them, from claiming costs from the plaintiff.

58. In Wentworth’s case at [104] Basten JA stated:

    The indemnity principle has been held to operate in two circumstances which might not obviously fall within its terms.  The first is where the lawyers will be paid for their services, but not, as a matter of practice, by the client.  Examples of that situation include cases where the litigant is indemnified by an insurer .... or where legal aid is obtained.  In each case the primary liability was held to be that of the litigant or client.

59. Law Claims were not representing the insurer.  Rather, they acted as agents for the insurer.  An insurer is entitled to recover costs in the name of an insured as the litigant, from the losing party.  It does not matter that the insured is indemnified by the insurer for its costs[10].

    [10] Johnson v Santa Teresa Housing Association (1992) 83 NTR 14

60. I reject the plaintiff’s contention that the absence of a written agreement means that the defendants are not liable to pay their solicitors’ costs. I also reject the plaintiff’s contention that the defendants were not liable to pay their solicitors’ costs because the defendants would have looked to their insurers through Law Claims, for payment of their costs.  The defendants retained a liability to pay their solicitors’ fees.  Therefore, the defendants are entitled to recover costs.  After a review of the Master’s reconsideration in relation to the totality of the defendants’ Bill and in relation to the individual items identified during this application and in Master Norman’s reasons, I dismiss the application for review of both the reconsideration by the Master and of the decision to issue the interim allocatur.

61. The plaintiff also applied to set aside the judgment of Judge Anderson and for an order for costs against MMAL.  Although this matter came before me as a judge in chambers to review a reconsideration of costs by a master, I propose to address briefly, the plaintiff’s additional applications, because in my view they are completely without merit.

    B.     Application to Set Aside Judge Anderson’s Order

62. Pursuant to Rule 3.04 of the District Court Rules, the plaintiff sought an order to set aside or revoke the judgment and all the orders made by Judge Anderson in this action.  Alternatively, the plaintiff sought an order pursuant to Rule 84.12 of the District Court Rules to revoke Judge Anderson’s judgment.

63. The plaintiff submitted that his original common law action against MMAL in respect of which he had been represented by the defendants, was statute barred as a result of the operation of section 54 of the Workers Rehabilitation and Compensation Act 1986. Therefore, the decision of Judge Anderson in this action was ultra vires and made without jurisdiction.  He sought an order revoking Judge Anderson’s judgment.

64. The plaintiff did not appeal against Judge Anderson’s judgment nor against the costs order. 

65. The plaintiff submitted that a judge sitting in the District Court was entitled to set aside the judgment and orders of another District Court Judge where that District Court Judge had acted outside his jurisdiction.

66. He relied upon Re Macks; Ex parte Saint - Re Macks Ex parte Johnson[11].

    [11] [2000] HCA 62 at paras 48-49

67. He submitted that the District Court was an inferior court of record.  Therefore, as a matter of law, if an inferior court makes an order without jurisdiction or power, the order is not binding because the court is not presumed to have acted within jurisdiction.

68. The plaintiff relied upon the judgment of the High Court in Manser v Spry[12] and the decision in Danielson v One Steel Manufacturing[13].

    [12] (1994) 181 CLR 428

    [13] [2006] SADC 126

69. I do not accept the plaintiff’s submission.  The application is misconceived. 

70. An order for costs has been made.  This matter came before me upon an application for a review of the reconsideration by Master Norman in relation to the taxation of costs.

71. I do not accept that I have jurisdiction to revoke the final orders of another District Court Judge in the circumstances contended for by the plaintiff.   In any event, there is no merit in the suggested criticisms of His Honour’s decision.

72. I therefore decline to revoke or set aside the orders of Judge Anderson. 

    C.     Application for Costs Against Non-party

73. On 12 December 2006, the plaintiff applied for specific directions and for an order for costs against a non-party, MMAL in this action.  I am not convinced I have jurisdiction to determine the plaintiff’s application.  Nevertheless, I will consider the merits of the application.  MMAL filed a Notice for Specific Directions seeking a direction that the plaintiff’s Notice for Specific Directions dated 12 December 2006, be dismissed as an abuse of process. 

74. MMAL submitted that the plaintiff was required to obtain leave from the Supreme Court to apply for non-party costs against MMAL.  The plaintiff submitted that this application is interlocutory and therefore, he does not require leave from the Supreme Court. 

75. The plaintiff relied upon Kowalski v Andrew Sim[14], where His Honour Judge Lunn determined that no leave was required in relation to the interlocutory proceeding in that case.

    [14] District Court action No. 957 of 1996

76. Prior to the hearing in this action commencing before Judge Anderson, the plaintiff sought discovery from MMAL as a non-party.  MMAL consented to providing discovery.  However, MMAL had no other involvement in this action. 

77. I am of the view that this is not a further application in relation to the previous discovery given by MMAL. 

78. Rather, relief in the nature of a liability for the plaintiff’s costs is sought against MMAL.  Prior to the application on 12 December 2006, the plaintiff had not given notice of nor instituted any action to allege that MMAL was liable for his costs in this action[15].

    [15] Kowalski v Workers Compensation Tribunal [2006] SASC 253 Para 29

79. The plaintiff is seeking to invoke the jurisdiction of the Court to make an order for costs against MMAL.

80. In my opinion, this application is a proceeding for the purposes of section 39 of the Supreme Court Act.

81. Leave is required before the proceeding can be issued.  Therefore, I grant the application of MMAL to dismiss the plaintiff’s application against MMAL as an abuse of process.

82. If indeed the plaintiff does not require leave to commence these proceedings against MMAL, I consider the plaintiff’s claim is without merit in any event.

83. The plaintiff submitted that, MMAL was liable to pay the defendants’ costs, because if his claim for damages against the defendants had been successful, MMAL would have been the sole beneficiaries of that award.

84. The plaintiff contended that he sustained an injury at work. MMAL paid him compensation. Therefore, pursuant to section 54(7) of the Workers Rehabilitation and Compensation Act 1986, MMAL was entitled to recover the damages obtained by the plaintiff from another wrongdoer in respect of the same injury.  The plaintiff submitted that even though Judge Anderson had found that the defendants were not negligent in their conduct of the plaintiff’s failed common law claim for his work injury, MMAL was liable for the costs of his failed action against the defendants.

1. He contended that his situation was analogous to that of Mr Moore-McQuillan in Rodas v Workcover Ex parteMoore McQuillan[16].  He submitted that although Mr Moore-McQuillan was not a party to those proceedings, an order for costs was made against him.

   [16] [2002] SADC 90.

2. The plaintiff’s argument is misconceived.  In the case of Rodas, the District Court Judge had found that Mr Moore-McQuillan was the “real driving force behind the proceedings”[17].

   [17] On appeal Moore-McQuillan v Workcover Corporation No. 2 [2000] SASC 68; [2000] SASC 157 (Full Court)

3. The plaintiff acknowledged that MMAL had no part to play in instituting his action against the defendants, supporting the action or even providing any encouragement of the action. 

4. I am of the view that section 54(7) of the Workers Rehabilitation and Compensation Act 1986 has no application to the circumstances of the present case. Section 54(7) of the Act may have application where compensation is paid in respect of a work injury and a damages action is issued in respect of the same work injury.

5. Where the two sets of proceedings might result in “double compensation”, the compensating authority is entitled to recover an amount in respect of that double compensation.  That is not the situation in the present case.

6. The plaintiff had alleged before Judge Anderson, that the defendants were negligent in their representation of him.  It was not a claim for damages in respect of a work injury.

7. In any event, the plaintiff did not obtain an award of damages at common law in respect of a work injury for which he was also compensated under the Workers Rehabilitation and Compensation Act 1986.

8. Therefore, if I had found that I had jurisdiction to determine the plaintiff’s application in relation to MMAL, I would have determined that it failed on the merits.

9. For the reasons I have given, I dismiss each of the plaintiff’s applications.  I will hear the parties as to costs.