Legalese Pty Ltd v Gregory - [2018] SASC 58

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
LEGALESE PTY LTD v GREGORY
[2018] SASC 58
Judgment of Judge Dart a Master of the Supreme Court
8 May 2018
PROCEDURE - COSTS - TAXATION - PARTICULAR ITEMS
Provisional costs order made - respondent seeks review of the order - whether GST payable - whether allocatur should be stayed.
Held:
1. Claim for GST disallowed.
2. Allocatur to issue in the amount of $8182.
3. No reason to stay allocatur.
Supreme Court Act 1935 s 114; Supreme Court Civil Rules 2006 r 278(1), referred to.
Coshott v Spencer & Ors [2017] HCA Trans 263; Guss v Veenhuizen [No 2] (1976) 136 CLR 47; London Scottish Benefit Society v Chorley, Crawford and Chester (1884) 13 QBD 872; Osborne v Kelly & Klimenko [1999] SASC 486; Umphelby v Grey (1898) 24 VLR 979; Willing v Hollobone (1972) 3 SASR 532, considered.

LEGALESE PTY LTD v GREGORY
[2018] SASC 58
JUDGE DART:

These reasons deal with two issues in respect of a particular Bill of Costs. The adjudication proceeded, at my behest, as a lump sum adjudication. The costs relate to an order made by his Honour Justice Nicholson on 14 December 2016 in respect of an appeal from a Magistrate's Court judgment. The claim for costs was in the amount of $16,155.36.
There is separately a broader costs dispute between the parties in respect of their former relationship as solicitor and client. That issue remains unresolved.
The respondent has sought a review of the adjudication. Rule 278(1) provides that a party may apply for a review of the provisional costs order, which review is conducted by the person who undertook the adjudication. That is the first issue that needs to be dealt with.
The parties provided written submissions, which I have considered. I bear in mind the fact that the matter proceeded as a lump sum adjudication. That necessarily involves a broad-axe approach rather than a specific item-by-item approach. The respondent on the review seeks to deal with a number of specific items. In my opinion, it is not possible to approach the matter in that way. I, save for one issue, would not alter the provisional costs order.
That issue relates to a claim in respect of GST which was allowed by me on the original adjudication. I fixed the costs at $9000. The allowance for GST is therefore $818.
The respondent points to Note B in the Second Schedule of Costs. That provides that GST is not to be added in circumstances where the receiving party is able to recover GST as an input tax credit. That would appear to be the case where, as here, the solicitor was acting on its own account. If there is a dispute as to whether GST is claimable, the party recovering the costs may provide a certificate from a solicitor or an auditor establishing the extent of any input tax credit available. No certificate has been provided.
The applicant is no doubt registered for the purpose of paying GST. There is also no doubt that the applicant would be entitled to an input tax credit to some extent. A person who has paid GST becomes entitled to set-off the amount it has paid against any obligation it has to remit GST that it has collected. A company such as the applicant would, for example, pay GST on rent, stationery, utility bills, insurance premiums and many other transactions.
If the respondent was obliged to pay the $818 on account of GST in this situation, the applicant may be entitled to retain that money for itself, to the extent it can claim an input tax credit. It is clearly the intention of the Rules to ensure that a party entitled to receive costs does not receive an allowance for GST in circumstances where the amount will be retained.
In the circumstances, I propose to deduct the $818 and, subject to the claim for interest, fix the costs in the amount of $8182. The net position is the same for the applicant.
The second issue to be determined in these reasons is the question of the applicant’s claim to be entitled to pre-adjudication interest. The applicant seeks interest be awarded from the date of the costs order, being 14 December 2016.
The Supreme Court Act 1935 provides as follows:
114—Interest on judgment debts
(1)All money, including costs, payable under any judgment or order shall bear interest at the rate from time to time prescribed by the rules of court.
(2)The interest shall be computed from the following times:
(a)in the case of money other than adjudicated costs, from the time specified in the judgment or order, and if no time is so specified from the date of the judgment or order;
(b)in the case of adjudicated costs, from the date of the certificate of the adjudicating officer by whom the costs were adjudicated or an earlier date specified by the adjudicating officer in the certificate.
The operation of the section was considered by the Full Court in Osborne v Kelly & Klimenko.[1]The Court made clear that the power to award interest was discretionary. His Honour the Chief Justice noted that interest ordinarily runs from the date the adjudicating officer certifies the amount due. The question in Osborne was whether interest could be calculated from an earlier date.
[1] [1999] SASC 486.
In Osborne the Chief Justice stated that, where a party had paid legal costs or disbursements during the conduct of proceedings there may be a sound basis for the exercise of the discretion to make an award of interest from a date earlier than the date on which the costs are fixed.[2]
[2] Osborne v Kelly & Klimenko [1999] SASC 486 p 10.
In my opinion, the Court’s discretion to award interest from an earlier time is not enlivened on the facts of this matter. The applicant is an incorporated legal practice. The principal of that practice acted in the proceeding before Justice Nicholson. No legal costs have been paid by the applicant to any other party. The applicant delayed for nearly 12 months in producing the Bill of Costs. The Bill of Costs was adjudicated upon within a few weeks of its lodgement. Nothing in the interests of justice requires the Court to award interest from a time earlier than the date the allocatur is sealed.
The order of the Court is that an allocatur is to issue in the amount of $8,182.
Separately, the respondent requests that I stay execution on the allocatur due to a matter pending in the High Court. In the appeal before Justice Nicholson the applicant was a respondent. It is a firm of solicitors. Its principal is Mr Peter Scragg, who appeared on the subject appeal.
A lay litigant who is successful is not entitled to any allowance for his or her costs.[3] The position has long been different in respect of a solicitor acting on his or her own account. The position is of some antiquity. It has been the position since at least the English Court of Appeal decision in London Scottish Benefit Society v Chorley, Crawford and Chester.[4]That case held that a solicitor who successfully acted for himself in litigation was entitled to the same costs as if he had engaged legal representation, except for items such as obtaining instructions or attendances which were unnecessary because he was of course the client.
[3] Willing v Hollobone (1972) 3 SASR 532 at 535 per Bray CJ.
[4] (1884) 13 QBD 872.
The solicitor’s entitlement to costs has become known as the Chorley exception. The Chorley exception was considered by the High Court in Guss v Veenhuizen [No 2].[5]In the majority judgment of Gibbs ACJ, Jacobs and Aickin JJ the Court appeared to confirm that the Chorley exception was good law in Australia. Certainly from an earlier time it has been applied in Australia.[6]
[5] (1976) 136 CLR 47.
[6] Umphelby v Grey (1898) 24 VLR 979.
The basis on which the respondent seeks to stay execution on the allocatur is because of a recent application for special leave in the High Court. That matter is Coshott v Spencer & Ors[7] in respect of which, on 15 December 2017, the High Court made a grant of special leave. The issue in the matter is whether the Chorley exception is good law in Australia. The appeal has not been heard as yet.
[7] [2017] HCA Trans 263.
The Chorley exception is anomalous in some respects. Ordinarily, an order for costs is intended to be compensatory and to reimburse a litigant for actual expenditure. That is not the position with a solicitor. If costs are allowed on the Court Scale, as is the practice, a solicitor is recovering more than expenditure because the Court Scale necessarily contains a profit component.
However, in my opinion, it is not appropriate to stay enforcement of the allocatur. The outcome before the High Court is unknown and it may be some time before a judgment is delivered. In proceedings to finalise this matter the court is applying the law as it has been applied for over one hundred years.