Noye v Robbins [No 6]
[2008] WASC 266
•21 NOVEMBER 2008
NOYE -v- ROBBINS [No 6] [2008] WASC 266
| Link to Appeal : | [2010] WASCA 83 |
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 266 | |
| Case No: | CIV:2231/1999 | 29 JANUARY, 3 JULY & 25 SEPTEMBER 2008 | |
| Coram: | EM HEENAN J | 20/11/08 | |
| 42 | Judgment Part: | 1 of 1 | |
| Result: | Order for joinder of the State of Western Australia as an additional defendant in CIV 2231 of 1999 Order for plaintiff to pay first defendant's costs in accordance with conditional order of 29 January 2008 | ||
| A | |||
| PDF Version |
| Parties: | JEFFREY HOWARD NOYE STEPHEN JOHN ROBBINS THE STATE OF WESTERN AUSTRALIA |
Catchwords: | Costs Police officer Indemnity principle Funding agreement for defendants' costs of action All defendants' costs met by State Entitlement of successful defendant to an order for costs against plaintiff Terms of funding arrangement Necessity for joinder of State Indemnity Subrogation Payment by third party of defendants' liability Restitution |
Legislation: | Nil |
Case References: | ABB Power Generation Ltd v Chapple (2001) 25 WAR 158 Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 Angor Pty Ltd v Ilich Motor Co Pty Ltd (1992) 37 FCR 65 Backhouse v Judd [1925] SASR 395 Baird v Roberts [1977] 2 NSWLR 389 Bakewell v Deputy Federal Commissioner of Taxation (SA) [1937] HCA 11; (1937) 58 CLR 743 Blackall v Trotter (No 1) [1969] VR 639 Blundel v Musgrave (1956) 96 CLR 73 Boscawen v Bajwa [1996] 1 WLR 328 Brambles Constructions Pty Ltd v Helmers (1966) 114 CLR 213 Cachia v Hanes (1994) 177 CLR 403 Carson v Pickersgill & Sons (1885) 14 QBD 859 City Bank of Sydney v McLaughlin (1909) 9 CLR 615 Commercial Bank of Australia Ltd v Colonial Finance Mortgage Investment & Guarantee Corporation Ltd [1906] HCA 30; (1906) 4 CLR 57 Coshott v Woollahra Municipal Council [2007] NSWSC 834 Coshott v Woollahra Municipal Council [2008] NSWCA 176 Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154 Griffiths v Kerkemeyer (1997) 139 CLR 161 Gundry v Sainsbury [1910] 1 KB 645 Harold v Smith (1860) 5 H&N 381; (1860) 157 ER 1229 Homestyle Pty Ltd v City of Belmont [1999] WASCA 59 Hudgson v Endrust (Aust) Pty Ltd (1986) 11 FCR 152 Inglis v Moore (No 2) (1979) 46 FLR 470 Insurance Commission (WA) v Kightly [2005] WASCA 154; (2005) 30 WAR 380 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 2) [2003] VSC 212 Johnson v Santa Teresa Housing Association (1992) 83 NTR 14 Kars v Kars [1996] HCA 37; (1996) 187 CLR 354 Lenthall v Hillson [1933] SASR 31 McCullum v Ifield [1969] 2 NSWR 329 McLaughlin v The City Bank of Sydney (1914) 18 CLR 598 Morris v Ford Motor Co Ltd [1973] QB 792 National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569 New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50 Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 North Australian Aboriginal Legal Aid Service Inc v Bradley (No 2) [2002] FCA 564 Noye v Robbins; Noye v Crimmins [2007] WASC 98 O'Keefe v Hayes Knight GTO Pty Ltd (2005) 218 ALR 604 R v Archbishop of Canterbury [1903] 1 KB 289 R v Miller [1983] 3 All ER 186 Redding v Lee [1983] HCA 16; (1983) 151 CLR 117 Stobbart v Mocnaj [1999] WASC 252 The Esso Bernicia; Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] AC 643 Trevorrow v State of South Australia (No 7) [2008] SASC 5 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474 Wilson v Richmond River Shire Council [2000] NSWSC 71 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
STEPHEN JOHN ROBBINS
First Defendant
THE STATE OF WESTERN AUSTRALIA
Second Defendant
Catchwords:
Costs - Police officer - Indemnity principle - Funding agreement for defendants' costs of action - All defendants' costs met by State - Entitlement of successful defendant to an order for costs against plaintiff - Terms of funding arrangement - Necessity for joinder of State - Indemnity - Subrogation - Payment by third party of defendants' liability - Restitution
Legislation:
Nil
(Page 2)
Result:
Order for joinder of the State of Western Australia as an additional defendant in CIV 2231 of 1999
Order for plaintiff to pay first defendant's costs in accordance with conditional order of 29 January 2008
Category: A
Representation:
Counsel:
Plaintiff : Mr B L Nugawela (appeared on 25 September 2008) Mr N P Lindsay (appeared on 29 January and 3 July 2008)
First Defendant : Mr M T McKenna
Second Defendant : Mr A J Sefton (appeared on 25 September 2008)
Solicitors:
Plaintiff : S C Nigam & Co
First Defendant : Hunt & Humphry
Second Defendant : State Solicitor for Western Australia
Case(s) referred to in judgment(s):
ABB Power Generation Ltd v Chapple (2001) 25 WAR 158
Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495
Angor Pty Ltd v Ilich Motor Co Pty Ltd (1992) 37 FCR 65
Backhouse v Judd [1925] SASR 395
Baird v Roberts [1977] 2 NSWLR 389
Bakewell v Deputy Federal Commissioner of Taxation (SA) [1937] HCA 11; (1937) 58 CLR 743
Blackall v Trotter (No 1) [1969] VR 639
Blundel v Musgrave (1956) 96 CLR 73
Boscawen v Bajwa [1996] 1 WLR 328
Brambles Constructions Pty Ltd v Helmers (1966) 114 CLR 213
Cachia v Hanes (1994) 177 CLR 403
Carson v Pickersgill & Sons (1885) 14 QBD 859
(Page 3)
City Bank of Sydney v McLaughlin (1909) 9 CLR 615
Commercial Bank of Australia Ltd v Colonial Finance Mortgage Investment & Guarantee Corporation Ltd [1906] HCA 30; (1906) 4 CLR 57
Coshott v Woollahra Municipal Council [2007] NSWSC 834
Coshott v Woollahra Municipal Council [2008] NSWCA 176
Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154
Griffiths v Kerkemeyer (1997) 139 CLR 161
Gundry v Sainsbury [1910] 1 KB 645
Harold v Smith (1860) 5 H&N 381; (1860) 157 ER 1229
Homestyle Pty Ltd v City of Belmont [1999] WASCA 59
Hudgson v Endrust (Aust) Pty Ltd (1986) 11 FCR 152
Inglis v Moore (No 2) (1979) 46 FLR 470
Insurance Commission (WA) v Kightly [2005] WASCA 154; (2005) 30 WAR 380
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 2) [2003] VSC 212
Johnson v Santa Teresa Housing Association (1992) 83 NTR 14
Kars v Kars [1996] HCA 37; (1996) 187 CLR 354
Lenthall v Hillson [1933] SASR 31
McCullum v Ifield [1969] 2 NSWR 329
McLaughlin v The City Bank of Sydney (1914) 18 CLR 598
Morris v Ford Motor Co Ltd [1973] QB 792
National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569
New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50
Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9
North Australian Aboriginal Legal Aid Service Inc v Bradley (No 2) [2002] FCA 564
Noye v Robbins; Noye v Crimmins [2007] WASC 98
O'Keefe v Hayes Knight GTO Pty Ltd (2005) 218 ALR 604
R v Archbishop of Canterbury [1903] 1 KB 289
R v Miller [1983] 3 All ER 186
Redding v Lee [1983] HCA 16; (1983) 151 CLR 117
Stobbart v Mocnaj [1999] WASC 252
The Esso Bernicia; Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] AC 643
Trevorrow v State of South Australia (No 7) [2008] SASC 5
Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514
Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474
Wilson v Richmond River Shire Council [2000] NSWSC 71
(Page 4)
1 EM HEENAN J: Some unusual issues of complexity have arisen over the liability for costs arising from the judgment of 30 April 2007. That dismissed the plaintiff's claims in this action and ordered that issues of costs arising out of the action should be reserved.
2 This action was tried with the related action, CIV 2490 of 2000, in which the present plaintiff succeeded in obtaining an order for damages against the defendant to that action, Lynette Beryl Crimmins. The details of the many claims, the interrelationship of the actions, and the reasons why the plaintiff failed in this present action but succeeded in the related action are contained in Noye v Robbins; Noye v Crimmins [2007] WASC 98. It was the need to accommodate the consequences of the different results in the two actions heard together and to make separate orders for costs in the two actions which reflected the differing outcomes which resulted in the question of costs in this action being reserved on 30 April 2007.
3 At the hearing at a special appointment on 29 January 2008 to deal with applications for costs it became apparent that, subject to one potentially significant contingency, the first defendant, Inspector Robbins, is entitled to an order for costs which provides for the recovery of part of his costs of the action. However, counsel for the plaintiff submitted that there had been a funding agreement, the details of which were not then fully known to the plaintiff, under which the first defendant had all of his legal costs of this litigation paid from another source and that he was not personally liable to repay any of that funding. On this basis, it was submitted for the plaintiff that, not being under any liability to pay his costs of the proceedings, or to repay the source from which those costs had been funded, the first defendant was not entitled to an order for costs against the plaintiff because there was no payment or liability for which he needed an indemnity. As it was then apparent that some such arrangement for the first defendant's costs of the action had been made and that he had not, personally, met any of those costs, I made a series of orders on 29 January 2008 addressing the situation which had arisen. Those orders were that:
(1) subject to pars 2, 3 and 4 of the order, the plaintiff pay the defendant's costs of the action to be taxed on the basis that the plaintiff pay 50% of the costs up to and including 1 June 2005;
(2) the defendant or the defendant's solicitors disclose on affidavit all documents comprising the agreement or agreements relating to funding assistance from any third
- person to the defendant and the terms of such agreement within 35 days;
- (3) the plaintiff have 14 days from the disclosure to issue a subpoena to any third party or third parties believed to have provided or to be providing financial assistance to the defendant;
(4) the parties have liberty to apply generally;
(5) this matter be listed for further hearing and submissions and for a date to be fixed in late April or May;
(6) the costs of this hearing are part of the costs of the action.
4 Discovery of the first defendant's documents relating to his costs funding arrangements was given and the documents inspected by the solicitors for the plaintiff. The plaintiff issued two subpoenas dated 13 June 2008 addressed to the Commissioner for Police and the State Solicitor of Western Australia respectively requiring the production of documents in the possession of those persons in connection with the payment or arrangement to pay legal costs and disbursements of the first defendant in connection with Supreme Court action CIV 2231 of 1999. No objection was taken to the late issue of the subpoenas but that delayed the relisting of the hearing which had been ordered for April or May. That hearing did not take place until 3 July 2008, at which counsel for the plaintiff and the first defendant again appeared.
5 At this July hearing the evidence established that all the first defendant's costs of the action had been paid progressively to his solicitors throughout the course of the proceedings by the State of Western Australia under arrangements approved and recommended by the Commissioner of Police and, later, by the State Solicitor. Indeed, it is the fact that Inspector Robbins did not pay any of the costs which he had incurred with solicitors acting for him in this litigation and that any personal liability which he had, or may have had, in relation to his solicitors' costs has been, or will be, fully discharged by the State under this arrangement.
6 Nevertheless, counsel for the first defendant submitted at that hearing that the mere fact that the first defendant had been or would have been liable to meet his solicitors' costs had they not been discharged by the State was a sufficient basis for him to be entitled to an order for costs against the plaintiff following the outcome of the action. As it was then not possible to discern whether, under the terms of the funding arrangement, the State was by assignment, subrogation or otherwise,
(Page 6)
- entitled to seek an indemnity for part of the moneys which it had paid for costs on behalf of the first defendant either in its own name or in the first defendant's name or what were the precise terms of the funding arrangement between the State and the first defendant, I considered that notice of the application should be given to the State and the parties should have liberty to apply to file further evidence and make further submissions.
7 Accordingly, on 3 July 2008 I ordered that:
(1) the defendant's application for costs be adjourned to a date to be fixed in September;
(2) the defendant be given liberty to file further evidence and/or further submissions no later than the end of August;
(3) notice of this application and the orders of 3 July 2008, and the proposed listing, be served upon the State Solicitor for Western Australia by the solicitors for the defendant, together with a copy of the transcript of the hearing before me on 3 July 2008;
(4) the State Solicitor for Western Australia be granted liberty to apply to be joined in these proceedings for the purposes of this application and, if he so wishes and if he applies to be joined or to be heard, he is to file written submissions and any evidence by affidavit if he desires to adduce evidence;
(5) such submissions and/or evidence may be served on the plaintiff and the defendant no later than the end of August;
(6) the costs of this application be reserved.
8 Further affidavit evidence was filed following the order of 3 July 2008 and by summons dated 9 September 2008 the State Solicitor applied for an order that the State of Western Australia be added as a defendant to the proceedings for the purposes of the determination of the first defendant's application for costs. Further written submissions were filed by the parties, and on behalf of the State. The adjourned application and the fresh application for joinder came on for hearing before me on 25 September 2008 when counsel for the plaintiff and the first defendant and counsel for the State of Western Australia appeared.
9 At the hearing on 25 September 2008 I was satisfied that the presence of the State before the court was necessary to ensure that all matters in dispute in relation to whether the first defendant ought to be
(Page 7)
- awarded costs may be effectually and completely determined and adjudicated upon (O 18 r 6(2)(b)) Rules of the Supreme Court 1971 and because the outcome of the application directly may affect the State's rights against the first defendant so that the State should be joined: Homestyle Pty Ltd v City of Belmont [1999] WASCA 59 [1], [2], [30] - [31].
10 Essentially, the propositions advanced for the plaintiff, in opposition to any order for costs, proceed on the basis that because Inspector Robbins has not in fact paid any costs, nor is liable to pay moneys paid by the State to his solicitors for his costs, he has suffered no loss for which any indemnity to be provided by an order for costs is necessary. In this regard, the submissions for the plaintiff maintain that, notwithstanding that he had a personal contractual liability to pay to his solicitors the costs which were properly rendered by them for his representation in these proceedings, the fact that that liability has been discharged by the State, without recourse to him, means that he has suffered no loss and requires no indemnity.
11 Counsel for the plaintiff relies on the explanation of the indemnity principle provided by Whealy J in Coshott v Woollahra Municipal Council [2007] NSWSC 834, [17] where his Honour said:
The principle known as the indemnity principle was explained in Gundry v Sainsbury [1910] 1 K.B. 645. This states that the fundamental purpose of an order that one party of the litigation pay the legal expenses or 'costs' of another party is to provide an indemnity in relation to the whole, or usually part, of the legal obligation incurred by the other party to his or her lawyers. Where the party is under no legal obligation to pay lawyers' fees, no amount can be recovered from the unsuccessful party.
12 Further, counsel for the plaintiff cites what he submits is a corollary to this principle described by Mason P in Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154 [7] where the learned President said:
Another corollary is invoked by the respondent in the present case. If a party to an action has agreed with the solicitor that the party does not have to pay any costs, then costs cannot be recovered against the adversary under a party and party order (Gundry v Sainsbury [1910] 1 K.B. 645; McCullum v Ifield [1969] 2 NSWLR 329 at 330). Alternatively, if the solicitor-client agreement caps the amount of costs recoverable, this enures to the benefit of the client's adversary (Tarry v Pryce (No 2) (1987) 88 FLR 270).
(Page 8)
13 The plaintiff also, in effect, submits that to the extent that Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 494 held that a concurrent liability by the client to pay his solicitors' costs, even if those costs were later discharged by a third party, was sufficient to give rise to an entitlement to an order for costs on the indemnity basis unless it could be proved that under no circumstances was the party to be liable to the solicitors for his costs, that decision should not be followed or applied because it is inconsistent with more recent Australian authorities which recognise that, in circumstances where costs are to be met or defrayed by a third party, the application of the indemnity principle should turn upon the content and proper construction of the costs agreement - per Santow JA in Wentworth v Rogers; Wentworth & Russo v Rogers [2006] NSWCA 145, [49] and [66].
14 That an order for costs is made in order to provide an indemnity, or a partial indemnity, for professional legal fees paid or incurred by a successful party to the litigation cannot be doubted: Cachia v Hanes (1994) 177 CLR 403 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ at 410 - so that a litigant who is not a lawyer is not entitled to compensation for time spent in preparing and conducting his case. The rationale behind the indemnity principle essentially is that costs are not imposed as a punishment on the party ordered to pay them, nor given as a bonus to the party who receives them: Harold v Smith (1860) 5 H&N 381, 385; (1860) 157 ER 1229, 1231 and Wentworth v Rogers per Santow JA at [54]. Accordingly, the effect of the indemnity principle is that an order for costs will not ordinarily be made to a party who has not incurred a liability to pay costs to his or her own solicitor: Hudgson v Endrust (Aust) Pty Ltd (1986) 11 FCR 152, 153 and 154; Stobbart v Mocnaj [1999] WASC 252 [8] - [9] (Parker J).
15 With this abbreviated introduction to the principle underlying the power to make an award of costs in litigation, it is necessary to turn to the facts of this particular arrangement.
16 The evidence adduced on this application comprises six affidavits filed by the parties, namely:
(1) affidavit of the defendant sworn 27 June 2008;
(2) supplementary affidavit of the defendant sworn 1 July 2008;
(3) affidavit of Jemimah May Mills sworn 27 June 2008;
(Page 9)
- (4) affidavit of John Francis O'Sullivan sworn 2 September 2008 filed on behalf of the State of Western Australia;
(5) affidavit of the defendant sworn 16 September 2008;
(6) affidavit of Mr Marshall Timothy McKenna sworn 16 September 2008 filed on behalf of the defendant.
17 The first of these affidavits deals only with the process of giving discovery and inspection following my orders of 29 January 2008 and need not be mentioned further.
18 In his affidavit of 27 June 2008 the first defendant, Inspector Robbins, deposed that he engaged a firm of solicitors, Messrs Corser & Corser, to defend this action and that on or about 26 October 1999 he received a letter from that firm containing a standard form costs agreement setting out the terms upon which the engagement would be accepted. This set out proposed hourly rates for various solicitors of the firm, provision for interim billing, a demand for payment of an initial deposit against anticipated costs and gave an estimate of the firm's anticipated costs under the agreement from the date of engagement until entry for trial. Inspector Robbins confirmed the engagement on those terms and returned a copy of the letter accepting the solicitors' standard conditions.
19 Later, Inspector Robbins decided to change solicitors and engaged the firm of Hunt & Humphry to act for him in the place of Corser & Corser. Under cover of a letter of 6 June 2000 Messrs Hunt & Humphry submitted to Inspector Robbins that firm's costs agreement which they requested him to sign to confirm their engagement. This also provided for charging by hourly rates in varying amounts designated for different staff members, interim accounts and other associated matters. Inspector Robbins accepted those terms, signed a copy of that costs agreement and returned it to Messrs Hunt & Humphry.
20 By the time that Inspector Robbins changed solicitors to Hunt & Humphry an arrangement had already been reached for the State to pay his legal expenses for the defence of the litigation. The terms of this do not appear from Inspector Robbins' affidavit of 27 June 2008 but the letter from Messrs Hunt & Humphry to him of 6 June 2000 (enclosing the firm's costs agreement) alludes to this arrangement and constitutes evidence of some of its aspects. I set out those parts of the letter from Messrs Hunt & Humphry to the first defendant dated 6 June 2000 which bear on this subject, namely:
(Page 10)
- …
It is in the interests of both parties that we enter into a formal Costs Agreement. This is particularly so in the circumstances of this case where the costs of the matter are being met by the State overseen [by] the Crown Solicitor's Office on certain conditions (which conditions are set out in this letter). I attach a draft [of the] Costs Agreement for your consideration.
Basis Of Your Indemnity
The basis of your indemnity is that the State considers that actions against its officers should be defended at its cost provided that:
(1) the officer being sued is being sued in their capacity as an officer of the State;
(2) the officer was acting in good faith in executing those functions in relation to which they are being sued; and
(3) the costs are reasonable.
We are instructed to provide representation to you on the above basis. We are instructed that the State accepts, on information known to it at present, that you were acting in good faith in issuing complaints against Noye and Roddan. However, if it transpires that you were not acting in good faith the payment for such representation may be withdrawn.
On that topic, it is important for us to tell you that in the ordinary course of a solicitor client relationship, we would have a duty of confidentiality to you that did not allow us to impart any information to the Crown Solicitor's Office. Our instructions to represent you are, however, conditional upon you irrevocably authorising us to provide to the Crown Solicitor's Office such information as we consider necessary or appropriate [from] time to time for the purpose of:
(1) keeping the Crown Solicitor informed of the progress of these proceedings; and
(2) advising the Crown Solicitor that the conditions for his continued funding of your defence are or are not met from time to time (including advising him of information that comes into our knowledge by reason of our representing you, whether sourced from you or any other person).
In signing and returning a copy of this letter you agree to this condition and to the terms of our costs agreement, as to which see below.
Costs
The State is indemnifying you for costs in accordance with the policy stated above. Accordingly, it is you who will be engaging us and who is
(Page 11)
- primarily liable for our fees. Thus, we set out below the basis upon which we propose to represent you.
…
…
Additionally, we have been requested by the Crown Solicitor's Office to engage Mr … of the independent bar as your counsel. We will primarily work in a solicitorial role although our Marshall McKenna may undertake counsel work at interlocutory stages. Mr …'s daily rate is $...
…
Costs orders may be made in the proceedings. If the costs orders are in your favour we may be able to recover funds from Messrs Noye & Roddan. Any money so recovered would be payable by you to the State in part reimbursement of funds he has expended in your defence. A costs order against you will be met by the State, provided that the conditions as to your indemnity set out above continue to be met.
Instructions
You are our client, accordingly, we take our instructions from you.
However, the Crown Solicitor is in a position of a kind of co-client and has the right to decide whether a course of action that you authorise us to take is or is not reasonable. That is, the Crown Solicitor can direct us to take particular action on any aspect of this matter.
If your instructions and those of the Crown Solicitor conflict you may direct us not to take such action and appoint replacement solicitors at your own expense. Otherwise, you accept and agree that any instruction given to us by the Crown Solicitor (either directly or through a solicitor in his office) is a proper instruction with which you concur.
Approval Of The Crown Solicitor
We are instructed to inform you that the Crown Solicitor has approved the terms of this letter.
…
…
21 Further, in his affidavit of 27 June 2008 Inspector Robbins deposed that it was his understanding that the State provides financial support such that actions against police officers are defended at its cost provided that the officer is sued in his capacity as an officer of the State, was acting in good faith and that the costs are reasonable. He said that he understood
(Page 12)
- that this was pursuant to a general policy which had been formulated by the State Government at about the time these proceedings had been commenced.
22 Inspector Robbins then said that he has never paid any of the legal costs incurred in this matter to either Corser & Corser or to Hunt & Humphry. All accounts for legal expenses for his representation have been paid by or on behalf of the State. As best he could recollect, whenever an account for legal fees had been sent to him he requested the Western Australian Police Service Legal Services branch to attend to payment and that was done. Nevertheless, Inspector Robbins says that he always understood that he was personally liable for legal costs chargeable by his solicitors if the State did not pay them (whether because the State formed the view that he was not acting in good faith or if he elected to do something that the State did not consider reasonable or necessary (such as engaging a Queen's Counsel)).
23 In his supplementary affidavit of 1 July 2008 Inspector Robbins annexed a copy of a letter dated 8 May 2002 which he had received from the Legal Services Unit of the WA Police Service. He explained that he had not kept a copy of the letter himself and that this copy had only come to light and been recalled by him after the process of discovery and production already described. Relevantly, this letter provides:
Dear Superintendent Robbins,
As you are aware, in late 1999 your application for legal representation funding to defend the action Jeffrey Noye and Lindsay Roddan commenced against you (CIV 2231 of 1991) was approved. The approval was granted on an interim basis, subject to a monetary limit of $10,000 and ultimate approval being obtained from the Attorney General or Cabinet. Approval was also subject to the general conditions set out below.
As your legal costs exceeded that amount, under the Government Guidelines relevant to Ministers and Officers involved in legal proceedings, approval was sought from Cabinet for an ex gratia payment to cover the $58,234.43 incurred by Corsers in the conduct of your defence. Cabinet approved an ex gratia payment for that amount as well as the continued up front payments towards your reasonable legal costs, subject to the oversight of the Crown Solicitor's Office. Cabinet's approval was based on an assessment in the presently known circumstances and whether your conduct the subject of these proceedings was in good faith, reasonable and in the official discharge of your duties.
(Page 13)
- As with other officers in respect of whom up front approval has been granted for legal representation funding, I confirm that the following general conditions continue to apply to that approval:
(i) the cost and level of your legal representation must be acceptable to the Commissioner of Police and the Crown Solicitor;
(ii) any payment of costs may be suspended or stopped if at any time the Commissioner of Police and the Crown Solicitor consider that your conduct was improper or inappropriate, whether from the Police Service's or the community's perspective;
(iii) any such decision of the Commissioner of Police and the Crown Solicitor to suspend or terminate funding is solely within their discretion and may not be called into question or challenged;
(iv) if funding is terminated, you may be required to repay any funding provided as a result of this request (including the $58,234.53 payment approved by Cabinet);
(v) you keeping the Commissioner advised of developments in the case, including any negotiations in respect to settlement of the claim; and
(vi) you regularly advising the Commissioner of developments in the case and reporting the outcome of the matter to the Commissioner, as soon as practicable.
It is important for you to appreciate that you ultimately remain legally responsible to your solicitors and counsel for costs incurred by you in engaging their legal services. To the extent that approval has been granted to pay your reasonable legal representation costs, subject to the above conditions, those costs will continue to either be reimbursed once paid for by you or, if considered to be appropriate, paid direct to your solicitors.
You should also be aware that the present Cabinet approval does not extend to any liabilities that may be incurred by you in the course of the litigation such as any orders that you pay the plaintiff's costs or any damages awarded against you. If such circumstances arise, you may submit a further application to the A/Civil Claims Coordinator at the Legal Services Unit for such amounts to be met. If appropriate, consistent with the Government Guidelines, the approval of the Attorney General or Cabinet will then be sought for the making of an ex gratia payment to cover those amounts. Any such application would ordinarily be made at the conclusion of the litigation to enable a fully informed assessment to be made of whether your conduct the subject of these proceedings was in good faith, reasonable and in the official discharge of your duties.
(Page 14)
- …
Inspector Officer in Charge
Legal Services Unit
24 These arrangements were confirmed in later affidavits of Inspector Robbins and Mr McKenna after further information from the State Solicitor's Office had been disclosed. In his affidavit of 16 September 2008 (exhibit 6) Mr McKenna deposes that throughout the term of Inspector Robbins' engagement of the firm of Hunt & Humphry that firm had been 'co-instructed' to a certain extent by the State. He described how the funding arrangement was reached following a telephone conversation between himself and Mr John O'Sullivan of the Crown Solicitor's Office of about 2 May 2001. While there was no contemporaneous record of that conversation, Mr McKenna recalled that the substance of it was that:
(a) Mr O'Sullivan asked whether Mr McKenna would be prepared to act for Robbins on the basis that his fees would be paid by the State at a rate to be agreed with the State and on the basis of a conditional indemnity;
(b) Mr McKenna responded that he would be prepared to act, subject to ensuring that the relationships of the firm of Hunt & Humphry, the State and the defendant Robbins were clearly defined because he saw the relationship as somewhat analogous to acting for insurers in that a solicitor acting for a party and his indemnifier was in a position of potential conflict of interest where the indemnity was conditional; and
(c) Mr O'Sullivan and Mr McKenna discussed mechanisms for billing, rates, terms of payment and the relationship that the firm Hunt & Humphry would have with Robbins and with the State in respect of which it was specifically discussed that:
(i) Robbins would engage Hunt & Humphry directly, and the State would pay for the costs incurred by him subject to the State's assessment of the reasonableness of those costs;
(ii) should Hunt & Humphry (through Mr McKenna) form the view that Robbins' prosecution of Messrs Noye and Roddan was malicious or that he had otherwise not acted in good faith, Mr McKenna
- would be obliged to advise the State of that and the State would then (potentially) withdraw the indemnity given to Robbins;
- (iii) Mr McKenna providing such advice to the State would be a conflict of interest with his duty to Robbins and that there would need to be an express written agreement between Robbins and Hunt & Humphry permitting Mr McKenna to provide such advice to the State Solicitor;
(iv) the question of the conduct of the proceedings would be in the hands of Robbins (in that he would instruct Mr McKenna) but the indemnity for costs of the action would be in the hands of the State so that decisions in that regard would be made by the State;
(v) should costs be recovered by Robbins, they would be paid by the defendant to the State;
(vi) the costs agreement that Mr McKenna would prepare on behalf of Hunt & Humphry (should Robbins retain him) would have to deal with these points.
25 Further discussions occurred between Mr McKenna and Mr O'Sullivan of the State Solicitor's Office resulting in the State Solicitor's Office indicating that it was prepared to instruct Hunt & Humphry on this basis and by which Mr O'Sullivan settled the terms of the costs agreement that was ultimately sent by Hunt & Humphry to Inspector Robbins and accepted by him (as mentioned in [19] above).
26 Mr McKenna also deposes that at about this time he spoke with Inspector Robbins on several occasions about the defence of the action and specifically mentioned by him, and accepted by Robbins, were the following matters:
(a) the State would be indemnifying Robbins on a conditional basis (being that it would cease to indemnify him if it reached the view that he had maliciously prosecuted Messrs Noye and Roddan and that it had to approve his expenses);
(b) Mr McKenna was obliged to report on the conduct of proceedings to the State Solicitor, including providing to
- the State Solicitor his own recommendations to Robbins about the conduct of the proceedings;
- (c) Robbins could instruct Mr McKenna in any way he wished (including as to briefing counsel) but ultimately the costs in the matter were in the discretion of the State, which could decline to indemnify him for all or part of the matter - specifically, the State (via the Crown Solicitor's Office) was of the view that junior counsel and not senior counsel was appropriate for the defence of this matter and that it would fund junior counsel so that if Robbins wished to engage senior counsel he could do so but the costs of doing so would be borne by him;
(d) Robbins may be obliged to repay to the State all funds paid by the State to Corser & Corser and the Hunt & Humphry if the State formed the view that he had maliciously prosecuted Messrs Noye and Roddan; and
(e) the State would require payment to it of any costs recovered by him in the course of the proceedings.
27 Mr McKenna swears that he understood at all times that the State would retain its entitlement to the recovery of costs through Robbins and that Robbins was aware of that and agreed to it. Mr McKenna's evidence in this regard is repeated and confirmed by Inspector Robbins in his affidavit of 16 September 2008 (exhibit 5) and Inspector Robbins there went on to depose that:
(a) at all times he understood and expected that any fees recovered in the defence of this action (whether by Corser & Corser or Hunt & Humphry) would be payable by him to the State;
(b) he considers himself to be obliged to seek costs on behalf of the State and to pay all costs recovered to the State; and
(c) to the extent that it may be necessary to do so, he undertakes to pay any costs recovered by him in this action to the State.
28 More detail is provided in the affidavit of Mr John Francis O'Sullivan sworn 2 September 2008 and filed on behalf of the State. Mr O'Sullivan is a senior assistant State counsel and it was he who largely dealt with the funding arrangements which had been requested on behalf of Inspector Robbins for his defence of the plaintiffs' claims in this action. He explains that the funding of legal representation for ministers and
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- public officers of the State who are the subject of civil proceedings is the subject of government policy. This policy, revised from time to time, is set out in the 'Guidelines relevant to Ministers and Officers involved in legal proceedings' which were tabled in the Legislative Council on 10 July 1990. The policy evidenced by these guidelines is that the State will meet the legal costs incurred in defending a civil action against a minister or public officer where the conduct of the minister or officer was in good faith and reasonable and in discharge of official responsibilities. Under the guidelines, applications by ministers or public officers for 'indemnities' for legal costs and damages are to be decided by Cabinet. Such applications are to be accompanied by an assessment prepared by the Attorney-General with the assistance of the solicitor-general or State solicitor and that in every case a decision to reimburse legal costs will be in respect of 'reasonable costs' and in some cases may require a contribution towards legal costs. Significantly, the guidelines include the statement that:
Any amount recovered by a minister or officer in proceedings, whether for costs or damages, will usually be set off against the indemnity.
30 The form of financial assistance may involve the State paying, or reimbursing the applicant, at the end of the proceedings for all the costs which he or she incurred or, as in a case such as the present, for regular progressive payments to be made during the course of the litigation either in reimbursement of, or in discharge of, liabilities for costs incurred by the individual. It is, presumably, this notion of reimbursing the applicant for legal costs paid by him or her, either progressively or at the end of the proceedings, which accounts for the use of the term 'indemnity' in the guidelines; in the correspondence, and in the discussions which are referred to in the evidence before me. This use of the term 'indemnity' may not correspond precisely with the legal concept of a contract of
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- indemnity or a right to indemnity at law or in equity and, I am satisfied, this has given rise to some ambiguous use of language on this application.
31 Mr O'Sullivan describes how applications for government financial assistance for a minister or public officer are dealt with in practice; how the WA Police Service produced its own internal policy in August 1999 for legal representation of police officers; and how applications pursuant to that policy should be made. Essentially, as in the present case, a police officer who desires such financial assistance is required to make a written application to the civil claims coordinator of legal services within the Police Service. That claims coordinator assesses the application and refers it to the Commissioner for Police who will, if he approves it, forward it to the State Solicitor. At the State Solicitor's Office it is further considered and, if approved, the terms of the proposed arrangement are negotiated with the police officer concerned or his solicitors, approved by the attorney-general and submitted to Cabinet for approval. Once approved by Cabinet the arrangement takes effect subject to its terms.
32 In the present case Inspector Robbins made an application for funding by the State to represent him in defending the proceedings brought by the plaintiff and this was referred to the assistant commissioner and to the commissioner. The Commissioner for Police notified Inspector Robbins by memorandum of 8 October 1999 that he and the Crown solicitor had agreed that the Crown solicitor was himself unable to provide representation for Inspector Robbins' defence but that it was agreed that the State would meet the first defendant's legal costs in defence of the writ on condition that should it be found that the prosecution of Noye and Roddan was malicious, the first defendant would be required to refund moneys paid for his legal representation and would be responsible for any damages that might be awarded against him. The commissioner notified Inspector Robbins that he should seek a private legal representative whose accounts would be paid in the interim by the Police Service. The arrangement was later varied in that the first defendant's legal costs were paid by the State. Then Mr O'Sullivan goes on to describe how the first defendant engaged first Messrs Corser & Corser and then, after further discussions with the State Solicitor, retained Messrs Hunt & Humphry in place of the former solicitors and how the costs agreements and the letters already described were prepared and agreed.
33 Significantly, annexure JF012 to the affidavit of Mr O'Sullivan (exhibit 4) is a copy of a Cabinet decision sheet dated 17 May 2004
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- recording a decision of Cabinet over the hand of the then Premier, and at the responsibility of the attorney-general, entitled as follows:
Ex Gratia Payment Of Legal Costs Incurred By A Police Officer Defending An Action For Malicious Prosecution
Decision
Cabinet
. pursuant to the Government Guidelines relevant to ministers and officers involved in legal proceedings, approves the making of an ex gratia payment of $54,824.53 to Corsers and $47,258.85 to Hunt & Humphry on behalf of police officer, Superintendent Stephen Robbins so as to fully satisfy the payment of legal costs incurred by Superintendent Stephen Robbins in his ongoing defence of an action for malicious prosecution brought by Jeffrey Noye and Lindsay Roddan;
. in addition, approves the continued payment of Superintendent Robbins' legal costs that are subject to scrutiny and satisfaction of the State Solicitor's Office.
35 However, while the application for representation was initially made in writing by Inspector Robbins and while Inspector Robbins also signed the costs agreements, respectively with Corser & Corser and Hunt & Humphry, the latter of which reflected discussions between his solicitor, Mr McKenna, and Mr O'Sullivan for the State Solicitor, there is no single comprehensive document or set of documents which contains all the terms sought to be relied upon by the first defendant or by the State. Furthermore, there is unquestionably an ambiguity in the term 'ex gratia payment', as used in the Cabinet minute of the decision of 17 May 2004 and in the letter of 8 May 2002 to Inspector Robbins from the officer in charge of the legal services unit confirming the 'ex gratia payment' to Corser & Corser as well as for the 'upfront payments towards your reasonable costs'.
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36 The terms of the funding arrangement are express in relation to the obligation of Inspector Robbins to refund the State all moneys paid to his solicitors for the defence of legal proceedings in the event that the State Solicitor should conclude that he had acted with impropriety or if a finding of impropriety were to be made against him in the proceedings but (save as to the reference to the guidelines generally) there is no express provision dealing with:
(i) an obligation on Robbins to seek and attempt to recover costs against another party to the litigation for the benefit of the State;
(ii) any express assignment to or right of subrogation by the State to seek to recover costs in the name of Robbins or otherwise against another party in the action;
(iii) any obligation or sanction upon Robbins if he failed either to pursue or enforce the recovery of costs against another party to the litigation.
37 Furthermore, it is evident from both the Government Guidelines and the police guidelines establishing the policy as mentioned that a primary purpose of the policy and arrangements established under it is to ensure that ministers and public officers should not be prejudiced or be obliged to bear a significant personal financial burden in order to conduct reasonable and proper defences of actions involving civil claims against them for alleged liabilities incurred by them in the honest and reasonable discharge of their duties. It is largely for these purposes that the policy has been established and the eventual recovery of part or all of the expenditure outlaid for the officer's defence of the claims, while not altogether unimportant, receives only minor recognition in the guidelines and in the documentation produced in this case.
38 The provision in the policy guidelines tabled in the Legislative Council to the effect that any amount recovered by a minister or officer in proceedings, whether for costs or damages, will usually be set off against an indemnity seems, to me, to be inconclusive in this respect. In the first place, it speaks only of what the 'usual' practice will be and there has been nothing shown to suggest that any decision has or could be taken under the arrangement struck with Inspector Robbins about setting off against his 'indemnity' costs which he might recover in the proceedings. Of course, the payments which were made in the present case were not, strictly speaking, in the nature of indemnities because Inspector Robbins had never personally discharged his primary contractual obligation for fees and had thereupon never strictly become entitled to an indemnity -
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- see Brambles Constructions Pty Ltd v Helmers (1966) 114 CLR 213; Commercial Bank of Australia Ltd v Colonial Finance Mortgage Investment & Guarantee Corporation Ltd [1906] HCA 30; (1906) 4 CLR 57, 66, 69; and Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514. So, for both these reasons, that particular passage in the guidelines has no direct application to the circumstances which evolved in this case.
39 Nor is there any basis for a conclusion that there was any form of assignment, conditional or otherwise, of Inspector Robbins' right to recover costs from the plaintiff in the event of a successful outcome for him of the proceedings, for the benefit of the State even if such an assignment were possible which, being at best a future chose in action, could only be assignable in equity and then only for consideration: Norman v Federal Commissioner of Taxation [1963] HCA 21;(1963) 109 CLR 9, 16, 20, 25 - 26; Bakewell v Deputy Federal Commissioner of Taxation (SA) [1937] HCA 11; (1937) 58 CLR 743, 761 - 762.
40 Despite this, it seems clearly to have been contemplated, at least in the discussions between Mr O'Sullivan and Mr McKenna, that in the event of costs orders being made in the proceedings it might become possible to recover funds from Noye, in which case any money so recovered would be payable by Robbins to the State in part reimbursement of the funds which the State had expended in the first defendant's defence. (See [27] above and exhibit 2, annexure SJR2). So far as it is significant, it is obviously the case that both the first defendant and his solicitor, Mr McKenna, have an understanding that, at least implicitly, the funding arrangement obliged Inspector Robbins to seek and to attempt to enforce an order for costs against the plaintiff in the event of a successful outcome of the proceedings and, in the event of recovery, to pay the whole of the moneys recovered to the State. As I have already mentioned, there is no express right of subrogation granted to the State under this funding arrangement for it to enforce, in the name of Inspector Robbins, a claim for his costs of the proceedings against the plaintiff.
41 I consider that the present arrangements amount to an agreement by the State to pay money for the benefit, that is to the use of, the first defendant, Inspector Robbins, under terms which would permit the State to terminate the funding and to seek to recover from Robbins payments already made in the event that the State were advised that there was reason to conclude that the first defendant no longer deserved to have this support continued or to retain the benefits of the support which had to that point been given. This conferred a large discretion on the State to decide
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- whether such circumstances had arisen and, further, upon the extent and nature of the funding which would be supplied during the life of the arrangement. To the extent that consideration moving from Robbins is necessary to support the existence of the contract, it may be found in Robbins submitting to the control and supervision of his defence of the action by the State Solicitor and by disclosure to the State Solicitor of information and advice by his own legal representatives which would otherwise be confidential.
42 However, I find it difficult to see this as providing all the terms of a contract upon which the first defendant or the State seeks to rely for demonstrating an actual or contingent present liability by Inspector Robbins to repay the State some or all of the expenditure which it outlaid for his defence and, therefore, to provide the basis for the indemnity which an order for costs would be intended to satisfy. Rather, I see the situation as the State making a series of discretionary payments for the defence of the interests of one of its own officers and, therefore, indirectly for its own interests. The word 'discretionary' in this setting is intended to connote that the State was under no enforceable obligation to make the payments and, unlike an insurer embarking upon a contract of indemnity, received no premium or remuneration for doing so.
43 Nor could the payments by the State be characterised as a loan because it was never contemplated that they would be fully repaid. However, if these were payments made by the State for the use of the first defendant and circumstances arose where the first defendant became entitled to recover from a third party, in this case the plaintiff, some or all of those payments, it would seem to follow that the State would be entitled to claim in restitution for so much of the moneys that the plaintiff could recover. This ever present contingency also means that Inspector Robbins' liability for the costs to his solicitors, was not absolutely or unconditionally discharged by the payments made progressively to his solicitors by the State. This aspect of the situation will be addressed more fully later.
44 At this point it becomes necessary to give closer attention to the authorities relied upon by the parties and to their submissions as to principles of law or equity which are said to apply.
Relationship of the parties
45 Obviously the arrangement between the State of Western Australia and the first defendant Inspector Robbins whether contractual or otherwise is a bilateral arrangement but, in part, was made between their
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- respective agents. To the extent that Inspector Robbins agreed personally to the terms it is clear that he completed the application for funding which was submitted to the police legal services unit and through that to the Commissioner for Police and then to the State Solicitor. From then on his communications with the State were via his solicitor and agent Mr McKenna who was liaising with Mr O'Sullivan from the State Solicitors Office. Communications on behalf of the State came on behalf of the Commissioner for Police in the form of the letter of 8 May 2002 and the oral discussions between Mr O'Sullivan with Mr McKenna which had contributed to the formation of the content of the letter of engagement from Hunt & Humphrey to Inspector Robbins referred to in [20] above. However, if the understandings referred to by Mr McKenna and Inspector Robbins in their affidavits of 16 September 2008 are to be regarded as forming part of the contractual arrangement or some other agreement short of contract, it would seem that there were some oral terms discussed with Mr McKenna by Mr O'Sullivan, passed on by Mr McKenna to Inspector Robbins, and assented to by the latter, to the effect that in the event of a successful outcome, Inspector Robbins would be obliged to pursue any claim for costs available arising from the action and to pay the proceeds of any amounts recovered to the State in partial reimbursement of the payments made by the State for his legal expenses, or even, perhaps, to participate in any way which may be necessary to allow the State, with or without the use of his name, to pursue any such avenue for the recovery of costs.
46 One thing is clear, and it is that at all times until, and to the extent that his obligation was discharged by payments made by the State under this arrangement, Inspector Robbins was personally liable to his solicitors, first to Messrs Corser & Corser and then to Messrs Hunt & Humphrey, for the proper charges which those firms rendered to him for professional services in advising him and acting on his behalf in the defence of this litigation. It is equally clear that Inspector Robbins successive liabilities for the costs rendered from time to time by his solicitors were in fact discharged, not by him but by the State by the payments described. He is not presently liable to his solicitors for any of the costs which have been rendered and paid nor is he liable, independently of recovery of any costs which might be awarded in this case, to repay to the State any or all of the payments which it made on his behalf.
47 The issue for consideration is whether, in these circumstances the payments made by the State were a total and unconditional payment of Inspector Robbins' liabilities for costs in the sense that those payments have extinguished his right to claim the costs indemnity now being
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- sought. Perhaps another way of putting the issue is to ask whether, notwithstanding the payments in apparent discharge of Inspector Robbins' liability for costs to his solicitors, there is a sufficient residual interest for him to maintain the claim for an order for costs indemnity. In view of the authorities it may be surprising that this question is even asked, but there must certainly be situations as, for example, those raised in argument where costs were met by a third party philanthropist who seeks no recompense for his payment and whose philanthropy has exonerated all liability of the person who, otherwise, may have had to pay the costs and who would need an indemnity.
48 The position is not unlike the issue which sometimes arises in claims for damages for personal injury where a successful plaintiff has, during the period of his incapacity from the date of injury until eventual judgment, had the benefit of a variety of pension or insurance payments such as sickness benefits, invalid pensions or unemployment payments and the question arises whether or not such payments, at least where they do not have to be reimbursed to the insurer or to the government, should be credited against the damages otherwise payable to the victim because, at least in respect of some of his losses, he had received a partial indemnity. The principles applicable in these instances have been examined in Redding v Lee [1983] HCA 16; (1983) 151 CLR 117 which held that invalid pensions had to be ignored and in Baird v Roberts [1977] 2 NSWLR 389 which held that sickness benefits should not be credited against such damages and in National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569 which ruled that such payments should be disregarded in assessing damages.
49 However, it has been acknowledged that it is 'hardly possible to work out any principle which would apply to every such case': see National Insurance Co of New Zealand Ltd v Espagne (573) (Dixon CJ). In that case the approach adopted by the learned Chief Justice was to consider whether or not the payment of money to the claimant was intended to be a benefit both independent of and cumulative upon whatever right of redress against others might arise out of the circumstances of the accident.
50 Blundel v Musgrave (1956) 96 CLR 73 is the case about the naval rating whose hospital and medical treatment had been provided by the navy in a naval hospital but where the Navy Board, in the exercise of a discretionary power, excluded him from the entitlement to free hospital and medical treatment, and levied a charge for the treatment, subject to review later, because of the pendency of the rating's claim for damages against a third person for the personal injuries sustained and giving rise to
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- the treatment. The majority of the court held that the rating was entitled to recover damages in the action for negligence in a sum which included the special damages for the hospital and medical treatment in view of the decision of the Navy Board requiring him to pay for that treatment. Although there was a division of opinion (with Dixon CJ and Fullagar J dissenting) over whether the contingent possibility that the Navy Board would annul its order for the rating to pay for his medical treatment in the event that he did not recover damages, all members of the court proceeded on the basis that the special damages were only recoverable in the event of an actual legal liability by the claimant to pay for them.
51 Such an actual or contingent liability to pay continued to be an essential condition for recoverability until the rule was modified, in personal injuries claims, to accommodate the recovery of an allowance for gratuitous services notwithstanding that there was no liability to pay for them: see Griffiths v Kerkemeyer (1997) 139 CLR 161 and the explanation of this development given by Dawson J in Kars v Kars [1996] HCA 37; (1996) 187 CLR 354, 358. That in personal injuries claims there is the potential to recover an allowance for gratuitous services for which, by hypothesis, the plaintiff has no liability to pay, or even to account, to the provider of the services, is regarded as anomalous and as an exception to the general principle: see per Toohey, McHugh, Gummow and Kirby JJ in Kars v Kars at 365. Whatever the justification for the present rule allowing (limited) recovery of an allowance for gratuitous services in actions for damages for personal injuries, there has been no suggestion in the present case that the indemnity principle relating to the making of an order for party and party costs can be satisfied by anything less than an actual or contingent liability (at least at some point) by the party seeking the order to pay his own legal representatives' proper costs.
52 The present controversy, however, is about what constitutes such an actual or contingent liability to pay and what happens when the obligation is discharged by some third party.
53 It would be difficult in the present case to justify any conclusion that the payments of costs made by the State on behalf of Inspector Robbins were intended to be entirely for his own benefit both independently and cumulatively upon whatever right of redress he may recover in the action so that if, for example, he were to be awarded and recoup costs he could retain these without accounting to the State. No such intention could ever be attributed to the State or to Inspector Robbins under these circumstances. However this approach does highlight both the need for, and the justification of, a quest for the policy or intention underlying the
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- payment so as to examine whether or not its receipt extinguished the right to claim costs which otherwise would have existed.
Course of authority
54 It is, therefore, necessary to examine the manner in which the principles applying to these issues have been developed over recent years.
55 Counsel for Inspector Robbins and for the State each submitted that the contractual liability which Inspector Robbins had to pay his solicitors for their proper costs of his representation was, of itself, sufficient to allow him to obtain the order for costs being sought, notwithstanding that this liability was wholly discharged by the State without recourse to him and, in this respect, rely on Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495, especially a passage in the judgment of Bankes LJ at 501 where his Lordship said:
When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to his solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs. In my opinion, the evidence falls short of establishing that necessary fact, without which the defendants are not entitled to succeed.
56 To similar effect are observations made by Atkin LJ at 502. By contrast, Younger LJ, although agreeing in the particular result, observed that:
I think however, that, if the principle is that of indemnity, and that is the only ground upon which the plaintiff's claim to recover costs against the defendants can be established, he certainly on that ground would be entitled to no further costs than those represented by the amount of his own contributions to the fund out of which the total costs were to come [507] - [508].
57 That case was one in which the plaintiff brought an action against his employers for wrongful dismissal and recovered a judgment in the action against the defendants. The question became whether or not the plaintiff was entitled to an order for costs against the defendants in view of the circumstances where he had been represented by the general solicitors for his union, pursuant to the rules of the union. The solicitors' costs were to be paid for by the union and from union funds because of an entitlement to legal aid contained in the union rules. The decision of the court
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- upholding the plaintiff's entitlement to an order for costs against the defendant was based upon the existence of a concurrent liability by the plaintiff to pay the solicitors for the costs of their representation, a liability which was not excluded by the union also undertaking to pay the costs. It is perhaps not insignificant that in Adams' case Younger LJ took the view that the authorities upon which Bankes and Atkin LLJ relied proceeded on the basis that the successful plaintiff remained under some liability, even if only remote, personally to discharge his solicitors' costs (see page 508).
58 The facts to which the rule in Adams' case were applied would not appear to be materially distinguishable from the facts in the present case and, therefore, the question becomes whether or not, in the light of subsequent authority, that decision should be followed in the present case.
59 Adams' case has been cited with approval and applied in numerous decisions in this country, including Backhouse v Judd [1925] SASR 395; Angor Pty Ltd v Ilich Motor Co Pty Ltd(1992)37 FCR 65, 72; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 2) [2003] VSC 212; and O'Keefe v Hayes Knight GTO Pty Ltd (2005) 218 ALR 604 [40].
60 These and other authorities were also recently reviewed byGray J in Trevorrow v State of South Australia (No 7) [2008] SASC 5. Trevorrow v State of South Australia (No 7) had been successful in a claim against the State of South Australia in circumstances in which he had been provided with legal assistance from the Commonwealth Attorney-General's Department under a scheme available for persons pursuing certain claims approved by the Aboriginal Legal Rights Movement Inc and governed by the Indigenous Test Case Guidelines promulgated by the Commonwealth. However, those guidelines specifically contemplated an amount of costs being awarded by the court to a successful claimant and did not provide or suggest that such a claimant be relieved from any liability to his solicitor.
61 In his judgment Gray J noted the indemnity principle as demonstrated in Cachia v Hanes, 410; Harold v Smith (1860) 5 H&N 381; (1860) 157 ER 1229, 1231 and then referred to Gundry v Sainsbury [1910] 1 KB 645 where a plaintiff was successful but was refused his costs of the trial because he had agreed with his solicitor that he should not have to pay the solicitor any costs. As Gray J summarised the result:
The Court of Appeal held that he could not recover party and party costs on the basis of the indemnity principle. Cozens-Hardy J commented that if the plaintiff had recovered a costs order, he would have received a 'bonus'
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- which 'is contrary to justice and to common sense and also the law as laid down in Harold v Smith.
62 When further discussing the authorities Gray J at [12] cited the following passage from the judgment of French J in Angor Pty Ltd v Ilich Motor Co Pty Ltd:
The decision in Adams is clear authority for the proposition that the indemnity principle will permit recovery of costs by a successful party who is under a legal liability to his solicitors to repay them even though the likelihood of being called upon to do so is remote.
63 Gray J also considered the decision of the New South Wales Court of Appeal in Wentworth v Rogers (2006) 66 NSWLR 474 in coming to the conclusion that Trevorrow was entitled to an order for costs to be taxed but it will be necessary to examine more closely the reasons given in Wentworth v Rogers later.
64 A similar issue occurred in McCullum v Ifield [1969] 2 NSWR 329, where the solicitors for the successful defendant which had resisted a claim for damages for personal injuries arising out of a motor vehicle accident, had been engaged and retained by the defendant's insurer - the statutory insurer in NSW - and where the solicitor was engaged by the insurer and paid a salary by the insurer. Despite a submission that the defendant's solicitor was not entitled to an order for costs the plaintiff was made liable to pay party and party costs in the action. Taylor J observed at 330:
It is established that if a party to an action has an agreement with his solicitor that he will not have to pay any costs then he cannot recover party and party costs against the adversary. (Gundry v Sainsbury, [1910] 1 K.B. 645). Equally, it is clear that the fact that a party to civil proceedings is indemnified by insurance or other agreement against his liability to pay the costs does not prevent him recovering his party and party costs. (See New Pinnacle Group Silver Lead Mining v Luhrig Coal & Ore Dressing Appliances Co (1902), 2 S.R. (NSW) 50; Adams v London Improved Motor Coach Builders [1921] 1 K.B. 495).
65 At 331 Taylor J considered that the entitlement to costs was concluded, contrary to the plaintiff's submissions, by the decisions in R v Archbishop of Canterbury [1903] 1 KB 289 and by Adams' case. Throughout his Honour's reasons there is a constant underlying premise that the fact that the solicitor was acting for the defendant, at the instance of an indemnifier, to whom the solicitor would look for costs, nevertheless meant that for all practical purposes against the plaintiff the solicitor was acting for the defendant and entitled to an order for costs.
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66 The same approach was taken in R v Miller [1983] 3 All ER 186 where the question was whether a defendant, acquitted of a criminal charge, was entitled to the costs of the solicitors representing him on the basis that they had been 'incurred by' the defendant within the meaning of Costs In Criminal Cases Act 1973 (Eng). The situation there was that the defendant's employers had undertaken to pay the costs of the defence but the defendant was aware that if they did not do so he would have to pay the costs himself. In ordering that the defendant was entitled to be paid costs out of the central fund, Lloyd J said that it was only where there was an express or implied agreement which was binding on the accused's solicitors to the effect that in no circumstances would they seek to recover the costs from the accused that the costs ceased to be 'incurred by him' for the purposes of the Act. The arrangements which had been made by the defendant's employer in that case were merely a factor to be taken into account in determining whether there was an implied agreement that the accused would not be liable for the costs in any event.
67 The same approach, namely that a party indemnified as to his costs by some third party is entitled to obtain an order for his costs against another party unless it is established that there was an agreement by the party indemnified with his legal representatives, that in no circumstances was that party to be liable to pay his legal representatives, was taken in Johnson v Santa Teresa Housing Association (1992) 83 NTR 14 where Mildren J also applied Adams' case, Backhouse v Judd and Blackall v Trotter (No 1) [1969] VR 639.
68 Having paid a successful party's costs pursuant to an agreement to do so, an indemnifier would usually become subrogated to all rights which that party had in respect of that payment, although to enforce them it would be obliged to sue in that party's name by way of subrogation for the remedy - see Denning LJ in Morris v Ford Motor Co Ltd [1973] QB 792, 800 - 801.
69 Another recognition of the principle that costs are awarded to the successful party in a litigation in order to indemnify that party against an actual liability for payment of costs incurred and no more is to be found in the decision of Parker J in Stobbart v Mocnaj, which was a case involving a review of taxation where the solicitors for one party were ordered to pay the opposing party's costs on an indemnity basis. In recognition of the indemnity principle Parker J observed:
If there is no legal liability at all, there is nothing to indemnify. If there is a statutory limit to the liability, that is the extent of the indemnity. It is sufficient to refer to the decision of Poole ACJ in Backhouse v Judd
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- [1925] SASR 395 at 396 - 398, which decision was affirmed by the Full Court, its decision being reported in the same report at 400 - 404. See also the decision of Brown v Julius ex parte Julius (No 2) (1959) QWN 37 which relied upon the decision in Gundry v Sainsbury [1910] 1 K.B. 645. Hence, in my view, if a party has not incurred costs, in the normal sense of incurring a binding legal liability to pay costs, there would be nothing to indemnify. Gratuitous payments could not sensibly be made the subject of an obligation to indemnify in this context.
70 The result of the application of this principle in Stobbart's case was that because the solicitors' costs, which were being sought on an indemnity basis, had been calculated without regard to the statutory limits contained in s 59 and s 58ZB(1)(a) of the Legal Practitioners Act 1893 and O 66 r 11(2) of the Rules of the Supreme Court1971 (WA), they could not be enforced in the absence of a formal written agreement as to costs between the plaintiff and the plaintiff's solicitors, which had not been made, but, on the particular facts, the costs charged had not exceeded the relevant scale and the review of taxation was dismissed.
71 The principles were again addressed on an appeal against a decision of a costs assessor in Wilson v Richmond River Shire Council [2000] NSWSC 71. In that case, the unsuccessful applicant had made an application to the Land and Environment Court under the Environmental Planning & Assessment Act 1979 (NSW) to seek an injunction to restrain development on certain land. He had received an assurance from the Bandjalun custodian that its council would meet his own costs and disbursements incurred in representing him in the proceedings. In fact, his costs were met by the NSW Land Council, which effectively indemnified him in relation to the proceedings. By reason of that alleged indemnification, the costs assessor declined to award costs in favour of that applicant in the proceedings and his decision became the subject of appeal. The learned master referred to Carson v Pickersgill & Sons (1885) 14 QBD 859 and observed:
If a solicitor cannot recover from his or her client, then there are no costs to be recovered from any party to a proceedings required to indemnify that client. A litigant, when absolved for any reason from paying those costs to his or her solicitor, has no costs to recover.
72 and also referred to Adams' case, and other Australian authority already cited, before concluding:
It is my view that there was no agreement between the plaintiff and his solicitor that in no circumstances was he (the plaintiff) liable to pay the costs. In the absence of evidence of a bargain to that effect, the plaintiff became liable to his solicitor for costs and this liability is not excluded
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- because the New South Wales Aboriginal Land Council undertook to pay his fees. Mr Wilson was the person giving instructions to the solicitor. The solicitor was acting with the plaintiff's knowledge and assent. Thus the plaintiff was liable to pay his solicitor's costs and the fact that the New South Wales Aboriginal Land Council indemnified the plaintiff does not prevent him from recovering his costs [15].
73 A similar result ensured in North Australian Aboriginal Legal Aid Service Inc v Bradley (No 2) [2002] FCA 564 where Weinberg J rejected, in summary terms, a submission that the indemnity principle meant that a party whose costs were being paid by some external source was, for that reason, prevented from recovering an order for costs upon his success in the action. Without turning to the authorities, his Honour concluded:
[103] The effect of this submission, if accepted, would be remarkable. Ministers of the Crown are frequently sued in this and other courts. When proceedings fail, they receive costs. There is no suggestion that they are personally liable for costs incurred in defending those proceedings. They are, by convention, fully indemnified by their governments.
[104] Whatever arrangements there may in any given case be for the payment of fees, whether by government or by some benevolent third party, that is a matter between the parties to those arrangements. It is of no relevance when determining whether or not, as successful litigants, they are entitled to costs.
74 With all respect, these observations appear to go beyond what was necessary to dispose of that case and do not appear to deal with the established principles which emerge from the earlier cases. Nevertheless, there is no escaping the effect of the decision reached by Weinberg J nor its consistency with the applicable authorities.
75 There is then a trilogy of cases which deal with the issues in a more contemporary setting and which acknowledge the prevalence of cost funding agreements reached on a commercial basis by litigation funders and other instances in which the costs of the successful party are met from other sources. These require close attention. The first is Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154 by a court comprised of Mason P, McColl JA and Davies AJA.
76 Dyktynski's case involved an appeal from a master concerning a determination for costs of an earlier appeal to the Court of Appeal in New South Wales from a decision of the Compensation Court. Under the first order of the Court of Appeal the respondent had been ordered to pay to Mr Dyktynski his costs of the appeal and costs were later determined by
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- assessment. However, there was a long delay in the payment of costs and Mr Dyktynski's solicitors claimed an entitlement to interest on the unpaid costs over the period during which they had been outstanding and made an application to the Compensation Court for interest, which was refused. Because the entitlement to interest involved a matter of principle of general importance Mr Dyktynski's solicitors desired to treat it as a test case. They, therefore, proposed a second appeal to the Court of Appeal over the alleged entitlement to interest. Because the outcome of that issue would have no practical effect for Mr Dyktynski, but only for the solicitors, the solicitors sought and obtained from the appellant his agreement for the appeal to be conducted in his name but on the basis that under no circumstances would he be required to contribute to the costs of the appeal, whether successful or otherwise, and that, in the event that the appeal failed or that Dyktynski was ordered to pay any costs, the solicitors would meet those costs themselves.
77 The solicitors were successful in the appeal and the respondent was ordered to pay the appellant's costs but, when it came to determining the costs, the respondents contended that there was no entitlement to an order for party and party costs because Dyktynski had never been required to pay the costs of the proceedings and was, therefore, in no need of an indemnity.
78 The court unanimously held that an order for costs could be made against the respondent, notwithstanding the arrangements between Dyktynski and his solicitors and that the situation which had arisen, which was an example of the 'nominal plaintiff' type of cases, meant that the indemnity principle did not apply merely because the nominal plaintiff was under no liability to pay costs. The court held that the question was whether the 'real party' to the proceedings had an interest to advance and a liability for costs and, as the solicitors did, they were entitled to obtain an order for costs in favour of the nominal plaintiff for their benefit. In the process, there was an extensive examination of the indemnity principle both in the reasons for decision of Mason P and also in the reasons of McColl JA. The operation of the indemnity principle was described by Mason P in these terms:
[4] The indemnity principle is well-established. In Cachia v Haynes [1994] HCA 14; (1994) 179 CLR 430 Mason CJ, Brennan, Deane, Dawson and McHugh JJ said at [410] that:
It has not been doubted since 1278, when the Statute of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more
- accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation.
- [5] As BramwellB put it in Harold v Smith(1860) 5 H&M 381 at 385, 157 E.R. 1229 at 1231, '… find out the damnification and then you find out the costs which should be allowed'.
[6] One corollary of the principle is the rule that a litigant in person who is not a lawyer cannot recover compensation for time spent in preparing and conducting the case (Cachia).
[7] Another corollary is invoked by the respondent in the present case. If a party to an action has agreed with the solicitor that the party does not have to pay any costs, then costs cannot be recovered against the adversary under a party and party order (Gundry v Sainsbury[1910] 1 K.B. 645; McCullum v Ifield[1969] 2 NSWR 329 at 330). Alternatively, if the solicitor-client agreement caps the amount of costs recoverable, this enures to the benefit of the client's adversary (Tarry v Pryce (No 2)(1987) 88 FLR 270).
[8] The situation is different if the client has the benefit of an indemnity from a third party, so long as the client remains under a legal liability to the solicitor (Adams v London Improved Motor Coach Builders Ltd [1921] 1 K.B. 495; Backhouse v Judd [1925] SASR 395; Angor Pty Ltd v Ilich Motor Co Pty Ltd (1992) 37 FCR 65; Wilson v Richmond River Shire Council [2000] NSWSC 71.
79 After reciting the facts giving rise to the appeal and the terms of the agreement between Mr Dyktynski and his solicitors over the costs of the appeal, Mason P concluded that the case came within an exception to the indemnity principle involving those instances where the litigation was brought by a nominal plaintiff, similar to an assignor of a chose in action who permitted the assignee to sue in the assignor's name or a beneficiary suing in the name of his trustee subject to an indemnity as to costs - an example of this exceptional category of cases was provided by New Pinnacle Group Silver Mining Co v Luhrig Coal & Ore Dressing Appliances Co (1902) 2 SR (NSW) 50.
80 The same view was taken by McColl J who (at [67] - [83]) reviewed this category of exceptions and examined other examples provided by the decisions in Lenthall v Hillson [1933] SASR 31 at 36; Blackall v Trotter (No 1) [1969] V.R. 639 at 947 and Inglis v Moore (No 2) (1979) 46 FLR 470 at 472, before coming to her conclusions which are encapsulated in [92] and [95] as follows:
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- [92] This review of authorities demonstrates that courts have consistently held that a nominal plaintiff, whether one who had not incurred any liability for costs (Lenthall v Hillson, Inglis v Moore, Maclaurin v Hall, Blackall v Trotter (No 1)) or who had received an express indemnity in respect of such costs (New Pinnacle), was entitled to a costs order even though the benefit of that costs order enured to a third party with an interest in the litigation.
…
[95] Applying the indemnity principle to ensure that a real party with an interest in the litigation can recover the costs incurred in proceedings brought in another's name accords with the proposition that:
'it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred': Latoudis v Casey
- and, previously, in reaching this decision her Honour concluded that Gundry v Sainsbury is distinguishable from the nominal plaintiff authorities because there the plaintiff was the only party with an interest in the litigation and he was under no liability for his costs. Accordingly, the indemnity principle was properly applied to preclude him recovering a costs order.
81 This review of the principles is illuminating but it cannot be said that, in the present case, Inspector Robbins was in the role of a nominal plaintiff or party because it was he, and he alone, who was directly concerned and potentially liable at the suit of the plaintiff.
82 The next recent example of the indemnity principle being recognised and, pertinently, in circumstances where any obligation by the client to pay his solicitors' fees may have been contingent upon success in the litigation, is provided by the decision of Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474, a decision of the NSW Court of Appeal comprised by Santow and Basten JJA and Hislop J. This is another example of an application for leave to appeal from a determination of a costs assessor under the Legal Profession Act 1987 (NSW). The result turned upon the absence of any adequate power by the costs assessor to determine, by taking evidence and allowing cross-examination of witnesses, the material provisions of a costs agreement, partly written and partly oral, between the client and his solicitor.
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83 The controversy was over whether or not the terms of the costs agreement between Mr Rogers and his solicitor were to the effect that the solicitor performed work on an entirely 'pro bono' basis, in the sense that the work was entirely voluntary and that there would never be a liability for payment of costs, thus putting the solicitor effectively in the position of volunteer (see Murray J in ABB Power Generation Ltd v Chapple (2001) 25 WAR 158) or whether the particular sense in which the description 'pro bono costs agreement' was used contemplated that in certain circumstances, that is, in the event of success by the client, or even perhaps where there otherwise arose an ability to pay, costs would be chargeable and recoverable by the solicitor from the client. Whether the particular costs agreement fell into the first or second of those categories would determine whether or not the indemnity principle would apply to prevent an order for party and party costs being made in favour of that client. Only in the second case would there be an entitlement to recover the costs.
84 The appeal was allowed and orders were made to provide for evidence to be taken to determine the true meaning and effect of the costs agreement. In the process, extensive attention was given to the indemnity principle as it affected an entitlement of a party to litigation to an order for party and party costs, and the unanimous decision was that the principle did apply.
85 In Wentworth v Rogers Santow JA considered the indemnity principle at 846 - 488. His Honour made reference to Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 2003 [50] - [53] as also did Basten JA at [161] - [166], but both Santow and Basten JJA were of the view that because of the exception recognised in Dyktynski relating to the 'nominal parties' cases, the decision was not determinative of the result in Wentworth v Rogers because the client had sued in his own name and in his own interests. Nevertheless, Santow JA considered that the indemnity principle was not immutable and should be applied flexibly [50] so that, in cases involving conditional costs agreements, the result should be approached as follows:
[53] In Dyktynski the nominal party principle was applied by analogy. So in the present case, and depending on the ultimate content and interpretation of the agreement, I would provisionally conclude that the fee arrangement was in general conformity with the conditional costs agreements permitted by statute such that the indemnity principle would not be contravened. As required by s 186(4) [of the Legal Profession Act 1987] the written version of the agreement
- does 'set out the circumstances constituting a successful outcome of the matter'; it is based on successful recovery.
- [54] The general law governing the indemnity principle with its emphasis on flexibility is, in my opinion, quite capable of accommodating conditional fee agreements of this kind. It should do so recognising the importance of such agreements in promoting access to justice which may otherwise be unaffordable. The residual undertaking to pay, though qualified, strengthens the case for conformance with the indemnity principle. It is reasonable, not just in this ferocious litigation but more generally, to recognise in a costs agreement that the unsuccessful party who is subject to a costs order may delay or defeat recovery. Hence predicating payment on successful recovery is not unreasonable.
- (See also Baston JA at [165] - [167].)
86 The result, in my respectful view, may therefore be stated that although there may be a 'no win no fee' arrangement agreed between the solicitor and client or a conditional fee arrangement which has the effect that if the client is 'unsuccessful' (an eventuality which may be defined in several different ways), there may nevertheless be a contingent liability to pay fees in the event of success and the existence of such an agreement does not mean that the client, if successful, is not entitled to an order for party and party costs. It is only in cases where there is no liability of any kind to pay costs that making order to do so would infringe the indemnity principle.
87 This is of significance in the present case because of the arrangement struck between the State of Western Australia and Inspector Robbins meant that the State would pay his costs in the litigation if he were successful, and even perhaps in certain circumstances if he were unsuccessful, but that if there was any finding of fraud or improper conduct on his behalf the arrangement would not apply. So that not only would he be exposed to a liability to pay the opposing party's costs, but that he might be required to repay to the State some or all of the costs which had been advanced to his solicitors for his defence of the proceedings. As already noted, there was a broad discretion by the State to withdraw from the funding arrangement or to terminate it at any time. The situation, therefore, was that Inspector Robbins was, at least, contingently liable to his solicitors for costs or to indemnify the State for the costs which it had paid to his solicitors, in a number of eventualities. The point of contention is whether the fact that Inspector Robbins was successful and, in the result, fully indemnified for costs by the State
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- means that he is unable to obtain a party and party order for payment of his costs by Mr Noye.
88 Very recently the Court of Appeal of NSW has again considered the issue of the indemnity principle in relation to a claim for an order for party and party costs in the case of Coshott v Woollahra Municipal Council [2008] NSWCA 176. There the court was constituted by Tobias and McColl JJA and Handley AJA. Under a judgment of the District Court of New South Wales Coshott was required to pay the costs of the Woollahra Municipal Council but the council had received a partial indemnity against those costs from a third party. Consequently, Mr Coshott asserted that the council was not entitled to an assessment of costs which would include that portion of costs which had been paid by the third party. His appeal failed and the court confirmed the order for costs which had been made. In a judgment agreed with by Tobias and McColl JA, Handley AJA said:
[11] The remaining point concerns the payments by Premsure [the third party]. The contractual arrangements between the members, by way of indemnity, may have been in the nature of insurance. But whether or not this was so is not critical. Its payments reduced the prima facie liability of the Council to pay that amount to its solicitors: Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495, at 501. A litigant, liable to its own solicitor for the costs of proceedings, who is indemnified in whole or in part for those proceedings, is entitled to recover his taxed or assessed costs for the benefit, in whole or in part, of the party providing that indemnity: Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203 CA. The principle extends to all indemnity arrangements whether or not they are in the nature of insurance.
[12] The Premsure deed does not give the group any contractual right to reimbursement from recoveries by a member in respect of amounts for which it has been indemnified by the group. However subrogation is an equitable right which does not depend upon a contractual entitlement: Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (1978) 141 CLR 335, 348; Lord Napier v Hunter [1993] A.C. 713. Premsure had a clear entitlement in equity to be subrogated to the Council's rights to recover costs from Mr Coshott once the Council had been reimbursed for its own expenditures.
89 In the contractual arrangements between the State and Inspector Robbins which provided for the State to pay his legal expenses of the defence of these proceedings, subject to conditions already described, there was no express term by which any rights in respect of costs
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- possessed by Inspector Robbins were, or might be, assigned to the State or by which the State was given a contractual right of subrogation to any or all such entitlements which Inspector Robbins himself might have. Hence the question arises as to whether or not the State is entitled to be subrogated. Alternatively, the question may be framed as whether any right which the State might have to recover costs against Inspector Robbins for so much of the advances as may be recoverable on a costs order against Noye, is a factor which gives Inspector Robbins a sufficient interest to seek an order for costs against Mr Noye on his own behalf. It was for this reason that the submissions from the parties extended to cover alleged rights of subrogation, restitution or the recovery from Inspector Robbins by the State of money which it had paid to his solicitors for his use.
Subrogation - Restitutionary Remedies
90 The submissions of the State are to the effect that it is not necessary for there to be contractual terms in the arrangement between the State and Inspector Robbins for the State to be subrogated to the alleged right to costs of Inspector Robbins because subrogation is an equitable incident of the indemnity given by the State for the defendant's legal expenses: Insurance Commission (WA) v Kightly [2005] WASCA 154; (2005) 30 WAR 380; and Boscawen v Bajwa [1996] 1 WLR 328, 355 - the latter case being an example of where the equitable remedy of subrogation arose outside the categories of insurance or trust. However, to an extent this begs the question by describing the arrangement between the State and Inspector Robbins as one involving the provision of an indemnity. The contrasting submission put for Inspector Robbins is that the payments made by the State were entirely voluntary without providing for a repayment obligation by Robbins, except in circumstances which have not arisen. The position of the State in this regard, in its written submissions, is:
[27] It was an inferred, alternatively implied, term of the agreement that, to the extent the defendant successfully recovered costs from the plaintiff he would reimburse the State. The inclusion of such a term was reasonable, obvious and necessary to give business efficacy to the agreement.
Further, such a term was an express term of the agreement at least in relation to any payments made by the State (through the Western Australian Police) after the defendant engaged his present solicitors (Hunt & Humphry):
- The terms of the letter from Hunt & Humphry were approved by the State, forwarded to the defendant at the State's request, and accepted by the defendant, who signed the letter …
- [29] The description of the payments made by the State of the defendant's legal bills as 'ex gratia' does not militate against the above conclusions. Whilst the payments themselves were 'ex gratia' in the sense that the State was not under any legal obligation to make any payments, the making of the payments were subject to binding contractual conditions as outlined above.
91 The submissions for the State in this regard proceeded further to assert:
[37] In circumstances where a person confers a benefit on another as a mere stranger or volunteer or an intermeddler equity does not recognise any equitable subrogation remedy: Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D. 234 at 241; Foskett v McKeown [2001] 1 AC 102 at 119 and 140; and Meagher, Heydon & Leeming, Meagher Gummow & Lehane's: EquityDoctrines & Remedies (4th ed) Butterworths (Sydney) 2002 at [9-010] and Goff & Jones The Law of Restitution (7th ed) Sweet & Maxwell (London) 2007 at [3-105].
Here, however, the State was not a mere stranger or volunteer or intermeddler. Rather, the State had an interest in the defence of the defendant and the defendant applied to the State for the benefit. The description of the payments as 'ex gratia' do not alter that characterisation.
93 The niceties of the common law rule that A's payment to C did not discharge B's liability to C unless it was authorised by B or ratified, as postulated by Goff & Jones at [3.106] is unravelled and explained by reference to the Roman law origins of the doctrine by Professor Peter Birks and Professor Jack Beatson in 'Unrequested Payment Of Another's
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- Debt' (1976) 92 LQR at 188. Among the conclusions of the authors to that article, at 211, is proposition 4:
A voluntary intervener has a right to be reimbursed by the debtor if the latter assents to his discharge, provided that that assent is given in the knowledge that the intervener did not intend to act gratuitously and is (as, subject to proposition 8, it always must be) material to the discharge.
Where the payment is made at the defendant's request, there will usually be a contract. If there is not, restitution lies unless it appears that the plaintiff intended to make a gift (see Heydon v Perpetual Executors Trustees & Agency Co (WA) Ltd (1930) 45 CLR 111). Similarly, if an unauthorised payment is adopted or ratified, a restitutionary claim lies: City Bank of Sydney v McLaughlin (1909) 9 CLR 615, 625 and Johnston v Arnaboldi [1990] 2 Qd R. 138.
95 City Bank of Sydney v McLaughlin (1909) 9 CLR 615 was later upheld and approved on appeal to the Privy Council: McLaughlin v The City Bank of Sydney (1914) 18 CLR 598. These authorities demonstrate that the onus of proving that the payment was not an absolute or unconditional gift lies on the party asserting that fact although that proof may sometimes be assisted by some presumptions.
96 The present case also involves the added complications that the payments for costs made by the State were not all, nor in all circumstances, regarded as recoverable. If Inspector Robbins were to fail in the action (without being found to have engaged in improper conduct) or not recover costs, in full or at all, there was to be no obligation upon him to repay the State any of the payments beyond those amounts (if any) which he actually recovered from the plaintiff. Accordingly, there was always the high probability that some of the payments made by the State would not be recoverable and, to that extent, that they were truly voluntary. Nevertheless, the contemplation that some measure of the advances would be repayable in the event of a costs order being made in favour of Inspector Robbins and being successfully enforced puts that component of the advances (admittedly incapable of quantification in advance) in a different category.
97 While it is true that there are no comprehensive terms in the contractual arrangements between the State and Inspector Robbins dealing
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- with the situation which has presently arisen, it is clear that the arrangement was not entirely gratuitous and that the State was not a mere volunteer. The arrangements for repayment or cessation of advances in certain circumstances, none of which arose, all have the clearest implication that the payments made by the State, so long as the assumptions about the propriety of Inspector Robbins' conduct were not displaced, were in the advancement of a common interest of the State and of Robbins, namely of allowing for a proper legal defence of police officers sued for matters arising out of the performance of their official duties.
98 Accepting, as I do, the evidence of Mr McKenna in his affidavit to the effect that he orally conveyed to Inspector Robbins, and the latter accepted, the explanation provided by Mr O'Sullivan of the State Solicitor's Office that costs would be payable to the State in the event of a successful outcome, then indeed there is a contractual basis for a relationship of indemnity so that, in accordance with the authorities discussed, there is a clear entitlement for Robbins to obtain a party and party costs order even though that would, in practical terms, be almost entirely for the benefit of the State. However, even if it were not sufficiently clear that there was an express or implied term in the arrangement between Inspector Robbins and the State, negotiated via Mr McKenna, that in the eventuality which has happened Inspector Robbins would be expected to repay to the State so much of the costs paid to his solicitors as he could recover on a party and party order for taxed costs against Noye, the situation is nevertheless plain that Robbins always accepted the benefit of the payments to his solicitors made by the State. He was willing to accept the imposition of all the terms stipulated by the State in relation to the payments, and ratified the payments as discharging his personal liability to his solicitors for costs as they were progressively rendered during the retainer.
99 That is sufficient to give rise to an entitlement to a restitutionary claim by the State and demonstrates that the advances made by the State to Inspector Robbins' solicitors were not voluntary or gratuitous in any sense which would deprive Inspector Robbins of an entitlement to an order for party and party costs.
100 I appreciate that the extent of this analysis goes further than the State's primary submission about what is necessary to recognise an entitlement by Inspector Robbins to an order for taxed costs based on no more than the principle in Adams v London Improved Motor Coach Builders Ltd. Nevertheless, I prefer to take the approach to Adams' case
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- adopted by French J in Angor Pty Ltd v Ilich Motor Co that notwithstanding that there once was a liability by the client to pay his solicitors' costs, if that liability has been discharged by a third person, then the entitlement by the client to an order for party and party costs would depend on the continuation of some potential by the party to meet that liability to the solicitors, even if only remote, or indirectly when there is a potential liability to the party making the payment under some form of restitutionary claim. The State did not in this present case attempt to assert a claim for costs itself in the name of Inspector Robbins by right of subrogation but may have been entitled to do so.
101 In the circumstances, therefore, I consider that Inspector Robbins is entitled to an unconditional costs order against Mr Noye in the terms of the orders for costs which I made originally on 29 January 2008.
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