Morgan v Claim It SA Pty Ltd
[2013] VSC 119
•13 March 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
S CI 2011 01843
IN THE MATTER of s 3.4.43 and s 3.4.45 of the Legal Profession Act 2004
BETWEEN
| FREDERICK JOHN MORGAN | Applicant |
| and | |
| CLAIM IT SA PTY LTD (ACN 065 364 945) (Trading as NICHOLAS BIRDSEYE & ASSOCIATES) | Respondents |
| and | |
| NICHOLAS BIRDSEYE |
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JUDGE: | DIGBY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 November 2012 |
DATE OF JUDGMENT: | 13 March 2013 |
CASE MAY BE CITED AS: | Morgan v Claim IT SA Pty Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2013] VSC 119 |
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PRACTICE AND PROCEDURE - Legal Profession Act 2004 – Referral from Costs Court – s 3.4.45(3) - Recovery of professional fees - Supreme Court (General Civil Procedure) Rules 2005, r 63.65.2(1) – Reconsideration of Cost Court decision – Interest on outstanding fees and costs - Indemnity costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr P Duggan | Lewis Holdway Lawyers |
| For the Respondents | Mr M Lapirow | Mirabelli D’Ortenzio & Co |
HIS HONOUR:
This matter came before the Practice Court on 29 November 2012 as an application referred from a Costs Judge of the Costs Court to a judge alone, by direction of the Costs Judge (Wood AsJ) made on 19 November 2012.
Background and relief sought
The application before the Court, brought by summons dated 25 September 2012, is for an order that the respondents pay the applicant (“Mr Morgan”) the sum of $43,000 in connection with Mr Morgan’s professional fees and disbursements, plus interest and costs. Mr Morgan claims that the subject fees have now been outstanding since at least the beginning of 2010.
The summons further seeks the reconsideration of earlier orders made by the Costs Court on 2 November 2011 pursuant to r 63.56.2(1) of the Supreme Court (General Civil Procedure) Rules 2005 (“SCR”). Mr Morgan also seeks an order, if necessary, that the time stipulated in r 63.65.2(5) for application to the Court for reconsideration be extended pursuant to r 3.02. Other orders sought by the summons are, in the circumstances, no longer relevant or pressed. Similarly, the question of any need to extend time in relation to r 63.65.2(5) has been resolved as a result of the respondents’ consent, during argument, to any necessary extension. I note however, that counsel for the respondents conveyed that the respondents’ consent in that regard was to permit reconsideration by a Judicial Registrar of cost for taxation issues.[1] I have therefore dealt with the question of an extension of time pursuant to r 63.56.2(5) in relation to notification of the application under r 63.56.2(1).
[1]Transcript: P 3, L 9-14 and page 4, L 13-22.
By order made on 19 November 2012, a Costs Judge referred the applicant’s summons to a judge sitting in the Practice Court. The referral did not expressly specify the provision pursuant to which it was made. I infer that it was made pursuant to s 3.4.45(3) of the Legal Profession Act 2004 (“the Act”), which contemplates such referrals.
The respondents however argue that this matter has not been appropriately referred to this Court and therefore cannot be disposed of by a judge alone at this point. The respondents also argue that all of their objections to the applicant’s professional fees should be available to be argued so as to impugn the applicant’s claims for fees. The respondents, by Notice of Objections dated 29 July 2011 (“the respondents’ objections”), raise a multitude of such objections.
Chronology
The following is a chronology of the key events in the applicant’s protracted efforts to recover his fees. The exhibits referred to below are exhibits to the affidavit of the applicant, sworn 21 September 2012 (“the Morgan affidavit”):
Date
Event
Document
9 December 2009
Email dated 9 December 2009 [subsequently agreed[2] , details the costs agreement between the parties] from Mr Morgan to respondents.
Morgan affidavit, exhibit FJM 1.
December 2009 to March 2010
Mr Morgan prepares for and appears on behalf of client at AAT hearing on the respondents’ instructions and renders invoices in respect of that work to the respondents.
Morgan affidavit, para 3.
9 August 2010
Mr Morgan commences Magistrates’ Court proceeding against respondents to recover outstanding professional fees.
Morgan affidavit, exhibit FJM 2[3] and paras 7 and 8.
September 2010
Respondents file Notice of Defence which, inter alia, denies any liability whatsoever on the part of the second respondent, Mr Birdseye.
Morgan affidavit, exhibit FJM 3 and para 8.
3 March 2011
Magistrates’ Court proceeding stayed by consent pending costs review in the Costs Court.
Morgan affidavit, para 9.
19 April 2011
Mr Morgan files Summons for Taxation of Costs in Costs Court.
2 November 2011 (amended by the Judicial Registrar on 25 November 2011)
Costs Court constituted by Judicial Registrar make orders by consent -
Morgan affidavit, exhibit FJM 4.
• that the costs agreement between Mr Morgan on one part and both respondents on the other part is as detailed in the email dated 9 December 2009;[4]
• fixing applicant’s costs and disbursements at $43,000; and
• remitting the issues of both interest and of the costs of the Costs Court proceeding to be determined as part of the Magistrates’ Court proceeding.
1 June 2012
Matter comes on again for hearing in the Magistrates’ Court. Not reached.
Morgan affidavit, para 12.
25 September 2012
Mr Morgan files and serves -
• Summons for review of Costs Court order of 2 November 2011; and
• Morgan affidavit sworn 21 September 2012 in support.
15 October 2012
By consent, the Magistrates’ Court proceeding is struck out with a right of reinstatement and the question of costs of the Magistrates’ Court proceeding is referred to the Costs Court pursuant to s 131A of the Magistrates’ Court Act.
29 October 2012
Costs Court advises parties’ solicitors that the review application is to be referred to the Practice Court.
19 November 2012
Costs Court refers summons dated 25 September 2012 to a judge alone sitting in the Practice Court.
29 November 2012
Practice Court hearing.
[2]See Costs Court order made 2 November 2011.
[3]Exhibit FJM 2 is the Amended Complaint in the Magistrates Court.
[4]The email is exhibit FJM 1.
The central issues
The respondents raise a number of issues and defences in relation to the application for recovery of professional fees and recovery costs and disbursements, as follows:
(a)The applicant’s summons dated 25 September 2012 has not been effectively referred to a judge alone pursuant to s 3.4.45(3) of the Act or otherwise;
(b)The applicant initially anticipated that the respondents would argue that the application for reconsideration is out of time pursuant to SCR r 63.56.2(5), , however during the course of submissions counsel for the respondents consented to an extension of time in relation to the application for reconsideration under SCR r 63.56.2(1), albeit as already noted, such consent was for the purpose of allowing a taxation of costs as part of the reconsideration of Order 3 of the Order of the Costs Court on 2 November 2011. Order 3 purported to remit costs questions for the determination of the Magistrates’ Court.
(c)The respondents are not liable to pay the applicant’s recovery costs and disbursements and should be permitted to argue all of their objections in relation to the applicant’s professional fees on a review of the 2 November 2011 orders including questions as to whether the applicant failed to make required disclosures pursuant to the Legal Profession Act 2004 (“the Act”), as alleged in the respondent’s Notice of Defence dated 7 December 2010, particularly in paragraphs 17 and 18. Similarly, the respondents assert that any consideration as to costs must involve a consideration of the defences raised by the respondents in Magistrates’ Court proceeding No A12158288 and the applicant’s right to costs pursuant to s 131A of the Magistrates’ Court Act 1989.
(d)The applicant should not be entitled to recover any legal costs or interest in relation to the Magistrates’ Court proceedings relating to the professional fees claimed, because the applicants’ claims related to fees in respect of which he had failed to make disclosures required by the Act, as referred to in subparagraph (c) above.
(e)Whether because the sum of $43,000 agreed in the order of 2 November 2011 is more than 15 percent less than the sum claimed by the applicant, the respondents should be awarded costs under s 3.4.45(2) of the Act.
(f)The respondents contest the applicant’s entitlement to interest in relation to any sums due and payable to the applicant prior to 2 November 2012.
(g)The respondents deny that the applicant is entitled to costs other than on a party and party basis in relation to any costs the Court may order.
Are the matters in issue properly referred to the Court
The first substantive issue to be disposed of is whether, as the respondents contend, this Court lacks jurisdiction to hear and determine the applicant’s summons because the Costs Judge has not effectively referred the matters relating to the subject costs review to a judge alone in the Practice Court, in the manner required by s 3.4.45(3) of the Act, or otherwise.
Section 3.4.45(3) provides:
3.4.45 Costs of review
(1)The Costs Court must determine the costs of a costs review.
(2)Unless the Costs Court otherwise orders and subject to subsection (3), the law practice to which the legal costs are payable or were paid must pay the costs of the review if—
(a)on the review the legal costs are reduced by 15% or more; or
(b)the Costs Court is satisfied that the law practice failed to comply with Division 3.
(2A)Unless the Costs Court otherwise orders and subject to subsection (3), if the law practice is not, under subsection (2), liable to pay the costs of the review, the costs of the review must be paid by the party ordered by the Costs Court to pay those costs.
(3)A Costs Judge of the Costs Court may refer to the Supreme Court constituted by a Judge of the Court within the meaning of the Supreme Court Act 1986 any special circumstances relating to a costs review and the Supreme Court constituted by a Judge of the Court may make any order the Court thinks fit concerning the costs of the costs review.
For reasons that follow, I reject the respondents’ submissions in relation to the jurisdiction of this Court to deal with the matters in issue. In my view, the order made by the Costs Judge, Associate Justice Wood, on 19 November 2012 (“the referral order”)[5] effectively referred the above costs issues between the parties to the Practice Court for hearing and determination.
[5]The order is recorded on Part B of the “Court Record of Hearing” forming part of the Court file in this matter.
The referral order was in the following terms:
The summons dated 25 September 2012 and filed by the applicant is referred to the Practice Court for hearing at 10.30 am on Thursday, 29 November 2012 or as soon thereafter as the business court [sic] will allow.
The respondents argue that the Costs Judge failed to properly invoke s 3.4.45(3) of the Act because the Costs Judge did not expressly identify the referral of “any special circumstances” relating to the relevant costs review.
I reject this submission for two reasons. Firstly, it is not open to the respondents, at this point, to seek to impugn the referral order. The respondents have not sought to appeal the referral order[6] and accordingly it stands.
[6]As they could have done under the Supreme Court Act 1986 s 17I, Legal Profession Act 2004 s 3.4.47 and/or SCR r 77.06.
Secondly, even if it were open to the respondents to challenge the referral order, at this stage and in this Court, in the context of the applicant’s applications by summons dated 25 September 2012, I reject the respondents’ submission that the Costs Judge, is required to identify “special circumstances” relating to a costs review in an express way as part of an effective referral order. Rather, s 3.4.45(3) of the Act is intended to provide a wide and facilitative discretion to the Costs Judge to refer to a single judge of this Court any costs review in respect of which the Costs Judge considers a special circumstance exists and where it is expedient to do so in the circumstances. This includes special circumstances constituted by any issue or issues in a relevant costs review which the Costs Judge considered were such that they should be determined by a judge alone rather than the Costs Court.
Here, the referral order is by clear inference predicated upon the Costs Judge concluding that there were special circumstances relating to a costs review such that it was appropriate to refer the summons of 25 September 2012 to a judge alone, in the exercise of the Costs Judge’s discretion.
Furthermore, the referral order was specific in that, on its face, it referred the applicant’s summons dated 25 September 2012, which summons identified, by the relief it sought, the special circumstances which the Costs Judge must have considered appropriate for referral.
At all events, the Costs Court is separately authorised to refer any question arising on taxation to this Court pursuant to SCR 63.51, and this Court is also empowered by s 17(1) of the Supreme Court Act 1986 to hear and determine all matters which are not required to be heard and determined by the Court of Appeal.
Extension of time for costs review
The applicant’s summons sought an extension of time in relation to SCR r 63.56.2(5), which stipulates that within 14 days after the making of the order which is to be the subject of reconsideration or review, a notice for reconsideration or review is to be filed with the Costs Court and a copy of the order is to be served on each interested party.
During argument the respondents’ counsel accepted that the applicant should be granted an extension of time, although he did so for the purpose of allowing a taxation of costs as part of the reconsideration of order 3 of the Costs Court made on 2 November 2011. However, even if that concession were not made, I consider that there should be an extension of the time stipulated by r 63.56.2(5), pursuant to r 3.02(1) of the SCR. Such an extension is warranted in the circumstances of this application which seeks a relatively short extension which the respondents did not contend would cause them any prejudice. Further, a refusal of the extension sought by the applicant may cause prejudice to the applicant by preventing him from obtaining a costs review and otherwise having his applications finally determined by this Court. In all the circumstances an extension of time, if necessary, is warranted.
Do the consent orders made on 2 November 2011 defeat the respondents’ arguments in relation to liability for the outstanding professional fees and the applicant’s entitlement to costs of recovery
The third substantive issue to be determined is whether, in light of the consent orders made on 2 November 2011 (“the consent order”), the respondents should succeed in relation to their defences and arguments before this Court, either on the basis of the respondents’ objections or the alleged failures by the applicant to disclose, as required by the Act, or because of the applicant’s level of recovery and the asserted effect of s 3.4.45(2) of the Act.
The genesis of this fee recovery proceeding commences with a brief that the respondents delivered to Mr Morgan in about December 2009 instructing Mr Morgan to act for a taxpayer in relation to certain proceedings in the Administrative Appeals Tribunal (Cth). Mr Morgan appeared for the client and rendered invoices to the respondents calculated in accordance with a costs agreement which Mr Morgan deposes[7] to being set out in his email to the second respondent of 9 December 2009.
[7]Affidavit Frederick John Morgan sworn 21 September 2012, exhibit FJM 1.
The respondents have not paid the applicant’s invoices in excess of $50,000 and the applicant commenced proceedings in the Magistrates’ Court against the respondents in August 2010.
The respondents’ defence in the Magistrates’ Court proceeding denied that the second respondent, Mr Birdseye, was in any way personally liable to the applicant and further the respondents raised, by way of pleading in the Magistrates’ Court, that the proceeding in that Court could not continue without a review of the applicant’s fees under Div 7 of Pt 3.4 of the Act. On 3 March 2011 consent orders were made in the Magistrates’ Court, staying those proceedings pending a review of the applicant’s costs in the Costs Court. The respondents subsequently filed the Respondents’ Objections dated 29 July 2011, in the Costs Court.
In due course the matter came on before the Costs Court of the Supreme Court.
By a consent orders made on 2 November 2011, amended by the Judicial Registrar pursuant to SCR r 36.07 on 25 November 2011, the Costs Court ordered that:
(1)The Costs Agreement between the Applicant and Respondents is as detailed in the Applicant’s email of 9 December 2009 at 12.44.35 pm and sent to the Second Named Respondent.
(2)Pursuant to Division 7 of the Legal Profession Act 2004 the costs and disbursements of the Applicant as claimed in Fee slips numbered 475133, 475134, 477186, 477187, 477479 and 477480 (the Fee slips) are agreed at $43,000 (inclusive of GST).
(3)All issues of interest claimed in respect of the Fee slips and all issues of costs of the Costs Court proceeding S CI 2011 01843 are to be determined as part of Magistrates Court proceeding No A12158288.
The Consent Order dated 2 November 2011 is exhibit “FJM 4” to the Morgan affidavit of 21 September 2012. It is to be noted that this consent order was sought by both respondents.
A number of affidavits have been filed in the matter, including the Morgan affidavit sworn 21 September 2012 and further affidavits sworn by Mr Morgan and dated 5 August 2011, 12 September 2011 and 31 October 2011. The respondents have filed one affidavit on these applications, namely the affidavit of Nicholas Guy Birdseye sworn 24 October 2011 which, inter alia, in a very general way criticises the applicant in relation to the conduct of the relevant case before the Administrative Appeals Tribunal. Mr Morgan rebuts these criticisms in a comprehensive way in paragraph 12 of his affidavit sworn 31 October 2011.
The Morgan affidavit sworn 21 September 2012 details the costs incurred by the applicant in relation to pursuing his professional fees from the respondents.[8] These legal costs of $33,444.87 comprise of the applicant’s fees to counsel and to his solicitors, calculated in accordance with the 2011 Magistrates’ Court scale rates, as well as the separate costs consultants’ costs referable to Blackstones Legal Costing.
[8]Paras 15, 16, 17 and 18.
Reconsideration pursuant to SCR s 63.56.2(1)
The applicant’s summons of 25 September 2012 seeks a costs review in relation to the consent order, it appears because, paragraph 3 of the consent order is, as the respondents concede, beyond the Costs Court power and is ineffective by reason of s 3.4.45(1) of the Act, and, secondly, because notwithstanding the consent order the respondents continue to argue that they are entitled to raise the respondents’ objections to payment of the applicant’s outstanding professional fees.
The summons of 25 September 2012 also seeks reconsideration of paragraph 1 of the consent order, pursuant to SCR r 63.56.2(1). However, given that this order was made by consent of the parties, it is not an order made after a consideration of the merits of any aspect of this matter by the Costs Court and reconsideration of the type contemplated by r 63.56.2(1) is not available. Order 63.56.2(1) provides for reconsideration of an order of the Costs Court on the application of an interested party and is therefore not intended to permit a consent order to be reconsidered. It would be a most unusual interpretation of r 63.56.2 which permitted parties who earlier consented to Costs Court orders to later object to the same orders. This would be to allow a consenting party to retrobate so as to seek reconsideration under SCR r 63.56.2(1), a course which for the above reasons is not open.
I also observe that, at all events, it would not be appropriate for this Court to reconsider the issues raised pursuant to r 63.56.2(1), which provides for an order of the Costs Court constituted by a Judicial Registrar to be reconsidered by the same Judicial Registrar, on appropriate application by an interested party.
In this proceeding, to this point, there has not been any review by the Judicial Registrar pursuant to r 63.56.2(1) or by a Costs Judge pursuant to the powers provided in r 63.56.4. Further, there is no application to this Court pursuant to r 63.57(1), nor have any of the required preceding reviews occurred.
The respondents’ defences to the applicant’s professional fee entitlement and recovery costs
I consider that the Consent Order dated 2 November 2011 (amended on 25 November 2011) reflects the agreement of the parties and also constitutes a valid order which the parties have not sought to appeal. Such parts of that order as are valid and effective cannot be “reconsidered” under SCR r 63.56.2(1).
Accordingly, paragraphs 1 and 2 of the consent orders stand and there is extant an order of this Court including that the respondents are liable to pay $43,000.00 to the applicant.
The respondents’ argue that the defences referred to on paragraph 7 (c) and (d) above preclude the applicant from recovering his costs and disbursements incurred in pursuing his outstanding professional fees.
I consider that the respondents’ arguments that the applicant should not be entitled to recover his costs of pursuing his professional fees in the initial proceedings in the Magistrates’ Court and in the Costs Court of this Court, prior to 2 November 2011, fail to recognise the effect of the respondents’ acceptance that they were liable for the very professional fees which the applicant was seeking to recover in those proceedings. The respondents’ acceptance of liability is established by their consent to Order 2 of the Consent Orders of 2 November 2011. That being so, the respondents cannot now successfully argue that the applicant was not entitled to the costs of pursuing those unpaid fees because the applicant had, in some respect, failed to comply with fee disclosure requirements imposed by the Act or because the respondents asserted a multitude of objections in relation to the subject professional fees in the Magistrates Court and in the Costs Court proceedings prior to the date of the Consent Orders. The acceptance of liability for those fees, and the consent to a Court Order giving effect to that liability in the sum of $43,000, negates such arguments in relation to the applicant’s recovery costs and indeed founds a cost entitlement in this matter in favour of the applicant.
Similarly, I reject the respondents’ argument pursuant to s 3.4.45(2) of the Act that because the sum recovered under the Consent Orders of 2 November 2011 represents a reduction of in excess of 15% of the applicant’s original claim for fees, the respondents’ legal fees in relation to this recovery action should be paid by the applicant. Because the applicant has ultimately recovered an amount agreed by the respondents and in a sum which represents most of the applicant’s professional fees and disbursements claimed since 2010 and also because the Consent Order does not reflect any reservation by the respondents to argue that s 3.4.45 (2) of the Act provides a basis to deprive the applicant of its costs, I order costs otherwise than in accordance with s 3.4.45 (2) and detailed below. I also note that s 3.4.45 (2) and (2A) are sections expressly subject to s 3.4.45 (3) of the Act.
Further, in relation to s 3.4.45 of the Act, I note that paragraph 3 of the Consent Order is invalid by reason of s 3.4.45(1) of the Act, which provides that ‘[t]he Costs Court must determine the costs of a costs review’. The parties in seeking an order that all issues of costs be determined in specified Magistrates’ Court proceedings, went beyond the Cost Court’s power. In this regard counsel for both the applicant and the respondents conceded during argument[9] that the whole of paragraph 3 of the Consent Order was beyond power, including that part of the order referring issues of the applicant’s interest entitlement to the Magistrates’ Court.
[9]Transcript page 14, lines 28-31 and page 29, lines 6-9.
In these circumstances, there is a need for the Court to address and reconsider paragraph 3 of the Consent Order, pursuant to the Associate Judge’s referral under s 3.4.45(3) of the Act, in relation to the applicant’s entitlement to interest and legal costs. This Court also has the power, apart from s3.4.45(3) of the Act, to order interest and costs in this matter.
Interest
The applicant seeks interest on the sum of $43,000 from the respective dates of each of the invoiced amounts making up that $43,000 claim until 2 November 2011. The relevant invoices are specified in the Consent Order dated 2 November 2011.
The claim for interest is made at the rate agreed between the applicant and the respondents in the costs agreement dated 9 August 2010. The costs agreement provided that the invoices submitted by the applicant would “accrue interest after 30 days at the rate permitted under the Victorian Legal Profession Act 2004 (and that rate is a variable market rate and the specific rate from time to time will appear on the relevant invoices)”. I accept this basis for the part of the applicant’s interest entitlement up to 2 November 2011.
The Act provides in s 3.4.21(2) that a law practice may charge interest on unpaid legal costs in accordance with a cost agreement. In argument the respondents agreed that this section of the Act establishes an entitlement to interest.
In accordance with the concessional rate of interest specified by s 3.4.21 of the Act and reg 3.4.3 of the Legal Profession Regulations the applicant put forward calculations of his interest entitlement on unpaid invoices up to 2 November 2011 in the total invoiced sum of $51,389.98, over a period from December 2009 to March 2010, namely interest in the sum of $4,167.56, after allowance for the difference between the total outstanding sum sought by the applicant at the time of the 2 November 2011 Costs Court hearing ($51,389.98) and the reduced sum which the respondents agreed to pay by the Consent Orders made on 2 November 2011, namely $43,000.00. The applicant detailed the bases for the calculation of interest due at the time of the Costs Court hearing on 2 November 2011 in paras 23 and 24 of the applicant’s written submissions dated 28 November 2012. I accept the calculation of interest as detailed in those submissions amounting to $4,167.56.
The applicant seeks additional interest in relation to the period after the Consent Order of 2 November 2011, namely interest pursuant to s 101 of the Supreme Court Act 1986, and calculated on the sum of $43,000 in accordance with s 2 of the Penalty Interest Rates Act 1983. Again the applicant in its written submissions dated 28 November 2012, para 26, sets out claimed interest pursuant to the Supreme Court Act 1986 in the total sum of $4,862.44, calculated to 29 December 2012. I also accept these bases for the award of interest and I accept this calculation of interest on the judgment dated 2 November 2011, subject to the agreed adjustment to that calculation, referred to below. Further, I note that the respondents by their counsel conceded that they had been ordered to pay $43,000 by the orders of 2 November 2011, and also conceded liability for interest from the date of those orders at the rate fixed by the Penalty Interest Rates Act.[10] During argument counsel for the applicant and counsel for the respondents also accepted that the appropriate sum for interest after 2 November 2011 is $4,845.67.[11]
[10]Transcript page 7, lines 24-31; page 8, lines 1-5 and page 38, lines 23-26.
[11]Transcript page 37, lines 17-28, page 38, line 8.
Accordingly, the Court is satisfied that the applicant is entitled to interest in the total sum of $9,013.23, namely, $4,167.56 plus $4,845.67.
Costs and applicable bases for costs recovery
The applicant’s affidavit sworn 21 September 2012 deposes to the legal costs which he has incurred on a Magistrates’ Court scale, and on a party and party basis. In addition, there are further costs in the nature of consultants’ costs paid to the applicant’s cost consultants, Blackstones Legal Costing, which are also deposed to by the applicant’s affidavit sworn 21 September 2012.
The order for costs which the applicant seeks is the cost of the recovery of his outstanding professional fees.
For the reasons stated above I am unpersuaded that any basis or good reason exists to deprive the applicant of his costs associated with the recovery of outstanding professional fees from the respondents, both up to 2 November 2011 and thereafter, including in connection with the summons dated 25 September 2012 and its referral to this Court. The applicant has succeeded, after a long road to recovery, in obtaining judgment for $43,000 against the respondents. Ultimately, both respondents agreed to pay $43,000 in relation to the professional fees being pursued by the applicant, which represented most of the fees in issue. Cost would ordinarily, and should in this matter, follow this event.
Further, the applicant in its written submissions has noted that he is presently unable to quantify legal costs incurred since the filing of the applicant’s summons dated 25 September 2012. This aspect is addressed below by way of the final costs orders outlined.
The applicant also argues that he should recover his costs on an indemnity basis because:
(i)The respondents agreed to pay indemnity costs under the costs agreement dated 9 December 2009, confirmed as applicable in the Consent Order dated 2 November 2011. Relevantly, that cost agreement, which is exhibit FJM-1 to the applicant’s affidavit of 21 September 2012, sets out, in the applicant’s email to the second respondent dated 9 December 2009 the following term:
[Mr Morgan] will also be contractually entitled to recover whatever reasonable collection costs [he ended] up having to incur.[12]
(ii)The conduct of the respondents referred to in paragraph [55] below warrants an indemnity cost order.
[12]The words in brackets have been interpolated to allow the term to read grammatically.
The above term relating to the recovery of collection costs also included other strict terms of payment and expressly stated that the applicant did not want a repeat of troubles he had earlier experienced with recovering payment from Nicholas Birdseye & Associates.
The above term of the costs agreement between the applicant and the respondents evidences the intention of the parties to that agreement that the applicant will be entitled to recover such costs as he reasonably expended recovering any professional fees to which he was entitled.
It is well established that the Court’s discretion to award costs in cases where there is a contractual right to those costs will ordinarily be exercised consistently with any such right.[13]
[13]Taree Pty Ltd v Bob Jane Corporation [2008] VSC 228 [43], Talacko v Talacko [2009] VSC 579 [44].
I accept the applicant’s submission that the element of the costs agreement extracted above in relation to the collection of whatever “reasonable costs” were ultimately incurred by the applicant in recovering professional fees reflects the parties’ intent that the applicant will be entitled to recover costs in the nature of “indemnity costs” if he was required to pursue recovery of outstanding fees. Indemnity costs are in essence all costs necessarily and reasonably incurred. A term agreeing to the recovery of “reasonable collection costs” equates to agreeing to the recovery of costs necessarily and reasonably incurred.
Further, even if I am wrong about the effect and relevance of the above term extracted from the parties’ costs agreement, I would, in any event, order the respondents to pay the applicant’s costs of all proceedings necessary to recover his professional fees and disbursements on an indemnity basis because of the following conduct by the respondents which I consider constitutes special circumstances warranting an indemnity costs order:
(i) The respondents have resisted recognising the applicant’s entitlements to both fees and in relation to costs incurred by the applicant to recover unpaid professional fees, notwithstanding the terms of the costs agreement referred to in paragraphs [6] (9 December 2009) and [51(i)].
(ii) Although the second respondent from the outset denied any liability to Morgan in relation to the fees sought, on 2 November 2011 the second respondent sought consent orders, including an order recognising liability for the sum of $43,000 and interest and costs, to be determined.
(iii)Notwithstanding the consent orders sought by the first and second respondents on 2 November 2011, which recognised that each of the respondents were jointly and severally liable to pay Mr Morgan the sum of $43,000, the respondents have remained in breach of that court order for approximately one year.
(iv)In this case, properly advised, the respondents should have appreciated that they had no reasonable prospect of success in relation to most of the applicant’s claim for professional fees and disbursements.[14] Further, it is reasonable to infer that this is a position which the respondents recognised and accepted, at least by 2 November 2011.
(v)The respondents have throughout denied the applicant’s entitlement to be paid any part of the claimed professional fees and disbursements.
[14]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401.
At the hearing of this matter on 29 November 2012 I deferred argument as to the effect, if any, of the offers to settle made by the applicant which were mentioned in paragraph 21 (f ) of the applicant’s written submissions dated 28 November 2012. The applicant did not provide copies of such offers to the Court at the hearing on 29 November 2012 because that may have been inappropriate given the unresolved arguments of the respondents on liability questions. No offers relevant to cost questions were said to have been made by the respondents.
I have now had the opportunity to fully consider the arguments concerning the applicant’s level of cost recovery save for any argument arising from the applicant’s said offers to settle his claim for professional fees and for the above reasons I am persuaded that the applicant should have his costs on an indemnity basis. Accordingly, I consider it unnecessary to hear argument about the possible effect of the applicant’s earlier offers to settle.
Conclusion
For the preceding reasons I find that the respondents are jointly and severally liable to pay to the applicant the sum of $43,000.00 together with interest in the total sum of $9,013.23.
Additionally, the applicant is entitled to recover his costs in the sum of $33,444.87 and the applicant is also entitled to payment by the respondents of the applicant’s costs of and associated with the applicant’s summons dated 25 September 2012, all such costs to be on an indemnity basis for the same reasons I have identified in relation to the recovery of the component of costs earlier referred to in the sum of $33,444.87.
I shall hear the parties as to the precise terms of the Orders to be made in the applicant’s favour.
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