Kowalski v Stanley & Partners

Case [2016] SASCFC 74

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Civil)

KOWALSKI v STANLEY & PARTNERS & ANOR

[2016] SASCFC 74

Judgment of The Full Court

(The Honourable Justice Kelly, The Honourable Justice Peek and The Honourable Justice Lovell)

22 July 2016

PROCEDURE - COSTS - TAXATION

PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - VEXATIOUS LITIGANTS AND PROCEEDINGS

Appeal against a decision of a single Judge to refuse permission to appeal against an order of a Master dismissing an application to tax a bill of costs.

The first respondent acted for the appellant in relation to claims against his former employer and sought to recover those costs in 1993. The appellant consented to judgment and paid the judgment sum. In 1995 he made three unsuccessful applications to set that judgment aside, and sought an extension of time within which to appeal to the Supreme Court. In 1996 a Judge of this Court refused that application and the subsequent applications to reopen the decision and to set aside the order. The appellant did not seek to appeal this decision to the Full Court until 2012 when he sought an extension of time to file a notice of appeal against the refusal to extend time to appeal. This application was dismissed by a Judge of this Court. On 20 January 2014 the appellant was declared to be a vexatious litigant, but was subsequently granted permission to institute an application for a Master to tax the costs of the first respondent, to which the consent judgment of 1993 related.

On 27 November 2014, a Master heard the appellant’s application to tax the costs. The second respondent, who had been a partner in the first respondent firm, sought an order that the application for a taxation be dismissed or permanently stayed. The Master granted the application on three bases: that s 42(1) of the Legal Practitioners Act 1981 invests the Court with a discretion as to whether to order a taxation and that in the circumstances that discretion should be exercised adversely to the appellant; that the application should be found to be an abuse of process; and that because the appellant had entered into a consent judgment, the doctrine of res judicata applies and is fatal to the application. The appellant sought permission to appeal to a single Judge against the Master’s decision. The Judge dismissed the application. The appellant now appeals against that decision to the Full Court.

Held, per Kelly and Peek JJ (dismissing the appeal) (Lovell J agreeing in separate reasons):

1.       The Master was clearly correct in holding that he had a discretion whether to tax the costs and that the correct exercise of that discretion in all the circumstances of this case was to refuse to tax.

Held, per Kelly and Peek JJ:

2.       The Master’s decision to dismiss the application as an abuse of process was correct, as was the Judge’s decision to decline to interfere with that decision.

Legal Practitioners Act 1981 ss 42, 42(1), 42(2), 42(5); Supreme Court Act

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Kowalski v Stanley & Partners [2016] SASCFC 74
Case
[2016] SASCFC 74
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CaseChat Overview and Summary

This case concerned an appeal by Mr Kowalski against a decision of Judge Dart, who had dismissed Mr Kowalski's application to have legal costs taxed. Mr Kowalski had previously made several applications in the Magistrates Court seeking to set aside a judgment, which were all dismissed. His final application sought to rescind or tax the costs awarded against him. The Magistrates Court, per Magistrate Millard, held that it lacked jurisdiction to tax costs, as this power resided exclusively with the Supreme Court under section 42 of the Legal Practitioners Act 1981 (SA). Magistrate Millard further determined that there was no basis to order taxation as the judgment had not been set aside.

The central legal issue before the Full Court was whether the Supreme Court, under section 42(1) of the Legal Practitioners Act 1981 (SA), had a discretion to refuse an application to tax costs, or whether it was obliged to tax costs upon being asked to do so, regardless of the circumstances or the lateness of the request. Mr Kowalski contended that the court had no such discretion and was bound to tax the costs.

The Full Court, comprising Kelly, Peek, and Lovell JJ, affirmed the decision of Judge Dart. The Court reasoned that the wording of section 42(1), specifically "may tax and settle," indicated a discretionary power rather than a mandatory duty. This interpretation was supported by the phrase "The Supreme Court's power," which suggested a power to act, not an obligation to do so simply upon application. The Court also referred to the decision in *Nagy v Ryan*, where Gray J had similarly held that the powers conferred by sections 42(1) and 42(5) of the Act were discretionary. The Court found that the Magistrate had correctly exercised her discretion in dismissing the application to tax costs, particularly given the history of prior unsuccessful applications by Mr Kowalski and the fact that the judgment had not been set aside.

The appeal was dismissed.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

PEEK JJ
Bampton J summarised the initial proceedings in the Magistrates Court thus:[10] On 29 March 1995, Mr Kowalski filed an application in the Magistrates Court seeking that the judgment be set aside. The application was dismissed by Magistrate Millard SM on 7 April 1995. On 9 October 1995, Mr Kowalski filed another application seeking that judgment be set aside. That application was dismissed by Mr Johansen SM on 3 November 1995. Mr Kowalski filed yet a further application on 10 November 1995 seeking that the costs be rescinded or taxed. That application was dismissed by Mr Millard on 17 November 1995. [11] On 27 November 1995, Mr Millard published detailed reasons for dismissing Mr Kowalski’s application filed 10 November 1995. [12] In his reasons, Mr Millard referred to Mr Kowalski’s affidavit (sworn 10 November 1995) filed in support of his application. Mr Millard stated that in that affidavit, Mr Kowalski asserted that he had consented to the judgment believing that the costs had been taxed in the Supreme Court and having learned that they were not taxed, he asserted it was unconscionable for Stanley & Partners to pursue judgment in this matter. Mr Millard stated that what Mr Kowalski’s affidavit did not depose to was the earlier history of the claim for costs and the various applications before the Court in respect of that claim or the fact that he had satisfied the judgment. Mr Millard referred to the application filed on 29 March 1995 where Mr Kowalski sought an order that judgment be set aside and that he be given leave to file a defence and counterclaim. At the hearing of the application on 7 April 1995, there was no appearance by or on behalf of Mr Kowalski. Mr Millard dismissed the application and ordered that Mr Kowalski pay Stanley & Partners’ costs. Mr Millard referred to a letter that Mr Kowalski had written to the Magistrates Court by letter dated 3 April 1995 stating: With respect to the application to action number 788/93 that judgment against the defendant be set aside I ask to withdraw this application pending a police investigation into the matter. It was confirmed by a clerk of the Court during my phone conversation on 31 March 1995 that following the potential police investigation I will be able to lodge another (my underlining) application to set the judgment aside in regards to action number 788/93.[13] Mr Millard also referred to Mr Kowalski’s affidavit not deposing to the fact that Mr Kowalski had also issued an application on 9 October 1995 which was dismissed by Mr Johansen on 3 November 1995. In that application, Mr Kowalski again sought an order setting aside his consent to judgment. Mr Millard referred to having informed Mr Kowalski that if he sought a review of Mr Johansen’s decision, he must institute an appeal. [14] Mr Millard rejected Mr Kowalski’s argument that as a bill of costs had never been taxed Stanley & Partners was not entitled to recover judgment, stating:The plaintiff was entitled to proceed to issue these proceedings and once judgment was entered the issue of quantum and of liability was resolved thus there was no basis upon which this Court could usefully stay the proceedings pending a taxation. Mr Millard noted that the Magistrates Court has power to determine liability for legal costs and to fix quantum of the costs, but it has no jurisdiction to tax costs in the event of a dispute as to quantum. That jurisdiction, he said, lies exclusively with the Supreme Court pursuant to s 42 of the Legal Practitioners Act 1981 (SA) (the LPA).[1][15] Mr Millard said that if there is a dispute regarding quantum the Magistrates Court will adjourn the proceedings pending the issuing of an allocator by a Master of the Supreme Court certifying taxation of costs. He went on to say that it follows that where there is no dispute as to quantum there will be no taxation and where judgment is entered the judgment must be set aside before any question can arise as to a stay of further proceedings pending taxation. Mr Millard said he took the view that unless and until Mr Kowalski had judgment set aside, there was no basis upon which to order that costs be taxed. [1] Schedule 3 of the LPA replaced the repealed Division 8 (ss 41 to 43) of the LPA on 1 July 2014. The effect of clause 9 of Part 4 of Schedule 2 to the Legal Practitioners (Miscellaneous) Amendment Act 2013 (SA) No 44 is that repealed ss 41 to 43 of the LPA continue to apply to matters where first instructions were given before 1 July 2014. The appeal to Williams J against the refusal(s) to set aside judgment

Ratio Decidendi

Legal Principle Established

Established by: PEEK JJ

Mr Kowalski submits that Judge Dart had no discretion not to tax the costs upon being asked to do so, no matter how belatedly and in whatever circumstances.Consideration of ground 4 of appeal Section 42 of the Act at the relevant time (prior to 1 July 2014), appeared thus:42—Costs(1) On the application—(a) of a person claiming to be entitled to legal costs; or(b) of a person who is liable to pay, or who has paid, any legal costs,the Supreme Court may tax and settle the bill for those costs.(1a)The Supreme Court's power to tax and settle a bill of costs (but no other power of the Supreme Court under this section) may, subject to any rule, order or direction of the Court, be exercised by the Registrar of the Court.(1b)Subject to the rules of the Supreme Court, an appeal lies to a judge against a decision of the Registrar pursuant to subsection (1a).(2)Where an application has been made under subsection (1), the Supreme Court may—(a) restrain a person claiming to be entitled to the costs from commencing an action for recovery of the costs; or(b) stay any proceedings for recovery of the costs.(3) The Court may, on taxation of a bill of costs under this section—(a) order the refund of any amount overpaid; or(b) where the proceedings have been instituted by the person seeking recovery of the costs—order payment of legal costs in accordance with the taxed bill.(4)The Board may institute proceedings for the taxation of legal costs under this section on behalf of a person who is liable to pay, or has paid, the legal costs and must institute such proceedings if ordered to do so by the Tribunal.(5)Any court in which proceedings for the recovery of legal costs have been instituted may order the plaintiff to apply to have the legal costs taxed in accordance with this section, and may adjourn the proceedings until the taxation has been completed. Judge Dart held that there is a discretion to either accept, or to reject, an application to tax costs pursuant to s 42(1). His Honour rightly emphasised that the words are “may order” rather than mandatory words such as “must”. We would add that the following words “The Supreme Court’s power” (as distinct from “duty”) again confirms that the Court has a power to tax, rather than an obligation to do so merely because an application has been made. Judge Dart correctly noted that in Nagy v Ryan,[30] Gray J accepted submissions that the powers in s 42(1) and s 42(5) of the Act are discretionary. Gray J there stated:[31][26] The appellant submitted that the Magistrate erred in failing to consider and exercise her discretion pursuant to sections 42(1) and 42(5) of the Legal Practitioners Act. These sections provide a discretion to order that costs be taxed and to adjourn any recovery proceedings until the taxation of costs has been completed. …[27] Counsel for Mr Ryan submitted that section 42 provides a discretion to order taxation following an application for taxation. It was said that no such application had been made. Mr Nagy had made no complaint regarding the accounts. There had been no request before proceedings for an itemised account. In any event at the trial there was no dispute with respect to the agreed fee for the trial or the agent fee for the appeal.[28] Counsel further submitted that the power in section 42(5) was discretionary. The section provides that the court ‘may order’ and ‘may adjourn’. Counsel said that it was reasonable for the Magistrate not to exercise her discretion to make such an order. This was particularly relevant given that Mr Nagy made no prior complaint about the claim for professional fees.[29] I accept these submissions. As was apparent from evidence presented to the Magistrate the vast bulk of the account was undisputed. Taxation of the bill had not been requested by Mr Nagy. This ground is without substance.[30] (2003) 225 LSJS 432.[31] (2003) 225 LSJS 432, 437.