Port Stephens Council v Theodorakakis (No 2)

NEW SOUTH WALES COURT OF APPEAL

CITATION: Port Stephens Council v Theodorakakis (NO 2) [2006] NSWCA 143

FILE NUMBER(S):
40422/2005

HEARING DATE(S): 23/03/2006

DECISION DATE: 05/06/2006

PARTIES:
Claimant – Port Stephens Council
Opponent – Maria Theodorakakis

JUDGMENT OF: Giles JA Ipp JA Bryson JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 654/03

LOWER COURT JUDICIAL OFFICER: Rein DCJ

COUNSEL:
Claimant – Mr P.R. Garling SC & Mr P. Cummings
Opponent – Mr M.R. Aldridge SC & Ms E. Welsh

SOLICITORS:
Claimant – Phillips Fox
Opponent – Bryden’s Law Office

CATCHWORDS:
COSTS -
LEGAL PROFESSION
Cap on costs recoverable in connection with personal injury damages claims - cap applies in appeal unless Court of Appeal makes excluding order - unsuccessful defendant applied for leave to appeal and failed - cap of $13,587.23 on damages probably already exceeded after 3-day hearing in District Court - held by majority (Bryson JA dissenting) it had not been shown that the application for leave to appeal was not reasonably necessary for advancement of claimant's case. Note that this application was made under LPAct 1987 ss.198D and 198G, cf. LPAct 2004 ss 338 and 341 but see now LPAct 2004 s.338A.

LEGISLATION CITED:
Civil Liability Act 2002 s.42
Legal Profession Act 1987 Pt.11 Div.5B ss.198D & 198G
Legal Profession Act 2004 ss. 341, 338 & 737 and Schd.9 cl.18(1).

DECISION:
1. Order that the claimant pay the opponent’s costs of the claimant’s Summons for leave to appeal
2. Order that each party pay its or her own costs of the opponent’s Summons for leave to appeal.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40422/2005
GILES JA
IPP JA
BRYSON JA
5 JUNE 2006

PORT STEPHENS COUNCIL v MARIA THEODORAKAKIS (No.2)

Judgment

GILES JA: The reasons of Bryson JA, which I have had the advantage of reading in draft, describe the costs question arising under s 198G of the Legal Profession Act 1987 (“the Act”). For the reasons which follow, in which I draw upon his Honour’s reasons without unnecessary repetition, I have arrived at a different answer to the question.
An order excluding legal services from the operation of Pt 11 Div 5B of the Act could be made -
“ … if the court is satisfied that the legal services were provided in response to any action on the claim by or on behalf of the other party to the claim that in the circumstances was not reasonably necessary for the advancement of that party’s case or was intended or reasonably likely to unnecessarily delay or complicate determination of the claim.”
Although the question arose at appellate level, the relevant claim was the opponent’s claim for damages for injury suffered when she tripped and fell on the footpath, her “original (and continuing) claim”: Newcastle City Council v McShane(No 3) [2005] NSWCA 431 at [37]. The relevant action on the claim was the claimant’s application for leave to appeal: in its submissions on the costs question the opponent so identified it (“ … whether the action, ie the application for leave to appeal was reasonably necessary … “.) The relevant legal services provided to the opponent were her representation in response to the application for leave to appeal. In many cases the action on the claim and responsive provision of legal services might be part only of what occurred in the first instance or appellate proceedings, but not in this case.
Alternatives offered by s 198G were that the application for leave to appeal -
(i)in the circumstances was not reasonably necessary for the advancement of the claimant’s case;
(ii)was intended to unnecessarily delay or complicate determination of the opponent’s claim; or
(iii)was reasonably likely to unnecessarily delay or complicate determination of the opponent’s claim.
There were the further alternatives of delay or complication within (ii) and (iii). Possibly “in the circumstances” qualified all the alternatives, although it would be odd to speak of “in the circumstances … was intended”. Since s 198G did not confine the facts on which it was to be decided whether one of the alternatives applied, the words added little if anything, and this need not be decided.

(i) Not reasonably necessary for the advancement of the claimant’s case

Respectfully differing from Bryson JA, I do not think that this limb of the question is answered by the failure of the application for leave to appeal. Whether action by a party was reasonably necessary for the advancement of the party’s case was concerned with proportionality between advancement of the case and action taken to advance it, by stating a standard of reasonable necessity. Although the party failed in the case, it may have been “a damned nice thing – the nearest run thing you ever saw in your life”, as Wellington said of Waterloo, and the action to advance the case could well have been reasonably necessary in the endeavour to advance it. Napoleon lost at Waterloo, but his deployment of his forces must at least for the most part have been reasonably necessary in the endeavour to win the battle.
The application for leave to appeal was necessary for the advancement of the claimant’s case – it was the only way it could seek to establish that, contrary to the trial judge’s decision, it was not liable on the opponent’s claim. Whether the application was reasonably necessary for the advancement of the claimant’s case brought in the proportionality, and was not measured solely by the fate of the application; the claimant could reasonably have taken action on the opponent’s claim to advance its case even if the action did not advance the case to a successful conclusion.
Although the costs cap under s 198D of the Act could operate harshly in some circumstances, the legislation must be applied according to its terms: see Newcastle City Council v McShane(No 3), passim. In that case ss 198F and 198G were described at [25] as providing a protection against the risk of a party’s costs being affected by the conduct of the other party, and at [39] it was suggested that they could “be invoked in many situations by a plaintiff who becomes the opponent or respondent in fruitless proceedings in the Court of Appeal”. I do not think the suggestion was that fruitlessness in itself warranted an exclusion order. The bluntness of the legislative scheme was alleviated, but not by making failure in a party’s case the measure of reasonable necessity; that would quite distort the scheme.
The party could take action to advance its case in the knowledge that its costs exposure was limited by the cap, subject amongst other qualifications to greater costs exposure to the extent that the action was not reasonably necessary for that purpose. It should not be forgotten that action on the claim by the successful party in the claim could be not reasonably necessary for the advancement of that party’s case. While reasonable necessity did not exclude regard to the outcome, it called also and in my view principally for regard to the circumstances at the time the action was taken and the nature and quality of the action itself.
The opponent accepted that the claimant “conducted its case in a professional manner”, but submitted that s 198G could nonetheless apply: Wollongong City Council v Nyboer [2005] NSWCA 394 at [4]. Whether it applied turned on the reasonable necessity of applying for leave to appeal, not on the professionalism with which the application was conducted. The opponent’s submissions more to the point were that the appeal had no reasonable prospects of success when the finding of obviousness was clearly open to the trial judge and the claimant’s reliance on s 42 of the Civil Liability Act 2002 was bound to fail because the claimant had not properly pleaded it or called evidence to support it; she submitted that no issue of principle arose, and that on the facts the trial judge was clearly correct.
I join with Bryson JA in declining to accept that the application for leave to appeal had no reasonable prospects of success, and in his description of it as not lacking in substance. The application was fairly arguable, although the arguments did not prevail, and the courts should be slow to effectively penalise a party in costs by an exclusion order under s 198G where the party brought a fairly arguable application. I do not think that bringing the application for leave to appeal should be held to have been not reasonably necessary for the advancement of the claimant’s case.

(ii) Intended to unnecessary delay or complicate determination of the opponent’s claim

It was not submitted that the application for leave to appeal was intended to unnecessarily delay or complicate determination of the opponent’s claim.

(iii) Reasonably likely to unnecessarily delay or complicate determination of the opponent’s claim

Whether action by a party was reasonably likely to unnecessarily delay or complicate determination of the claim also involved proportionality. It accepted that action on the claim could delay or complicate its determination, and stated a standard of lack of necessity. The reasonable likelihood was at least of the delay or complication; reasonable likelihood of lack of necessity is a difficult notion, but it appears that it also was to be assessed by likelihood and thus, albeit objectively, by regard to the circumstances at the time the action was taken and the nature and quality of the action itself.
The application for leave to appeal did delay determination of the opponent’s claim. It is not easy to see that it complicated the determination beyond the need to decide the application, but what I next say would equally apply if it did.
The delay and any complication flowed inevitably from bringing the application for leave to appeal; they were reasonably likely. Were the delay and any complication reasonably likely to be unnecessary; or, if the assessment of lack of necessity was more straightforward, were they unnecessary? The application for leave to appeal, and the consequential delay and any complication, were necessary if the claimant’s case was to be advanced at all. Again, the application for leave to appeal was fairly arguable. I do not think delay and any complication because a fairly arguable application for leave to appeal was brought should be held to have been reasonably likely to be unnecessary, or unnecessary.
I agree with Bryson JA as to each party bearing its or her own costs of the cross-application. In my opinion, orders 2 and 3 as proposed by his Honour should be made, but not order 1.
IPP JA: I have had the benefit of reading the reasons to be published by Giles JA and Bryson JA.
As Bryson JA points out, the issue for determination depends upon whether the application for leave to appeal was reasonably necessary for the advancement of the claimant’s case.
I agree with Giles JA that, while the failure of the application for leave to appeal is relevant to the question of reasonableness, it is not determinative.
The application brought by the claimant was reasonably arguable. There is nothing based on the proportionality of the claimant’s action that suggests that it was unreasonable for it to have brought the application. There do not appear to be any other matters relevant to the reasonable necessity of the application for leave to appeal.
Accordingly, I agree with the conclusion arrived at by Giles JA and with the orders proposed by him.
BRYSON JA: These reasons relate to the costs of the ordinary summonses for leave to appeal which the Court of Appeal dismissed on 6 April 2006 – [2006] NSWCA 70. The Court directed that each party make a written submission on any further question of costs which is said to arise. Written submissions have been made by each party. As the earlier reasons show more fully, the claimant (defendant) applied for leave to appeal from the judgment for the opponent (plaintiff) given by Judge Rein SC in the District Court on the opponent’s claim for damages for personal injuries suffered when she tripped and fell on the footpath on the south side of Shoal Bay Road, Shoal Bay on 18 January 2002. The Trial Judge awarded the opponent damages of $67,936.16 for personal injuries. The opponent sought leave to cross appeal upon one question relating to damages. This application was said in written submissions to be conditional upon grant of leave to appeal to the claimant, although this condition was not adhered to in oral submissions. The Court of Appeal was of the provisional view, subject to written submissions, that the Court should order that the claimant (defendant) pay the opponent’s (plaintiff’s) costs of the summons for leave to appeal and that each party pay her or its own costs of the cross summons.
On ordinary principles governing the discretion to order costs the opponent should recover an order for costs of the claimant’s summons for leave to appeal. Written submissions by the opponent’s senior counsel seek an order pursuant to s.198G of the Legal Profession Act 1987 that the costs of the application for leave to appeal be excluded from the operation of Pt.11 Div.5B of the Legal Profession Act 1987. This would have the effect of removing the cap imposed by s.198D on the costs which can be recovered.
The Legal Profession Act 1987 has been repealed, and provisions substantially identical with its ss.198D and 198G now appear as ss.338 and 341 of the Legal Profession Act 2004. Section 338A of the Legal Profession Act 2004 makes further provision and among other things deals with appeal costs, but there was no corresponding provision in the Legal Profession Act 1987. Transitional provisions in the Legal Profession Act 2004 have the effect that Pt.11 Div.5B of the Legal Profession Act 1987 continues to apply to the present proceedings; see Legal Profession Act 2004 s.737 and Schd.9 cl.18(1).
Sections 198D and 198G provided:
198D (1) If the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a party in connection with the claim are fixed as follows:
(a) in the case of legal services provided to a plaintiff maximum costs are fixed at 20% of the amount recovered or $10,000, whichever is greater,
(b) in the case of legal services provided to a defendant maximum costs are fixed at 20% of the amount sought to be recovered by the plaintiff or $10,000, whichever is greater.
(2) The regulations may prescribe an amount to replace the amount of $100,000 or $10,000 in subsection (1) and may prescribe a percentage to replace the percentage of 20% in subsection (1). When such a replacement amount or percentage is prescribed, it applies for the purposes of subsection (1) in place of the amount or percentage that it replaces.
(3) The regulations may contain provisions of a savings or transitional nature consequent on the making of regulations under this section.
(4) When the maximum costs for legal services provided to a party are fixed by this Division the following provisions apply (subject to sections 198E–198G):
(a) a solicitor or barrister is not entitled to be paid or recover for those legal services an amount that exceeds those maximum costs,
(b) a court or tribunal cannot order the payment by another party to the claim of costs in respect of those legal services in an amount that exceeds that maximum,
(c) in assessing the amount of those costs that is a fair and reasonable amount, a costs assessor cannot determine an amount that exceeds the maximum set by this section.
(5) A reference in this Division to legal services provided to a party is a reference to legal services provided to the party by a solicitor or barrister (including by an agent or employee of the solicitor or barrister). Costs for legal services do not include costs charged as disbursements for services provided by any other person or other disbursements.
(6) If proceedings are commenced on a claim, the amount sought to be recovered by the plaintiff is taken to be the amount sought to be proved by the plaintiff at the hearing of the claim.
(7) Maximum costs fixed by this section apply despite regulations under section 196(1)(a2) fixing those costs.
198G A court hearing a claim for personal injury damages may by order exclude from the operation of this Division legal services provided to a party to the claim if the Court is satisfied that the legal services were provided in response to any action on the claim by or on behalf of the other party to the claim that in the circumstances was not reasonably necessary for the advancement of that party’s case or was intended or reasonably likely to unnecessarily delay or complicate determination of the claim.
In Newcastle City Council v Travis McShane (No.3) [2005] NSWCA 437 the Court of Appeal decided that the cap on costs in s.198D extends to appeal costs. Costs recoverable by the opponent under the costs orders in the District Court and in the Court of Appeal are limited to 20% of the amount recovered, that is $13,587.23, unless the opponent obtains an excluding order under s.198G. The hearing in the District Court occupied three days and it is likely that costs recoverable in the District Court already exceed the cap, and that no costs are recoverable by the opponent in the Court of Appeal unless the present application is successful.
Section 198G creates more than one test. An excluding order may be made if the Court of Appeal is satisfied that the legal services provided to the plaintiff in relation to the application for leave to appeal were provided in response to any action on the plaintiff’s claim by or on the part of the defendant that:

(a)          in the circumstances was not reasonably necessary for the advancement of that party's case;
               or further or alternatively
(b)          was intended or reasonably likely to unnecessarily delay or complicate the termination of the claim.

It will be seen that there are further possible alternatives within ground (b). The opponent’s counsel did not contend that there was intentional delay or complication, but otherwise, as I understand the written submissions, relied on both grounds. As Mason P. said in Newcastle City Council v McShane (No. 3) at [39] “… there seems no reason why ss.198F or 198G could not be invoked in many situations by a plaintiff who becomes an opponent or respondent in fruitless proceedings in the Court of Appeal.”

I address whether the first ground under s.198G exists; that is, whether the legal services provided to the opponent in the Court of Appeal were provided in response to any action on the claim by or on behalf of the claimant that in the circumstances was not reasonably necessary for the advancement of (the claimant’s) case. I have emphasised some words.
The question posed by s.198G, whether the Court is satisfied of the existence of a ground, would ordinarily be addressed at the conclusion of proceedings when a decision is available and questions of costs present themselves. (It may be that the question could be opened for the Court's consideration earlier; in concept, a party might decide to seek an excluding order at an earlier stage of the proceedings; I do not know of any instance where this has happened, but the terms of s.198G do not make it impossible for a court to make an excluding order before final disposition.)
In my opinion the question whether the first ground has been made out is a question which the Court should consider in the light of all the facts and circumstances known when the Court decides whether to make an order. Consideration of the first ground is not limited to the point of view of the ultimately unsuccessful party when deciding whether to initiate the action under consideration. If, when the Court comes to consider an excluding order, the relevant action on the claim has been completed and has been the subject of the Court's decision, the Court is in a position to consider the whole course of events, including what was obtained by the order which concluded the action, and then to decide whether the action on the claim was or was not reasonably necessary for the advancement of the party's case. The Court's decision about what was reasonably necessary for the advancement of the party's case takes place from the informed position of knowing the outcome. In this case the application for leave to appeal was unsuccessful, the claimant achieved nothing by the application, and the claimant’s case was not advanced in any way beyond the position in which it stood with the disposition made by Judge Rein SC. From the Court's point of view of the information now available, it appears clearly in my opinion that the claimant achieved nothing by making the application and did not advance its case in any way by doing so, and for that reason the claimant’s action in making the application was not, as a matter of fact, reasonably necessary for the advancement of the claimant’s case.

The second ground, which relates to what was intended or reasonably likely to happen, may fall to be judged as at an earlier point of time, in relation to the conduct of the party at or about the time of initiating the action in response to which the party seeking the excluding order was provided with legal services. If this is correct, the retrospective view with knowledge of the outcome may not have such overwhelming effect. However I do not act on the second ground, and it is not necessary to state any conclusion with respect to it.
In my opinion it must be found, and the Court of Appeal should be satisfied, that the relevant action taken by the claimant was not reasonably necessary for the advancement of the claimant’s case. Nothing was achieved by it. It was fruitless. The Court of Appeal is empowered by a s.198G, as a matter of discretion, to make an exclusion order, and the considerations which ordinarily as a matter of course move the Court to exercise its discretion as to costs in favour of a successful party should move the Court to exercise that discretion favourably to the opponent.
It will be seen that no element of irresponsible or inappropriate conduct of the application for leave to appeal, or of misuse of the Court’s process, has taken any part in my consideration; and it was not contended on behalf of the opponent that there had been any such thing. The application for leave to appeal was not groundless; it was presented in a meticulous way by senior counsel for the claimant, in submissions which engaged the Court of Appeal’s attention for several hours. However at the conclusion of those submissions the Court of Appeal called upon the opponent’s senior counsel to reply only on one aspect of those submissions. Judgment was reserved, and the reasons which I published on 6 April 2006 show that I did not regard the application as lacking in substance. On behalf of the opponent it has been submitted that the proposed appeal had no reasonable prospects of success; and this submission was exemplified by referring to particular aspects of the Trial Judge's conclusions. It was also said that no issue of principle arose from the facts found by the Trial Judge or from the manner in which the trial was conducted. I do not accept that the application for leave to appeal had no reasonable prospects of success, although after full and careful consideration my opinion was decidedly against it. It is my opinion however that in the application of this part of s.198G the entire lack of success of the application, and the absence of any contribution overall to the advancement of the claimant’s case, are conclusive considerations.
For these reasons the Court of Appeal should in my opinion make an excluding order under s.198G.
Written submissions on behalf of the claimant have contended that the claimant should recover costs of the opponent’s cross-application for leave to cross-appeal. Although the opponent’s senior counsel departed in oral submissions from an early indication that the application was solely conditional upon the claimant’s obtaining leave to appeal, the cross-application did not ever, in my view, lose its essential character as a defensive measure against the contingency of there being an appeal; if there were leave to appeal, it would only be just for the Court of Appeal to allow each side’s case to be put fully, including any continuing controversy on damages; whereas the controversy relating to damages, in respect to both nature and amount, could not ever have had prospects of attracting leave to appeal if it were free-standing. I adhere to my earlier provisional view that it is appropriate that each party bear its or her own costs of the cross-application.
In my opinion the Court of Appeal should make the following orders relating to costs:
1. Order that legal services provided to the opponent in relation to the claimant’s application for leave to appeal be excluded from the operation of Part 11 Division 5B of the Legal Profession Act 1987.
2. Order that the claimant pay the opponent’s costs of the claimant’s Summons for leave to appeal.
3. Order that each party pay its or her own costs of the opponent’s Summons for leave to appeal.
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LAST UPDATED: 02/03/2007

[2006] NSWCA 143

5 June 2006