Palmos v Pravlik (No 3)
[2021] VSC 5
•22 January 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
COSTS COURT LIST
S ECI 2019 01099
| ELLIS PALMOS | Applicant |
| v | |
| ZUZANA PRAVLIK | Respondent |
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JUDICIAL REGISTRAR: | Gourlay JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 November 2020 |
DATE OF JUDGMENT: | 22 January 2021 |
CASE MAY BE CITED AS: | Palmos v Pravlik (No 3) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 5 |
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LEGAL COSTS – Costs of proceeding – The application of s 204(2) of the Legal Profession Uniform Law (the LPUL) or r 63.85 of the Supreme Court (General Civil Procedure) Rules 2015 (the SCR) – Issue of reduction of bill of costs and calculation of 15% reduction to invoke costs rules – The application of r 26 of the SCR as modified by r 63.26 to any costs order as a result of the applicant’s offers of compromise.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Ms S Cherry | Paul Linsdell & Associates |
| For the Respondent | Mr D Williams SC | The Australian Legal Costing Group |
JUDICIAL REGISTRARL
These reasons concern the making of an order for the costs of the proceeding. On 30 September 2020 the parties were ordered to file and serve submissions addressing the question of the orders that should be made in respect of the costs of the proceeding by 5 November 2020. The respondent sought to extend that date to 10 November 2020, with the applicant’s consent. On 10 November 2020 both parties complied with the order. The respondent also filed an affidavit of Ms Dealehr sworn on 10 November 2020 and 73 pages of exhibits. On 16 November 2020 in response to the applicant’s submissions seeking orders for costs pursuant to sections 28 and 29 of the Civil Procedure Act (CPA), affidavits of the respondent and a further affidavit of Ms Dealehr were filed. The costs issues were heard on 17 November 2020.
The bill of costs of the applicant has been taxed in the sum of $381,256.22 and the parties argued the following questions:
(a) the application of Section 204(2) of the Legal Profession Uniform Law (the LPUL) or Rule 63.85 of the Supreme Court (General Civil Procedure) Rules 2015 (the SCR) to the amount allowed for taxed costs and whether the taxed sum was a reduction of 15% or more of the amount claimed in the bill (in these reasons referred to as the 15% rule).
(b) the application of Rule 26 of the SCR as modified by Rule 63.26 to any costs order as a result of the applicant’s Offers of Compromise made on 1 May 2020 or alternatively on 1 June 2020 on any costs order to be made; and
(c) whether the respondent’s conduct of the proceedings breached her overarching obligations of the CPA and if so found whether the court should make orders pursuant to sections 28 and 29 of the CPA.
The proceeding
The proceeding was issued on 14 March 2019 by the law firm applicant. Following issue the applicant encountered some difficulties serving the initiating documents and orders for substituted service were made on 22 May 2019 for service of the Summons for Taxation, bill of costs and an order made on 24 October 2017. These orders required the applicant to effect service of the bill of costs by 28 May 2019. The 22 May 2019 order also required the respondent to file and serve a Notice of Objections by 28 June 2019 and that the Costs Court would conduct an assessment of the costs payable to the applicant pursuant to Order 63.88 of the Rules. In my view, despite both parties seeking to impugn each other’s conduct in respect of these orders, nothing turns on the applicant’s initial difficulties in effecting service of the summons and bill of costs.
On 26 June 2019, the respondent’s solicitor emailed my Associate as follows:
I have been engaged as costs lawyer for Zuzana Pravlik today. I have filed this afternoon a Notice of Appearance with Redcrest which I will shortly serve on the Applicant and its costs lawyers, Blackstone Legal Costing.
I refer to the orders of Judicial Registrar Gourlay made 22 May 2019 wherein the Respondent has been ordered to prepare Notice of Objections by 28 June 2019 and the matter be listed for assessment in chambers.
The Respondent seeks to be heard on having the matter listed for taxation rather than assessment in chambers and also seeks an extension of time for provision of Notice of Objections given the size of the bill of costs (1491 items totaling (sic) $553,011.06.
Accordingly the Respondent requests that the matter be listed for a directions hearing as a matter of urgency so that appropriate orders might be obtained.
After receipt of this email the parties submitted consent orders agreeing timetabling of steps to file and serve costs agreements and costs disclosures, allowing the respondent’s solicitor to inspect the applicant’s files and listing the matter for a mediation on 7 August 2019 after the respondent had filed a General Notice of Objections to the bill of costs. This mediation was conducted, but failed to resolve any of the issues in dispute between the parties.
As the mediation failed to settle the proceeding, orders were made on 28 August 2019 by a costs registrar, adding three additional respondents to the proceeding. The added respondents were KCI Lawyers, Mr Terry Casey QC and Mr Dugald McWilliams of Counsel (‘Counsel’). It was also ordered that the items numbered 1-21 were to be withdrawn from the bill. Further orders were made for the exchange of affidavits and submissions prior to a preliminary hearing listed for 25 October 2019. The main question addressed at the preliminary hearing was whether the applicant and Counsel had failed to give the respondent the required costs disclosure and had failed to update costs disclosures as required by Division 3 of Part 4.3 of the LPUL. This issue is addressed in my reasons delivered on 20 March 2020[1]. On 29 March 2020 orders were made listing the taxation of the bill of costs, for the filing of a detailed Notice of Objections and for the applicant to provide the respondent and the Court documents from the file in an electronic form to enable taxation of the bill to be conducted by Zoom. This was a consequence of the coronavirus (COVID-19) requiring the Court to change from in Court hearings to remote hearings.
[1][2020] VSC 112.
The taxation was heard by Zoom on 11 and 12 June 2020 and 29 and 30 September 2020 and the applicant’s costs and disbursements were allowed in the sum of $381,256.22.
The taxation had been listed for hearing on 2 and 3 July 2020. However, on 2 July 2020 the respondent sought that I recuse myself from further hearing the taxation and that application was listed for hearing on 7 August 2020. The respondent abandoned the recusal application a few days before it was listed to be heard.
This costs review is made pursuant to Division 7 of Part 4.3 of the LPUL. It was commenced by the applicant seeking payment of its legal costs for acting for the respondent in her Supreme Court proceeding claiming damages for injuries she suffered as a result of an assault by a fellow employee at her workplace. The applicant was the third firm of solicitors engaged by the respondent and acted from 7 February 2017 until 1 March 2018 or thereabouts. The applicant undertook all trial preparation, instructed at the trial and acting to recover party party costs from the defendant in that proceeding. The proceeding was resolved at a mediation held on the second day of the trial and with the respondent receiving payment of substantial damages and her party party costs. Those costs were settled at a mediation attended by the respondent, Mr Palmos of the applicant and a costs consultant. Since the payment of the party party costs the parties have been unable to agree on an amount to be paid for any solicitor and client costs in addition to the party party costs paid. The inter-partes legal costs were paid to the applicant and have been held the applicant’s trust account since early 2018[2]. At the time of the issue of this proceeding the applicant had not been paid any costs for the work undertaken.
[2]Some amount have been paid out to Counsel in respect of the fees certified by the trial judge.
Section 134AB of the Accident Compensation Act requires an order of the Court for the payment of legal costs to the applicant law firm from the damages received by the respondent. The respondent failed to give instructions to allow the applicant to apply to the trial judge for the usual order for payment of an agreed amount so the applicant commenced the review of the legal costs pursuant to section 198 of the LPUL.
The bill of costs
The bill filed by the applicant was prepared based on the bill prepared to claim the respondent’s party party costs. It was necessary for the party party bill to include all the work undertaken by two earlier legal practitioners from 29 July 2014 until the end of 2016.[3] This work totalled $99,249.69. The party party bill had 1390 items of work which totalled $412,521.40. The bill claimed the solicitors’ professional costs of $215,069.02 and disbursements of $197,452.38.
[3]Items 1 -414 of the party party bill dated 18 December 2017.
The solicitor client bill has 1491 items and totalled $553,011.06. This is divided between the claim for the applicant’s legal costs of $286,591.00 and disbursements of $266,420.06. Somewhat perversely and without any explanation the first 414 items from the party party bill have been included in the applicant’s solicitor and client bill of costs and includes a five additional items. The first 419 items total $99,835.94. No explanation for the variation in the number of items or the different amounts claimed was provided to the respondent or the Court. I have no doubt that the failure to explain the basis for the preparation of the bill of costs contributed to the respondent’s response to the bill and her conduct of the costs review.
In my view increased amounts in the solicitor client bill arise from the different amounts claimed for disbursements particularly the fees of counsel are claimed as marked rather than at the rates certified by Judge Cavanough on 24 October 2017. The bill also includes a 25% uplift fee on professional costs 25% of $33,030.62 based on the conditional costs agreement signed by the respondent on 27 April 2017 and a charged of GST of 10%, in the sum of $16,515.31, on the scale items in the professional costs in the bill.[4] Both these sums apply to work undertaken from the date of signing of the costs agreement.
[4]The supreme Court scale of costs is GST exclusive therefore GST is added on solicitor client costs.
It is regrettable that the solicitor client bill failed to underline or otherwise identify any additions to or alterations of the earlier bill. This failure caused the respondent considerable alarm and resulted in continuing, although in my view unnecessary complaints, submissions and applications by her solicitor about the amounts claimed by the applicant and the applicant’s entitlement to claim or recover any of the legal costs included in items 1 – 419 which resulted in wasted time in the taxation hearings.
The applicant’s summons for taxation seeks a review of the costs which are payable to the Applicant by the Respondent pursuant to the bill of costs herewith[5] and items 1 – 419 were never payable to the applicant and therefore they were not the subject of the review.In the reasons delivered on 20 March 2020[6], I ruled that items 1 – 419 were never payable by the respondent to the applicant and relied on Section 17D(3) of the Supreme Court Act 2015[7], to order on 29 March 2020 that:
1.Items 1 – 419 of the bill of costs are not the subject of the review and are not to be treated as taxed off for the purpose of section 204 (2)(c) of the Uniform Law;
[5]Applicant’s summons for taxation filed on 14 March 2019.
[6]Ellis Palmos v Pravlik [2020] VSC 112
[7]Section 17D (3) states that: (3) The Costs Court must exercise its jurisdiction with as little formality and technicality, and with as much expedition, as the requirements of this Act, the Rules and the proper consideration of the matters before the Court permit.
The bill of costs as filed claimed a total of $553,011.06. After deducting items 1 – 419 the amount of solicitor client costs claimed by the applicant was $448,225.12. Items 1 – 419 total $99,835.94 and Items 1488-1489 claimed at $4,950.00 were all struck out of the bill.[8]
[8]These items relate to the costs of the respondent’s accountant Mr E. Townsend which were paid by the respondent directly.
In its submissions seeking costs orders the applicant argued that item 1483 should be reduced by $9,874.90 as this amount was included in error. That sum was the calculation of the loading claimed for items 1 – 419 (the previous solicitors costs). If this amount was struck-out the applicant’s total sum of costs was $438,350.90. The applicant submitted that that amount of $438,350.90 was the sum claimed that should be the basis of any calculation for the purpose of calculating whether the amount of the reduction of the applicant’s costs had been reduced by 15% or more.
At the conclusion of the taxation of costs the applicant’s legal costs from item 420 to item 1483 reduced by $57,094.68 to $381,256.22.
Submissions on the question of the orders for costs of the proceeding
The parties disagree about the reduction made to Item 1483. That item is the usual claim for a loading for care skill and attention[9]. The amount claimed was $30,918.92 and the amount allowed was $15,900, therefore $15,000 was taxed off the item. The issue of how much of the taxed off sum related to the claim for a loading on items 1 – 419 was not addressed by either party prior to my ruling on 30 September 2020 reducing the item. Item 1483 states that it is a claim for a Loading for skill, care and attention on work undertaken on the sum of 15%of $206,126.15 and claimed in the amount of $30,918.92. The sum of $206,126.15 is the total claimed for all professional costs items in the whole of the bill including items 1 – 419.[10]
[9]Item 17 of the Supreme Court scale allows an additional loading to be added to reflect the skill care and attention of the solicitor in conducting the litigation.
[10]The way that this claim was made is further evidence of the poor drafting of the bill of costs and the apparent lack of consideration given by the drafters to the proper claim for the applicant’s cost and disbursements.
At the conclusion of the taxation and whilst calculating the total amount to be allowed, the parties agreed that the professional costs items from items 420 to item 1482 totalled $140,298.05. Following the reduction of taxed off and struck out items the total allowed for the applicant’s professional costs was agreed at $106,024.10. This was sum used to calculate the item 17 loading. The bill claimed this loading at 15%.[11] Both parties submissions addressed the amount to be allowed using this figure. Neither party addressed the issue of whether any part of the reduced (taxed off) amount should be ‘struck out’ of item 1483 as an amount claimed in item 1483 as loading on the professional costs items included in items 1 – 419.
[11]The same 15% loading was also claimed in the party party bill.
The respondent’s argument addressing the amount to be allowed for a loading focussed on the criteria to be considered by the Court in making an allowance of a discretionary item in the bill as set out in Order 63.48.[12] It was her position that the solicitor’s conduct of the proceeding did not exhibit the required skill, care and attention that would warrant any loading at all considering the factors referred to in Order 63.48 of the Rules[13] and item 17. The respondent submitted that all the hard work in the Supreme Court proceeding had been undertaken by the previous solicitors. They had successfully obtained a Serious Injury Certificate, issued the Writ, obtained all necessary treating and consultant medical reports, all discoverable documents, including the defendant’s documents and reports and conducted a mediation prior to the trial.[14] The respondent also submitted that the applicant relied entirely on counsel for the carriage of the action.[15] She submitted that at least 25% of the amount allowed was in respect of the claims for the perusal of documents and that in Ms Dealehr’s opinion this work had not been undertaken properly or at all and so no loading should be allowed in addition to the sums allowed for perusals. In addition, the respondent submitted that the solicitor’s time claimed for attending conferences and instructing in court should not be considered in the calculation for a loading as both counsel were also present during the hearing and at all conferences. The conclusion of the respondent’s solicitor was that:
In those circumstances, we consider that the solicitor, at $106,000, has been well remunerated, and we would say for the reasons of the failures – and we’d say there are matters you can take into account, the costs orders, the delays in doing things, and the heavy reliance on counsel which have been effectively allowed in full – that no further allowances ought to be allowed.
So we would be saying no additional allowances, because already from the work done, sufficient allowances have been allowed. So unless the court has some queries, that is my submission.[16]
[12] 63.48 Discretionary costs
[13]Transcript p255 l 21-25 and also referred to in item 17 of the scale of costs.
[14]Transcript p255 l 27 to p256 l2.
[15]Transcript p256 lines 13-31.
[16]Transcript p263 line 24 – p26 line 3.
In reply the applicant submitted that:
The scale specifically contemplates, in addition to scale items, the solicitor is to be rewarded loading which reflects the level of skill, the difficulty of the issues, the complexity, and also the quantum of the claim.
So this is a matter where the previous offer that was put of approximately $500,000 was increased to $1.1 7 million plus costs. The defendants made no further offers in between the two. There was no alternative, other than to prepare this matter for hearing, and it was – in fact, did proceed to hearing. [17]
[17]Transcript p265 lines 1 – 11.
I taxed $15,000 off item 1483 and allowed $15,900. As to the issue of whether all or part of the reduction had been struck out, as opposed to taxed off, I did not make a finding either way as this issue was not addressed by either party. I do not consider that this issue needs to be addressed further. If the issue of the designation of the reduction had been raised, it is likely that I would have increased the amount that I allowed for item 1483 as I consider that, as I said when ruling on the issue on 30 September 2020, that:
... the solicitor was put in a difficult position of taking on a claim which had just been adjourned because solicitors were no longer retained, and received a large amount of file and material from the previous two solicitors.
The solicitor’s conduct, I think, has been beyond any reproach in that he has prepared the matter for trial, obtained updated medical reports, and subpoenaed all the necessary witnesses, liaised with all the necessary lay witnesses in order to have them agree to come to court, although they were subpoenaed, and has briefed competent counsel to handle the matter effectively.
I see no reason not to allow a 15 per cent loading in this matter. The loading is not an unusually high loading; it is not an unusually low loading. The fact that there are large numbers of perusals is more a product of the fact that the file came at the stage that it came and required a great deal of work for the solicitor to get under control.
In my view, a solicitor taking over a file from another solicitor or two previous solicitors, in fact, has a much harder job to do than somebody who is instructed initially and able to grow the case in the usual manner, so I will allow a 15 per cent loading.[18]
[18]Transcript p269 lines 15 -31 and p270 lines 1- 8
The application of the 15% rule to the amount of taxed costs
By reason of my findings that the applicant has not breached its costs disclosure obligations and that the conditional Costs Agreement was not void,[19] section 204 (2) (a) and (b) do not apply to the costs of this proceeding. That section states that:
[19]Ellis Palmos v Pravlik [2020] VSC 112 .
Costs of costs assessment
(1)Without affecting the powers of a court or tribunal to award costs in relation to a costs assessment, a costs assessor is, subject to this section, to determine the costs of a costs assessment and by whom they are payable.
(2)Unless the costs assessor believes that in all the circumstances it is not fair and reasonable for the costs to be paid otherwise, the costs of a costs assessment are payable by a law practice if—
(a)the law practice has failed to disclose a matter required to be disclosed by Division 3; or
(b)the law practice has failed to disclose a matter required to be disclosed in the manner required by Division 3; or
(c)the law practice’s costs have been reduced by 15% or more on assessment. the issue of the applicant’s costs. (‘the 15% rule’)
By reason of Section 204(2)(c) the applicant is only required to pay the respondent’s costs of the proceeding if the law practice’s costs have been reduced by 15% or more or if I exercise my discretion to otherwise order if I found that it was not ‘fair and reasonable’ for that the respondent to bear the applicant’s costs in whole or in part. Both parties addressed the application of the 15% rule. The applicant submitted that the law practice’s costs were not, even on the worst case scenario, reduced by 15% or more. The issue turned on each parties having calculations for the base costs to which the percentage reduction should be calculated, in particular what ruling was made on the reduction to item 1483, which is discussed in paragraphs 12-23 above. The applicant’s written submission states that:
14.A total of $438,350.90 was claimed by the Applicant and subject to taxation.
15.Of that amount, costs of $381,256.22 have been taxed and allowed, representing 86.98%. A total of 13.02% has been taxed off.
16.For the avoidance of doubt, even if the loading attributable to previous solicitors was not treated as struck out despite this Court’s previous rulings, the total taxed off would still be less than 15%. Allowed costs of $381,256.22 represent 85.06% of $448,225.12.
In response the respondent submitted that:
3.A very substantial reduction has been achieved in the sum payable compared to that which was set out in the bill. That is so, regardless of how one views the various means by which the bill has been reduced, viz.
(a)Reduction of $99,835.94 ($34,007.84 in disbursements and $65,828.10 in charges) by striking off items 1-419, being costs and disbursements covering the period when prior firms were acting;
(b)Reduction of a further $4,950 by striking off the Townsend invoices (items 1488 and 1489), on the basis that although claimed as disbursements on the bill they were not paid nor payable by the Applicant and hence not recoverable as disbursements;
(c)Reduction of a further $66,968.90 by taxing off or taxing down various items of work and disbursements.
In the result, a total of $381,256.22 has been allowed as costs and disbursements, out of a bill of costs that totalled $553,011.06 as originally presented in this proceeding, and which still totalled $453,175.12 after items 1 - 419 were struck off. This is a reduction of 31.1% from the initial bill, and 15.9% from the bill excluding items 1 - 419. [20]
[20]Respondent’s written submission dated 10 November 2020. In oral submissions the respondent conceded that the percentage was 14.94%
The respondent relied on the reduction of the whole bill submitting that no order had been made that the reduction of items 1 – 419 would count for the purpose of the application of the 15% rule and as the language of section 204 was sufficiently wide to include any reduction from a bill when considered the calculation amount for the purpose of calculating the 15% reduction of the solicitor’s costs. The client was within her rights to challenge the bill as served and the served bill has been reduced by more than 15%. The applicant’s conduct including in the bill items of costs that were not payable to it by the respondent is sufficient to prevent the applicant disavowing the claim for the larger amount and relying on ‘struck out’ amounts to avoid the sanction of paying the respondent’s costs.
In oral submissions the respondent submitted that if the Court accepts that all the ‘struck out’ amounts are not to be considered in the base figure to be used in the application of the 15% rule then the reduction of 14.94% was achieved by the respondent and the Court should exercise its discretion to award the respondent most if not all of her costs of this proceeding.[21] The respondent submitted that section 204(2)(c) had been engaged and that the court should include the ‘struck out’ items in the total for application of the 15% rule.
[21]Respondent’s written submission paragraph 4(f).
Both section 204[22] and order 63.85 use similar language when providing for a penalty to be applied if a bill of cost has been reduced by 15% or more. However the penalties to be applied is such a reduction is achieved are different. Order 63.85 states that:
If the amount of the professional charges and disbursements in any bill of costs (including a bill of costs payable out of a fund) is reduced by 15 per cent or more, unless the Costs Court otherwise orders, no costs shall be allowed to the solicitor filing the bill for taxation for preparing the bill and for attending the taxation. [23]
[22]See paragraph 24 above.
[23]Emphasis added.
Order 63.85, if applied, disallows the costs of the solicitor for preparing the bill of costs and attending the taxation, but does allow all other costs of the taxation, unless the Court orders otherwise.[24] This contrasts with section 204(2)(c) which provides that where there has not been a breach of the costs disclosures requirements the solicitor should be paid the costs of the costs review unless the costs are reduced by 15% or more or if the Court decided to exercise its discretion to order that the solicitor pay the clients costs on the basis that it was fair and reasonable to do so.
[24]In a solicitor client costs review the solicitor does not generally claim the costs of preparation (drawing and engrossing) the bill of costs.
On 29 March 2020, after the delivery of my first reasons on the issue of the respondent’s application for declarations that the costs agreement was void due to alleged failures to disclose I ordered that Items 1 – 419 of the bill of costs are not the subject of the review and are not to be treated as taxed off for the purpose of section 204(2)(c) of the Uniform Law. The applicant submitted that that order should also include part of the reduction to item 1483 relating to the loading claimed for the work in items 1 – 419. In addition items 1488 and 1489 should be treated in the same manner and not treated as taxed off for the purpose of section 204(2)(c). In my view, it is not necessary to consider this issue as both parties agreed at the hearing that the bill of costs was not reduced by 15% or more even on the worst case scenario. Therefore, prima facie, the applicant is entitled to an order that the respondent pay its costs of the proceeding.
The effect of Offers of Compromise made by the applicant on 1 May 2020 and 1 June 2020.
Even if I am wrong in respect of the application of the 15% rule the applicant submitted that it was fair and reasonable to order the respondent pay costs as the respondent had unreasonably failed to accept either of two offers of compromise made by the applicant. The 1 May 2020 offer states:
TAKE NOTICE that the abovenamed Applicant hereby serves pursuant to Part 36(3) of Order 63 and Order 26 of the Supreme Court Rules an Offer of Compromise in the sum of $355,115.00 in relation to the Applicant acting for the Respondent in her WorkCover common law damages claim (proceeding S CI 2014 04367). This offer is inclusive of costs of this proceeding save for the costs of and incidental to the Respondent’s preliminary application which the Respondent is to pay to the Applicant in addition to the $355,115.00, pursuant to Orders 2 and 3 of the Order of Judicial Registrar Gourlay dated 29 March 2020. This offer remains open to be accepted until the expiration of 7 days after receipt of this notice.
The 1 June 2020 offer repeats the 1 May 2020 offer. Both offers were accompanied by a letter of explanation of the method of calculation of the sum offered and stated the offer is made as a Calderbank[25] offer in addition to the Offers of Compromise. Each letter is headed without prejudice, as save to costs. The offers required the respondent to pay the applicant the sum of $350,000, in addition to the sum of $5,115.00 previously invoiced and paid, for the solicitor client costs. That sum also included the costs of the proceeding. The letter of explanation stated that the offered sum amounted to a reduction of more than 20% of the costs payable by the applicant as claimed in the bill of costs and was calculated as follows:
[25]Calderbank v Calderbank [1975] 3 All ER 333, and Cutts v Head [1984] 1 All ER 597 as adopted by the Supreme Court of Victoria in Mutual Community Ltd v Lorden Holdings Pty Ltd (28 April 1993, unreported) and John Holland Constructions & Engineering Pty Ltd v Majorca Projects Pty Ltd & Anor (1 November 1997, unreported).
Offer
Total costs and disbursements to be paid to the Applicant $355,115.00
Less invoice 21 April 2017 (paid) ($5,115.00)
Sub-total $350,000.00
Less amounts paid to Counsel to date ($132,000.00)
Sub-total $218,000.00
Less interim costs order ($120,000.00)
Total additional costs payable to the Applicant $98,000.00
The Applicant currently holds the sum of $239,893.20 in trust. If the offer is accepted by your client, this results in:
Trust Balance
Amount currently held in trust $239,893.20
Less interim costs order payment ($120,000.00)
Sub-total $119,893.20
Less additional amount payable to the Applicant pursuant to the offer ($98,000.00)
Amount remaining in trust $21,893.20
As shown, if your client accepts the offer it will leave a total of $21,893.20 in the Applicant’s trust account, which would be payable to your client subject to costs of the preliminary application.
The letter of explanation that accompanied the 1 June 2020 offer of compromise has added to it an additional statement that the applicant would pay from the monies received any fees owing to Counsel and that the respondent would have no further liability to pay either counsel any further sum.
As is evident from the continuation of the taxation of the bill of costs the respondent did not accept either offer. The respondent submitted that it was reasonable not to have accepted either of the Offers of Compromise or the Calderbank offers. The reasons for not accepting the offers were outlined in her written submissions dated 10 November 2020 and in oral submissions. It was submitted[26] that the offers were unclear and incapable of acceptance as:
[26]Affidavit of Cate Dealehr sworn 10 November 2020 at paragraph 12.
(a) the offers each reduced the applicant’s solicitor client costs by at least 20%. Therefore the respondent submitted that she should have been paid her costs by reason of the 15% rule. These costs were calculated to be $47,609.10 up to 1 June 2020;[27]
[27]Affidavit of Cate Dealehr sworn 10 November 2020 Exhibit “CMD-5” and paragraphs 10 and 11.
(b) the offers each acknowledged the payment of $5,115.00 by the respondent in respect of the first, fixed, costs agreement. However, the respondent submitted that she had, in fact, paid a further sum of $12,109.47 in respect of disbursements and this payment was not taken into account in the sum offered.[28] The failure to acknowledge these payments created a degree of uncertainty for the respondent that prevented acceptance of the offers;
[28]It is unclear if these disbursements are included in the bill of costs.
(c) the applicant’s costs lawyer declined to explain the basis of the offer when requested to by Ms Dealehr by telephone on 4 May 2020;
(d) the respondent could not assess the likely outcome of the costs review at the time of the 1 May 2020 offer as, it was submitted that, Ms Dealehr needed to further inspect the applicant’s file and prepare a detailed Notice of Objection. Only then would she be able to advise on the likelihood of the offers being successful. That further inspection was undertaken on 11 May 2020 and the notice was filed and served on 29 May 2020. However, the 1 June 2020 offer was not accepted;
(e) in Ms Dealehr’s swears that her advice to her client was that substantial objections were likely to be made to the items in the bills on the basis of the items objected to and these objections remained un-argued. Further, she advised that it was possible that bill could be reduced by in excess of $80,000 and that the Court’s likely approach to the objections was unknown;[29]
(f) the respondent was advised by Ms Dealehr that the applicant did not act for the two Counsel who had been added as parties to the costs review[30] Therefore, in respect the applicant’s confirmation in the 1 June 2020 offer that it would pay all counsel’s fees, no explanation was given about what agreement had been made with Counsel to pay the fees and whether the fees would be paid as marked or for some other amount; and
(g) the respondent was advised by Ms Dealehr that the sum the applicant offered to accept was a reduction of about 20% of the amount claimed in the bill. This was clear evidence that the applicant was seeking to over-charge and as a consequence of the over-charging the respondent was entitled to payment of her costs of the proceeding.
[29]Affidavit of Cate Dealehr sworn 10 November 2020 at paragraph 20.
[30]Counsel were added as parties to the proceeding by the order of 28 August 2019 following the unsuccessful Mediation. Counsel did not generally participate in the hearing and agreed to abide by the decision of the Court.
The respondent submitted that Order 26 should not be interpreted in favour of the applicant and that the Court should not order that the respondent pay indemnity costs of the proceedings from two business days after the date of service of either offer. It was submitted that LPUL costs reviews do not neatly fit into the Order 26 costs regime. Order 63.36(3) provides that Order 26 can be necessarily modified when applied to offers of compromise in the Costs Court. The power to make necessary modifications of Order 26 reflects that the Costs Court has different practices compared to general litigation in the Supreme Court. Therefore, Order 63.36(3) should be modified to regard the applicant as the ‘defendant’ within the meaning of Order 26 because, but for the offer, there has been a substantial reduction in the sum payable to the applicant and it is fair and reasonable for the Court to order that the applicant pay the respondent’s costs in any event.[31]
[31]Respondent’s submission paragraph 6(d).
The applicant sought orders for costs pursuant to O26.08(2)(b) that the respondent pay the applicant’s costs of the proceeding including reserved costs on a standard basis up to 3 May 2020 and thereafter on an indemnity basis. The applicant submitted that each offer made was a reasonable attempt to resolve the proceedings prior to the commencement of the taxation and each offer was capable of acceptance. In respect of the respondent’s submission that the offers were unclear and that the applicant has failed to explain the offers when requested in a telephone conversation on 4 May 2020 it is clear that the respondent’s solicitor did not write to seek clarification of the 1 May 2020 offer or to outline the issue said to exist in respect of other payments made by the respondent for disbursements. Such a step would have been a responsible step to take in the circumstances. In addition, the respondent’s solicitor as a very experienced costs lawyer was capable of assessing the likely outcome of the costs review and to advise the respondent, on a commercial basis, of the substance of the offer.
Both offers were made on a commercial basis and settlement at the time the offers were made would have relieved the parties of the time and substantial cost incurred. Each offer was reasonable and should have received serious consideration by the respondent. The respondent should not have refused the offers on the basis that she had a liability to pay counsel, in addition to the amount of the offer, as at all times the liability to pay counsel remained with the applicant.
In this matter the parties had participated in a mediation on 7 August 2019. By attending a mediation it is reasonable to expected that the parties are in a position to resolve the proceeding. Therefore in order to appear at the mediation Ms Dealehr had inspected the applicant’s file on 15 July 2019 and 18 July 2019[32] and had prepared a general list of objections for filing prior to the mediation which was conducted on 7 August 2020. It is not unreasonable to expect that she would have turned her mind to settlement figures at that time. As the matter did not settle there followed a contested hearing on the respondent’s preliminary issues which resulted in findings in favour of the applicant.[33] It is reasonable to expect that the respondent should have considered the reasonableness of the offers. In these circumstances I conclude that by the time the offers were made the respondent was able to be advised of the likely outcome of the taxation of the bill. The offer made is more than $30,000 less than the taxed sum and was made on the basis that it included the applicant’s cost of the proceeding. As such, I consider that the applicant has done better on taxation than the sum it offered by it to accept and it is reasonable to order that the respondent pay the applicant’s costs.
[32]Affidavit of Cate Dealehr sworn 10 November 2020 exhibit “CMD-5”
[33]The respondent has, in the course of the taxations, made it abundantly clear that she does not accept most of the findings made in my first reasons that the applicant’s costs agreements and costs disclosures were properly given and that neither the applicant or Counsel breached their disclosure obligations under the LPUL.
The submission is made by the respondent that as she had attained a substantial reduction to the bill of costs, particularly as the bill incorrectly included the costs of items 1-419, that but for the offer, the applicant would have been ordered to pay the costs of the proceeding:
That is because, but for the offer, the likely outcome of a taxation with as significant a reduction as in this proceeding is that the Applicant would be paying the Respondent’s costs. Hence, even if either or both of the Applicant’s offers is to be rewarded in this proceeding, either by “necessary modification” per Rule 63.36(3), or alternatively by the Court ‘otherwise order[ing]’, it should only be as if it were a “successful” offer of compromise by a defendant. In other words, Rule 26.08(3) would apply, as if the Applicant was the ‘defendant’ and the respondent was the ‘plaintiff’. [34]
[34]Respondent’s written submission paragraph 7(d).
The respondent submitted that I should therefore order a ‘necessary modification’ of order 26 and treat the applicant as a successful defendant pursuant to Order 26.08 (3) and order that:
(a)the respondent shall be entitled to an order against the applicant for the respondent’s costs in respect of the claim until 11.00 a.m. on the second business day after the offer was made, taxed on the ordinarily applicable basis; and
(b)the applicant shall be entitled to an order against the respondent in respect of the applicant’s costs after the time referred to in paragraph (a) taxed on an indemnity basis.
This argument refers to the bill of costs being substantially reduced and that, even though it was not reduced by 15%, it is fair and reasonable to otherwise order that the applicant pay at least a portion of the respondent’s costs as there had been a substantial reduction and also the applicant should not be rewarded for filing the bill in its present form. In my view each of the offers of compromise were capable of acceptance and the respondent, if properly advised by 1 June 2020, was in a position to understand that on a commercial basis the offer made was a generous reduction of the applicant’s legal costs. I see no reason not to apply order 26.08 (2) (b).
In respect of the applicant’s submissions that the respondent’s conduct of the proceeding was unreasonable, inappropriate and obstructive[35] and was a breach of the respondent’s overarching obligations pursuant to sections 18, 20, 22, 23, 24, and 25 of the Civil Procedure Act . In view of my reasons little is to be gained in considering these submissions.
[35] Applicant’s written submissions paragraphs 20 – 49.
I will make the following orders in respect of the costs of the proceeding:
The respondent pay the applicant’s costs of the proceeding, including reserved costs –
(a) up to 11.00am on 3 June 2020 on a standard basis
(b) thereafter on an indemnity basis; and
(c) the costs are to be taxed in default of agreement.
The parties are to confer and provide the Court with a draft of the orders sought in respect of Section 134AB of the Accident Compensation Act, orders relating to payment from the monies held in trust and any other orders required.
(1)Except where these Rules or any order of the Court otherwise provides, the fees and allowances which are discretionary that are referred to in Appendix A shall be allowed at the discretion of the Costs Court.
(2) In exercising the discretion under paragraph (1), the Costs Court shall have regard to—
(a) the complexity of the matter;
(b) the difficulty or novelty of the questions involved in the matter;
(c)the skill, specialised knowledge and responsibility involved and the time and labour expended by the legal practitioner;
(d)the number and importance of the documents prepared and perused, regardless of length;
(e) the amount or value of money or property involved;
(f) research and consideration of questions of law and fact;
(g)the general care and conduct of the legal practitioner, having regard to the instructions and all relevant circumstances;
(h) the time within which the work was required to be done;
(i) allowances otherwise made in accordance with the scale in Appendix A;
(j) any other relevant matter.
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