Lahoud v Lahoud

[2011] NSWSC 994

Supreme Court

New South Wales

Medium Neutral Citation:

Lahoud v Lahoud [2011] NSWSC 994

Hearing dates:

24 June 2011

Decision date:

01 September 2011

Jurisdiction:

Equity Division

Before:

Campbell JA

Decision:

(1) Order that the judgment in favour of Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd in the sum of $1,186,398.90 dated 17 November 2010 be set aside.

(2) Otherwise dismiss the Amended Notice of Motion filed by Victor Lahoud on 31 January 2011.

(3) Dismiss the Notice of Motion filed by Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd on 7 December 2010.

(4) Order Victor Lahoud to pay 33% of the costs as agreed or assessed of Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd concerning the two Notices of Motion.

Catchwords:

COSTS - Interest on costs - rate of interest - UCPR 36.7(1) - earlier order that interest be paid "at the rates set out in Schedule 5" UCPR - effect of repeal of Schedule 5 and amendment of r 36.7(1) - rate at which interest payable prior to 1 July 2010 - proper construction of order

COSTS - Interest on costs - time during which interest runs - earlier order reserving consideration of whether costs should continue to run - whether power to make order denying interest over past periods - power to make order denying interest over future periods - whether delay that makes it just for the successful parties not to receive interest on costs for a particular time - delay in preparing bill of costs before High Court special leave application determined - delay while Review Panel reviewed cost assessor's assessment - delay while appeal from Review Panel to District Court was on foot

COSTS - Effect of the entitlement to an input credit for GST on extent of indemnity -

COSTS - failure of costs assessor to disclose costs agreement between other party and solicitor - client legal privilege - procedural fairness

Legislation Cited:

Civil Liability Act 2002
Civil Procedure Act 2005
Courts Legislation Amendment Act 2010
Evidence Act 1995
Interpretation Act 1987
Legal Profession Act 1987
Legal Profession Act 2004
Uniform Civil Procedure Rules

Cases Cited:

Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58
Australian Hardboards Ltd v Hudson Investment Group Ltd [2007] NSWCA 104; (2007) 70 NSWLR 201
Beach Retreat Pty Ltd v Mooloolaba Marina Ltd [2009] QSC 84; 2 Qd R 356
Boyce v McIntyre [2009] NSWCA 185
ChongHerr Investments Ltd v Titan Sandstone Pty Ltd [2007] QCA 278
CSR Ltd v Eddy [2008] NSWCA 83; (2008) 70 NSWLR 725
Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154; (2004) 60 NSWLR 203
Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322
Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691
Hearne v Street [2008] HCA 36; (2008) 235 CLR 125
Hennessey Glass and Aluminium Pty Ltd v Watpac Australia Pty Ltd [2007] QDC 57; (2007) 69 ATR 374
Hexiva Pty Ltd v Lederer (No 2) [2007] NSWSC 49
Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242
Joseph Lahoud v Victor Lahoud [2006] NSWSC 126
Kalls Enterprises Pty Ltd (in liq) v Balogow (No 3) [2007] NSWCA 298
Kara Kar Holdings Pty Ltd v Brookton Holdings [1997] NSWCA 171
Kation Pty Ltd v Lamru Pty Ltd; Lewis v Nortex Pty Ltd (in liq) (No 5) [2010] NSWCA 294
Lahoud v Lahoud [2005] NSWSC 1019
Lahoud v Lahoud [2005] NSWSC 509
Lahoud v Lahoud [2006] NSWCA 169
Lahoud v Lahoud [2007] HCA Trans 128
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar, the Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand [2006] NSWCA 160; (2006) 66 NSWLR 112
Mann v Carnell (1999) 201 CLR 1
Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146
Merringtons Pty Ltd v Luxottica Retail Australia Pty Ltd [2005] VSC 525
MPB (SA) Pty Ltd v Gogic (1991) 171 CLR 657
Re Minister for Immigration and Ethnic Affairs; ex parte Lai Quinn (1997) 186 CLR 622
Rosser v Maritime Services Board of NSW (No 2) (1996) 14 BCL 375
Stein v Torella Holdings Pty Ltd [2010] NSWSC 1445
Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347
Thornton v Apollo Nominees Pty Ltd [2005] TASSC 38; (2005) 15 Tas R 35
Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 1106
Vrkic v Otta International [2003] NSWSC 641
Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474
Woolworths Limited v Strong (No 2) [2011] NSWCA 72

Category:

Interlocutory applications

Parties:

Joseph Lahoud
Joseph Lahoud & Associates Pty Limited
Victor Lahoud
Castle Constructions Pty Ltd
Solidare Pty Ltd

Representation:

Counsel
I M Neil SC (for Joseph Lahoud Parties)
S Philips (for Victor Lahoud Parties)
Solicitors
Verekers (for Joseph Lahoud Parties)
McLachlan Thorpe Partners (for Victor Lahoud Parties)

File Number(s):

2007/255809; 2001/60576

Publication restriction:

Nil

Judgment

1. CAMPBELL JA : Over five years ago now, I gave judgment, when sitting as a judge of the Equity Division, concerning the costs order that should be made in some complex litigation: Joseph Lahoud v Victor Lahoud[2006] NSWSC 126 (" the Costs Judgment "). The litigation had involved several different proceedings. All of them were between Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd, on the one side; and his brother Victor Lahoud and two companies that he controlled, on the other. It is convenient to refer to them, respectively, as the JL Parties and the VL Parties.

1. I made orders on 10 March 2006 to give effect to the Costs Judgment (" the Costs Orders "). Orders 1 and 2 required the VL Parties to pay certain identified costs of the JL Parties, with the costs of a particular issue being paid on the indemnity basis. Orders 3 and 4 provided:

"3. In this order:

X - equals the total amount of costs and disbursements which the Plaintiffs have paid or are liable to pay to their legal advisers in connection with these proceedings.

Y - equals the total amount of costs and disbursements allowed on assessment to the Plaintiffs in connection with these proceedings.

The Allowed Percentage equals ((Y/X) x 100)%

Order the Defendants to pay to the Plaintiffs interest on costs and disbursements, at the rates set out in Schedule 5 Uniform Civil Procedure Rules , on the Allowed Percentage of each amount of costs and disbursements actually paid by the Plaintiffs, from the date of payment by the Plaintiffs of each such amount of costs and disbursements until the first to occur of:

(a) such time as the Defendants have paid the costs due to the Plaintiffs under any order made in these proceedings, or

(b) any further order relating to interest on costs in these proceedings.

4. Reserve further consideration of whether interest on costs should continue to run."

1. The parties are still in dispute about the quantum of costs properly payable pursuant to Orders 1 and 2, and the manner of calculation of interest on those costs.

1. Two Notices of Motion have been referred to me for determination. They relate to three issues:

(1) The manner of calculating interest on costs. The Costs Orders required interest to be paid at the rates set out in Schedule 5 Uniform Civil Procedure Rules . However Schedule 5 has now been repealed. At the same time as that repeal took effect UCPR 36.7 was amended so that interest on costs was to be calculated by reference to a formula dependent upon the Reserve Bank cash rate, rather than by reference to a table that stipulates particular rates of interest for particular periods.

(2) Whether, in exercise of the further consideration that was reserved, there should now be an order that interest not run on costs during four particular periods of time.

(3) Whether a particular judgment that the JL Parties obtained on 17 November 2010, for an amount of costs and interest, on the basis of a Costs Determination Certificate, should be set aside or varied.

1. One Notice of Motion was taken out by the JL Parties, against the VL Parties. The other was taken out by Victor Lahoud alone, against the JL Parties. As it has eventuated, the fact that two of the VL Parties were not moving parties has not affected the outcome of the proceedings.

1. Written submissions addressing all three topics were exchanged prior to the hearing of the Notices of Motion. However, by the day of the hearing of the Notices of Motion it had become common ground that the judgment of 17 November 2010 should be set aside, without my ordering it to be replaced by any alternative judgment. The JL Parties submit that they will, at a later time, become entitled to a judgment in substitution for that of 17 November 2010. It is not necessary for me to express a view about the correctness of that submission, but appropriate that I record that the submission was made.

1. Thus, this judgment relates only to issues 1 and 2 identified above.

1. At the outset I should record that I have no recollection of the particular circumstances that led to my making the Costs Orders, beyond the fact that I had an impression that these parties had a capacity for disagreement that might not yet be exhausted. Thus I am approaching this judgment as though the Costs Orders and the Costs Judgment were another judge's work.

Issue 1 - The Rate of Interest on Costs

1. On 10 March 2006 and at all times since, s 101 Civil Procedure Act2005 has provided:

"(1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid.

(2) Interest under subsection (1) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:

(a) the date on which the judgment takes effect, or

(b) such later date as the court may order.

(3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary.

(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs.

(5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:

(a) the date or dates on which the costs concerned were paid, or

(b) such later date as the court may order.

(6) This section does not authorise the giving of interest on any interest payable under this section.

(7) In this section, a reference to the prescribed rate of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section.

1. Until 1 July 2010 UCPR 36.7(1) said:

"The prescribed rates at which interest is payable under section 101 of the Civil Procedure Act2005 are as set in Schedule 5."

1. Until 1 July 2010 Schedule 5 UCPR took the form of a table that identified, by reference to successive periods of time, the interest rate that would apply during each respective such period of time.

1. Effective from 1 July 2010 Schedule 5 was repealed and UCPR 36.7(1) was amended to read:

"(1) The prescribed rate at which interest is payable under section 101 of the Civil Procedure Act2005 is:

(a) in respect of the period from 1 January to 30 June in any year-the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and

(b) in respect of the period from 1 July to 31 December in any year-the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced."

1. The JL Parties contend that interest should be calculated pursuant to r 36.7(1), as it now stands, for all periods during which interest runs to date. The VL Parties contend that interest should be calculated under Schedule 5 up to 30 June 2010, and thereafter pursuant to r 36.7(1) in its present form.

1. The parties accept that it follows from the Court of Appeal's decision in Kation Pty Ltd v Lamru Pty Ltd; Lewis v Nortex Pty Ltd (in liq) (No 5)[2010] NSWCA 294 that the repeal of Schedule 5 has not had the consequence that interest on costs ceases to be payable pursuant to the Costs Orders after 1 July 2010. They accept that, as a matter of construction of Order 3 in accordance with Kation, the words that require interest to be paid " at the rates set out in Schedule 5 Uniform Civil Procedure Rules" should be construed, in the application of the order to interest that accrues after 1 July 2010, as requiring interest to be paid in accordance with the present version of UCPR 36.7. The dispute relates to the rate at which interest is payable, on the proper construction of the orders, for the period prior to 1 July 2010.

Practical Effect of the Different Contentions Concerning Applicable Rate

1. The RBA cash rate targets from time to time are published at That RBA publication includes the following entries that are relevant to the time during which interest falls to be calculated under the Costs Orders:

Cash Rate Target
Effective Date	Change in cash rate Percentage points	New cash rate target Per cent
3 Nov 2010	+0.25	4.75
5 May 2010	+0.25	4.50
7 Apr 2010	+0.25	4.25
3 Mar 2010	+0.25	4.00
2 Dec 2009	+0.25	3.75
4 Nov 2009	+0.25	3.50
7 Oct 2009	+0.25	3.25
8 Apr 2009	-0.25	3.00
4 Feb 2009	-1.00	3.25
3 Dec 2008	-1.00	4.25
5 Nov 2008	-0.75	5.25
8 Oct 2008	-1.00	6.00
3 Sep 2008	-0.25	7.00
5 Mar 2008	+0.25	7.25
6 Feb 2008	+0.25	7.00
7 Nov 2007	+0.25	6.75
8 Aug 2007	+0.25	6.50
8 Nov 2006	+0.25	6.25
2 Aug 2006	+0.25	6.00
3 May 2006	+0.25	5.75
2 Mar 2005	+0.25	5.50

1. If one performs the calculation called for by the post-1 July 2010 version of UCPR 36.7, but in relation to the whole of the period after the Costs Orders were made, one obtains the following results:

Half year starting	Immediately preceding cash rate	Immediately preceding cash rate + 6%
1 Jan 2006	5.5%	11.5%
1 Jul 2006	5.75%	11.75%
1 Jan 2007	6.25%	12.25%
1 Jul 2007	6.25%	12.25%
1 Jan 2008	6.75%	12.75%
1 Jul 2008	7.25%	13.25%
1 Jan 2009	4.25%	10.25%
1 Jul 2009	3.00%	9.00%
1 Jan 2010	3.75%	9.75%
1 Jul 2010	4.50%	10.50%
1 Jan 2011	4.75%	10.75%

1. Schedule 5 rates that applied during the period after the Costs Orders were made but prior to 1 July 2010 were:

the beginning of 1 March 2002 to the end of 31 December 2006	9%
the beginning of 1 January 2007 to the end of 5 March 2009	10%
after 5 March 2009	9%

1. A comparison of the last two tables shows that, except for the period 1 July 2009 to 1 January 2010, the rates that were applicable under Schedule 5 are less, and sometimes much less, than the rates that would be applicable if the present version of UCPR 36.7 were to apply during all of the time that interest was running under the Costs Orders. During the period 1 July 2009 to 1 January 2010 the rates were identical. It can be seen that if the JL parties are correct in their contention about the applicable rate then considerably more interest would be payable on the costs than would be the case if the Schedule 5 rates applied up to 1 July 2010.

Analogy with Section 100 Interest?

1. The JL Parties submit that reasoning analogous to that of Barrett J in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd[2010] NSWSC 1106, followed by Hallen AsJ in Stein v Torella Holdings Pty Ltd[2010] NSWSC 1445 at [93]-[95], leads to the conclusion for which they contend.

1. Tim Barrwas decided after 1 July 2010. The question for consideration concerned the rate at which pre-judgment interest should be awarded, pursuant to s 100 Civil Procedure Act , concerning a cause of action that had accrued prior to 1 July 2010.

1. Prior to 1 July 2010, s 100 Civil Procedure Act provided:

"(1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit:

(a) on the whole or any part of the money, and

(b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.

(2) In proceedings for the recovery of a debt or damages in which payment of the whole or a part of the debt or damages has been made after the proceedings commenced but before, or without, judgment being given, the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit:

(a) on the whole or any part of the money paid, and

(b) for the whole or any part of the period from the time the cause of action arose until the time the money was paid.

(3) This section:

(a) does not authorise the giving of interest on any interest awarded under this section, and

(b) does not authorise the giving of interest on a debt in respect of any period for which interests is payable as of right, whether by virtue of an agreement or otherwise ..."

1. Section 100(1) and (2) proceed on the basis that the rate of pre-judgment interest is a matter for the court to decide on a case-by-case basis. However, prior to 1 July 2010, there was a conventional practice of adopting the rates that were prescribed under Schedule 5 for post-judgment interest, unless there was reason to do otherwise: Hexiva Pty Ltd v Lederer (No 2)[2007] NSWSC 49 at [16]; Kalls Enterprises Pty Ltd (in liq) v Balogow (No 3)[2007] NSWCA 298 at [19]; Elite Protective Personnel Pty Ltd v Salmon[2007] NSWCA 322 at [84]. Prior to 1 July 2010 some indirect recognition was given to that practice by UCPR 6.12. In the course of setting out the requirements for a statement of relief in a statement of claim or summons, it said:

"(6) An order for interest up to judgment must be specifically claimed.

(7) In the case of a liquidated claim, a claim for an order for interest up to judgment:

(a) must specify the period or periods for which interest is claimed, and

(b) may specify the rate or rates at which interest is claimed.

(8) If no rate of interest is specified under subrule (7)(b), the rate at which interest is claimed is taken to be the relevant rate of interest prescribed by Schedule 5 for the purposes of section 101 of the Civil Procedure Act2005 ."

(There was an exception concerning the rate of pre-judgment interest awarded on items of non-economic loss in personal injury cases ( MPB (SA) Pty Ltd v Gogic(1991) 171 CLR 657), and after the introduction of the Civil Liability Act2002 , s 18 of that Act imposed limitations on the payment of interest on certain elements of personal injury damages. However those exceptions do not affect the present case.)

1. While s 100 was not altered on 1 July 2010, a change in its manner of practical operation came into effect on that day. UCPR 6.12(8) was amended to read:

"(8) If no rate of interest is specified under subrule (7)(b), the rate at which interest is claimed is taken to be:

(a) in respect of the period from 1 January to 30 June in any year-the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and

(b) in respect of the period from 1 July to 31 December in any year-the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced."

1. Further, a new Practice Note SC Gen 16 was issued, to commence on 1 July 2010. It stated:

" Application

2. This Practice Note applies to new and existing civil proceedings in the Court.

Introduction

3. The purpose of this Practice Note is to set the rate of pre-judgment interest that may be awarded under s 100(1) and (2) of the Civil Procedure Act2005 .

Calculating pre-judgment interest

4. Section 100 of the Civil Procedure Act2005 provides for the making of orders for the inclusion of interest in judgments.

5. Practitioners and litigants should expect that where, pursuant to s 100(1) and (2) of the Civil Procedure Act2005 , interest in respect of a pre-judgment period is to be included in a judgment, the Court will have regard to the following rates, being rates agreed upon by the Discount and Interest Rate Harmonisation Committee established following a referral by the Council of Chief Justices:

(a) in respect of the period from 1 January to 30 June in any year - the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and

(b) in respect of the period from 1 July to 31 December in any year - the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced."

1. The new UCPR 6.12(8) and this Practice Note, and the new UCPR 36.7 involved a change of policy concerning the award of interest rates. From 1 July 2010, the prima facie position was that there was to be a difference between the rate at which pre-judgment interest was awarded, and the rate at which interest accrued on judgments. Subject to the court deciding otherwise in a particular case, pre-judgment interest was to be awarded at a rate 2% lower than the rate at which interest on judgments accrued. (The Practice Note could not detract from a statutory limitation on the payment of interest on damages, such as that which arises concerning certain awards of personal injury damages under s 18 Civil Liability Act2002 . Another statutory limitation is that s 100(3)(c) Civil Liability Act states that s 100 does not authorise the giving of interest in any proceedings in which the amount claimed is less than such amount as may be prescribed by the uniform rules.) In issuing the Practice Note, the view appears to have been taken that failure to pay a liability that a court has held to exist warrants a higher rate of interest than failure to pay a claim while the claim is still disputed. The view may also have been taken that having a high rate of pre-judgment interest might provide a disincentive to plaintiff with a fairly strong case agreeing to a settlement.

1. In Tim Barrthe statement of claim had made a claim for "interest pursuant to s 100 of the Civil Procedure Act 2005 ", but had not specified a claim at any particular rate of interest. Barrett J held, at [20]:

"The content requirements must therefore be regarded as speaking at the time of creation and activation so that, to the extent that there is any default mechanism (as in rule 6.12(8)), the mechanism will operate to supply content at the time of creation and activation."

1. Thus, Barrett J concluded that the claim for interest in the statement of claim must be taken to be a claim for interest at the rates derived from Schedule 5 as it existed in March 2008.

1. In Tim BarrBarrett J said, at [22]-[23]:

"But, of course, the court, having decided that interest should be awarded, is not confined to simply granting or rejecting the claimant's claim, including any claim deemed by the rules to have been made. Section 100 empowers the court to award interest 'calculated at such rate as the court thinks fit'. The court must therefore make an award of interest that is just.

The just outcome, in the light of the change to the rules, is that there should be interest at the rate provided for in rule 36.5 as it now stands. That rule must be taken to reflect the prevailing view about what is just. This, to my mind, indicates that, in the absence of any countervailing consideration (and none is suggested), the rates of interest applicable at the date of the order for the purposes of s 101 should also be applied for the purposes of s 100; and this is so even if the actual claim is for something else."

1. The reference to rule 36.5 in [23] is, fairly clearly, a typographical error for rule 36.7, as rule 36.5 has nothing to do with rates of interest. Further, his Honour's conclusion that "the rates of interest applicable at the date of the order for the purpose of s 101 should also be applied for the purpose of s 100 ; and this is so even if the actual claim is for something else" makes sense only if the rule intended was r 36.7.

1. It appears that his Honour's attention was not drawn to the terms of the Practice Note SC Gen 16, and in particular clause 2, which might possibly have provided a "countervailing consideration" . However, it is not necessary to reach a conclusion about that.

1. In my view, a fundamental difference between Tim Barrand the present case is that the awarding of pre-judgment interest under s 100 involves the exercise of a judicial discretion, at the time the judgment is given. Prior to that time, there is no judicial decision that the party who has proved successful in the case would receive pre-judgment interest, and that party has no other source of a right to receive pre-judgment interest. (Sometimes, as in cases like that of an action on a contract that itself set a rate of interest for unpaid amounts, a party who proves successful in litigation might have a right, prior to judgment, to receive interest on the judgment debt, but s 100(3)(b) Civil Procedure Act makes s 100 inapplicable in those circumstances.) The situation that exists when pre-judgment interest is awarded under s 100 may be contrasted to the instant case. In the present proceedings an order was made on 10 March 2006 holding that the JL Parties were to receive interest on costs, in accordance with the formula set out in those orders, until the first to occur of payment of the costs or further order. While further consideration was reserved of whether interest should continue to run on those costs, the decision had been made that the JL Parties should receive interest on costs, and should continue receiving it, until payment or any such further consideration might terminate the right for interest on the costs to continue to accrue.

Effect of Woolworths v Strong (No. 2)

1. In Woolworths Limited v Strong (No 2)[2011] NSWCA 72 the question for consideration concerned the rate of interest that should be ordered in circumstances where a judgment for damages had been paid in part, but the judgment was reversed on appeal. In that circumstance, the successful appellant was entitled, as of right, to restitution of the sum paid, with interest. The appellant's notice of appeal had sought restitution, with interest, on the amount that had been claimed. It did not seek interest to be paid at any particular rate. At the time the Notice of Appeal was filed in Woolworths v Strong, UCPR 51.19 required that, where restitution was sought, the notice of appeal should stipulate any claim for interest that is at a rate other than the relevant rate set out in Schedule 5.

1. While the judgment in Woolworths v Strong (No 2) arose in the context of a decision about the rate of interest appropriate on an order for restitution, the decision concerning the rate turned on the construction of UCPR 36.7. I said (with the agreement of Handley AJA and Harrison J) at [59]-[62]:

"... The principal role of UCPR 36.7 is to state the rates that are payable on judgment debts. Whenever there is an unpaid judgment debt, that has been ordered to bear interest at the rates prescribed under s 101 from time to time, the judgment creditor would have had a vested right, as at 30 June 2010, to receive interest at the rate that had been prescribed up to 30 June 2010 by the former UCPR 36.7 and Schedule 5. The usual principle about retrospective operation of legislation is that it does not operate to take away vested rights unless there is an intention expressed 'with reasonable certainty' that it do so: Maxwell v Murphy(1957) 96 CLR 261 at 267.

The amendment to UCPR 36.7 that came into effect on 1 July 2010 was made by Schedule 1 [5] Uniform Civil Procedure Rules (Amendment No 32) 2010 . That provision said nothing more than that the old version of 36.7 was to be omitted, and the new one inserted. The regulation that effected the amendment had no transitional provisions.

In those circumstances there is no indication at all that the amendment will operate retrospectively. Hence it does not operate retrospectively.

The applicable rate of interest should be ascertained, up to 1 July 2010, by reference to Schedule 5 as it was from time to time up to 1 July 2010, and only from 1 July 2010 should the new version of UCPR 36.7 be used. ...."

1. Mr S Philips, counsel for the VL Parties, points out that s 30(1) Interpretation Act1987 provides:

"The amendment or repeal of an Act or statutory rule does not:

...

(b) affect the previous operation of the Act or statutory rule or anything duly suffered, done or commenced under the Act or statutory rule, or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act or statutory rule, or

...

(e) affect any ... legal proceeding or remedy in respect of any such right, privilege, obligation, liability or ...,

and ... any such ... legal proceeding or remedy may be instituted, continued or enforced, as if the Act or statutory rule had not been amended or repealed."

1. I accept that s 30 provides an additional reason why the amendment to UCPR 36.7 does not operate retrospectively.

1. Mr I M Neil SC, counsel for the JL Parties, submits that Woolworths v Strong (No 2) does not dictate the answer to the present problem. He points out that UCPR 36.4 provides:

"(1) A judgment or order takes effect:

(a) as of the date on which it is given or made, or

(b) if the court orders that it not take effect until it is entered, as of the date on which it is entered.

(2) Despite subrule (1), if an order of the court directs the payment of costs, and the costs are to be assessed, the order takes effect as of the date when the relevant cost assessor's certificate is filed.

(3) Despite subrules (1) and (2), the court may order that a judgment or order is to take effect as of a date earlier or later than the date fixed by those subrules."

1. Mr Neil correctly points out that UCPR 36.4(3) is not applicable, because no order has been made fixing a date when the judgment concerning interest on costs is to take effect. Mr Neil further submits that there has been no final determination of the amount of costs payable and therefore pursuant to UCPR 36.4(2) the order for costs has not yet taken effect. He submits that if the order for costs has not yet taken effect, the order for interest on those costs must likewise have not yet taken effect. Thus, he submits that the VL Parties do not yet have a vested right to receive interest on costs at the rates that have been fixed pursuant to Schedule 5 up to 30 June 2010, and pursuant to the new UCPR 36.7 thereafter. He points out that the reasoning in Woolworths v Strong (No 2) was influenced by the principle that legislation was not to be construed so as to take away vested rights.

1. In my view, this argument does not succeed. A judgment "takes effect" , within the meaning of UCPR 36.4(2), when the judgment becomes enforceable. Clearly, it would not be possible to enforce the order for interest on costs until the assessment of costs was complete, as only then would all of the material necessary to calculate the amount of the interest be available. But, even so, there has already been a decision that there should be a payment of interest on costs, at an identifiable rate (the Schedule 5 rate) for an identifiable period of time (payment of the costs or further order).

1. It is common for litigation to involve a determination of some of the rights of parties, even if accounts or inquiries are ordered to enable the court to be put into a position to make enforceable orders to give effect to those rights: eg Meehan v Glazier Holdings Pty Ltd[2002] NSWCA 22; (2002) 54 NSWLR 146 at [31]-[32]. Here, Order 3 of the Costs Orders was a binding determination of rights from the time it was made, even though it could not result in a judgment for a specific sum of money until the costs assessment was complete. The meaning of Order 3 is to be ascertained as at the date it was made. Its meaning is ascertained with the aid (if necessary) of any surrounding circumstances, including the reasons the judgment: Athens v Randwick City Council[2005] NSWCA 317; (2005) 64 NSWLR 58 at [28]-[29], [36]-[37] per Hodgson JA, [129]-[140] per Santow JA, [141] per Tobias JA. Order 3 of the Costs Orders was quite clear in saying that interest was to be paid at the rates set out in Schedule 5. That is totally consistent with the reasons. The Costs Judgment said, at [87]: "I see no reason for ordering interest to accrue at any rate other than the rates set out in Schedule 5 of the Rules ." If the submission of the JL Parties about the rate of interest were right, it would have the bizarre consequence that I had deliberately decided to order interest to run at the Schedule 5 rates, but effect should not be given to my decision, and instead a higher rate than the one I decided should be payable. Only the clearest of statutory words, not present here, could result in such a consequence.

1. It is important to bear in mind the precise role that the notion of vested rights played in Woolworths v Strong (No 2) . There, the judgment sum had been paid on 28 September 2009. The judgment was set aside on 2 Nov 2010. It was not decided that during the whole period from September 2009 Woolworths had had a vested right to restitution. Rather, it was only once the District Court's judgment was set aside on appeal that Woolworths acquired a right to be repaid the judgment sum with interest. Indeed until the order of the District Court was set aside, that order was decisive of Woolworths' lack of right to be repaid the judgment sum, and thus lack of right to be paid interest on it.

1. The question of vested rights arose at [59]. At that stage of the judgment, the decision had been made that Woolworths was entitled to restitution with interest at the prescribed rate, but a question remained of what was " the prescribed rate " , in light of the amendments effected on 1 July 2010. That question was a question of construction of UCPR 36.7. Answering the question required one to consider the range of circumstances in which UCPR 36.7 operated, not just the circumstances of the particular case. The circumstance in which UCPR 36.7 most commonly operated was as a means of fixing the rate of interest on judgment debts. In its application to a judgment debt for a particular sum of money pursuant to a judgment that was made prior to 1 July 2010, UCPR 36.7 in its pre-July 2010 form created a vested right in the judgment creditor to payment of interest at whatever rate UCPR 36.7 and Schedule 5 prescribed from time to time. It could not have a different meaning when pressed into service to ascertain the rate of interest applicable for restitution of a judgment set aside. It was for that reason, not because Woolworths had had at any time prior to 2 November 2010 a vested right to interest, that the rate of interest applied to the period prior to 1 July 2010 for the purposes of restitution was the rate prescribed from time to time under Schedule 5. That is not the sort of consideration that enters into the present case.

1. No question arose in Woolworths v Strong (No 2) about whether it would now be more appropriate, when a judgment that has been paid has been set aside on appeal, to order interest on the judgment amount at the rate identified in Practice Note SC Gen 16 for pre-judgment interest, rather than the rate prescribed under UCPR 36.7.

1. I conclude that, except to the extent that interest might cease to run pursuant to the exercise of further consideration, the order made interest payable on the Allowed Percentage of the costs at the rates prescribed from time to time under Schedule 5, for the whole of the time up to 1 July 2010. The JL Parties fail in their contention about the applicable rate of interest.

Issue 2 - Time During which Interest on Costs Runs

1. Victor Lahoud contends that I should exercise the further consideration that was reserved by Order 4, and order that interest not run during four particular periods of time.

1. The explanation for the reservation of further consideration of whether interest on costs should continue to run is found at [88] in the Costs Judgment:

"When judgment is given for a sum of money which is ascertained, it is usual for post-judgment interest to run on that sum of money until such time as the judgment has been paid. An order for payment of interest on costs operates somewhat differently, in that the amount of the costs is not quantified at the time of making of the order. Further, a measure of co-operation is needed to quantify that order for costs. If it were to happen that Joseph's interests were to delay in obtaining an assessment of costs, the result could be that Victor was obliged to pay interest, at the comparatively high rates of Schedule 5, during the period that Joseph was delaying. There is no basis in the evidence for concluding that it is likely that Joseph will delay assessment of the costs, but I do not think it right that Victor should be at risk of having to continue to pay interest if Joseph were to delay assessment of the costs, either deliberately, or through some unplanned happening like illness. I will deal with that possibility by making an order that the interest on costs runs until the payment of the costs is made, or further order, and reserving further consideration of the question of whether interest on the costs should continue to run."

1. Victor Lahoud asserts that during four periods of time the JL Parties have delayed the finalisation of the assessment of costs coming to a conclusion, and that interest should cease to run by reason of that delay. As ultimately put in oral submissions, the periods in question are from 1 July 2006 to February 2007 (" the First Delay Period "), from January or March of 2008 to July 2008 (" the Second Delay Period "), from October 2009 to June 2010 (" the Third Delay Period "), and from September 2010 to June 2011 (and perhaps ongoing) (" the Fourth Delay Period "). At the hearing of these Notices of Motion Mr Philips submitted that the Fourth Delay Period should be taken into account if they were to succeed in an appeal that was then on foot in the District Court concerning the assessment of costs. He submitted that in that event the Fourth Delay Period should continue at least until the conclusion of assessment of costs by a Review Panel.

Power to Make the Orders Sought

1. In connection with the JL Parties' Notice of Motion concerning the rate of interest, Mr Philips had submitted that the application was in substance to vary the orders made on 10 March 2006, and that the court does not have power to effect any such variation. He pointed out that Order 3 was made more than five years ago, on 10 March 2006; was varied (pursuant to an express liberty to apply that was reserved) on 28 March 2006; and that the order as so varied was entered on 11 June 2009. He submitted that it is now too late to vary it in the manner sought by the JL Parties.

1. I do not agree that the JL Parties were seeking a variation of Order 3. Rather, they were seeking a decision concerning its correct construction. However, as it eventuates, those submissions of Mr Philips also have a bearing upon the power of the court to make the orders that Victor Lahoud seeks.

1. Mr Philips acknowledged that the court has statutory power to set aside or vary a judgment or order under UCPR 36.15, 36.16, 36.17 and 36.18. However Mr Philips submitted that none of those provisions apply. He submitted that the provision that comes closest to providing power to make the orders sought is UCPR 36.16(3), which confers a power to "set aside or vary any judgment or order" . However, he submitted that even UCPR 36.16(3) is not applicable, because UCPR 36.16(3)(a) creates an exception to that power so far as the judgment or order "determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief" . He submits that Order 3 determined a claim for relief, and hence there is no statutory power to vary it. I accept all those submissions.

1. Mr Philips also submitted that, while the court has an inherent power to vary its own perfected orders, that power is to be used only in the most exceptional cases and with extreme care: Wentworth v Rogers (No 9)(1987) 8 NSWLR 388 at 394-5. He submitted that the present case is not exceptional in any respect, and it would be inappropriate to exercise the inherent power concerning it.

1. I agree that it would be inappropriate to use the inherent power to vary the entered Order 3.

1. However, making an order that stopped interest on costs from running would not be beyond power. Order 3 decided that interest should be paid on the Allowed Percentage of the costs and disbursements, and decided the rate at which it should be paid. Further, it decided the time during which that rate of interest should be paid, namely until the first to occur of payment by the defendants of the costs in question, or further order. Making a further order concerning the time during which interest should run on the costs does not involve any variation of Order 3, but rather an exercise of the power that Order 3 specifically reserved to make a further order.

1. However, there remains a question, which I raised in the course of argument, about whether I have power to make the precise orders that Victor Lahoud seeks. I have come to the conclusion that I do not.

1. Reservation of further consideration does not permit a judge to review and reconsider a matter that he or she, or another judge, has already decided at an earlier hearing: Rosser v Maritime Services Board of NSW (No 2) (1996) 14 BCL 375 at 382 per Young J; Australian Hardboards Ltd v Hudson Investment Group Ltd[2007] NSWCA 104; (2007) 70 NSWLR 201 at [73]; Kara Kar Holdings Pty Ltd v Brookton Holdings[1997] NSWCA 171 at [4] per Powell JA (Sheller JA agreeing).

1. The Costs Orders operate so that interest continues to run at the Schedule 5 rates until the costs are paid or further order. It is possible consistently with what has already been decided by the Costs Judgment, for a further order to be made at a time when the costs remain unpaid, providing that interest on costs should not run for a period of time in the future, or perhaps indefinitely in the future. However, an order made pursuant to further consideration cannot undo what has already been decided. Consistently with the order already made it is only payment, or the making of a further order, that can stop interest on costs from running.

1. When these considerations were put to Mr Phillips in the course of argument, he modified Victor Lahoud's application so as to claim, in the alternative, an order that interest on costs should cease to run either indefinitely in the future, or for a period of future time equal to the period of inappropriate delay on the part of the JL Parties that has (in his submission) been demonstrated so far. If the rates of interest were not to change, then if there had been inappropriate delay by the JL Parties for a period of, say, X months in the past, the same mathematical result for the amount of interest payable will be arrived at if interest does not run for X months in the future as if it does not run for some particular period of X months in the past. That is subject only to the possibility that interest might cease to run by virtue of the costs being assessed and paid. Mr Neil took no objection to the application being modified in this fashion.

1. I also mention that if different rates of interest were to be applicable in a period of X months of inappropriate delay that has now passed, and in any future period of X months, it would be possible to draft the order in a way that produced the same arithmetical result as interest not running during X months in the past. One way of drafting the order to achieve that objective would be to order interest not to run until such time as, if interest were to run, interest equal to the amount that accrued in the X months from [date] to [date] had accrued.

1. Mr Philips also submitted that, if a period of delay in the past was established, I should order that interest cease to run from the date of the filing of the notice of motion by which the VL Parties sought an order that interest cease to run. In my view there is no power, under the reservation of further consideration, to back date the cessation of interest in this way. All that can be done is to order that interest cease to run for a period of time from the date of the making of a further order.

1. Some general matters of principle apply to whether an order ceasing the running of interest on costs should be made. The first is that, as explained in [83] of the Costs Judgment, the order for interest on costs is made as compensation for the successful parties in litigation having been out of pocket as a result of having paid their lawyers' costs and disbursements from time to time. The type of delay that is relevant is delay that makes it just for the successful parties not to receive that compensation for a particular period of time. The second is that the onus lies on Victor Lahoud of establishing that there has been a delay of that type.

1. I turn to consider the particular allegations of delay that Victor Lahoud makes.

Facts Preceding the Periods in Question

1. The principal issues in the litigation between the JL Parties and the VL Parties had been decided by Palmer J, in a judgment delivered on 30 May 2005: Lahoud v Lahoud[2005] NSWSC 509 (" the Palmer J Judgment "). The effect of the Palmer J Judgment was that the JL Parties were successful. However his Honour did not make orders at the time of delivering judgment. The costs questions came to be decided by me when Palmer J was absent on long leave.

1. The VL Parties instituted an appeal to the Court of Appeal concerning the Palmer J Judgment on 28 June 2005.

1. On 13 October 2005 Palmer J delivered a judgment concerning the form of the final orders (other than as to costs), and stayed those orders, pending the determination of the appeal: Lahoud v Lahoud[2005] NSWSC 1019.

1. All issues in the appeal related to the correctness of the Palmer J Judgment. While clearly the orders made pursuant to the Costs Judgment would have needed to be reconsidered if any of the orders made pursuant to the Palmer J Judgment were set aside or altered, the appeal did not involve any separate attack on the correctness of the Costs Judgment.

1. On 30 June 2006 the appeal was dismissed with costs: Lahoud v Lahoud[2006] NSWCA 169. The stay that Palmer J had ordered on 13 October 2005 thus expired on 30 June 2006.

The First Delay Period - Facts and Submissions

1. On 28 July 2006 the VL Parties filed in the High Court an Application for Special Leave to Appeal from the Court of Appeal's decision. The application for special leave to appeal stated that one of the orders that the VL Parties sought from the High Court was an order that there be a new trial of the action.

1. The High Court dismissed the application for special leave on 18 April 2007: Lahoud v Lahoud[2007] HCA Trans 128.

1. The first indication in the evidence of the JL Parties taking any steps to prepare a bill of costs is a letter dated 26 March 2007 from Ms Chris Davitt, Costs Consultant, to the solicitors for the JL Parties (" the JL solicitors "). That letter refers to "your recent letter relating to this matter and the attached material" , and goes to set out the basis on which she would charge fees for preparation of the bill of costs. I infer that it was shortly before 26 March 2007 that the JL solicitors took the first step towards the preparation of a bill of costs, by contacting Ms Davitt.

1. On 10 May 2007 the JL solicitors wrote to the solicitors for the VL Parties (" the VL solicitors ") making a settlement offer concerning the quantum of the costs. The VL solicitors replied on 15 May 2007 saying they had insufficient information to assess the proposal, and requested a draft bill. On 21 May 2007 the JL solicitors wrote to the VL solicitors, saying that they would instruct the costs consultant to prepare a draft bill.

1. Mr Philips submits that the JL Parties engaged in undue delay in waiting until March 2007 to commence preparation of the bill of costs. He submits that that period of delay runs from the beginning of July 2006 to the end of February 2007.

1. Mr Philips submits that, once the stay ordered by Palmer J had been dissolved, nothing was stopping the JL Parties from proceeding to prepare a bill of costs. He points out that there were some respects in which the JL Parties took active steps for enforce the orders of Palmer J. Those orders required (amongst other things) the VL Parties to hand to the JL Parties various title documents concerning two home units.

1. On 6 July 2006 the JL solicitors had requested those indicia of title from the VL solicitors. The VL solicitors replied on 14 July 2006, saying that they were considering an application for special leave to appeal, and that it was premature to give effect to Palmer J's orders "until such time as our client has been afforded the opportunity to file an application for special leave to appeal" .

1. On 18 July 2006 the JL solicitors foreshadowed that, if no application was made for a stay, there would be an application to the court for enforcement of orders, including by contempt.

1. The VL solicitors replied on 25 July 2006, saying they had received instructions to file an application for special leave to appeal, and in those circumstances "your foreshadowed application to enforce Justice Palmer's orders of 13 July 2005 including an order for contempt is, in the context of the matters set out above, premature and completely inappropriate."

1. On 14 August 2006 the JL solicitors wrote to the VL solicitors saying that, as no stay was in place, they would be applying to the court for enforcement of the orders in the immediate future.

1. On 22 January 2007 the VL solicitors wrote to the JL solicitors reminding them that "it is theoretically possible that our client's application before the High Court may succeed, and that our client could also succeed in any re-trial that may be ordered by the High Court ..." .

1. On 15 February 2007 the JL Parties filed a Notice of Motion seeking to commit the VL Parties for contempt, and for having failed to hand over the title indicia concerning the two home units. That Notice of Motion was dismissed on 27 February 2007, on the basis that the VL Parties pay the costs of the JL Parties of it on an indemnity basis.

1. On 19 March 2007 the JL Parties filed a notice of motion to commence the enquiry for damages that Palmer J's orders had envisaged.

1. Mr Philips submits that taking contempt proceedings to enforce Palmer J's orders, starting the enquiry as to damages and engaging Ms Davitt, before the High Court's decision on the special leave application was known, together demonstrate that it was possible to give effect to Palmer J's orders before the special leave application had been determined.

The First Delay Period - Decision

1. I am not persuaded that the failure of the JL Parties to start preparation of the bill of costs in the period between the Court of Appeal stay being lifted, and the application for special leave being dismissed, occurred in circumstances that make it just for the JL Parties not to receive interest on costs during that period. Nor am I persuaded that the steps that the JL Parties took towards obtaining compliance with the orders of Palmer J during the period during which the High Court application was pending show that, if the JL Parties were to continue to receive interest on costs during that period, they should also have been preparing a bill of costs during that time. The VL Parties, by not handing over the indicia of title to the home units, were in breach of orders of Palmer J that were presently performable and enforceable. While those orders required some co-operation on the part of the JL Parties, that co-operation had been proffered. The task involved in preparation of the bill of costs was very large: ultimately the bill was over 600 pages long. The effort involved in taking steps towards enforcing the orders of Palmer J concerning the handing over the indicia of title of the two home units was vastly less. If the application for leave to appeal succeeded, and the appeal itself succeeded, and a new trial produced a different result, the work involved in the preparation of a bill of costs would be totally wasted. By comparison, if there came to be a new trial that altered Palmer J's orders concerning the home units giving restitution concerning the units would not seem to be particularly difficult. It was the VL Parties themselves who had cast a cloud over the enforceability in the longer term of the Costs Orders, in the period immediately following the judgment of the Court of Appeal, by lodging, on the last available day, their application for special leave to appeal.

1. Further, though the JL solicitors had discussions with Ms Davitt about the basis on which she might prepare the bill of costs before the High Court's decision was known, there is no evidence of Ms Davitt having done work of any substance before the High Court's decision was known. The communications between the solicitors in May 2007 ([69] above) are consistent with that. Indeed, lining Ms Davitt up to be ready to prepare the bill of costs, if the High Court application were to fail, is consistent with the JL Parties pressing on with enforcing the costs order.

1. Similarly, it has not been shown that any work of substance was done concerning the enquiry as to damages before the High Court decision, or that the filing of the notice of motion to initiate the enquiry was anything other than a necessary first step. These comparatively small steps bear no comparison with the very large task of preparation of the bill of costs, and do not show that preparation of the bill of costs should have commenced earlier.

1. In all these circumstances, I am not persuaded that there has been undue delay on the part of the JL Parties during the First Delay Period.

The Second Delay Period - Facts

1. The Second Delay Period is said to run from January or March of 2008 to July 2008. It relates to the period between when the JL Parties and the JL solicitors received a draft bill of costs from Ms Davitt, and the time a bill of costs was served on the VL Parties.

1. On 7 January 2008 Ms Davitt wrote to the JL solicitors saying "I have a first draft of the primary bill of costs ready and it may be helpful for Joseph to go through the draft prior to my finalising it." I take it that the reference to "the primary bill" relates to the fact that bills were being prepared for several different pieces of litigation, not all of equal complexity.

1. By letter dated 26 February 2008 Ms Davitt told the JL solicitors that she had prepared the bill of costs, and returned the file together with her tax invoice.

1. On 3 March 2008 Joseph emailed the JL solicitors referring to the bill of costs from Ms Davitt:

"... delivered to your office this morning. Attached are my schedule of invoices for professional fees and disbursements since 2001 ... Please check my invoices and calculations so we can serve the correct claim ASAP. Please call me on [telephone number] if we need to discuss."

1. On 15 May 2008 Ms Davitt wrote to the JL solicitors. The letter included:

"May I suggest that any amendments be marked on a copy of the Narrative and/or the bill itself with any lengthier additions simply set out with the details of where they are to be inserted and I will happily prepare as many amended versions as required without further cost."

From that I infer that, as at 15 May 2008, amendments were still being proposed to at least one of the bills of costs.

1. On 19 June 2008 Joseph emailed the JL solicitors saying:

"I discussed figures and documents with Chris Davitt as per our discussion and Chris advised she will attend to it this weekend so we can send to the other side early next week. We will also need to finalise the draft letter you previously sent to her. It is now extremely urgent to serve the letter and documents by early next week. As you know, I am paying interest on loans which I can not recover from VL and need to obtain the legal costs I paid ASAP to repay the loans."

1. On 27 June 2008 the JL solicitors wrote to the VL solicitors requesting whether they had instructions to accept service of bills of costs. The letter said that if no reply had been received by 30 June 2008 "we shall assume that you have no instructions to accept service and we shall make alternative arrangements for service on your client."

1. On 1 July 2008 the JL solicitors wrote to the VL solicitors referring to a telephone conversation that they had had on 30 June 2008, and saying:

"We note that you have not yet received any instructions to accept service of the Bills of Costs in the Supreme Court, Court of Appeal and Federal Court proceedings. As you and your client may well be aware if your firm does not receive those instructions we will need to arrange for photocopies of each of the Bills (in triplicate) so as to enable them to be served on each of your clients. We advise that the Bills totals are in excess of 700 pages and that our client will obviously in those circumstances be seeking recovery of the additional photocopying expenses incurred.

In the event that we do not receive your written confirmation by close of business today (1 July 2008), our client will proceed with making arrangements for the copies and we will arrange for service directly on your clients."

1. Three copies of the bill of costs were prepared, and a copy was served on each of the VL Parties on 10 July 2008.

The Second Delay Period - Decision

1. I am not persuaded that Victor Lahoud has established that these events demonstrate that the JL Parties engaged in any undue delay in advancing assessment of the costs in the period between January and July 2008. The evidence does not establish what particular bills of costs were the subject of Joseph's email of 3 March 2008, or Ms Davitt's letter of 7 June 2008. Further, the delay between 27 June 2008 and 10 July 2008 is attributable to the VL Parties' failure to co-operate by facilitating service of the bills, and requiring the pointless effort of preparation and personal service of three copies of the bills.

1. Mr Neil submits that the evaluation of the evidence that relates specifically to the January to July 2008 period should be carried out bearing in mind evidence relating to other periods, and in particular during the period when Ms Davitt was preparing the bill. On 19 June 2007 Joseph faxed her, saying:

"I refer to my last fax dated 30 May 2007. I have not received a response.

Please advise as a matter of urgency what work has been done to date and by what date you will be able to complete the bill of costs.

I can not afford to have this matter delayed."

1. Ms Davitt had made arrangements to travel overseas between 12 June and 29 June 2007. On 3 July 2007 she wrote to the JL solicitors referring to two faxes that she had received from Joseph Lahoud just prior to and during her leave overseas. She said:

"Having spoken to Mr Lahoud at the time of delivery of the file, I understand his anxiousness to have the costing completed in as short a time as possible. No doubt, the whole affair has been an emotional and financial drain on him for many years. Nevertheless, I believe Mr Lahoud does not really comprehend what is involved in a costing job such as this and the time consuming nature of going through every piece of paper in the file and cross referencing that material with numerous court orders and complex proceedings.

...

Would you please discuss this matter with Mr Lahoud as I would prefer not to continue with the matter if I am to be subjected to fairly regular requests for progress reports and pressure to finish the task in a timeframe which is physically impossible for me to achieve. Again, I fully understand your client's position and have a great deal of sympathy for him, but I can only do what I can do in a day's work and I feel quite uncomfortable with being required to push myself beyond my limitations."

1. On 14 August 2007 someone from the office of the JL solicitors emailed Joseph saying that the JL solicitor had,

"... communicated with Chris Davitt on even date and advised her that all future communication will be through our firm. [He] also apologized on your behalf for being 'over anxious' ..."

1. Those communications lead to an inference that, while the bill was being prepared, the JL Parties were anxious that it be prepared as soon as possible. That tends to make it unlikely that they engaged in any unjustified delay once a draft bill was available. However, it suffices, given where the onus lies, to conclude that it has not been established that the JL Parties engaged in undue delay during the Second Delay Period.

The Third and Fourth Delay Periods - Legal Background

1. Both the Third Delay Period and the Fourth Delay Period concern the time occupied by an assessment of party/party costs by a costs assessor, a review of the cost assessor's determination by a Review Panel, and an appeal to the District Court from the determination of the Review Panel. It is necessary first to give an account of the legal provisions that govern those procedures.

1. Assessment of costs that a person is entitled to receive as a result of an order for payment of an unspecified amount of costs made by a court or tribunal is carried out under the procedure laid down by ss 353-394 Legal Profession Act2004 (" LP Act "). Under the definition in s 4 of that Act " Manager, Costs Assessment means the person holding office as Manager, Costs Assessment in the Attorney General's Department, and includes a delegate of that person." An application for assessment of party/party costs may be initiated, under s 353 LP Act , by the party entitled to receive the costs applying to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs. Under s 356 LP Act , it is the Manager, Costs Assessment who is to decide who should be notified of the application, and then give notification in accordance with that decision. The Manager, Costs Assessment then, under s 357(1) LP Act , refers the application for costs assessment to a costs assessor.

1. Costs assessors are appointed by the Chief Justice pursuant to s 390(1) LP Act . Pursuant to s 390(3) Schedule 5 LP Act applies to costs assessors. Under Schedule 5, clause 1, a person is not eligible to be appointed as a costs assessor unless that person is an Australian legal practitioner of at least five years standing. A costs assessor is appointed for a limited period of time, specified in the instrument of appointment, but is eligible for reappointment. Section 390(4) LP Act specifically provides that a costs assessor is not an officer of the Supreme Court when acting as a costs assessor.

1. The criteria by reference to which a costs assessor assesses a party/party bill of costs are laid down in ss 364 and 365:

" 364 Assessment of costs-costs ordered by court or tribunal

(1) In conducting an assessment of legal costs payable as a result of an order made by a court or tribunal, the costs assessor must consider:

(a) whether or not it was reasonable to carry out the work to which the costs relate, and

(b) whether or not the work was carried out in a reasonable manner, and

(c) what is a fair and reasonable amount of costs for the work concerned.

(2) In considering what is a fair and reasonable amount of legal costs, a costs assessor may have regard to any or all of the following matters:

(a) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter,

(b) the complexity, novelty or difficulty of the matter,

(c) the quality of the work done and whether the level of expertise was appropriate to the nature of the work done,

(d) the place where and circumstances in which the legal services were provided,

(e) the time within which the work was required to be done,

(f) the outcome of the matter.

...

365 Effect of costs agreements in assessments of party/party costs

(1) A costs assessor may obtain a copy of, and may have regard to, a costs agreement.

(2) However, a costs assessor must not apply the terms of a costs agreement for the purposes of determining appropriate fair and reasonable costs when assessing costs payable as a result of an order by a court or tribunal."

1. Section 367A LP Act provides:

"A costs assessor is to determine an application for an assessment of costs payable as a result of an order made by a court or tribunal by making a determination of the fair and reasonable amount of those costs."

1. Section 367 LP Act provides:

"(1) A costs assessor is to determine an application for a costs assessment relating to a bill by confirming the bill or, if the assessor is satisfied that the disputed costs are unfair or unreasonable, by substituting for the amount of the costs an amount that, in the assessor's opinion, is a fair and reasonable amount.

(2) The costs assessor may include an allowance for any fee paid or payable for the application by the applicant."

1. On making a determination of costs, the assessor issues a certificate that sets out the determination: s 368(1) LP Act . If the amount of costs has not been paid, the certificate may be filed in the office or registry of a court having jurisdiction to order the payment of that amount of money, and thereupon is taken to be a judgment of that court for the amount of unpaid cost, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed: s 368(5) LP Act .

1. If a party to a costs assessment is dissatisfied with a determination of a costs assessor, s 373(1) LP Act permits that party, within a limited time, to apply to the Manager, Costs Assessment for a review of the determination. Pursuant to s 374 LP Act , the Manager, Costs Assessment then refers the application to a panel constituted by two costs assessors, not including the assessor whose determination is to be reviewed.

1. Section 375 LP Act permits the panel to review the determination of the costs assessor, and to:

"(a) affirm the costs assessor's determination, or

(b) set aside the costs assessor's determination and substitute such determination in relation to the costs assessment as, in their opinion, should have been made by the costs assessor who made the determination that is the subject of the review."

1. Section 375(2) LP Act confers on the panel all the functions of a costs assessor. Section 375(3) requires the panel to conduct the assessment on the evidence that was received by the costs assessor, unless the panel determines otherwise.

1. On making its determination, the panel is to issue to each party, and the Manager, Costs Assessment a certificate that sets out the determination. Section 380 LP Act requires the certificate to be accompanied by a statement of reasons.

1. Section 384 LP Act permits a party to an application for a costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings, to appeal to the District Court against the decision. Pursuant to s 382(1) LP Act , s 384 also applies concerning a determination of a review panel.

The Third Delay Period - Facts

1. At the same time as the bills of costs were served on 10 July 2008 the JL solicitors sent the VL Parties a letter making an offer of compromise of the costs claim, and limiting a period of one calendar month for accepting it.

1. On 30 July 2008 the VL solicitors wrote to the JL solicitors, saying that a one month period was inadequate, and seeking a period of three months in which to respond.

1. On 5 November 2008 the JL Parties filed with the Manager, Costs Assessment an application for assessment of party/party costs. The amount claimed included the GST component of costs and disbursements.

1. At the start of the costs assessment, on 14 November 2008, the assessor sent to the JL solicitors a standard form providing some explanation about the costs assessment process. Note 13 on that form was:

"Please advise if the Costs Applicant or Costs Respondent has an entitlement to an input tax credit for the GST paid on its solicitor/own client, costs. If so, it is not entitled to illicit [sic] a claim reimbursing for GST from the party ordered to pay the costs herein."

1. A copy of that form was also sent to the VL solicitors.

1. Notwithstanding that, the assessor was not informed by anyone about whether the JL Parties (or any of them) were entitled to an input tax credit for the GST paid, the assessor did not enquire, and neither party made any submissions to the assessor concerning GST.

1. The assessor to whom the determination was referred issued a Certificate of Determination on 28 July 2009. That certificate was sent to the Manager, Cost Assessment. It was made available to the parties on 2 September 2009. The cause of time passing between 28 July 2009 and 2 September 2009 was not established on the evidence, but the VL Parties do not assert that that period of time was attributable to unreasonable delay on the part of the JL Parties.

1. 1 October 2009 marks the start of the period that Mr Philips identifies as the Third Delay Period. On 1 October 2009 the VL Parties filed an application for review of the assessor's determination. One of the grounds on which review was sought was:

"Pursuant to Boyce v McIntyre[2009] NSWCA 185, a costs assessor does not have jurisdiction to determine matters of GST. The Costs Assessor erred at law in making a determination of GST amounts payable in respect of either or both professional costs, and disbursements."

1. Boyce v McIntyre[2009] NSWCA 185 arose when a sublessee who had a contractual obligation under the sublease to pay certain legal costs of the sublessor sought an assessment of those costs. The sublessee was entitled to seek that assessment pursuant to ss 302A(1) and 350(2) LP Act , even though it was not a party to the contract of retainer between the sublessor and the sublessor's solicitor. The assessor reduced the costs that the sublessor's solicitor had charged to the sublessor. A question arose concerning whether the assessor had the power to determine the amount of GST that was payable on the costs. Ipp JA (Macfarlan JA and Hoeben J agreeing) held at [50]-[51] that the assessor had no such power, because "GST is an issue in respect of taxation, not legal costs."

1. That aspect of the decision in Boyce v McIntyrewas fairly promptly altered by legislation. Section 302B LP Act now provides:

"A costs assessor (or, in the case of a review of or an appeal against a costs assessment, a panel under Subdivision 5 of Division 11 or a court) is to take into account the GST (within the meaning of the A New Tax System (Goods and Services Tax) Act1999 of the Commonwealth) referable to the provision of legal services when making or reviewing a determination of legal costs payable."

1. That section was introduced by the Courts Legislation Amendment Act2010 . It came into effect on the date of assent, 28 June 2010, but with transitional provisions now found in Schedule 9, Part 5, clause 35 LP Act . That clause provides:

"(1) Section 302B (as inserted by the Courts Legislation Amendment Act2010 ) extends to any applications for the assessment of costs made (but not determined) before the commencement of that section.

(2) However, section 302B does not extend to any application for a review of, or any appeal against, an assessment of costs by a costs assessor (whether the application for review or the appeal is made before or after the commencement of that section) if the assessment of costs was determined by the costs assessor before that commencement.

(3) For the purposes of this clause, an assessment of costs has been determined by a costs assessor if a certificate setting out the cost assessor's determination has been issued under section 368."

1. Thus the new s 302B did not apply on the facts of the present case concerning either the review of costs by the assessor, or the review by the Review Panel.

1. I will leave aside questions concerning the scope of the powers of a costs assessor or a review panel, as no such question has been raised in the present case. Outside the context of assessment of costs by assessors, it had been established, prior to Boyce v McIntyre, that the extent of the indemnity to which a person was entitled, when that person had paid legal costs and was entitled to recover concerning those costs pursuant to a party/party costs order, could depend upon whether the person who was entitled to the benefit of the order was entitled to an input credit for GST purposes: Vrkic v Otta International[2003] NSWSC 641 at [25]; Thornton v Apollo Nominees Pty Ltd[2005] TASSC 38; (2005) 15 Tas R 35; Merringtons Pty Ltd v Luxottica Retail Australia Pty Ltd[2005] VSC 525 at [35]-[36], [41]; Hennessey Glass and Aluminium Pty Ltd v Watpac Australia Pty Ltd[2007] QDC 57; (2007) 69 ATR 374 at [142]-[143]; ChongHerr Investments Ltd v Titan Sandstone Pty Ltd[2007] QCA 278 at [9]; Beach Retreat Pty Ltd v Mooloolaba Marina Ltd[2009] QSC 84; 2 Qd R 356 at [113]-[115]; Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd[2009] NSWCA 413; (2009) 262 ALR 691 at [147]-[153].

1. On 4 March 2010 Mr RG Webley, solicitor, a member of the Review Panel, wrote to the VL solicitors saying:

"The Review Application raises the question of GST and the decision in Boyce v McIntyre. In order [to] assist the Review Panel please advise within the next seven (7) days whether it is conceded that Joseph Lahoud and Joseph Lahoud & Associates are registered for GST and would be entitled to an Input Tax Credit for the costs payable.

On the face of it the individuals are so registered (see attached print outs).

A copy of this letter has been forwarded to the Review Applicants."

1. The "attached print outs" were printouts from an Australian Government website that identified the name and postcode of entities registered for GST, and stated the ABN of that entity. The printout showed the registration of a company called Joseph Lahoud & Associates Pty Ltd, and of two people each named Joseph Lahoud, one of whom was also stated to be a casual taxi driver. Each Joseph Lahoud shown in those printouts had a postcode that was different to the other, and the postcode of both of them differed from the postcode shown in the printout for Joseph Lahoud & Associates Pty Ltd. The Joseph Lahoud who is involved in this litigation is an architect.

1. On 11 March 2010 the VL solicitors wrote back to Mr Webley:

"We are instructed that it is a matter for the Review Applicants to confirm that they are registered for GST and would therefore be entitled to an Input Tax Credit for any costs payable.

Our clients reserve their position in this regard, subject to such confirmation. If the Review Applicants confirm their entitlement to an Input Tax Credit, we will seek further instructions from our clients."

1. On 26 March 2010 the JL solicitors wrote to Mr Webley saying:

"We advise that Joseph Lahoud and Associates Pty Limited and the Joseph Lahoud Family Trust are both registered for GST, though Joseph Lahoud personally is not."

1. Mr Webley replied on 30 March 2010:

"I attach copies of print outs from the Government site. It does appear that both Costs Applicants in the original proceedings are registered for GST.

Do you concede that the Costs Applicants are entitled to an Input Tax Credit for the GST component of costs they have paid in the matter?"

The attached printouts were the same as the ones that had been sent on 4 March 2010.

1. On 14 April 2010 the JL solicitors wrote to Mr Webley saying:

"We apologise for the delay in response. We seek to do so comprehensively and will reply shortly after we have finalised enquiries we are making."

1. That letter was sent by facsimile. Mr Webley replied the same day:

"The Panel do not need a comprehensive response. A succinct answer to our letter of the 30 th of March 2010 is all that is required. The Costs Applicants are both apparently registered. It is a simple question as to whether they concede that they are entitled to an Input Tax Credit for any GST."

1. On 15 April 2010 the JL solicitors replied to Mr Webley, saying:

"We concede an entitlement to claim an input tax credit for GST."

1. On 16 April 2010 the VL solicitors sent a facsimile to Mr Webley, that included:

"We have a duty to inform you that the material that you relied upon to conclude that the First Costs Applicant Joseph Lahoud was registered for GST purposes (your letter to the Costs Applicants dated 30 March 2010) does not relate to Joseph Lahoud the First Costs Applicant in this matter. The Joseph Lahoud referred to in that material is not Joseph Lahoud the First Costs Applicant in this matter. We note that the Costs Applicants ought to have realised that the material you relied upon did not relate to the First Costs Applicant. In any event, it would thus appear that Joseph Lahoud, the First Costs Applicant in this matter, is in fact not registered for GST purposes. If that is so, the concession in the Costs Applicants' letter to you of 15 April 2010, if that concession was conveyed in respect of both costs applicants, would be false."

1. From submissions that the VL Solicitors had made to the assessor early in the assessment process on 14 January 2009, and also from later correspondence between the VL solicitors and Mr Webley, it is apparent that the VL solicitors wished to argue that Joseph had not personally paid the relevant legal costs, but rather they had been paid by his family trust. They wished to argue that the consequence of the fees having been paid by the family trust was that, pursuant to the indemnity principle ( Wentworth v Rogers[2006] NSWCA 145; (2006) 66 NSWLR 474), the JL Parties could not recover anything under the Costs Order.

1. The Review Panel, in a Certificate of Determination issued on 23 June 2010 reduced the costs that had been allowed by the assessor to an amount of $783,027.39. The only amount that was deducted from the amount that the assessor had determined, was an amount for the GST component of the costs and disbursements claimed.

1. Mr Philips submits that the whole of the period during which the Review Panel procedure was being invoked is a period of delay attributable to the JL Parties. He submits that this conclusion arises because it was the failure of the JL Parties to advise whether they had an entitlement to input tax credits for the GST, that led the assessor to include in his determination an amount of approximately $90,000 for GST. He submits that, had the information been provided to the assessor when requested, the issue of GST would have been dealt with correctly by the assessor, and there would have been no need for the VL Parties to apply to have the assessor's determination reviewed, successfully, on that ground. He submits that this would have led to an earlier conclusion of the assessment process.

1. I am not persuaded that this argument should succeed. There were numerous grounds apart from GST on which the Review Panel was asked to review the assessor's assessment. Those additional grounds included that the assessor:

- had given insufficient reasons in relation to disbursements, and insufficient reasons for allowing the professional costs claimed;

- had failed to comply with s 367A Legal Profession Act because he allowed certain objections and did not allow others without making a positive determination that the costs were fair and reasonable;

- had made no reference to any costs agreement in breach of s 361;

- had engaged in procedural unfairness in denying the VL Parties access to the costs agreement between the JL Parties and their solicitors from time to time, and

- had, in fixing the amount of assessed costs, contravened the indemnity principle by reason of the costs having been paid by the family trusts connected with the JL Parties.

1. The statement of reasons of the Review Panel dealt with each of those issues. When the VL Parties presented so many and varied issues to the Review Panel for determination, I am unable to conclude that the Review Panel's procedures would have taken any less time if the GST issue had never arisen. Particularly is that so when the members of the Review Panel upheld some of the objections to the inadequacy of reasons of the assessor, but reviewed the items in question themselves and satisfied themselves about the reasonableness of the items claimed.

The Fourth Delay Period

1. Mr Philips contended at the hearing of these Notices of Motion that, if the VL Parties' appeal to the District Court against the determination of the Review Panel were to be upheld, the period of delay in assessing the costs during the period that the District Court appeal was on foot, and during any reconsideration by the Review Panel that the District Court might order, would have been caused by two matters that are the responsibility of the JL Parties. One of them is the failure to produce the costs agreements between the JL Parties and their solicitors. The other is having given to the costs assessor a wrong version of the Costs Orders.

1. The District Court appeal was commenced on 3 September 2010. At the time of the hearing of these Notices of Motion the appeal to the District Court was part-heard, with its hearing due to be completed on Monday, 27 June 2011. If the District Court appeal had remained undetermined, I would not have made the order that Mr Philips sought concerning the Fourth Delay Period. That order is one that is contingent on the appeal being upheld. However, the appeal could be upheld in various ways, conferring greater or less degrees of success on the VL Parties. One possible outcome was that a ground of appeal was made out, but the District Court decided that it was not appropriate to remit the matter to the Review Panel. The variety of possible outcomes of the appeal would have provided a sufficient reason why it was not possible, while the District Court appeal remained undetermined, to make a final order that was dependent upon the outcome of the appeal to the District Court.

1. While these reasons for judgment were reserved, the District Court proceedings were settled. The settlement resulted in court orders that, in my view, make it possible now to consider the merits of the submissions that were made concerning the Fourth Delay Period.

Provision of Incorrect Costs Orders - Facts

1. The proceedings that Palmer J decided arose from the settlement of an action that the JL Parties had begun in the Industrial Relations Commission of New South Wales against the VL Parties. That settlement gave rise to two sets of proceedings in the Industrial Relations Commission, and one set of proceedings in the Federal Court. In circumstances explained in the Costs Judgment at [2]-[4], [8] and [27]-[34] the two IRC proceedings, and the Federal Court proceedings, all came to be transferred to the Supreme Court. They became, respectively, proceedings 6132 of 2005, 6079 of 2005 and 2530 of 2004 in the Supreme Court. At the time of the transfer, the only live application in the IRC proceedings that became 6132 of 2005 was a notice of motion seeking to enforce the terms of settlement.

1. In the Costs Judgment, I said, at [91]:

"Through what I assume to be a slip in the Short Minutes of Order which were presented to Palmer J for consideration after he had dealt with the substance of the claim, no provision was made to dispose of the various proceedings between the parties to this litigation which were transferred into this Court. On the assumption that this omission was indeed a slip, I shall make orders which dispose of those proceedings, and deal with the costs incurred in them. If that assumption is mistaken, I will give the parties the opportunity to make any further submissions they might wish concerning those transferred proceedings, before the orders are entered."

1. The orders made at the time of delivering the Costs Judgment included:

"2. Subject to Order 1 and any other costs orders previously made, order the defendants to pay the costs of the plaintiffs of these proceedings, and of proceedings 6132 of 2005, 6079 of 2005 and 2530 of 2004.

...

6. All applications not previously decided in proceedings 6132 of 2005, 6079 of 2005 and 2530 of 2004, in the Equity Division of this Court are dismissed.

7. Direct Orders 2, 5 and 6 not be entered for 21 days after the date of delivery of these reasons for judgment.

8. Reserve liberty to either party to apply, at a time arranged with my Associate within 14 days of the date of delivery of these reasons for judgment, to vary Orders 5 and 6, and to vary Order 2 insofar as it makes costs orders concerning proceedings 6132 of 2005, 6079 of 2005 and 2530 of 2004 in the Equity Division of this Court."

1. The liberty to apply that had been reserved was exercised. On 28 March 2006 I ordered that:

"Para 2 of those orders be varied so as to delete the reference [to] proceedings 6079 of 2005 from that para."

1. On 5 February 2009 the assessor wrote to the JL solicitors requesting a copy of the "formal order entered on 10 March 2006 in this matter following the hearing on costs before his Honour Mr Justice Campbell." The document he received by reply included a listing of 6079 of 2005 in para 2 of the orders.

1. The VL solicitors wrote to the assessor on 22 May 2009, enclosing objections to the bill of costs and also saying:

"Order of Palmer J dated 14 March 2005. The purpose of this is to direct your attention to Order 1 which relates to the Notices of Motion filed in May and July 2001 in IRC proceedings 282/1999. Those proceedings were transferred to the Supreme Court as 6079/2005 and were part of Campbell J's order of 10 March 2006 in the Costs Applicants' favour. However, Campbell J's order was 'subject to any other costs orders previously made' and you will note from this enclosure that Palmer J previously ordered that there be no order as to costs in these proceedings. As such, the Costs Respondents seek that this is taken into account during the assessment of any costs relating to proceedings IRC 282/1999 or SC 6079/2005."

1. When the assessor issued his Certificate of Determination of costs on 28 July 2009, the accompanying reasons set out the terms of the orders, as I had originally made them on 10 March 2006.

1. Mr Philips submitted that the assessor thus proceeded on an incorrect basis, by including in the costs assessed the costs of proceedings concerning which no costs order had ultimately been made. Thus, he submitted that providing the incorrect order to the assessor had caused unnecessary delay in the assessment process, and had led to him making an assessment of costs on a wrong factual basis, extending to an additional set of proceedings. He submitted that if the District Court were to accept provision of the incorrect costs order as a basis for remitting the matter to a Review Panel, the incorrect provision would have caused delay in necessitating the District Court appeal, and the remittal to the Review Panel.

1. The orders made following the Costs Judgment, as varied on 28 March 2006, were not entered until 11 June 2009. They were entered at the instigation of the JL Parties. Those orders as entered contained (correctly) no costs order relating to 6079 of 2005. Mr Philips submitted that the attention of the JL Parties must thereby have been drawn to the terms of the orders as ultimately made, yet they did not correct the earlier mistaken information that they had given to the costs assessor about the terms of the order, and permitted the costs assessor to deliver his determination on 28 July 2009 in ignorance of the correct terms of the order. He submitted that this compounds the earlier provision of the wrong costs order.

Provision of Incorrect Costs Orders - Decision

1. I am not persuaded that these contentions have been made out.

1. The evidence before me does not suggest that the information that the VL solicitors gave to the assessor on 22 May 2009 ([145] above) was incorrect, or challenged. It was clear on the face of Order 2 that I had made on 10 March 2006, that the order for the VL Parties to pay the costs of proceedings 6079 of 2005 was "subject to ... any costs orders previously made." The draft bill of costs that was submitted for assessment contained some items of work relating to IRC proceedings 282/1999, but in relation to that notice of motion the draft bill also included, in bold type, a note saying:

"Note: This Notice of Motion dismissed with no order as to costs in Supreme Court on 14/03/05."

1. The draft bill of costs contains some items of work in relation to which a zero amount is claimed. At least some of those items specifically state that they relate to proceedings 282/1999. Some other entries that on their face show they relate to 282/1999 and to another proceeding also state that the claimed cost is one that has been apportioned.

1. An explanatory document submitted to the assessor contained a list of various proceedings between the JL Parties and the VL Parties. One entry on the list is:

"1. NoM IRC 282 of 99 Filed 5 July 2001 [later SC 6079 of 2005] Industrial Relations Commission of NSW [Dismissed per Palmer J orders 14 March 2005 - No order as to costs]

1. A narrative accompanying the draft bill of costs also stated, in a summary of events at various hearings:

"14/03/05 - hearing before Palmer J. instructions both Senior and Junior Counsel; leave granted to Defendants to discontinue IRC 7189/01 as cross vested to Supreme Court on terms that Defendant not bring any further proceedings with respect to same claims; Notices of Motion filed by Plaintiffs 01/05/01 and by Defendants on 02/07/01 in IRC 282/99 be dismissed with no order as to costs."

1. A flow chart that had been submitted to the assessor, showing the interrelationship between the various proceedings, also recorded the events of 14 March 2005, including: "Two IRC 282/99 NoM are dismissed with no order as to costs."

1. Thus, the assessor was told on numerous occasions that no costs were payable concerning IRC 282/1999 or SC 6079/2005. I am not persuaded that the assessor has included in the costs he allowed, any costs attributable to IRC 282/1999 or to SC 6079/2005, or that any delay resulted from provision to the assessor of the wrong costs order. Thus, the factual foundation for this contention concerning the Fourth Delay Period is not made out. In any event, as will appear, the orders and notes in the District Court appeal provide no basis for concluding that the provision of the incorrect costs order was a reason for the remittal of the assessment to the Review Panel.

Claiming Privilege for Costs Agreements - Facts

1. The other basis upon which Mr Philips submits that conduct of the JL Parties has unreasonably delayed the assessment of costs during the Fourth Delay Period, arises from the JL Parties having claimed legal professional privilege concerning the costs agreements between the JL Parties and their solicitors.

1. Before the assessment began the VL Parties wrote to the JL Parties on 2 October 2008 seeking copies of the costs agreements under which the JL Parties had paid the costs whose reimbursement they sought. By letter dated 21 October 2008 the JL Parties declined to produce the costs agreements, and claimed privilege concerning them.

1. The JL Parties maintained their claim for privilege before the costs assessor. When that claim was questioned, they provided the costs assessor with copies of the costs agreement, but did not provide any copy to the VL Parties.

1. After the VL solicitors had notified the assessor of a global objection that they took to the draft bills of costs, based on the indemnity principle and their contention that the family trust had paid the costs, the VL solicitors requested the assessor to make a preliminary determination of the correctness of that objection. The VL Parties pointed out that, if that submission was successful, the costs and trouble of preparing detailed objections to the bill of costs could be avoided.

1. On 11 February 2009 the assessor made a preliminary determination that the VL Parties' global objection did not succeed. His letter rejecting the objection said:

"The liability to pay costs under a Court Order arises from the order of the Court in favour of the client who seeks to have the costs assessed under the Legal Practitioners Act 2004 . The fact that the fees rendered by the legal practitioner to the client, are in fact paid by a third party does not breach the indemnity principle."

He reserved the right of the parties to make further submissions on the topic.

1. On 11 May 2009 the VL Parties made further submissions to the assessor, contending that CSR Ltd v Eddy [2008] NSWCA 83; (2008) 70 NSWLR 725 at [9], [38] had held that costs respondents were entitled to be provided with copies of the costs agreements to allow for appropriate submissions to be made in support of objections.

CSR v Eddy

1. CSR v Eddy concerned an assessment of costs that had been made under the Legal Profession Act1987 . A successful plaintiff in personal injuries litigation had obtained an order for costs, and obtained an assessment of costs. The assessor had been given a copy of the costs agreement, but did not provide it to the costs respondent. The solicitor for the successful plaintiff had never forwarded a memorandum of costs and disbursements to his client. The cost respondent contended that this had the effect that the plaintiff had "no unconditional and immediately enforceable liability in a fixed amount, as between the plaintiff and his solicitors, with respect to his costs" : [34]. The costs respondent contended that the indemnity principle was thereby attracted. Neither the assessor, nor a review panel, upheld that contention.

1. An appeal was brought to the Supreme Court (to which an appeal then lay under the then equivalent of s 384 LP Act ) on the basis that the costs respondent was "dissatisfied with a decision of the costs assessor as to a matter of law" . The matter of law that the costs respondent contended arose, was that it had been denied procedural fairness because it had not been provided with the costs agreements. The decision in the Court of Appeal, on an appeal brought by leave from the decision of the Supreme Court, concerned the correctness of that contention.

1. There was no issue about whether the costs assessor in CSR v Eddy had power to deal with the question of whether the indemnity principle was breached: [37]. Similarly, as I have said, in the present case, no issue is raised about the power of the assessor or the Review Panel to decide whether the indemnity principle has been breached.

1. In CSR v Eddy at [38], Basten JA held:

"Once it has been accepted that the costs assessor had power to deal with the objection, which was based, at least in part, on the content of the costs agreements, it would seem that the appellants were entitled to be provided with copies of those agreements, so that they could make appropriate submissions in support of their objection. That they were unable to do, but that alone is insufficient to establish procedural unfairness."

1. His Honour went on to hold that procedural unfairness would arise only if failure to provide the costs agreements caused the costs respondent's practical injustice. Ultimately, the court held that there had been no practical injustice, because "the costs agreement did not in terms provide any basis for asserting a breach of the indemnity principle." [72]. In the course of so doing, the court recognised (at [3] per Hodgson JA; [47] per Basten JA, McColl JA agreeing) that one way in which a costs agreement could be relevant on a party/party costs assessment was that if the agreement capped the amount of costs recoverable, no more than the capped amount could be recovered from the other party.

Returning to Facts Re Claiming Privilege for Costs Agreements

1. On 14 May 2009 the assessor rejected the further submissions that the VL solicitors had made in their letter of 11 May 2009. He said, obviously basing his reasoning on that in CSR v Eddy :

"I have called for the production of costs agreements and accounts sent on the solicitor/client basis. At this point of time, the Applicant does not have to provide the Respondent with copies of these documents. I simply have called for these documents so that I can establish the indemnity principle has not been breached. It would be necessary for the Costs Respondent to demonstrate to me that an opportunity has been lost in a practical sense to make some submissions material to the application for assessment, because it did not have access to these documents.

1. On 15 May 2009 the VL solicitors requested that the assessor reconsider his decision about not providing the costs agreements. That submission referred to Dyktynski v BHP Titanium Minerals Pty Ltd[2004] NSWCA 154; (2004) 60 NSWLR 203. In Dyktynski , the Court of Appeal had held that the indemnity principle did not prevent costs being payable under an order for party/party costs when (a) a litigant permitted an appeal to be brought in his name, but actually for the benefit of his solicitor, (b) the client had signed a costs agreement with the solicitor "as a formality under the Legal Profession Act" , and (c) the client had also received a very clear assurance from the solicitor that regardless of the outcome the client would not be liable to pay the costs of either the solicitor, or the other side. The court held that, when the client ultimately received a costs order, the solicitor could take its benefit, because the solicitor was the real party bringing the action, while the client was merely a nominal party.

1. At [7]-[8] in Dyktynski , Mason P (Davies AJA agreeing) had set out the following principles:

"... If a party to an action has agreed with the solicitor that the party does not have to pay any costs, then costs cannot be recovered against the adversary under a party and party order ( Gundry v Sainsbury[1910] 1 KB 645, McCullum v Ifield[1969] 2 NSWR 329 at 330). Alternatively, if the solicitor-client agreement caps the amount of costs recoverable, this enures to the benefit of the client's adversary ( Tarry v Pryce (No 2)(1987) 88 FLR 270).

The situation is different if the client has the benefit of an indemnity from a third party, so long as the client remains under a legal liability to the solicitor ( Adams v London Improved Motor Coach Builders Ltd[1921] 1 KB 495, Backhouse v Judd[1925] SASR 395, Angor Pty Ltd v Ilich Motor Co Pty Ltd(1992) 37 FCR 65, Wilson v Richmond River Shire Council[2000] NSWSC 71)."

1. The assessor in the present case evidently did not accede to the request for reconsideration.

1. It was not until 22 May 2009 that the VL solicitors filed their objections to the draft bill of costs. On 16 June 2009 the JL solicitors sent the assessor the JL Parties' response to the notice of objections. Quite promptly thereafter, bearing in mind the size of the bill of costs, on 28 July 2009 the assessor issued his certificate of determination of costs.

1. The costs assessor's refusal to allow access to the costs agreements was one of the matters concerning which the VL Parties brought their appeal to the Review Panel. The Review Panel held, in its Statement of Reasons, that the VL Parties had not suffered any procedural unfairness as a consequence of the costs assessor's refusal to provide access to the costs agreements.

1. In the District Court appeal the VL Parties issued a Notice to Produce seeking copies of the costs agreements. In November 2010 the JL Parties produced the costs agreements without making any claim for privilege.

1. Now, the costs agreements have been not only produced, but tendered in evidence in the District Court appeal. The VL Parties submit that the late production is a concession that they should have been produced earlier.

1. I would not be prepared to draw that conclusion from the mere fact of late production of the costs agreements. While the taking of a stance at one particular time in litigation, and later abandoning that stance, can sometimes be a concession that the stance should not have been taken at all, that is not necessarily so: cf Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd(1995) 36 NSWLR 242, as explained in the Costs Judgment at [38].

1. However, the costs agreements were also tendered at the hearing before me of the Notices of Motion now in issue. I was asked to decide whether the costs agreements were privileged or (if this be the relevant test for the purpose of deciding whether there was unreasonable delay) whether it had been seriously arguable that they were privileged. Those matters can only be decided after reaching a view about the appropriate legal standard on which the question of privilege should be decided.

Legal Basis for Deciding Privilege Claim

1. The Evidence Act1995 applies to "all proceedings in a NSW court" , subject to some exceptions not presently relevant: s 4. The Dictionary to the Evidence Act provides:

" NSW court means:

(a) the Supreme Court, or

(b) any other court created by Parliament,

and includes any person or body (other than a court) that, in exercising a function under the law of the State, is required to apply the laws of evidence."

1. It follows from the provisions of the LP Act that I have earlier set out at [99]-[109], that when a costs assessment is being made by an assessor, and when a review of a costs assessment is being conducted by a review panel, those proceedings are not taking place in a "NSW court" . Thus, any question of the application of legal professional privilege in the proceedings before the costs assessor, or before the review panel must be decided in accordance with the common law, not in accordance with the Evidence Act . That conclusion accords with the conclusion that Basten JA (McColl JA agreeing, and Hodgson JA agreeing substantially) reached in CSR Ltd v Eddy at [21] concerning the basis upon which privilege claims were to be decided when that question arose before an assessor or a review panel assessing costs under the Legal Profession Act1987 .

1. In contrast, once the appeal was taken to the District Court against the review panel's determination, the proceedings in the District Court were "in a NSW court" , within the meaning of the Evidence Act , and thus any questions of privilege would be decided in the District Court in accordance with the Evidence Act .

Decision Concerning Privilege

1. On their face the costs agreements are unexceptional commercial agreements between a solicitor and client. They give no legal advice. They contain no record of a confidential communication between the client and another person or between a lawyer acting for the client and another person, that was made for the dominant purpose of the client being provided with legal services. If tendered in evidence, they would not disclose the contents of any confidential document that was prepared for the dominant purpose of the client being provided with professional legal services. They are part of the contract pursuant to which the various solicitors were retained. They are not advice given or tasks performed in performance of the professional relationship between solicitor and client. As Basten JA said in CSR Ltd v Eddy at [62]:

"The existence of a retainer between client and lawyer is not the subject of the protection [of legal professional privilege], but a precondition to its operation. Accordingly, and generally speaking, the retainer will not be privileged: see Cook v Pasmenco Pty Ltd (No 2)(2000) 107 FCR 44 at [47] (Lindgren J)."

See also per Hodgson JA at [7], and J D Heydon, Cross on Evidence (2010), 8 th Australian edition at [25225].

1. Where the costs agreements were not privileged to start with, no question arises of whether the privilege has been waived. Waiver would have occurred if the costs agreements had been privileged and making them available to the costs assessor in connection with a dispute about the quantum of costs was conduct inconsistent with the maintenance of the confidentiality which the privilege is intended to protect ( Mann v Carnell(1999) 201 CLR 1 at [29]; Thomason v Campbelltown Municipal Council(1939) 39 SR (NSW) 347; cf Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar, the Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand[2006] NSWCA 160; (2006) 66 NSWLR 112 at [53]).

1. Further, if this be the relevant test, the actual contents of the costs agreements are such that it was not seriously arguable that privilege attached to them.

The Settlement of the District Court Proceedings

1. On 27 June 2011 the following orders were made by consent in the District Court proceedings:

"1. Appeal allowed.

2. Two Certificates of Determination of the Costs Review Panel in Assessment 2008/17766, both dated 23 June 2010, are set aside.

3. Order pursuant to s 384(2)(b) of the Legal Profession Act2004 that the Application in costs assessment proceedings 17766/08 filed on 5 November 2008 be remitted to the Review Panel for re-determination.

4. The JL Parties to pay the VL Parties' costs of the proceedings agreed in the sum of $35,000."

1. The District Court judge hearing those proceedings also made the following direction and notation:

"5. I direct that the parties pursue the above redetermination expeditiously and comply expeditiously with any directions of the manager, costs assessment and the review panel.

6. I note that the costs agreements and tax invoices of the defendant should be before the review panel and available to the plaintiff to make submissions."

1. After the judge had been told of the terms of the orders that the parties had agreed, he said:

"I think I should say that this is a sensible settlement because without canvassing the other issues it seemed to me likely, although I hadn't made up my mind that I would order along the lines of orders one, two and three, because I had formed the view that the decision of the review panel in respect of not providing a copy of the costs agreement to the plaintiff was in error, for reasons that you have no doubt explained to your respective clients. That was not a certain result, it would be wrong for me to say that it was because I hadn't heard the parties to conclusion in their submissions. But it was quite a likely result and in those circumstances I think I would have taken the view that it was sufficient ground to set aside the decision of the review panel as you've done by these orders, and that it was unnecessary for this court to examine all of the other reasons why that result was claimed. In other words this is a settlement which in my view very closely mirrors a most likely result ..."

Effect of Determination of the Proceedings in the District Court

1. I accept the submission of the JL Parties that reliance should not be placed on the remarks that the judge made after making the orders, direction and notation. As the judge said, they were preliminary views, formed without having heard all the submissions that might have been made if the matter had been argued to completion.

1. While it is a fair inference, from note number 6, that either the parties agreed, or the judge was of the view, that the costs agreements should be available to the VL Parties, the note was of no practical utility. By the time it was made, the VL Parties already had a copy of the costs agreements, and by virtue of those agreements having been tendered in court there would be no inhibition on the VL Parties using them in a different set of proceedings to that in which they had been obtained: cf Hearne v Street[2008] HCA 36; (2008) 235 CLR 125.

1. The evidence does not persuade me that the failure to provide the costs agreements to the VL Parties was the reason for the court's orders. The evidence before me includes what I take to be the latest version of the amended summons commencing the appeal in the District Court. The appeal grounds identified in it included matters arising from the failure to provide the costs agreements to the VL Parties, and the consequent inability of the VL Parties to make submissions concerning the costs agreements. However, it also contended that the Review Panel had erred in confirming the findings of the costs assessor based on the order of 10 March 2006 rather than the order as varied on 28 March 2006, and also made some more general complaints, namely:

"4 The Panel erred, with respect to a matter of law, in:

...

c. Failing to give any, or any adequate, statement of reasons for its determination, contrary to s 380(2) of the Legal Profession Act2004 (" the Act ") and cl 134(1)(d) of the Legal Profession Regulation2005 .

...

7 The Panel erred, with respect to a matter of law, in holding at [7.5] of the Reasons that s 361 of the Act was irrelevant to the Application.

8 Having set aside the determination of the Costs Assessor, the Panel erred, with respect to a matter of law, in failing, contrary to s 375(1)(b) and (2) of the Act, to:

(a) determine for itself the Application in the manner that a Costs Assessor would be required to determine an application for costs assessment under Part 3.2 of the Act; and

(b) substitute the Costs Assessor's determination with its determination.

9 The Panel erred, with respect to a matter of law, in failing to apply or have regard to s 369(1)(c) and (3)(c) of the Act, which apply to the Application as the quantum of costs was reduced by more than 15%, or to substitute its own determination of the extent to which the Costs Applicant should share the costs of assessment."

1. To give content to ground 7, s 361 LP Act appears in Subdivision 2 of Division 11 of the LP Act . Subdivision 2 contains general matters relating to all types of assessment, whether party/party or of other types. Section 361 provides:

"(1) A costs assessor must assess the amount of any disputed costs that are subject to a costs agreement by reference to the provisions of the costs agreement if:

(a) a relevant provision of the costs agreement specifies the amount, or a rate or other means for calculating the amount, of the costs, and

(b) the agreement has not been set aside under section 328 (Setting aside costs agreements),

unless the assessor is satisfied:

(c) that the agreement does not comply in a material respect with any applicable disclosure requirements of Division 3 (Costs disclosure), or

(d) that Division 5 (Costs agreements) precludes the law practice concerned from recovering the amount of the costs, or

(e) that the parties otherwise agree.

(2) The costs assessor is not required to initiate an examination of the matters referred to in subsection (1)(c) and (d)."

1. In para 7.5 of its reasons, the Review Panel had said:

" Non Compliance with Section 361 LPA

The Costs Assessor's Reasons make no reference to the determination having been conducted by reference to any provision or Costs Agreement in breach of Section 361.

The section which founds this ground for review applies to the conduct of assessments as between a law practice and a client and has no application to a party/party assessment.

The Review Panel does not therefore consider that a Section 361 Statement is required where Section 361 is irrelevant i.e. in this Party/Party Assessment. There is no indication that the Assessment proceeded on any other basis than that set out in Section 364. The Ground is not made out."

1. Thus, ground 7 raises a legal question concerning the interrelationship of ss 361 and 365. That legal question is separate to whether failure to provide the costs agreements resulted in procedural unfairness.

1. Grounds 8 and 9 in the District Court appeal also raised matters that were separate to that question of procedural unfairness alleged to arise from failure to provide the costs agreements to the VL Parties.

1. There was no argument before me concerning whether the VL Parties were caused practical injustice by the denial of the opportunity to make submissions concerning the costs agreements, even if (as I have found) the JL Parties had no real basis for claiming privilege for the costs agreements. Without seeking to express any view concerning it, there is scope for argument about whether wrongly making the costs agreements unavailable has caused any practical injustice. There are three relevant costs agreements, one with each of three different firms of solicitors who have worked on the matter. The client in two of those agreements is Joseph Lahoud, while the client in the third agreement is both Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd. It would be arguable that those clients had a contractual obligation to pay the solicitors' costs, and that a principle similar to that recognised by Mason P at [8] in Dyktynski (set out at [169] above) had the consequence that the indemnity principle would not prevent the JL Parties (namely, Joseph Lahoud, and Joseph Lahoud & Associates Pty Ltd) from receiving indemnity pursuant to the Costs Order, even if the contractual liability that they had to their solicitors had been met by some other entity. Further, none of the costs agreements imposed any cap on the amount of costs the solicitor might receive.

1. Another matter is relevant to whether the erroneous claim of privilege will be the cause of delay while the Review Panel reconsiders the matter. It is that the orders of the District Court place no limitation on the issues that might be argued when the matter is remitted to the Review Panel. It is not as though the only matter that the Review Panel will be free to consider is whether failure to provide the costs agreements caused practical injustice.

1. For these reasons, it could not be said that it is only the wrongful claiming of privilege for the costs agreements that has caused the District Court appeal to be brought, or caused the settlement of the District Court appeal, or will cause delay by reason of the remittal to the Review Panel.

The Alternative Basis

1. The VL Parties submit that, even if it has not been shown that any or all of the specific periods of time that they identify in their submissions are caused by delay on the part of the JL Parties, there has still been a general dragging of the feet on the part of the JL Parties that has contributed to the overall delay in obtaining assessment of the costs. The VL Parties submit that in consequence some reduction should be made in the period during which interest on costs runs.

1. When questioned at the hearing about whether the type of cause that was relevant, for deciding whether there had been conduct that was the cause of delay in assessment of the costs was a sole cause or a materially contributing matter, Mr Neil said: "I wouldn't go so high as to say sole cause but I wouldn't go below materially contributing" . That amounts in substance to a concession that a materially contributing cause can be sufficient. I propose to assume, without deciding, the correctness of that concession.

1. For the reasons I have given earlier, I am not persuaded that the events relied upon to make up the First Delay Period and the Second Delay Period made any material contribution to delay in the assessment of costs.

1. The manner in which the JL Parties dealt with the question of whether they were entitled to an input credit for GST was one of the circumstances that together caused the delay involved in the Third Delay Period. However, its significance needs to be assessed bearing in mind the general principles concerning whether an order ceasing the running of interest on costs should be made ([59] above). When there were so many other circumstances involved in the delay during the Third Delay Period, I am not persuaded that the role played by the JL Parties concerning their entitlement to an input credit for GST made a sufficient contribution to the Third Delay Period to make it just that the JL Parties should not receive interest, concerning that period or any part of it, on the costs that they paid so long ago.

1. Similarly, concerning the Fourth Delay Period, the conduct of the JL Parties in making an unjustified claim of privilege was one of the circumstances that together resulted (and, insofar as the remittal to the Review Panel has yet to be completed, will result) in delay in the assessment of costs. However, there are other circumstances involved in that delay, and I reach the same conclusion as I reached concerning the Third Delay Period.

Costs of These Notices of Motion

1. The result of these reasons is that the JL Parties fail completely on their Notice of Motion. Victor Lahoud succeeds, by consent, in obtaining an order that the judgment dated 17 November 2010 be set aside. Victor Lahoud fails concerning the rest of his Notice of Motion.

1. Rather than make separate orders for costs concerning the two Notices of Motion, it is highly desirable that a single order be made that encompasses the costs concerning both Notices of Motion. Proceeding in that way will avoid time-consuming and potentially expensive argument about the proper manner of apportionment of items of costs concerning the two Notices of Motion. It will enable a bill of costs to be prepared by only one side in the litigation, rather than requiring a bill of costs to be prepared by each side in the litigation, and setting off resulting costs orders.

1. It was only on the day of the hearing that it became apparent that the JL Parties agreed that the judgment dated 17 November 2010 should be set aside. However, there was some preparation relating to that aspect of the VL Parties' Notice of Motion, both in the form of evidence and submissions. A costs order should take into account that the JL Parties should bear those costs. This is one of those situations where, even though there has not been litigation of the question of whether the judgment should be set aside, the court can conclude that the JL Parties acted so unreasonably in obtaining the judgment that the other party should obtain the costs of that part of the notice of motion: Re Minister for Immigration and Ethnic Affairs; ex parte Lai Quinn(1997) 186 CLR 622 per McHugh J at 624-625.

1. The time involved in the aspect of the Victor Lahoud Notice of Motion that was argued, in gathering of evidence, in written submissions and in court time, substantially exceeded what was involved in the JL Parties' Notice of Motion.

1. In my view, the appropriate order is that Victor Lahoud pay 33% of the costs of the JL Parties concerning both Notices of Motion. Neither Notice of Motion sought an order for payment of interest on the costs associated with that Notice of Motion.

Orders

(1) Order that the judgment in favour of Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd in the sum of $1,186,398.90 dated 17 November 2010 be set aside.

(2) Otherwise dismiss the Amended Notice of Motion filed by Victor Lahoud on 31 January 2011.

(3) Dismiss the Notice of Motion filed by Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd on 7 December 2010.

(4) Order Victor Lahoud to pay 33% of the costs as agreed or assessed of Joseph Lahoud and Joseph Lahoud & Associates Pty Ltd concerning the two Notices of Motion.

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Decision last updated: 02 September 2011