Newcastle City Council v McShane (No 3)

[2005] NSWCA 437

Reported Decision: 65 NSWLR 155

Court of Appeal

CITATION:	NEWCASTLE CITY COUNCIL v TRAVIS McSHANE (NO 3) [2005] NSWCA 437
HEARING DATE(S):	10 November 2005
JUDGMENT DATE:	9 December 2005
JUDGMENT OF:	Mason P at 1; Giles JA at 49; Hunt AJA at 50
DECISION:	Amended Notice of Motion seeking declaration and other orders - dismissed

CATCHWORDS:	Legal profession - cap on costs recoverable "in connection with" personal injury damages claims - whether cap in Legal Profession Act 1987, s198D extends to appeal costs. (D)
LEGISLATION CITED:	Civil Liability Act 2002 Civil Procedure Act 2005, s60 Interpretation Act 1987, ss33, 34 Legal Profession Act 1987 Legal Profession Act 2004
CASES CITED:	Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd [2005] NSWSC 469 Doherty v Liverpool District Hospital (1991) 22 NSWLR 284 Hatfield v Health Insurance Commission (1987) 15 FCR 487 Newcastle City Council v McShane [2004] NSWCA 425 Newcastle City Council v McShane (No 2) [2005] NSWCA 250 Nolan v Clifford (1904) 1 CLR 429 Saraswati v The Queen (1991) 172 CLR 1 State of New South Wales v Mastronardi [2003] NSWCA 72 TCN Channel Nine Pty Ltd v Anning (2002) 54 NSWLR 333 Walton v National Employers’ Mutual General Insurance Association Ltd [1973] 2 NSWLR 73 Workers’ Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642
PARTIES:	NEWCASTLE CITY COUNCIL TRAVIS McSHANE
FILE NUMBER(S):	CA 40009/04
COUNSEL:	Appellant: P R Garling SC/ R G Gambi Respondent: G Beauchamp Law Society of NSW: K Rees/ J Single Bar Association of NSW: I G Harrison SC/ C N Bova Australian Lawyers Alliance: J Rowe
SOLICITORS:	Appellant: Carroll & O'Dea Respondent: Phillips Fox Australian Lawyers Alliance: Anthony Scarcella

LOWER COURT JURISDICTION:

CA 40009/2004

MASON P
GILES JA
HUNT AJA

Friday 9 December 2005

NEWCASTLE CITY COUNCIL v Travis McSHANE (No 3)

JUDGMENT

1 MASON P: Section 198D of the Legal Profession Act 1987 capped the costs recoverable by lawyers “in connection with” certain classes of personal injury damages claims. The question at issue is whether the cap extended to costs in the Court of Appeal.

2 The Legal Profession Act 1987 has been replaced with Legal Profession Act 2004 as from 1 October 2005. There is a corresponding section in the later Act (s338), but its operation has been extended by a new provision (s338A) that addresses appeal costs specifically. This enactment does not apply to the present case. The parties were at issue as to whether the new provision casts any light on the interpretation of the earlier enactment.

History of the litigation

3 Mr McShane (the plaintiff) suffered injury in 1999 when he tripped and fell over plastic orange mesh placed around a footbridge to guard against its use. The Council was responsible for the care and maintenance of the footpath that crossed the footbridge.

4 The matter was initially determined in the plaintiff’s favour in a court-directed arbitration. The Council exercised its right to require a rehearing in the District Court. That rehearing spanned four days, including a day when the case was not reached.

5 The plaintiff recovered a verdict of $62,300, being non-economic loss of $88,500 plus $500 for future out of pocket expenses less 30% for contributory negligence.

6 The plaintiff obtained an order for costs against the Council. However, those recoverable costs will greatly exceed the cap stipulated in s198D (20% of the amount recovered), ie $12,460.00.

7 Proceedings in this Court involved an application for a stay followed by a one day hearing that took place before Sheller JA, Giles JA and myself. The outcomes were orders granting the Council leave to appeal, but dismissing its appeal; refusing the plaintiff leave to cross-appeal; and ordering the Council to pay 85% of the plaintiff’s costs in the Court of Appeal (see Newcastle City Council v McShane [2004] NSWCA 425).

8 The plaintiff subsequently applied to vary the costs order by substituting an order that he be paid his costs in the Court of Appeal on an indemnity basis. This application stemmed from a Calderbank offer of settlement made shortly before the hearing fixed in the Court of Appeal. The application was rejected (see Newcastle City Council v McShane (No 2) [2005] NSWCA 250).

9 There was a further application raising the issue at the centre of the current proceedings. Sheller JA had retired from the Court by the time that matter was raised. Giles JA and I perceived a question of general principle inapt to be decided on the papers. The Court was re-constituted and an invitation sent to the Attorney General, the Bar Association, the Law Society and the Australian Lawyers Alliance to present argument on the matter if they chose. The last three organisations were represented by counsel who participated as friends of the Court. The plaintiff and the Council were also represented.

Issues raised

10 The written and oral submissions ranged over a wide expanse.

11 Mr Beauchamp representing the plaintiff, Ms Rees and Ms Single representing the Law Society, Mr Harrison SC and Mr Bova representing the Bar Association and Mr Rowe representing the Australian Lawyers Alliance all accept that the capping issue is not foreclosed merely because this Court has already made cost orders. Neverthess, each submitted that s198D had no application to appellate proceedings. Any “connection” between proceedings at first instance on a claim for personal injury damages and proceedings in this Court was not a relevant one. The submissions occasionally drifted into attack on the policy of the legislation that was camouflaged by a call for its strict interpretation because it trenched upon a firmly-embedded common law principle. The principle invoked was the right of access to the courts with the assistance of legal representation.

12 At the end of the day, these policy-based submissions directed little useful light on the central issue of statutory construction. The legislative scheme undoubtedly contemplates a continuing role for lawyers in personal injury litigation while, equally clearly, seeking to restrict in various ways the costs recoverable for legal services in smaller personal injury damages claims.

The legislative scheme

13 Part 11 Div 5B (ss198C-198M) was inserted into the Legal Profession Act 1987 by a Schedule to the Civil Liability Act 2002. The Division applied in respect of legal services provided on or after 7 May 2002 even if the services were provided in connection with a claim that arose before that date (and whether or not proceedings on the claim were commenced before that date) (Legal Profession Act 1987, Schedule 8, cl 90(1)).

14 Division 5B provided:

198C Interpretation and application
(1) In this Division:
defendant means a person against whom a claim for personal injury damages is or may be made.
party means plaintiff or defendant.
personal injury damages has the same meaning as in Part 2 of the Civil Liability Act 2002 .
plaintiff means a person who makes or is entitled to make a claim for personal injury damages.
(2) This Division does not apply to the following costs:

(a) costs payable to an applicant for compensation under Part 2 of the Victims Support and Rehabilitation Act 1996 in respect of the application for compensation,
(b) costs for legal services provided in respect of a claim under the Motor Accidents Act 1988 or Motor Accidents Compensation Act 1999 ,
(c) costs for legal services provided in respect of a claim for work injury damages (as defined in the Workplace Injury Management and Workers Compensation Act 1998 ),
(d) costs for legal services provided in respect of a claim for damages in proceedings of the kind referred to in section 11 (Claims for damages for dust diseases etc to be brought under this Act) of the Dust Diseases Tribunal Act 1989 .

198D Maximum costs fixed for claims up to $100,000
(1) If the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a party in connection with the claim are fixed as follows:
(a) in the case of legal services provided to a plaintiff maximum costs are fixed at 20% of the amount recovered or $10,000, whichever is greater,
(b) in the case of legal services provided to a defendant maximum costs are fixed at 20% of the amount sought to be recovered by the plaintiff or $10,000, whichever is greater.
(2) The regulations may prescribe an amount to replace the amount of $100,000 or $10,000 in subsection (1) and may prescribe a percentage to replace the percentage of 20% in subsection (1). When such a replacement amount or percentage is prescribed, it applies for the purposes of subsection (1) in place of the amount or percentage that it replaces.
(3) The regulations may contain provisions of a savings or transitional nature consequent on the making of regulations under this section.
(4) When the maximum costs for legal services provided to a party are fixed by this Division the following provisions apply (subject to sections 198E–198G):
(a) a solicitor or barrister is not entitled to be paid or recover for those legal services an amount that exceeds those maximum costs,
(b) a court or tribunal cannot order the payment by another party to the claim of costs in respect of those legal services in an amount that exceeds that maximum,
(c) in assessing the amount of those costs that is a fair and reasonable amount, a costs assessor cannot determine an amount that exceeds the maximum set by this section.
(5) A reference in this Division to legal services provided to a party is a reference to legal services provided to the party by a solicitor or barrister (including by an agent or employee of the solicitor or barrister). Costs for legal services do not include costs charged as disbursements for services provided by any other person or other disbursements.
(6) If proceedings are commenced on a claim, the amount sought to be recovered by the plaintiff is taken to be the amount sought to be proved by the plaintiff at the hearing of the claim.

(7) Maximum costs fixed by this section apply despite regulations under section 196 (1) (a2) fixing those costs.

198E Maximum costs do not affect solicitor-client costs under costs agreements
(1) This Division does not apply to the recovery of costs payable as between a solicitor or barrister and the solicitor’s or barrister’s client to the extent that recovery of those costs is provided for by a costs agreement that complies with Division 3.
(2) The regulations may make provision for or with respect to requiring disclosure by a solicitor or barrister to the solicitor’s or barrister’s client of information in relation to the effect of a costs agreement in connection with the operation of this Division.

(3) The regulations may provide that a failure by a solicitor or barrister to comply with the requirements of the regulations under this section disentitles the solicitor or barrister to the benefit of this section, and in such a case this Division applies in respect of the claim concerned despite the terms of any costs agreement.

198F Costs can be awarded on indemnity basis for costs incurred after failure to accept offer of compromise
(1) If a party to a claim for personal injury damages makes a reasonable offer of compromise on the claim that is not accepted, this Division does not prevent the awarding of costs against another party to be assessed on an indemnity basis in respect of legal services provided after the offer is made.
(2) An offer of compromise on a claim by a party is reasonable if the court determines or makes an order or award on the claim in terms that are no less favourable to the party than the terms of the offer.
(3) The regulations may make provision for or with respect to requiring disclosure by a solicitor or barrister to the solicitor’s or barrister’s client of information in relation to the operation of this section in respect of any refusal by the client to accept an offer of compromise.
(4) If it appears to the court in which proceedings are taken on a claim for damages that a solicitor or barrister has failed to comply with any provision of the regulations under this section, and that the client of the solicitor or barrister has incurred an increased liability for costs as a result of refusing a reasonable offer of compromise in connection with the claim concerned, the court may of its own motion or on the application of the client make either or both of the following orders:
(a) an order directing the solicitor or barrister to repay to the client the whole or any part of those increased costs that the client has been ordered to pay to any other party,

(b) an order directing the solicitor or barrister to indemnify any party other than the client against the whole or any part of the costs payable by the party indemnified in respect of legal services provided after the offer is refused.

198G Court may order certain legal services to be excluded from maximum costs limitation
A court hearing a claim for personal injury damages may by order exclude from the operation of this Division legal services provided to a party to the claim if the court is satisfied that the legal services were provided in response to any action on the claim by or on behalf of the other party to the claim that in the circumstances was not reasonably necessary for the advancement of that party’s case or was intended or reasonably likely to unnecessarily delay or complicate determination of the claim.
198H Apportionment of maximum costs between solicitors and barristers
(1) If more than one person (solicitor or barrister) provides legal services to a party in connection with a claim, the maximum costs fixed by this Division are to be apportioned between them as agreed by them or (failing agreement) as ordered by the court hearing proceedings on the claim.
(2) The maximum then applicable to a particular solicitor or barrister is the solicitor’s or barrister’s apportioned share of those maximum costs.
198I Meaning of “amount recovered” on a claim
(1) A reference in this Division to the amount recovered on a claim includes any amount paid under a compromise or settlement of the claim (whether or not legal proceedings have been instituted).
(2) In determining the amount recovered on a claim for personal injury damages, no regard is to be had to any part of the amount recovered that is attributable to costs or to the addition of interest.

15 This is not the occasion to explore all of the issues thrown up by Division 5B or its successor, Chapter 3, Part 3.2, Division 9 of the 2004 Act. Nevertheless, some general observations are in order:

1. The Division is not restricted to costs for legal services incurred in and after commencement of court proceedings. The word “plaintiff” is given an extended definition in s198C(1) referable to a person who makes or is entitled to make a claim for personal injury damages. A claim may be made and disposed of without proceedings (see the opening words of s198D(6) and s198 I . See also Walton v National Employers’ Mutual General Insurance Association Ltd [1973] 2 NSWLR 73 at 82, State of New South Wales v Mastronardi [2003] NSWCA 72 at [25].).

2. Section 198E allows lawyers to enter into costs agreements with their own client, in which event the Division does not apply to the recovery of costs payable as between lawyer and client. Subject to this and to other exceptions, the Division caps the costs as between lawyer and client and as between party and party referable to the legal costs of the parties (see s198D(4) and (5)).

3. The central provision is s198D(1), observing that regulations may vary the sums and percentages there referred to (see 198D(2)). To date, the maximum costs for legal services have been capped if the amount recovered on a claim for personal injury damages does not exceed $100,000. The meaning of “amount recovered” is expounded in s198 I : any amount recovered by way of compromise or settlement is included and amounts attributable to costs or the addition of interest are excluded.

4. I note, without deciding, the question whether any “amount” is recovered within s198D(1) if there is a verdict for the defendant. I incline to the view that nil is an amount in this context, especially given the legislative policy (discussed below) and the terms of s198D(1)(b).

5. Leaving this conundrum aside, s198D(1) addresses the costs of both “plaintiff” and “defendant” . These terms would not appear to embrace the costs of third parties joined in the proceedings, which is not the same as saying that the Division does not extend to include the plaintiff’s and defendant’s costs referable to third party proceedings for contribution or indemnity. Master Malpass has held the provision inapplicable to costs incurred on a cross claim for contribution ( Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd [2005] NSWSC 469).

6. The maximum costs are currently fixed at 20% of the amount recovered in the case of a plaintiff, and of the amount sought to be recovered by the plaintiff in the case of a defendant. Section 198D(6) casts some dim illumination on the meaning of the expression “amount sought to be recovered” . Where proceedings are commenced on the claim, the amount sought to be recovered by the plaintiff is taken to be “the amount sought to be proved by the plaintiff at the hearing of the claim” . It is unnecessary in the present case to decide whether this expression refers to any sum stated in the originating process (cf now UCPR , r14.13) or whether one is driven to a closer search for the “real” amount being pressed “at the hearing” . If it is the latter, what hearing (arbitration, trial or retrial?) is identified? And what is to happen if the plaintiff revises his or her monetary demand as the “hearing” progresses? I can pass over these issues in the present case because it is common ground that the plaintiff’s legal costs recoverable as between party and party had surpassed the cap before the trial at first instance came to an end.

7. Section 198F and 198G enable the Court to override the cap where a “reasonable” offer of compromise is not accepted and legal services are provided after the offer was made (s198F) and where the Court is satisfied that legal services were required in response to action by the other party that was not reasonably necessary for the advancement of its case (s198G). The Council is correct to point out that these provisions offer relief from the blunt operation of the central capping provision. The plaintiff and the others represented in this Court are equally correct in pointing out that there will be situations where the scheme falls harshly on a litigant, usually (but not invariably) the plaintiff.

16 The central question is whether the legal services provided to the present plaintiff in the Court of Appeal were provided “in connection with the plaintiff’s claim for personal injury damages” that was vindicated in the recovery in the District Court (and retention in this Court) of a verdict in the sum of $62,300.

17 None of the submissions filed embraced the suggestion floated for inquiry by myself that the cap might apply afresh to proceedings in this Court. The possibility was adverted to without enthusiasm by counsel for the plaintiff during argument. Since, however, there is no textual foothold for such an argument I pass over it. The choice presents between appeal costs falling within the original cap or being uncapped.

18 The Council submits that the legal services in this Court have the requisite connection. True, the plaintiff had recovered a verdict in the District Court that the Council could not displace unless it obtained leave to appeal and was successful in that appeal. Nevertheless, the appellate proceedings in this Court were, subject to grant of leave, an appeal by way of rehearing; the correctness of the original claim was in dispute in this Court, with the Council denying both duty of care and breach; and the plaintiff himself tried unsuccessfully in the Court of Appeal to have the damages increased. In all of these senses, the legal services provided in and for the proceedings in the Court of Appeal were intimately connected with the plaintiff’s claim for personal injury damages. Accordingly, the cap was said to be engaged by reason of the literal terms of the opening portion of s198D(1).

19 I do not understand the plaintiff or those participating as amici curiae to contest the proposition that the situation falls within the literal meaning of the provision. Their submission was, however, that the connection was not a relevant one. The statutory context will govern and guide the closeness of the requisite connection (see Hatfield v Health Insurance Commission (1987) 15 FCR 487 at 491, Workers’ Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642 at 653-4). The correctness of this general proposition is acknowledged. It will be necessary to examine closely the contextual and other arguments advanced against giving effect to the literal terms of the key provision.

Extrinsic material called in aid

20 It is convenient at this stage to examine statements made in parliamentary debate referable to the portion of the Bill that introduced Division 5B. This material is undoubtedly available to identify the purpose or object of the legislation (Interpretation Act 1987, ss33, 34(2)(h)). However, not everything said in Parliament during debate referable to a Bill provides “relevant material” (cf s34(2)(h)). For example, an opinion stated as to the meaning or application of a clause would not be relevant in the current sense, unless more were established.

21 The Division was proposed for insertion into the Legal Profession Act 1987 by a Schedule to the Civil Liability Bill 2002. The Second Reading speech in the Legislative Assembly was given by the Premier, Mr Carr, who introduced the Bill to “implement stage 1 of the Government’s tort law reform program”. The Bill covers a wide range of amendments affecting rights and remedies touching “common law” claims.

22 The Premier made specific reference to the amendment to the Legal Profession Act. He said (Legislative Assembly, Parliamentary Debates (Hansard) 28 May 2002, p2087):

These provisions have been amended since the Government released the consultation draft of the bill. The cap on plaintiff lawyers’ costs for claims under $100,000 will be the greater of $10,000 or 20 per cent of the amount recovered by the plaintiff. The cap has been extended to the defendant lawyers’ costs where it will be the greater of $10,000 or 20 per cent of the amount claimed by the plaintiff. Importantly, the bill now makes it clear that the cap applies to solicitors’ and barristers’ fees and the fees of their agents or employees. It does not apply to any other disbursements, such as medical reports, investigation reports and filing fees. The cap will not be a standard fee for lawyers to charge their clients. It is the maximum fee which applies unless there is a costs agreement. In many cases the Government expects lawyers to charge significantly less. Bills of costs will still be subject to the normal costs assessment rules in the Legal Profession Act. Lawyers will not be permitted to inflate their costs up to the cap.
The cap on fees will promote efficiency on the part of the legal profession and help to contain claims costs. The cap on costs will be the most that can be recovered from the other party in proceedings, unless the exceptions in clauses 198F and 198G apply. Clause 198F will enable the courts to award indemnity costs against a party if that party refuses an offer of compromise where the eventual outcome of the claim is no less favourable than the terms of the offer. The indemnity costs would apply for the period after the offer is made. Clause 198G will enable the court to order that some costs are not covered by the cap if it is satisfied that the costs are for legal services that were required because the other party took action that was not reasonably necessary for the advancement of its case.
For example, a defendant might make a number of pre-trial applications to the court, requiring the plaintiff’s representatives to attend court and argue the various points. If the court finds these applications were not reasonably necessary for the defendant’s case or they were intended to unnecessarily delay or complicate determination of the claim, the court can order the defendant to pay the plaintiff’s costs of those applications in addition to the capped costs. The bill does not prevent a client agreeing to pay a lawyer extra fees in addition to the cap. However, extra fees can be paid only if there is a costs agreement between the lawyer and the client.

23 Identification of the purpose or purposes of legislation as wide ranging as the Civil Liability Act is difficult once one moves beyond recognising that references to “tort law reform” generally meant restricting plaintiff-focussed developments in the common law. The Premier’s statement that the cap on fees “will promote efficiency on the part of the legal profession and help to contain claims costs” was a plain and, with respect, obvious purpose of the amendment. But it provides no assistance in the resolution of the problem at hand, unless (contrary to the arguments from other than the Council) it were taken as a green light to prefer an expansive view of the provision.

24 Mr Garling SC, representing the Council, correctly pointed out that a consequence, and undoubted intent, of the capping provision was that the lawyers representing both plaintiff and defendant in small personal injury claims within the scope of the Division would know from the outset that recoverable fees as between the parties would be capped as provided in s198D if the amount ultimately recovered on the claim did not exceed $100,000. The lawyers could protect themselves and their clients in three broad ways: first, by negotiating a costs agreement as between lawyer and client (s198E); secondly, by making a reasonable offer of compromise (s198F) and thirdly, by seeking a limiting order at the end of the process in a proper case (s198G). Beyond this, the legal services garment would have to be cut to suit the cloth. I accept this extrapolation of legislative purpose from the combination of the text and the Second Reading speech.

25 I also recognise that the legislation must be construed on the basis that Parliament understood the obvious fact that personal injury claims are various in their complexity. It is also known universally that the capacity of one party to contain legal costs may be affected by the conduct of the other side and its lawyers. Of course, that conduct is subject to judicial oversight and professional regulation. It was no accident that Division 5B was inserted into the Legal Profession Act. Sections 198F and 198G also provide a substantial degree of protection against this risk. An additional aspect of the scheme is the greater level of certainty it brings to parties anxious to know their maximum exposure in the event of losing the proceedings.

26 The legislation reflects recent legislative and judicial recognition of the principle that legal costs should be proportionate to the importance and complexity of the subject-matter in dispute (Civil Procedure Act 2005, s60; TCN Channel Nine Pty Ltd v Anning (2002) 54 NSWLR 333 at 364-5).

27 Parliament’s clearly expressed dictates require no justification. But these lastmentioned factors do serve to identify the policies underpinning the Division and to explain the blunt edges of the scheme.

28 There is another factor of possible relevance. It is probably speculative to infer that it was part of the legislative purpose, although it may well have been. For many years in this State a large proportion of personal injury work has been done by specialist solicitors and specialist members of the Bar. In the highest tradition, these practitioners have often acted at reduced fee or for no fee in certain categories of plaintiffs’ work. Their expertise and experience is brought to bear in decision-making as to which cases to pursue to trial and on appeal. There has also been cross-subsidisation with certain types of claims being assisted by lawyers working at reduced fee in return for more remunerative work in other areas.

29 In these and other areas of the “market” for legal services, the repeat players have become used to costing the risks of being left unpaid by their client or even by the other party depending on the outcome of the litigation. These considerations link in with the point made by the Attorney General during debate on the Bill when he observed that only a very low proportion of litigated small claims go on appeal (see below).

30 It is possible to view the introduction of Division 5B as legislative regulation of that market. The exercise of that market control will affect clients and their lawyers in the area of smaller claims for personal injuries, but it is undoubtedly intended to do so. This Court must take no position as to whether the policy scales have been weighted fairly or unfairly in the interests of lawyers, plaintiffs or defendants (and defendants’ insurers). Mr Rowe’s submission that the legislation must be construed strictly so as to exclude appeal costs because its effect is to wind back the common law rights of injured plaintiffs is therefore unpersuasive both as to its premise and its intended goal.

31 I have endeavoured to explain why the Parliamentary debates are ultimately unhelpful in resolving the present issue.

32 I am also unassisted by the answer given by the Attorney General when, in answer to a request to clarify the costs provision in s189D with reference to an appeal after a hearing, he said (Legislative Assembly, Parliamentary Debates (Hansard) 30 May 2002, p2256):

The cap on legal costs will apply to appeals. However, only a very small proportion of matters is litigated at all and an even smaller proportion of matters worth less than $100,000 is likely to be appealed.

33 This opinion may or may not be a correct interpretation of the “ordinary meaning” of the legislation. And it may or may not have been given with reference to a provision that is ambiguous or obscure (cf Interpretation Act, s34(1)(b)(i); Saraswati v The Queen (1991) 172 CLR 1 at 21). But it was not advanced as a statement of the mischief addressed by the Division or of the promoter’s purposes in introducing the legislation. In Nolan v Clifford (1904) 1 CLR 429 the High Court was considering the interpretation of a section of the Crimes Act 1900 (NSW). That was a consolidating statute, although there were some changes recorded in the note of the consolidating commissioner. Barton J pithily expressed the judicial task in the following terms (at 449):

We have been asked to refer to the brevier, the note of the consolidating commissioner, to find out what he meant. I do not think this reference is of any value, because we are not to consider what the commissioner thought, but what Parliament has said, and what it meant by what it has said.


See also Wilson v First County Trust (No 2) [2004] 1 AC 816.

Textual and contextual arguments

34 The plaintiff and those intervening in his interest sought to limit the scope of s198D(1) by arguments pointing to the distinction between proceedings at first instance and on appeal. A verdict at first instance is, until set aside, final for the purposes of res judicata. The trial is the occasion for the parties to bring forward their evidence. Their capacity to supplement the evidentiary record is restricted on appeal, even appeal by way of rehearing. When an appeal is brought in relation to an order, the focus is upon identifying error in the reasoning or processes that culminated in that order: it is not a simple matter of arguing the case afresh, as if on a blank slate. An appeal is not a re-trial (see generally Doherty v Liverpool District Hospital (1991) 22 NSWLR 284 at 293-6 per Gleeson CJ).

35 These considerations must be acknowledged. But they do not assist the plaintiff in constricting the fair reading of the words “legal services provided to a party in connection with the claim” in s198D(1). And they offer no basis for treating any and every foray into the Court of Appeal or any post-trial proceedings referable to a claim as outside the scope of s198D(1). It may have been different if the provision had spoken of the plaintiff’s costs incurred in making the claim, but this is not the language of the section.

36 Several examples show the difficulty in drawing any bright line of exclusion. What about proceedings in the trial court after verdict, for example concerning costs, invoking the slip rule, or seeking a stay? What about an interlocutory appeal referable to the grant or refusal of an extension of time or some key evidentiary ruling? What about a retrial, whether ordered by the court at first instance or the Court of Appeal?

37 An appeal by a plaintiff who comes to the Court of Appeal seeking to challenge a verdict for the defendant or an inadequate award of damages seems self-evidently to be in connection with the original (and continuing) claim.

38 The submissions did not really engage the difficulties inherent in seeking textual or contextual support for reading down s198D(1) so as to exclude these possibilities. Yet if they remain within the scope of the provision, it seems impossible to find a principled ground for excluding the present situation.

39 Nothing in the statutory language offers a toe-hold for drawing any line of exclusion that segregates interlocutory appellate proceedings, or appellate proceedings at the instance of the defendant. On the other hand, there seems no reason why ss198F or 198G could not be invoked in many situations by a plaintiff who becomes the opponent or respondent in fruitless proceedings in the Court of Appeal.

40 The plaintiff pointed to the harshness of the scheme with reference to the present case, one in which the conduct of the plaintiff and his lawyers did not cause the recoverable costs running well over the monetary cap. Here it was the defendant who challenged the outcome of the arbitration. And it was the defendant who appealed (unsuccessfully) to this Court (although there was a plaintiff’s application for leave to cross-appeal).

41 These considerations illustrate the harshness in a particular situation of the legislative scheme. But these matters do not preclude the legal services provided to the respondent in appellate proceedings such as the present from being fairly described as being in connection with the claim.

42 Simply because leave to appeal is required, because the sum at issue in the appeal is less than $100,000, does not advance the argument. That leave requirement would apply even if the legal costs were not capped by the legislation, for example if only $50,000 of a $1 million verdict were at issue in this Court. The existence of the leave filter casts no light on the proper scope of the legislative scheme involved in this appeal.

43 This Court is not at liberty to rewrite legislation. Our decisions may illustrate its harshness in particular circumstances. A strict interpretation will be appropriate if fundamental doctrines of the common law are threatened by ambiguous legislation. Purpose and context must never be ignored. But the legislation must be applied faithfully. If this points to problems with the policy or implementation of legislation then Parliament is free to address them.

44 Parliament thought fit to modify the scheme as and from 1 October 2005, by providing (in s338A of the Legal Profession Act 2004) for an uplift of the cap where additional costs are incurred in arbitration and appellate proceedings. I cannot however accept the submission that s338A assists in divining a Parliamentary intention that the earlier s189D had the narrower scope contended for by the plaintiff. If anything, s338A was added to remove an uncertainty or simply to change the law. Only Parliament can explain why a similar uplift of the cap was not provided in relation to the additional costs incurred in arbitration and appellate proceedings still governed by s198D of the Legal Profession Act 1987.

45 Two independent textual arguments deserve attention. Ms Rees placed reliance upon s198D(1)(b) as partially defined in s198D(6). The point was that the computation of the cap on the defendant’s costs was based upon a percentage of the amount sought to be proved by the plaintiff at the hearing of the claim. I agree that this refers to the first instance hearing, but do not accept that this confines the capping exercise to the trial. Many events that take place at trial impact upon the scope of the ensuing appeal. I observe that the argument would also have the effect of depriving an ultimately unsuccessful plaintiff of the costs capping protection referable to appeal costs payable to the defendant.

46 Mr Harrison SC argued that clarity emerged when it was recognised that the section speaks of legal services provided in connection with a claim, as distinct from proceedings in connection with a claim. A lawyer retained for the first time on appeal is not providing services otherwise than for the appeal. In my opinion, this beguiling submission just restates the issue. The services are provided to the appellant/respondent, but they are necessarily directed at vindicating that party’s legal rights, rights that are in turn connected with the claim for personal injury damages, to some degree at least.

47 The conclusion that appeal costs fall within the provision renders it unnecessary to grapple with framing some declaratory or other form of relief. Costs assessment will doubtless proceed in accordance with these reasons. The plaintiff’s amended notice of motion filed on 9 August 2005 seeking a declaration and other orders should be dismissed.

48 Mr Garling SC for the Council recognised that success on the point debated would make it futile to award his client the costs of the present issue. The Council’s costs “in connection with the claim” had exceeded the statutory cap well before the present issue surfaced. None of the other parties sought costs in the situation presented.

49 GILES JA: I agree with Mason P.

50 HUNT AJA: I agree with Mason P.

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