Kuek v Devflan Pty Ltd
[2012] VSC 571
•26 November 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2004 9228
| Gabriel Kuek | Plaintiff |
| v | |
| Devflan Pty Ltd | First Defendant |
| - and - | |
| Ljubomir Nikolovski | Second Defendant |
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JUDGE: | KYROU J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 November 2012 | |
DATE OF JUDGMENT: | 26 November 2012 | |
CASE MAY BE CITED AS: | Kuek v Devflan Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 571 | |
JUDGMENT APPEALED FROM: | Kuek v Devflan Pty Ltd [2012] VSC 327 (7 August 2012, Mukhtar AsJ) | |
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COSTS – Taxation of costs – Application for review of costs order from a Judge of the Court –Non-compliance with time limit for filing and service of notice applying for review – Whether acceptable explanation for delay – Prejudice to other party – Prospects of success –Application for review set aside.
PRACTICE AND PROCEDURE – Overarching obligations under Part 2.3 of the Civil Procedure Act 2010 – Protracted delay with no explanation for the delay – Contravention of overarching obligation – Civil Procedure Act ss 7, 8, 9, 10, 13, 14, 15, 20, 21, 24, 25, 28.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Perkins | Access Law |
| For the Defendants | Mr R Heath | Brygel Lawyers |
TABLE OF CONTENTS
Introduction and summary............................................................................................................... 1
History of the dispute between the parties and procedural context......................................... 2
Relevant rules..................................................................................................................................... 6
Principles relating to the granting of extensions of time............................................................ 7
The filing and service of the Notice................................................................................................ 8
The Notice was filed and served out of time................................................................................ 9
Has Mr Kuek provided an acceptable explanation for his delay?.......................................... 10
Did the late filing and service of the Notice cause prejudice to the defendants?................ 12
The prospects of success of a review under r 63.57 of the Rules............................................. 13
Civil Procedure Act.......................................................................................................................... 19
Conclusion......................................................................................................................................... 23
HIS HONOUR:
Introduction and summary
This is an appeal from an order made by Mukhtar AsJ on 30 August 2012 setting aside a Notice of Application to Review an Order of a Costs Judge (‘Notice’) that the plaintiff, Mr Gabriel Kuek, filed pursuant to r 63.57 of the Supreme Court (General Civil Procedure) Rules2005 (‘Rules’) out of time.[1] Pursuant to r 77.06(7) of the Rules, the appeal involved a hearing de novo of the defendants’ application to set aside the Notice.
[1]The reasons for the order were delivered on 7 August 2012. See Kuek v Devflan Pty Ltd [2012] VSC 327 (7 August 2012).
Mr Kuek is an experienced litigation solicitor and the principal of the law firm Access Law. His firm has acted for him in the multiple proceedings in which he has engaged with the defendants.
The key issues in the appeal are:
(a) whether Mr Kuek has provided an acceptable explanation for the late filing and service of the Notice;
(b) whether the late filing and service of the Notice caused any prejudice to the defendants;
(c) whether the Notice had any prospects of success; and
(d) whether the Civil Procedure Act 2010 (‘Act’) supports the setting aside of the Notice.
The Notice contended that Wood AsJ had erred in concluding that the amount of the party and party costs taxed in the defendants’ favour against Mr Kuek did not infringe the indemnity principle. His Honour erred, so it was said, because he failed to properly consider whether that amount exceeded the amount that the defendants were liable to pay to their lawyers.
For the reasons that follow, I have concluded that Mr Kuek did not provide an acceptable reason for the late filing and service of the Notice; that the defendants suffered prejudice; that the Notice had no prospects of success; that Mr Kuek breached the Act; and that the appeal should be dismissed.
History of the dispute between the parties and procedural context
The dispute between the parties has its genesis in repairs costing $705.32 that the defendants performed on Mr Kuek’s Toyota Camry vehicle in March 2003. Mr Kuek unsuccessfully sued the defendants in the Magistrates’ Court claiming $3,855.90, unsuccessfully appealed to Balmford J in the trial division of this Court against the Magistrates’ Court Order[2] and then unsuccessfully appealed to the Court of Appeal against Balmford J’s decision.[3]
[2]Kuek v Devflan Pty Ltd [2005] VSC 163 (18 May 2005).
[3]Kuek v Devflan Pty Ltd [2006] VSCA 186 (31 August 2006). Mr Kuek was successful in overturning an order for indemnity costs that was made by Balmford J. The Court of Appeal substituted an order for party and party costs.
Costs orders were made against Mr Kuek by Balmford J and the Court of Appeal. On 10 October 2007, the Taxing Master, as Wood AsJ then was, made an order taxing the costs to be paid by Mr Kuek to the defendants at $39,105.20. By notice for review dated 24 October 2007 under r 63.56.1 of the Rules, Mr Kuek sought a review of that order. After conducting the review, on 8 February 2008, the Taxing Master made an order reducing the amount of the taxed costs from $39,105.20 to $38,730.20 (‘February 2008 Review Costs Order’).[4]
[4]On 29 October 2008, Master Wood made an order for costs in relation to the review.
Pursuant to r 63.57 of the Rules, Mr Kuek sought a review of the February 2008 Review Costs Order.[5] He contended that Taxing Master Wood had failed to properly consider the indemnity principle, that is, whether the amount of $38,730.20 exceeded the amount of the defendants’ liability to their lawyers. The review was conducted by Beach J. In the course of the review, his Honour ordered the defendants to produce their disclosure and retainer letters on the basis that they were relevant and had the capacity to bear upon the defendants’ liability pursuant to the costs orders.[6] His Honour examined the retainer letters, the party and party bill and the signed costs agreement between the defendants and their solicitor and stated that he was unable to conclude that the total of the party and party costs was greater than the amount for which the defendants were liable to their solicitor.[7] Accordingly, his Honour dismissed the review.
[5]Mr Kuek also sought a review of the costs order of 29 October 2008.
[6]Kuek v Devflan Pty Ltd [2009] VSC 91 (20 March 2009) [13].
[7]Kuek v Devflan Pty Ltd [2009] VSC 91 (20 March 2009) [15].
Mr Kuek appealed against Beach J’s orders. On 10 February 2011, the Court of Appeal upheld the appeal.[8] The Court set aside the February 2008 Review Costs Order and Beach J’s order of 20 March 2009 and remitted to Wood AsJ the notice for review dated 24 October 2007. [9]
[8]See Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011).
[9]The Court of Appeal also set aside the costs order of 29 October 2008.
Hansen JA (with whom Neave and Harper JJA agreed) held that Beach J had correctly required the defendants to produce disclosure and retainer letters, as they were relevant to the alleged breach of the indemnity principle.[10] Hansen JA noted, however, that Beach J had not ordered production of the invoices rendered by the defendants’ solicitor to the defendants.[11] Hansen JA concluded that Beach J made the following errors:
[10]Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [60].
[11]Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [63].
(a) Beach J did not give proper consideration to Mr Kuek’s submission that the review before Taxing Master Wood had miscarried so fundamentally that the fair and appropriate disposition was to remit the matter.
(b) Beach J denied Mr Kuek appropriate time to consider the documents produced and the appropriate further conduct of the matter.
(c) Beach J did not have before him proper materials on which he could ascertain the defendants’ liability to their lawyers.[12]
[12]Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [64], [67].
As will become apparent, the following statement of Hansen JA assumed critical importance in the present proceeding:
[T]he view expressed in the Taxing Master’s reasons – to the effect that the course proposed by the applicant will lead to the taxation of two different bills with additional delay, expense and inconvenience – is a floodgates type argument which is no answer to a taxing officer’s fundamental duty to conduct each taxation on its own merits in accordance with law. In this case, the relevant legal principle is that the respondents have no entitlement to recover party/party costs in excess of their liability to their lawyers. This type of issue will not often arise because, in the ordinary case, party/party costs fall well short of the receiving party’s actual liability to its lawyers. But, as I have noted, here the material is sufficient to suggest that the position may be otherwise. It follows that the taxing officer must be satisfied that, as a question of fact, the party/party costs do not exceed the respondents’ liability to their lawyers. Both the Taxing Master and the judge seemed to assume that the consequence of such a factual exercise would be the (inconvenient) step of requiring the respondents to produce a solicitor/client bill, and that there was nothing in the authorities to require a solicitor/client bill. However, it does not follow that the factual question posed can only be determined by reference to a solicitor/client bill. It may be readily apparent on the face of the lawyers’ accounts that the receiving party has actually paid its lawyers more than the amount of the party/party bill. It is unnecessary to say anything further about the different ways in which a taxing officer may achieve satisfaction as to such a question of fact. That will no doubt be explored by the parties on the rehearing.[13]
[13]Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [70].
On 11 March 2011, a mention hearing took place before Wood AsJ. Mr Kuek requested orders for the production of documents that fell into 11 categories. Wood AsJ ordered production of nine of those categories, including copies of retainer letters and disclosure statements evidencing costs agreements, tax invoices, trust account statements and documents evidencing payment of the invoices. On 1 April 2011, the defendants complied with the order. They produced 15 lump sum tax invoices dated between 12 August 2005 and 23 October 2007 totalling $54,264.20 and trust account records which disclosed payments of $47,514.20 between 24 August 2005 and 1 July 2008 in respect of the tax invoices. The difference between the two amounts was due to reduced fees to which counsel had agreed.
At the mention hearing of 11 March 2011, Wood AsJ refused a request by Mr Kuek for an order requiring the defendants to produce a solicitor and client bill of costs, on the basis that it was a request to create a new document and because the Court of Appeal had said that a determination of whether there was a breach of the indemnity principle could be made without the creation of such a document.
On 13 April 2011, Mr Kuek wrote to the defendants’ solicitor and, after noting that the 15 tax invoices were lump sum bills, requested ‘an itemised bill or alternatively, such information as would enable us to compare the items claimed in the Taxable Bill of Costs and the legal and clerical attendances charged in your invoices’. Mr Kuek also sought copies of the trust ledger and trust account statements. On 18 April 2011, the defendants’ solicitor wrote to Mr Kuek refusing to prepare an itemised bill and stating that the other items had been provided.
On 12 May 2011, Mr Kuek wrote to the defendants’ solicitor pressing for bank statements, trust account statements, cheques, original and electronic copies of the defendants’ solicitor’s files and the information underlying the 15 tax invoices. Mr Kuek’s letter stated that if the requested documents were not produced, he would apply for orders for further production and inspection. Despite the fact that, on 20 May 2011, the defendants’ solicitor refused to comply with Mr Kuek’s request, Mr Kuek did not seek orders for production or inspection.
At the review hearing before Wood AsJ on 29 August 2011, Mr Kuek contended that ‘liability’ for the purposes of the indemnity principle means actual liability, and that the Court should not simply accept that a solicitor’s tax invoices represent the client’s actual legal liability. Rather, according to Mr Kuek, the Court should require the solicitor to produce materials to substantiate the value of the work covered by the tax invoices.
Wood AsJ accepted the defendants’ submission that, in accordance with Catto v Hampton Australia Ltd(In Liq),[14] quantification of the amount that a receiving party is actually liable to pay to its lawyers is not required and that the Court could rely on the amount that that party has paid its lawyers. His Honour stated that the 15 tax invoices were the types of documents that the Court of Appeal identified as having the capacity to resolve the factual question of whether the indemnity principle has been breached. Accordingly, his Honour held that the defendants’ liability for costs to their lawyers exceeded the taxed amount of party and party costs and that there was no breach of the indemnity principle. His Honour confirmed the February 2008 Review Costs Order.
[14][2008] SASC 231 (22 August 2008) (‘Catto’).
On 29 September 2011, Wood AsJ made a formal order fixing the taxed costs at $38,730.20 and an order requiring Mr Kuek to pay the costs of the remitted review.
Following the costs order of 29 September 2011, the defendants prepared a bill in taxable form and served it on Mr Kuek. Mr Kuek did not respond. On 31 January 2012, the defendants filed and served a summons for taxation of the bill. The taxation was scheduled for 16 April 2012. On 9 March 2012, Mr Kuek filed and served a notice of objections to the bill. Mr Kuek did not mention the Notice and the notice of objections made no reference to the indemnity principle. On 30 March 2012, Mr Kuek requested the defendants to agree to a stay of the taxation scheduled for 16 April 2012 pending the hearing and determination of the Notice, but the defendants refused. At the taxation on 16 April 2012, Costs Registrar Conidi taxed the costs at $17,602.50.
As will become apparent, the proposed review under r 63.57 of the Rules is based on the contention that Wood AsJ misinterpreted the Court of Appeal decision of 10 February 2011 and that his Honour erred by being satisfied solely on the basis of the 15 tax invoices and the payments made in respect of those invoices that the defendants’ liability to their lawyers exceeded the amount of the party and party costs.
On 27 April 2012, the defendants filed a summons seeking an order striking out the Notice.
Relevant rules
Rule 63.57 of the Rules relevantly provides:
(2)If any party interested objects to an order of the Costs Court under Rule 63.56.1(6) or Rule 63.56.4(7), a Judge of the Court, on the application of that party, may review the order if the Costs Court has given reasons under Rule 63.56.1(8) or Rule 63.56.4(8).
(3) An application under paragraph (2) shall be made by notice.
(4) The notice shall—
(a)state by a list each item in the bill in respect of which the party objects to the order of the Costs Court on the review; and
(b)state specifically and concisely the grounds of objection to that order and the order sought in its place.
(5)Within 14 days after the making of the order of the Costs Court or the giving of reasons, whichever is the later—
(a) the notice under paragraph (3) shall be filed;
(b) a copy of the notice shall be lodged with the Costs Court; and
(c) a copy of the notice shall be served on each party interested.
Rule 3.02 of the Rules enables this Court to extend any time fixed by the Rules. It relevantly provides
(1)The Court may extend … any time fixed by these Rules or by any order fixing, extending or abridging time.
(2)The Court may extend time under paragraph (1) before or after the time expires whether or not an application for the extension is made before the time expires.
Principles relating to the granting of extensions of time
Whether a time limit should be extended is in the discretion of the Court. Such discretion is to be exercised in the light of the circumstances of the particular case, and is given for the purpose of enabling the Court to do justice between the parties.[15]
[15]Komba v National Australia Bank Ltd [2010] VSCA 232 (27 August 2010) [29] (‘Komba’).
Relevant factors to be considered in determining whether or not to grant an extension of time are the length of the delay, the reasons for the delay, whether there is an arguable case, and the extent of any prejudice to the respondent if the extension is granted.[16] These factors are not exhaustive.
[16]Jackamarra v Krakouer (1998) 195 CLR 516, 521 [7], 539-43 [66] (‘Jackamarra’); Komba [2010] VSCA 232 (27 August 2010) [29]; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 215 [103] (‘Aon’).
Other relevant matters include whether the delay was intentional or contumelious, or merely the result of a bona fide mistake or blunder, and whether the delay was that of the litigant or of its legal representatives. It may also be relevant, where the default is that of a party's legal representatives, to take into account considerations personal to the party which might have affected its ability to safeguard its own interests. The extent to which any such prejudice may be remedied by an appropriate costs order may also be relevant.[17]
[17]Jackamarra (1998) 195 CLR 516, 543 [66].
The filing and service of the Notice
The impugned order was made by Wood AsJ on 29 September 2011 and was authenticated on that day. His Honour’s reasons for the order were delivered on 29 September 2011 and a certified copy was prepared on that day. A copy of the authenticated order and a certified copy of the reasons were emailed by Wood AsJ’s associate to Mr Kuek and to the defendants’ solicitor at 2.14pm on 29 September 2011.
Rule 63.57(5) of the Rules provides that a notice for review must be filed and served ‘[w]ithin 14 days after the making of the order … or the giving of reasons, whichever is the later’. The last day for the filing and service of such a notice in the present case was 13 October 2011. The Notice is dated 13 October 2011 on the first page and 14 October 2011 on the last page. However, it was not filed until 22 March 2012 and was not served until 30 March 2012.
In his affidavit of 15 May 2012, Mr Kuek stated the following about the filing and service of the Notice (omitting paragraphs which merely refer to the documents being exhibited):
17.On 3 October 2011, my office received, via ordinary post, a sealed copy of the Orders made by Wood AJ and his statement of Reasons on Costs of Review dated 29 September 2011.
…
19.I was aggrieved with the Taxing Master’s decisions on review.
20.On 14 October 2011, under cover of letter, my office posted three copies of my Notice of Application to Review Orders of Cost Judge (‘Application for Review’) to the Prothonotary for issuing.
...
22.On 14 February 2012, my office wrote to the Prothonotary’s office enquiring about the status of the Application for review.
…
24.I did not receive a response from the Prothonotary’s Office to my letter of 14 February 2012.
25.On 16 March 2012 at 9.15am, I telephoned and spoke with Mr Rod Ratcliffe of the Prothonotary’s office.
Mr Kuek’s affidavit explained that, following his discussion with Mr Ratcliffe, on 20 March 2012 three copies of the Notice were posted to the Prothonotary’s office. Those copies were sealed by the Court on 22 March 2012 and were returned to Mr Kuek’s office by post on 27 March 2012. One of the sealed copies of the Notice was served on the defendants’ solicitor on 30 March 2012.
Mr Kuek’s affidavit stated that, if the Court concludes that the Notice was filed out of time, he requests that the time for filing be extended to 23 March 2012.
The Notice was filed and served out of time
The first issue that I need to address is whether the Notice was filed and served out of time. Mr David Perkins, who appeared for Mr Kuek, submitted that it was not unreasonable for Mr Kuek to proceed on the basis that time for filing and serving the Notice did not commence until the authenticated order and reasons were received by him by post on 3 October 2011. Mr Perkins relied on the statement in Smith v The Queen[18] that ‘[u]ntil a judgment or order has passed into record, it remains under the control of the Court and the Court may recall or alter the judgment or order’.
[18][2012] VSCA 133 (21 June 2012) [30] n 7.
Mr Perkins’ submission must be rejected. Rule 60.01 of the Rules provides that an order may be enforced once it is authenticated. The impugned order in the present case was authenticated in accordance with r 60.02 on 29 September 2011. Rule 63.57(5) provides that time for filing and serving the Notice commenced on the day the order was made or the reasons were given, whichever was later. The authenticated order and the certified statement of reasons were emailed to Mr Kuek on 29 September 2011. Time commenced to run from that day and not from 3 October 2011 and it would have been unreasonable for Mr Kuek, as a legal practitioner, to proceed on any other basis. As it was not suggested by Mr Perkins that Mr Kuek did not receive the email of 29 September 2011, Mr Kuek’s affidavit should have made reference to it. The absence of such a reference had the potential to create a misleading impression.
I heard considerable argument on whether the evidence established that the Notice was posted to the Prothonotary’s office on 14 October 2011, as asserted by Mr Kuek in his affidavit. This issue does not go to the question of whether the Notice was filed out of time because the deadline for filing was 13 October 2011. Even if the Notice had been posted on Friday 14 October 2011, the earliest date upon which the Court could have sealed the Notice was Monday 17 October 2011.
Mr Kuek’s evidence about the posting of the Notice, however, is relevant to the issue of whether he has provided an acceptable explanation for the late filing and service of the Notice. I now turn to that issue.
Has Mr Kuek provided an acceptable explanation for his delay?
Mr Kuek’s affidavit does not provide any explanation for the late filing of the Notice. He merely states that, on 14 October 2011, ‘[his] office posted three copies of [the] Notice … to the Prothonotary for issuing’ and that, on 14 February 2012, ‘[his] office wrote to the Prothonotary’s office enquiring about the status of the [Notice]’. Presumably, Mr Kuek wants the Court to draw the inference that the Prothonotary’s office mislaid the Notice. The defendants want the Court to infer that the Notice was not posted at any time prior to 20 March 2012. Another possible inference, of course, is that the Notice was posted on 14 October 2011 and was lost in the mail.
As the drawing of the inference contended by Mr Kuek would potentially assist his position and, conversely, the drawing of the inference contended by the defendants would potentially assist their position, it is necessary for me to decide whether the Notice was posted on 14 October 2011.
As Mr Kuek is an experienced litigation solicitor, it can be assumed that, at the time that he affirmed his affidavit, he was aware of the importance of the timing of the posting of the Notice and of the need to provide an explanation for any delay. Accordingly, he must have selected the phrase ‘my office posted three copies of [the] Notice’ carefully and must have deliberately refrained from providing any explanation for his delay. If Mr Kuek had posted the Notice personally, he would have expressly stated this. As he did not do so, his statement means either that he saw an unidentified person in his office post the Notice (which is unlikely), or that an unidentified person in his office told him that he or she posted the Notice or saw someone else post it. Mr Perkins conceded that Mr Kuek’s statement involves hearsay. The defendants did not object to the admissibility of the hearsay evidence, but submitted that the Court should give it little weight.
It is surprising that, as an experienced litigation solicitor, Mr Kuek left proof of the important matter of the timing of the posting of the Notice to a bare hearsay assertion that ‘[his] office posted three copies of [the] Notice’. The person who actually posted the Notice has not been identified and no information has been provided about where and how the posting occurred.
Moreover, Mr Kuek’s affidavit is silent on why no steps were taken until 14 February 2012 to follow up why the Notice had not been issued and returned by the Prothonotary’s office. Mr Kuek has pursued his dispute with the defendants with vigour since 2003 and must have known the time limits provided for by the Rules and the consequences of non-compliance with those time limits. Accordingly, I would have expected that, if the Notice had been posted on 14 October 2011 as alleged by Mr Kuek, he would have contacted the Prothonotary’s office promptly in October 2011 to find out why the Notice had not been issued and returned to him.
Further, as Mr Kuek had dealings with the defendants’ solicitor between 14 October 2011 and 30 March 2012, I would have expected Mr Kuek to have mentioned the Notice to the solicitor during this period. Instead, Mr Kuek continued to take steps in relation to the taxation of costs whose efficacy depended on the very order that the Notice sought to impugn. This is inconsistent with the Notice having been posted on 14 October 2011.
In all the circumstances, I am not satisfied, on the balance of probabilities, that the Notice was posted by Mr Kuek or anyone in his office on 14 October 2011. However, even if I had been so satisfied, my conclusion as to the disposition of this proceeding would have remained the same. This is because the Notice would still have been filed and served late and the other matters which I discuss below would have remained apposite.
The Notice was filed on 22 March 2012, 161 days after it was due to be filed, and was served on 30 March 2012, 169 days after it was due to be served. This is a significant period of delay for which Mr Kuek has provided no explanation. The length of the delay and the absence of any explanation for it militate strongly against granting any extension of time and support the granting of the defendants’ application to set aside the Notice.
Did the late filing and service of the Notice cause prejudice to the defendants?
Mr Robert Heath, who appeared for the defendants, submitted that the late filing and service of the Notice has caused prejudice to the defendants in the form of stress which cannot be remedied by an order for costs. Mr Perkins, on the other hand, contended that the only prejudice that the defendants have suffered is costs thrown away, which can be remedied by a costs order.
In Aon Risk Services Australia Ltd v Australian National University,[19] the High Court recognised that an order for costs may not always overcome injustice to a party occasioned by the grant of an extension of time to an opposing party, and that a court is entitled to weigh in the balance the strain and uncertainty that litigation imposes upon litigants, including corporate litigants.[20]
[19](2009) 239 CLR 175.
[20]Aon (2009) 239 CLR 175, 192 [30], 214 [100]-[101].
In the context of litigation dating back to 2003, the late filing of the Notice would inevitably have caused prejudice to the defendants in the form of additional strain and uncertainty which cannot be adequately remedied by a costs order. This prejudice is another factor that militates against the granting of an extension of time to Mr Kuek and supports the defendants’ application to set aside the Notice.
I have also taken into account the prejudice that Mr Kuek would suffer from an order depriving him of the right to seek a review that is conferred by r 63.57 of the Rules. However, having regard to the view that I have formed about the prospects of success of such a review – to which I will now turn – I do not regard that prejudice as a significant consideration.
The prospects of success of a review under r 63.57 of the Rules
The submissions made by the parties on the prospects of success of a review under r 63.57 of the Rules focused on the meaning and effect of para 70 of the reasons of Hansen JA in the Court of Appeal decision of 10 February 2011, which is set out at [11] above. In particular, the parties referred to the following statements of his Honour:
the relevant legal principle is that the respondents have no entitlement to recover party/party costs in excess of their liability to their lawyers.
in the ordinary case, party/party costs fall well short of the receiving party’s actual liability to its lawyers.
the taxing officer must be satisfied that, as a question of fact, the party/party costs do not exceed the respondents’ liability to their lawyers.
it does not follow that the factual question posed can only be determined by reference to a solicitor/client bill. It may be readily apparent on the face of the lawyers’ accounts that the receiving party has actually paid its lawyers more than the amount of the party/party bill. It is unnecessary to say anything further about the different ways in which a taxing officer may achieve satisfaction as to such a question of fact.[21]
[21]Kuekv Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [70] (emphasis added).
Mr Perkins relied on Hansen JA’s references to the defendants’ ‘liability to their lawyers’ for the proposition that the Court of Appeal decision meant that, on remittal, Wood AsJ was required to be satisfied on the basis of the documentary evidence that the amount for which the defendants were legally liable to their lawyers for costs was not less than the amount awarded for party and party costs. Mr Perkins contended that Wood AsJ did not carry out the review in accordance with the Court of Appeal decision because he accepted the amounts in the 15 tax invoices rendered by the defendants’ solicitor and the amounts paid by the defendants in respect of those invoices, without conducting any analysis of the defendants’ legal liability for costs in accordance with the executed costs agreement. According to Mr Perkins, such an analysis required production of files recording the work performed by the defendants’ solicitor.
Mr Heath contended that, for the purpose of the indemnity principle, it is sufficient if the amount paid by the receiving party was not less than the amount of the party and party costs. Although Mr Heath did not expressly refer to Catto,[22] he implicitly relied on that case for the proposition that the indemnity principle does not require proof that the receiving party’s underlying legal liability to its lawyers is not less than the amount of the party and party costs.
[22][2008] SASC 231 (22 August 2008).
In Catto, the Full Court of the Supreme Court of South Australia decided that the indemnity costs to which the defendants were entitled were the amounts that they actually paid in defending the plaintiffs’ claims, and were not confined to those amounts that their solicitors could have enforced in an action against them – that is, the amounts that they were legally obliged to pay.
White J (with whom Vanstone and Anderson JJ agreed) said the following in relation to the expression ‘costs incurred’ in r 101.07(6)(d) of the Supreme Court Rules 1987 (SA):
[T]he expression ‘costs incurred’ in r 101.07(6)(d) … is capable of being construed so as to refer to amounts actually expended by a party for costs.
…
A litigant which has paid costs to its solicitors which were not strictly enforceable against it may be said to have incurred the costs by bringing the liability upon itself.
This construction is also consistent with the notion that costs are awarded to a party by way of indemnity. They are ‘intended to reimburse a litigant for costs actually incurred’.
…
Further, in analogous circumstances litigants have been held to be entitled to recover costs already paid in connection with litigation, even though their solicitors could not have enforced the claim for those costs. The cases involving uncertificated solicitors provide an example.[23]
[23]Catto [2008] SASC 231 (22 August 2008) [32], [33]-[34], [37] (citation omitted; emphasis in original).
Mr Perkins sought to distinguish Catto on the basis that, in that case, the clients paid their solicitors’ invoices using their own funds, whereas in the present case, the payments that were made in respect of the 15 tax invoices were largely funded by amounts paid by Mr Kuek pursuant to the costs orders set aside by the Court of Appeal. For the reasons discussed at [63] and [64] below, I am of the view that this is not a proper basis to distinguish Catto.
In my opinion, the principle in Catto is applicable to the present case. As a single judge, I should follow Catto unless I am satisfied that it is inconsistent with the Court of Appeal decision of 10 February 2011. I am not so satisfied. Hansen JA’s statement that ‘[i]t may be readily apparent on the face of the lawyers’ accounts that the receiving party has actually paid its lawyers more than the amount of the party/party bill’[24] is entirely consistent with Catto.
[24]Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [70].
Read in context, Hansen JA’s references to ‘liability to their lawyers’ were not references to a legally determined liability such as that which would arise from a solicitor and client taxation or a judgment. This conclusion is reinforced by his Honour’s earlier statement that production of the tax invoices that the defendants had received from the solicitor would have assisted the Court to produce a taxation in accordance with law.[25] His Honour was thus referring to amounts paid by the defendants in good faith to satisfy a genuine claim for costs by their lawyers.[26] It may be readily apparent from a lawyer’s invoice that an amount paid was a payment made in good faith to satisfy a genuine claim for costs. It will usually not be readily apparent, however, from a lawyer’s invoice that the invoice represents a legally determined liability.
[25]Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [63].
[26]Cf Catto [2008] SASC 231 (22 August 2008) [43].
My interpretation of para 70 of Hansen JA’s reasons is consonant with general principles and common sense. A costs order in favour of a successful party is intended to indemnify that party for costs incurred by it which are ‘necessary or proper for the attainment of justice or for enforcing or defending [its] rights’.[27] An assessment of party and party costs by the Costs Court is arrived at after an examination of the work performed against the applicable scale. As the amount assessed is, by definition, ‘necessary or proper’, it should be paid unless payment of that amount would more than indemnify that party for the costs it has incurred. Once it is established that the amount paid by the successful party is not less than the amount of the party and party costs and that the amount has been paid in good faith to satisfy a genuine claim for costs, the purpose of the indemnity principle has been served.
[27]Rules 63.29 and 63.69 of the Rules.
The interpretation that Mr Perkins sought to place on para 70 of Hansen JA’s reasons would require a comparison of the amount of the party and party costs and the amount of the legally determined liability of the successful party to its lawyers. In the absence of agreement about that amount as between the successful party and the unsuccessful party, that amount would have to be established by a solicitor and client taxation or a judgment.[28] This would be contrary to the administration of justice because it would prolong the Court processes and significantly add to the costs without any material benefit for anyone.
[28]The delivery of a bill of costs suitable for a solicitor and client taxation would not establish the client’s liability, as it would merely represent the amounts claimed by the lawyer.
It follows that, at the remitted review, the defendants did not need to satisfy Wood AsJ that they had a legally determined liability to pay their lawyers an amount that was not less than the amount of the party and party costs. It was sufficient for his Honour to be satisfied on the evidence that the defendants had paid their lawyers in good faith to satisfy a genuine claim for costs that was not less than the party and party costs. There was no evidence before his Honour from which he could have concluded that the 15 tax invoices did not represent genuine claims for costs or that the payments that were made in respect of those invoices were not made in good faith.
Mr Perkins submitted that, in the absence of a detailed examination of documents evidencing the work that had been performed by the defendants’ lawyers, and an assessment of that work against the executed costs agreement, Wood AsJ could not properly be satisfied that the amount paid to the lawyers was legally owing to them. He submitted that an analysis that was conducted by Mr Yu Shan Tong, a solicitor employed by Access Law, of the costs payable under the costs agreement indicated that those costs were significantly lower than the costs paid by the defendants to their lawyers.
The analysis to which Mr Perkins referred was contained in a table headed ‘Comparison of Solicitor Costs Claimed in Taxable Bill and Potential Costs Pursuant to Costs Agreement’ (‘Mr Tong’s Table’). Mr Perkins informed me that an earlier version of Mr Tong’s Table was produced at the Court of Appeal hearing. The Court, however, did not refer to Mr Tong’s Table. The ‘material’ that Hansen JA said was ‘sufficient to suggest’ that the actual liability of the defendants to their lawyers did not exceed the party and party costs was the retainer letters.[29] His Honour made this statement without the benefit of the 15 tax invoices which, at that stage, had not been produced to the Court.
[29]Kuek v Devflan Pty Ltd [2011] VSCA 25 (10 February 2011) [66], [70].
At the remitted review, Wood AsJ considered Mr Tong’s Table and concluded that it was flawed because it contained errors and was based on incorrect assumptions. Wood AsJ was right to so conclude. Mr Tong’s Table does not purport to be an expert report and there is no evidence that Mr Tong has any expertise in legal costing. Mr Tong’s Table contains bare monetary amounts without any explanation of how they were calculated and what, if any, assumptions underpin them. The amounts are no more than Mr Tong’s opinion of the amounts payable under the costs agreement. As Mr Tong is not an expert and, in any event, is not independent of Mr Kuek, it is difficult to see how Mr Tong’s Table is admissible, let alone of any probative value.
Having considered Mr Tong’s Table, I am not satisfied that it provides any evidentiary basis to impugn the accuracy or genuineness of the 15 tax invoices rendered to the defendants by their lawyers or the amounts paid by the defendants to their lawyers.
Mr Perkins also submitted that the amounts received by the defendants’ lawyers cannot be treated as evidence of payment by the defendants because, of the total amount of $47,514.20 that was received, $30,594.05 represented funds paid by Mr Kuek pursuant to costs orders that the Court of Appeal set aside. According to Mr Perkins, the defendants only paid $16,920.15 to their lawyers. I reject this submission. The orders required Mr Kuek to pay the relevant amounts to the defendants. The fact that Mr Kuek paid the amounts to the defendants’ solicitor and the defendants subsequently authorised the solicitor to apply those funds in payment of the invoices does not alter the character of the payments as payments by the defendants to discharge their liability to their lawyers under the tax invoices.
Likewise, the character of the payments is not altered by the fact that the orders pursuant to which Mr Kuek made them were set aside by the Court of Appeal. At the time that the payments were made from the trust account of the defendants’ solicitor, the orders were legally enforceable. Although the Court of Appeal set aside the orders, it did not order that the amounts paid by Mr Kuek be repaid. The withdrawals from the trust account to part-pay the 15 tax invoices remain legally efficacious.
Finally, Mr Perkins made the novel submission that the 15 tax invoices could not be a basis for ascertaining the defendants’ liability to their lawyers because they merely represented the lawyers’ estimate of the value of the work that they had performed. A tax invoice signed by a firm of solicitors is a business record rather than an opinion in writing. It evidences the amount claimed by the solicitors from their client, and unless it is successfully impugned, it can found legal proceedings to recover the amount claimed.
For all the above reasons, Wood AsJ was justified on the evidence before him to conclude that the indemnity principle had not been infringed. In my opinion, on any review of Wood AsJ’s decision under r 63.57 of the Rules, there would be no prospect that the decision would be set aside on the basis of the matters set out in the Notice, as articulated in Mr Perkins’ submissions.
My conclusion on the prospects of success of the Notice strongly militates against granting Mr Kuek an extension of time and supports the granting of the defendants’ application to set aside the Notice.
Civil Procedure Act
The overarching purpose of the Act, as set out in s 7(1), is ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. Under s 8(1), the Court must seek to give effect to the overarching purpose in the exercise of any of its powers or in the interpretation of those powers. Pursuant to s 9(1), the Court must have regard, among other matters, to the efficient conduct of the business of the Court, the efficient use of judicial resources and the timely determination of the civil proceeding.[30] Section 9(2) provides that the Court may have regard, among other matters, to the degree of promptness with which the parties have conducted the proceeding and the degree to which they have complied with the overarching obligations.[31]
[30]See s 9(1)(c), (d) and (f) of the Act.
[31]See s 9(2)(c) and (e) of the Act.
A lawyer acting for himself or herself in civil litigation is subject to two sets of overarching obligations under the Act – as a party[32] and as a legal practitioner[33] – and to a further set of common law obligations as an officer of the Court.[34] Such a lawyer must be scrupulous in his or her dealings with other parties and the Court and must not use his or her position to gain an improper advantage or to impose an improper burden.
[32]See s 10(1)(a) of the Act.
[33]See ss 10(1)(b), 13 and 14 of the Act.
[34]See s 15 of the Act.
Mr Heath submitted that Mr Kuek has breached his overarching obligations under ss 20, 21, 24 and 25 of the Act and that, pursuant to s 28, the Court should take those breaches into account in determining whether to grant the defendants’ application to set aside the Notice. Those sections provide as follows:
20Overarching obligation to cooperate in the conduct of civil proceeding
A person to whom the overarching obligations apply must cooperate with the parties to a civil proceeding and the court in connection with the conduct of that proceeding.
21 Overarching obligation not to mislead or deceive
A person to whom the overarching obligations apply must not, in respect of a civil proceeding, engage in conduct which is—
(a) misleading or deceptive; or
(b) likely to mislead or deceive.
24Overarching obligation to ensure costs are reasonable and proportionate
A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to—
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
25 Overarching obligation to minimise delay
For the purpose of ensuring the prompt conduct of a civil proceeding, a person to whom the overarching obligations apply must use reasonable endeavours in connection with the civil proceeding to—
(a) act promptly; and
(b) minimise delay.
28Court may take contravention of overarching obligations into account
(1)In exercising any power in relation to a civil proceeding, a court may take into account any contravention of the overarching obligations.
(2)Without limiting subsection (1), in exercising its discretion as to costs, a court may take into account any contravention of the overarching obligations.
It is arguable that Mr Kuek’s behaviour in conducting the taxation of costs in the period from 14 October 2011 until March 2012 without informing either the Court or the defendants of his intention to seek a review of Wood AsJ’s order of 29 September 2011 under r 63.57 of the Rules constituted a failure to cooperate with the defendants and with the Court. It is also arguable that the same behaviour misled the defendants, in the sense that it induced a belief that Mr Kuek would not seek a review of the order. In the light of my conclusion below regarding s 25 of the Act, it is not necessary for me to reach a final view on whether Mr Kuek breached ss 20 and 21 of the Act.
If the issue for consideration by the Court was whether Mr Kuek’s conduct since 2003 has been conducive to the costs in the overall dispute being reasonable and proportionate for the purposes of s 24 of the Act, the answer would be resounding ‘no’. However, that is not the question that arises under s 24. What I need to decide is whether any costs incurred since 29 September 2011 have been unreasonable or disproportionate. There is no evidence from which I can make such a finding.
In relation to s 25 of the Act, the matters to which I have referred at [32] to [43] above clearly demonstrate that Mr Kuek has failed to act promptly and to minimise delay in pursuing his professed desire to have Wood AsJ’s order of 29 September 2011 reviewed pursuant to r 63.57 of the Rules. Mr Kuek was required to file and serve the Notice by 13 October 2011. A party that purports to post a document to the Court for filing on the day after the document was required to be filed under the Rules does not act promptly and does not minimise delay. Further, a party that is anxious to protect its interests complies with the time limits imposed by the Rules and acts promptly once it realises that a step has not been taken in accordance with those time limits. I reject Mr Perkins’ submission that, having posted the Notice to the Prothonotary’s office, it was appropriate for Mr Kuek to wait until the sealed Notice was returned.
If Mr Kuek had realised on 14 October 2011 that the deadline for the filing of the Notice had already passed, he would have arranged for an employee to attend the Prothonotary’s office personally to file the Notice rather than posting it. Mr Kuek has not explained why he did not do so. Nor has he explained why he took no steps until February 2012.
Not only is Mr Kuek’s lack of action inconsistent with s 25 of the Act, his failure to explain to the Court why he took no action constitutes a failure to provide such information as the Court requires to properly decide whether to grant him the indulgence that he seeks.
In my opinion, Mr Kuek’s conduct constitutes a breach of s 25 of the Act and it is appropriate for me to take that breach into account in deciding whether to grant him an extension of time and whether to grant the defendants’ application to set aside the Notice.
Mr Perkins was dismissive of the defendants’ contentions that Mr Kuek had breached the Act. He made a broad-brush submission that the Act contains generalities and ‘rhetoric’ and that its ‘fundamental intent … is that justice be done’.
I reject Mr Perkins’ submissions. The Act does not contain generalities and rhetoric. Nor does it deal with abstract concepts of justice. The Act imposes specific statutory obligations on the Court, the parties to civil litigation, the lawyers acting in civil litigation and other persons involved in litigation such as expert witnesses.[35] It seeks to ensure that civil litigation is conducted in a just, efficient, timely and cost effective manner and it gives the Court wide powers to make orders limiting the rights and remedies that are otherwise available to a party if that party breaches its obligations under the Act.
[35]See ch 2 of the Act.
The Act must be taken seriously by litigants and their lawyers. In an appropriate case, the Court is entitled to – and will – say to a party seeking to enforce its rights in a manner that is antithetical to the overarching purpose and to that party’s overarching obligations that ‘enough is enough’, and will act to curtail those rights in the interests of the administration of justice.[36]
[36]Under s 16 of the Act, each person to whom the overarching obligations apply has a paramount duty to the Court to further the administration of justice in relation to any civil proceeding in which that person is involved.
Conclusion
For all of the above reasons, Mukhtar AsJ was right to set aside the Notice. Accordingly, the appeal from his Honour’s order should be dismissed. I will hear from the parties on the appropriate form of the order to be made by this Court and on the question of costs.
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