Laro-Bashford v Mihos
[2016] VSC 77
•7 March 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2015 4518
| ADAM LARO-BASHFORD & ORS | Plaintiffs |
| v | |
| GEORGE MIHOS | Defendant |
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JUDGE: | GOURLAY JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 February 2016 |
DATE OF JUDGMENT: | 7 March 2016 |
CASE MAY BE CITED AS: | Laro-Bashford & Ors v Mihos |
MEDIUM NEUTRAL CITATION: | [2016] VSC 77 |
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DECISIONS AND REASONS
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PRACTICE AND PROCEDURE – Review of costs by Judicial Registrar pursuant to Order 63.56.2 – Costs registrar’s exercise of discretion not to reduce costs pursuant to Order 63.85.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Colonna | MST Lawyers |
| For the Defendant | In person |
JUDICIAL REGISTRAR:
On 26 February 2016 I heard this application. I reserved my decision and now publish my decision and reasons.
The Respondent applied for a review, pursuant to Order 63.56(2), of taxation orders made by a costs registrar on 26 November 2015 that the costs of the applicants are taxed and allowed in the sum of $95,063.50. The basis of the application for review is that the costs registrar failed to apply the ordinary meaning to Order 63.85 (‘the Rule’) and disallow costs to the solicitor filing the bill of costs for preparing the bill for taxation and for attending the taxation as the bill WAS reduced by 15% or more. Order 63.56.2 requires the party seeking to review an order made by the Costs Court constituted by a costs registrar to file A Notice stating the order made in respect to each item in the bill of costs that the party objects to, and to state specifically and concisely the grounds of objection to that order, and the order sought in its place. The Notice of review complies with that rule.
The items sought to be reviewed are items 555 to 565, excluding items 557 and 564, totalling $11,219.04. The respondent in his notice of review argues that as the costs assessed up to item 554 had been reduced by $25,130.13, which is 23.10% of the total claimed of $108,770.05 to that point in the bill, he was entitled to have Order 63.85 applied in his favour and the applicant should be deprived of the charges in the bill that relate to the costs of the taxation. A further sum of $2,277.56 was taxed off items 555 and 556 to make the total reduction of the bill 23.08%. The review seeks further reductions as follows:
Item Amount claimed Amount allowed Amount sought Comment 555 $8,415.20 $6,539.20 00.00 Order 63.85 application preparation of the bill 556 $22.88 $18.92 00.00 Preparation of the bill 558 $53.60 $53.60 00.00 “filing the bill for taxation”
Order 63.85559 $35.30 $35.30 00.00 “filing the bill for taxation”
Order 63.85560 $296.50 $296.50 00.00 “filing the bill for taxation”
Order 63.85561 $30.40 $30.40 00.00 “filing the bill for taxation”
Order 63.85562 $15.04 $15.04 00.00 “filing the bill for taxation”
Order 63.85563 $150.08 $150.08 00.00 Preparation for taxation 565 $340.00 $4,080.00 00.00 “for attending taxation” $11,219.04
The Rule states:
If the amount of the professional charges and disbursements in the bill (including a bill of costs payable out of a fund) is reduced by 15 per cent or more, unless the Costs Court otherwise orders, no costs shall be allowed to the solicitor filing the bill for taxation for preparing the bill and for attending the taxation.
The Notice of Review states that:
The Registrar erred by failing to apply the ordinary meaning of the Order 63.85 as provided by the Rules as follows:
The Applicant bears the onus of proof to show the Court that the ordinary meaning of 63.85 should not be applied. The Applicant failed to show anything to proof (sic) the onus. The registrar, at the contrary(sic), requested the Respondent to advise, as to why the section 63.85 should not apply?
b) The Registrar took into account an irrelevant consideration to separate amounts of reduced professional costs and disbursements suggesting that, the amount of professional costs was not reduced substantially and that, most of the reductions are counsel fees.
c) The Registrar took into account an irrelevant consideration that, the bill was well drafted.
d) The Registrar took into account an irrelevant consideration that, most of the reductions were made by reason of exercising by him his judicial discretion.
The Applicant (sic) submits that the purpose of the section is to stipulate both parties to enter into negotiations to resolve matters in order to comply with parties’ overarching obligations to narrow issues in dispute, to minimise delay and to use all reasonable endeavours to resolve issues having a proper basis.
The Notice of Review further states that:
The Respondent reduced the amount of professional costs and disbursements by more than 15%, hence the section must apply as of default, unless “the Costs Court otherwise”.
The exercise of judicial discretion by the Court must be by reason of the conduct of the party, otherwise, entitle to rely upon the section.
The Court did not raise any issues of the Respondent’s conduct during or prior to the taxation of the bill of costs to deprive the Respondent of its right by default.
The Registrar failed to put additional weight to the fact that the Applicants failed to narrow issues in dispute and failed to use reasonable endeavours to responding to the Respondents offers to resolve proceedings and by failing to make any offer of their own.
The Court file does not include details of the ruling of the costs registrar other than that he declined to apply the Rule on the basis of submissions made to him after the taxation. There is no criticism of the costs registrar in this as it not expected that rulings on taxation be reduced to written reasons. Such a practice would be too onerous to undertake and would be contrary to the requirement that the Costs Court act ‘with as little formality and technicality as the requirements of this Act, the Rules and a proper consideration of the matters before the Court permit’.[1] At the hearing of the review I invited the applicant’s representative to detail the submissions made to the costs registrar by him on the taxation and make submissions on the principles and approach applying to an appeal from an exercise of discretion. He submitted that:
[1]Section 17D (3) Supreme Court Act 1986.
a. the majority of reductions to the bill of costs related to Counsel’s fees which are ‘at arm’s length’ from the solicitor’s professional charges;
b. that there were no ambit claims in the professional costs, which was found by the costs registrar to be ‘well drawn’ and each claim made was at least arguable but depended on the exercise of discretion by the taxing officer to be allowed;
c. that only 11% had been taxed off professional costs and the items taxed off were discretionary in nature;
d. that the Notice of Objection was served two days before the taxation[2] and the respondent did not seek to narrow the issues in dispute by late filing the Notice and by not inspecting the file prior to the taxation;
[2]The Notice of Objection on the file is dated 12 September 2015 and was filed on 8 October 2015 just prior to the taxation which was listed for 14 October 2015 .
e. that many of the respondent’s objections were unjustified as they had objected to documents that were common to the parties such as Court Documents or correspondence between solicitors. These objections were unreasonable as they had increased the time required to prepare for the taxation and the time of the taxation,
f. the applicant relied on the unpublished decision of Bronze Wing Ammunition Pty Ltd v Eley Australia Pty Ltd[3] (‘Bronze Wing’) that Order 63.85 does not limit the discretion of the costs registrar to decide whether or not to apply the Rule. The costs registrar must consider the facts and circumstances of each bill of costs and the conduct of the parties at the taxation , and
g. that the respondent is unable to show that there has been any error made in the refusal to apply the Rule.
[3]S CI 2013 05887 on 24 July 2014 by Gourlay JR
In reply the Respondent submitted that:
a. that he relied on the grounds in his notice of review;
b. that a consideration of the claims for both professional costs and disbursements separately shows that the sum claimed for each component was reduced by more than 15%, and the combined total of the reductions was more than 23%. Therefore the Rule should be applied;
c. that by requiring the respondent to argue against the Rule’s application first the registrar erred in placing the onus on the respondent to justify why the Rule should apply;
d. that the taxation was extended to a 3 day hearing by the applicant’s solicitor being unable to produce items objected to in the bill in a timely manner; and
e. that at the start of the taxation the costs registrar had commented that in his view the costs claimed were high.
The law in relation to review
A review of a taxation of costs by a costs registrar pursuant to r 63.56.2(2) is governed by the same principles and approach applying to an appeal from an exercise of discretion.[4] The Court of Appeal and Justice Beach in Kuek v Deflan Pty Ltd & Anor:[5] approved the principles detailed in Australian Coal and Shale Employees’ Federation v The Commonwealth and said:
A review of a taxation of costs is not a second bite of the cherry. It is necessary to show that there has been an error by the taxing officer of a material fact or reliance on an irrelevant consideration by the taxing officer.
[4]Magna Alloys & Research Pty. Ltd v Coffee (No. 2) [1982] VR 97 at pp. 102-3; also Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 C.L.R. 621 at 627-9.
[5] [2011] VSCA 25 and [2009] VSC 91 respectively.
In House v R[6] Justices Dixon, Evatt and McTiernan considered that a review of an exercise of unfettered discretion can only succeed on the following grounds:
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
[6](1936) 55 CLR 499 at 504-5.
The onus lies on the person seeking to impeach the rulings to satisfy the court that the decision appealed from is wrong. In general, the court will interfere with rulings only where the discretion appears not to have been exercised at all, or to have been exercised in a manner which is manifestly wrong[7]. A party seeking to review decisions made on taxation must show that the taxing officer made an error of a material fact, or gave weight to irrelevant considerations or failed to give weight or sufficient weight to a relevant consideration before any item challenged will be reconsidered.
[7]Hill v Peel (1870) LR 5 CP172 at 180-1; see also Schweppes Ltd v Archer (1934) SR (NSW) 178 at 183-4.
Reasons
The respondent submits that the costs registrar failed to apply his discretion correctly as he:
a. requested the respondent to advise why the order 63.85 should not apply thereby reversing the onus on the applicant to argue against applying the Rule,
b. considered that the reduction to professional costs and disbursements separately and held that professional costs were not substantially reduced,
c. held that most of the reductions were to counsel fees,
d. stated that he considered that the bill of costs was well drafted, and
e. found that most of the reductions were made by reason of the exercise of his judicial discretion.
To consider these issues I have analysed the bill of costs[8] as follows:
[8]My figures are from the costs registrar’s notations on the bill of costs.
a. the bill of costs contains 569 items in total, with the costs of acting in the substantive proceedings claimed in items 1 to item 555. The balance of items are the costs of the taxation. The costs and disbursements items up to item 555[9] totals $56,323.36 for professional costs, and $52,437.69 for disbursements, being a grand total of $108,770.05.
[9]The bill contains two items numbered 555. The calculations are to the first of these numbers.
b. the costs registrar’s notations in the bill show that $25,130.13 was taxed off up to item 555.
c. this is 23.10% of $108,770.05.
d. The professional costs items were reduced by $13,485.10 being 12.40% of the total sum claimed to item 555 and 23.94% of the professional costs claimed.
e. The disbursements were reduced by $11,645.03 being 10.70% of the total claimed and 22.21% of the disbursement claim.
f. of the items to number 555, 488 items are the claims for professional costs, 74 of these items were disallowed in their entirety, and in 19 items the amount was allowed at a reduced amount.
g. these 93 items represent 19.05% of the 488 professional costs items included to item 555.
h. there are 81 items claiming disbursements, 13 of these items were taxed off entirely, and 13 items had the amount of costs reduced.
i. these 26 disbursement items represent 32.09% of the 81 disbursement items.
At the conclusion of a taxation when the claimed sum of costs and disbursements has been reduced by 15% or more, Rule 63.85 provides that no costs shall be allowed to the solicitor who filed the bill of costs for preparing of the bill or attending the taxation, unless the court orders otherwise. The Rule gives the taxing officer wide discretion to allow these costs if he considers that circumstances exist that warrant inclusion of those costs in the sum fixed for taxation.
In Bronze Wing[10] I stated that:
SCR 63.85 provides that where a bill of costs is reduced on taxation by 15% or more the Court may order that no costs of preparing the bill and appearing at the taxation be allowed, if considered appropriate. The Rules do not in any way limit the discretion of the taxing officer in deciding whether to apply a reduction in costs. The taxing officer is able to consider any submission made to him, the claims in the bill of costs and the circumstances surrounding of the taxation in exercising his discretion. The consideration of unjustified or excessive claims in items in the bill of costs is relevant.
The Costs Court also has discretion to allow or not to allow the costs of taxation whether or not SCR 63.85 applies to the bill of costs. If the Court considered that the amounts claimed in the bill were unjustifiably made or excessive then it may decide to exercise its discretion. Other considerations such as offers of compromise or other less formal offers that may have been made, or the results of the procedure in SCR 63.88 for an estimate of the costs prior to taxation are relevant to the consideration of the costs of taxation.
[10]S CI 2013 05887 on 23 July 2014 at paragraphs 8 and 9.
The Rule is triggered when 15% or more has been taxed off the bill of costs. If that occurs the Court must apply the Rule unless there is reason not to apply it after considering the parties submissions. The onus lies with applicant to demonstrate why the Rule should not apply. It is accepted that a party who seeks an indulgence from the Court not to impose a penalty should justify why the indulgence be granted. As the onus lies with the applicant, the costs registrar must hear submissions from the applicant as to why the Rule should not apply first and then allowed the respondent to respond. By the costs registrar asking the respondent to argue for the Rules application it could appear that he held a preliminary view prior to asking for the submissions. As the costs registrar appears to have misunderstood where the burden of proof lay this error would be sufficient to allow the review to succeed as it did not afford the respondent procedural fairness.
Further analysis of the reasons given by the costs registrar not to invoke the Rule shows that at the conclusion of the taxation the parties had agreed that the bill of costs had been reduced by more than 15%. The analysis at paragraph 13 shows that each of the costs and disbursements were reduced by similar percentages, with professional costs being reduced by a slightly higher percentage. Consideration of the percentage reduction of professional costs and disbursements separately and by accepting the applicant’s submission that the reduction to professional costs was less than the reduction to disbursements has led to a mistaken finding that the reduction to costs was less significant than the reduction to the disbursements. Although it may be reasonable if there is a small reduction to professional costs and a large reduction to disbursements to order that the Rule not apply, this is not the case here. Here the reductions are similar percentages and both are of significant size. It also appears that the applicant’s submission that 11% was taxed off professional costs is incorrect
The Rule refers to the reductions to costs and disbursements together and does not separate these, so the Court must first consider the combined reduction. Although the fact that differing percentages are taxed off the costs and disbursements may be a consideration in deciding not to apply Order 63.85, the total reduction of costs and disbursements is the primary consideration in invoking the Rule. In this matter the reductions were similar in percentage exceeding 15% and this was not a taxation where the reductions were almost totally from Counsel’s fees.
In this matter I consider that the combined reductions are sufficient to apply the Rule.
In my view, it is not relevant to claim that the bill was ‘well drawn’ and did not contain an ambit claim for costs. The Costs Court is entitled to expect that all bills of costs are well drawn, are a factual statements of the claim for costs based on the solicitor’s file, other evidence available to the draftsperson and the application of the scale of costs. Whether or not the bill includes ambit claims and those claims are not supported by the evidence is relevant to the overarching obligations of parties under the Civil Procedure Act2010 to narrow the issues in dispute,[11] not to mislead or deceive [12] and to ensure that any claim made has a proper basis.[13] As 74 of the 488 professional costs items were entirely taxed off the bill a finding that the bill was ‘well drawn’ may be mistaken and is not a sufficient reason not to apply the Rule.
[11]Section 23.
[12]Section 21.
[13]Section 18.
The applicant submitted that another reason not to apply the Rule was that the reductions were mainly to discretionary items. This submission is an extension of the statement that the bill is ‘well drawn’. The two largest reductions to discretionary items were 24.62% taxed off item 184 (being the instructions for brief item in the old scale of costs) and 41.99% taxed off item 545 (being the loading post allowed 6 October 2014 on all items in the bill when the County Court changed its scale and basis of taxation). The allowance to be made to each of these item is entirely discretionary.
In item 184 a loading of 60% was claimed to the base figure for work claimed for instructions for brief. The allowance made in this item is discretionary and made on the basis of the work done and the complexity of the issues between the parties. The dispute between the parties involved reasonably complex questions of whether the respondent had made false representations and given financial advice to induce the applicants to make investments in a Unit Trust which caused the applicants to lose a significant sum of money. This item covered work undertaken over a year from 7 October 2013 to 6 October 2014 and included claims for perusal of the main documents that the applicant’s relied on to prove their case. More than 60% of the base figure was for these perusals so the solicitor must have expected that a reduction as the scale allowance for perusals in addition to the loading would have been high.
The loading claimed in item 545 is a claim for an additional 15% of the total of all professional costs claimed after 6 October 2014 as the County Court adopted a changed scale from that date. I consider this claim to be high. The recent Notice to the Profession[14] states that the usual range of allowances being made by the Costs Court for this item is of between 0-15%. While accepting that this information was not available to the drafter of the bill at the time it was prepared, the claim of 15% was such that the applicant must have expected a reduction would be made. In total the bill over-claimed the professional costs by 12.40% of the total sum claimed to item 555 and 23.94% of the actual professional costs claimed. Although discretionary items were reduced this does not mean that the Rule should be ousted in these circumstances.
[14]Published in February 2016.
Counsel’s fees are a disbursement and are ordinarily claimed in full in the bill of costs, unless a good reason for making a different claim is apparent, so the paying party and the Court is given a full picture of the costs incurred. A reason not to claim the marked fee could be that the scale limits the claimable amount for the task undertaken by Counsel or an order has fixed the amount to be allowed to Counsel for the task claimed.
However, the fees charged by Counsel to the client are not at large and a solicitor who delivers a brief to counsel is required to supervise the fees marked, and to be aware of the amount of charges and their proportionality to the issues in dispute. The Legal Profession Act2004 provides that a solicitor should give a client any costs disclosure provided counsel including counsel’s estimate of charges. Counsel cannot assume that charges for work will be allowed on a taxation of costs between the parties without reduction. Counsel has a duty to provide costs disclosure and on-going disclosure if his fees have increased beyond the initial disclosure amount.
The applicant argued that the majority of reductions to the bill were to Counsel’s fees which are ‘at arm’s length’ from the solicitor, that is, beyond the control of the solicitor. Therefore the solicitor should bear no responsibility for any reductions to Counsel’s fees. However, increasingly the Courts and the Civil Procedure Act2010 require moderation and scrutiny of all costs claimed. The solicitor can manage Counsel’s fees by setting budgets for Counsel and requiring Counsel update details of fees charged regularly. It is well accepted that the decision in re Blythe and Fanshawe[15] still applies to disbursements to require the solicitor to give a warning to the client that ‘costs of an unusual sum or nature are not allowed as between lawyer and client unless they have been particularly authorised by the client with full disclosure, including the fact that they may not be allowed as between party and party’[16]. Solicitors generally must bear some responsibility for charges of Counsel and cannot claim that if they are reduced at taxation that they have no responsibility and that the reduction does not warrant the application of the Rule if the total reduction to costs and disbursements is significant when no warnings or disclosure has been given to the client.
[15](1882) 10 QBD 207.
[16]Dal Pont on Costs (second edition) at page 125 – 130 and Rule 63.
Conclusion
For these reasons I conclude that it was not reasonably open to the costs registrar not to apply the Rule at the conclusion of the taxation. If Rule 63.85 is invoked, the items that would not be allowed are items 555, 556, and 565, the items claimed for preparation of the bill and attending the taxation. Items 555 and 556 were reduced on taxation by a total of $1,879.96, as the item claiming drawing and engrossing of the bill was reduced to reflect the reduction of items completely taxed off. Item 564 was increased by an additional sum of $3,740.00 to allow a charge of $4,080 for the solicitor appearing at the taxation. The reductions to items 555 and 556 stand and the items are reduced by further sums of $6,539.20 and $18.92 respectively. Item 565 is reduced by the sum claimed of $340 and the taxed on amount of $3,740 is disallowed. The taxed sum will be varied by $10,638.12, to allow a sum of $84,425.38.
The review is respect of item 558, 559, 560, 561, 562, and 563 is dismissed. These items claim the solicitor’s costs of preparing and filing the summons for taxation, receiving and perusing the Notice of Objections, attending the call- over to list the taxation and attending the obtain certification of payment of barristers fees. The Notice of Review in relation to these items misapprehends the words ‘solicitor filing the bill for taxation’. The Rule states that no costs shall be allowed to the solicitor filing the bill for taxation for preparing the bill and for attending the taxation [17]and does not provide for these costs to be disallowed. The effect of the Rule is that the solicitor filing the bill must repay the costs of preparing the bill of costs and attending the taxation and it also appears that the solicitor’s client (the applicants) also should not bear these costs.
[17]The underlining is added to assist understanding the meaning of the Rule.
In relation costs of the review I have found that it was not reasonably open to rule that the Rule should not apply to the taxation sum. Generally costs follow the event but, as the applicant has not retained any legal representation for the Review there can be no order in favour of the applicant for payment of legal costs[18], however I invite him to submit details of any out of pocket expenses he has incurred for the Review for the Court’s consideration.
[18] Cachia v Hanes (1994) 179 CLR 403.
ORDERS
Pursuant to Order 63.56.2 (5)(b) the taxation result of 8 June 2012 is varied to reduce the taxed sum by $10,638.12.
The respondent is to pay the applicant the sum of $84,425.38.
The respondent file and serve details of any out of pocket expenses he has incurred within 14 days of these reasons.
The applicant file and serve any submissions in reply within 14 days of receipt.
Liberty to apply
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