Preston v Nikolaidis

[2017] NSWSC 1527

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Preston v Nikolaidis [2017] NSWSC 1527

Hearing dates:

26, 27, 28 October 2015, 25 Nov 2015, 17 December 2015, 29 February 2016, 5 April and 5 May 2016, 29 August 2016, 20 September 2016

Date of orders:

17 November 2017

Decision date:

17 November 2017

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Declarations sought made. Claims on defendants’ bills of costs extinguished as relevant limitation period has expired. Directions made to deal with remaining issues.

Catchwords:

LIMITATION OF ACTIONS – retainer – claim for payment of legal fees – whether claim extinguished under Limitation Act 1969, s 63 - whether proceedings for recovery of fees brought by solicitor – whether client pleaded the limitation issue – whether client estopped from relying on limitation issue.

COSTS – solicitor/client – recovery – bill of costs – whether solicitor provided bill of costs – whether bill of costs sent for assessment – whether assessment is an “action” for the purposes of the Limitation Act.

Legislation Cited:

Civil Procedure Act 2005, ss 60, 98(4)(c)
Crimes Act 1900 (NSW), s 300(1)
Legal Profession Act 1987 (NSW), ss 199, 200, 203, 206(1), 208, Part 11
Legal Profession Act 2004 (NSW)
Legal Profession Reform Act 1993 No. 87 (NSW), Part 11
Legal Profession Regulation 1994 (NSW), Part 9, Division 3, clause 38(3)
Limitation Act 1969, ss 14(1), 63
Supreme Court Rules 1970 (NSW), Part 72 r 8, Part 52, Division 7
Uniform Civil Procedure Rules, r 42.4

Cases Cited:

Attorney-General (NSW) v Kennedy Miller Television Pty Ltd (1998) 43 NSWLR 729
Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006
Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119
Camillo Tank SS Co Ltd v Alexandria Engineering Works (1922) 38 TLR 134
Coshott v Barry and Anor [2012] NSWSC 850
Hamod v New South Wales [2011] NSWCA 375
Lownds v Home Office [2002] 4 All ER 775
Nikolaidis v R [2008] NSWCCA 323
Nudd v Mannix [2009] NSWCA 327
Rogers v The Queen (1994) 1 CLR 251
Sherborne Estate (No. 2): Vanvalen v Neaves (2005) 65 NSWLR 268
Windsurf Holdings Pty Ltd v Leonard; Carlson v Leonard; Wyvill v Leonard [2009] NSWCA 6

Category:

Principal judgment

Parties:

In proceedings1993/23395:

 

First Plaintiff: John Preston
Second Plaintiff: Western Suburbs Constructions Pty Limited (formerly Preston Erections Pty Limited)
First Defendant: Leon Nikolaidis as the executor of the estate of the late Mitrofanis Demetrius Nikolaidis
Second Defendant: Leon Nikolaidis trading as M.D. Nikolaidis & Co
Third Defendant: Michael Zwar

  In proceedings 2015/331795:
Plaintiff: John Preston
First Defendant: Leon Nikolaidis
Second Defendant: Michael Zwar

Representation:

In proceedings1993/23395:

 

Counsel:
Plaintiffs: Ben Zipser
Defendants: Julian Svehla

 

In proceedings1993/23395:

 

Solicitors:
Plaintiffs: Duncan McIntyre, Madgwicks Solicitors
Defendants: Mitrofanis Nikolaidis, M.D. Nikolaidis & Co Solicitors

 

In proceedings 2015/331795:

 

Counsel:
Plaintiff: Ben Zipser
Defendants: Julian Svehla

 

In proceedings 2015/331795:
Solicitors:

  Plaintiff: George Anastasi, Livingstone & Company Lawyers
First, Second & Third Defendants: Michael Zwar, Diamond Conway Lawyers

File Number(s):

1993/23395; 2015/331795

Publication restriction:

No

Judgment

1. The parties to these proceedings have been disputing an alleged debt of $95,749.40 for over 25 years. They now conduct the oldest unresolved litigation in the Registry of this Court. They tell the Court they have each accumulated legal costs of over $1,000,000. The proceedings have developed the character of a feud.

2. Parts of the dispute were successfully mediated by Sir Laurence Street in August 2011. The success of that mediation gives the Court hope that the limited aspects of these proceedings that survive after this judgment may yet be able to be productively mediated to a final resolution. In the meantime, the Court will deal with the issues for decision.

Overview of the Dispute

3. The plaintiff, Mr John Preston, was a client of the defendants, who represent a former firm of solicitors, Nikolaidis & Co (“the Firm”). Between April 1984 and October 1992, Mr Preston and companies he controlled (“the Preston interests”), retained the Firm to provide them with legal services. When the Preston interests terminated the Firm’s retainer in October 1992, the Firm sent Mr Preston a letter enclosing a summary of 22 final accounts for fees rendered between February and October 1992. The letter claimed that the Preston interests owed $95,749.40 to the Firm for legal professional costs. The letter claimed a lien over the files relevant to work performed for the Preston interests but did not include itemised bills of costs.

4. The Taxation of Costs – 1993 to 1996. By July 1993 the Firm had not served itemised bills of costs or commenced proceedings for its fees and the Firm’s files had not been returned to the clients. In August 1993, Mr Preston, as first plaintiff, together with Western Suburbs Constructions Pty Ltd (“Constructions”), a Mr Preston-controlled company as the second plaintiff, commenced these proceedings by Summons (proceedings no. 1993/23395), seeking the delivery of client files and bills of costs and the referral of the bills to taxation under the Legal Profession Act 1987, ss 199, 200 and 208, together with an account of all payments made to the Firm.

5. In November 1993 the Court ordered the delivery of itemised bills of costs. By mid-December 1993, the Firm delivered bills of costs in 16 disputed matters. The Court referred these bills of costs to taxation, and made costs orders against the Firm. In February 1994, the Court made procedural orders for the taking of accounts in relation to payments which the Preston interests had made to the Firm. Then in June 1994, the Court referred the taking of those accounts out to a referee for inquiry and report.

6. After the commencement of the July 1994 amendments to the Legal Profession Act 1987, the taxation needed to be reconstituted as a costs assessment. That costs assessment did not commence for another two years. But as these reasons show, it was never completed.

7. In November 1994, the Preston interests indicated to the Firm and the Court that they no longer sought to pursue the part of the reference requiring the taking of accounts. In February 1995 the Court dismissed the Summons, except in so far as orders (including costs orders) had been previously made, and made no additional order as to costs.

8. By April 1995, the Preston interests had served their objections to the bills of costs under assessment. In early 1996 the Firm raised an issue in the costs assessment about the terms of the client’s retainer of the Firm. The Firm contended that a costs assessor did not have the power to make a determination as to the existence of, or the terms of any retainer. In mid-1996 the Firm also moved for an assessment of the costs orders that had originally been made against the Firm in December 1993, and the consolidation of that costs assessment with the assessment of the Firm’s 16 bills.

9. Reference to Costs Assessment – 1996 to 2002. In July 1996 the Court formally ordered the reference of the bills of costs for assessment pursuant to Legal Profession Act 1987-1994, s 206(1). The Court also took the apparently efficient course of referring the question of the terms of the Firm’s retainer by the Preston interests to the same costs assessor, but in the additional capacity of referee, for inquiry and report.

10. The original 1993 bills of costs needed to be amended to conform with the formal requirements for assessment under Legal Profession Act 1987-1994. The procedure under the 1994 Act required a costs assessment application to be filed for the assessment of the costs for each of the bills of costs. By January 1997, the Firm had filed applications for the costs assessment of the 16 bills of costs at the Registry of the Court.

11. In January 1997 sealed copies of the Firm’s costs assessment applications, together with the bills of costs, were served on the Preston interests. In February 1997 the Preston interests completed the filing of objections against the 16 bills of costs in the Court’s Registry.

12. Between April 1997 and May 2010 no steps were taken in the costs assessment to quantify the 16 bills of costs. As will be seen for eight years of that period, from 2002 to 2009, these proceedings were stayed.

13. Between 1997 and 2002 the parties were pre-occupied with procedural disputes. During 1998 and 1999 the parties contested the question of the terms of the Firm’s retainer by the Preston interests.

14. The material that the Firm advanced to the costs assessor contained a carbon copy of a letter apparently dated 19 April 1984. The costs assessor invited submissions on the letter and indicated that upon their receipt he would soon be in a position to conclude each assessment and issue a certificate of determination for the costs assessments.

15. But the costs assessor hesitated to undertake the role of referee with which he had been invested. In November 1998 the Court decided to revoke the appointment of the costs assessor as referee on the issue of the terms of the retainer. Instead the Court ordered that Points of Claim and Points of Defence be served to isolate the issues joined between the parties about the terms of the retainer.

16. The Preston interests moved by Motion in July 2000 for leave to amend the Summons to add 11 new plaintiffs, to add Mr Zwar as a defendant, and for other orders. The Motion was dismissed. The Court decided in April 2001 that it was impractical to remit the matter back to the existing costs assessor, or a new costs assessor, without determining the retainer issues. In June 2001 the Court decided that it would determine the issues about the terms of the retainer. In April 2002 the Preston interests filed Further Amended Points of Claim alleging fraud on the part of the second defendant in relation to the creation of the 19 April 1984 letter. This was followed by a forensic examination of the letter in question. The hearing of the retainer issues were fixed for February 2003.

17. The Stay Period – 2002 to 2009. But the proceedings were stayed in 2002 and the listed February 2003 hearing was vacated. When these proceedings were first commenced, Mr Mitrofanis Nikolaidis, the father of the second defendant Mr Leon Nikolaidis, had been joined as the first defendant. Mr Mitrofanis Nikolaidis established the Firm. When he died in July 2002 his wife, Mrs Doreen Philomene Nikolaidis, his executrix, continued to represent his estate in the proceedings, until she also died in June 2012.

18. Mr Leon Nikolaidis, the second defendant, is the executor of his mother’s estate and thereby in 2012 became the executor of his father’s estate. Thus, Mr Leon Nikolaidis now defends these proceedings in two capacities: as the first defendant in a representative capacity, as executor of his father’s estate, and personally, as the second defendant.

19. Mr Leon Nikolaidis was until 2007 a principal of the Firm. But in 2002 he was charged under Crimes Act 1900, s 300(1) with one count of making a false instrument, namely the 19 April 1984 letter that he had used in the costs assessment. This criminal charge resulted in these proceedings being stayed from November 2002 until the second defendant’s criminal trial was concluded and relevant criminal appeal periods expired. He was convicted in 2007 of the Crimes Act, s 300(1) count and sentenced to imprisonment for one year. The same year, his name was struck from the roll of legal practitioners. The stay was formally discharged in May 2009 and action in these proceedings resumed.

20. The third defendant, Mr Michael Zwar, was a principal of the Firm when the Firm undertook the legal work in issue. The Firm dissolved when the criminal charges were brought against Mr Leon Nikolaidis. Mr Zwar has since joined another firm but remains a defendant in this matter.

21. After the Stay – 2009 to 2015. Shortly after the stay was discharged, in June 2009, the plaintiffs filed a Statement of Claim alleging fraud. On the Firm’s Motion in May 2010 the Statement of Claim was struck out, but the Firm’s Motion to dismiss the proceedings was itself dismissed. The Court also granted leave to the plaintiffs to amend the Summons by adding Mr Zwar as a defendant, which Amended Statement of Claim was filed in the proceedings in June 2010.

22. The Court also made clear in May 2010 that the April 2002 Further Amended Points of Claim represented the extant portion of the proceedings which were a “coherent but confined claim” by the Preston interests, which was to proceed to trial.

23. In October 2010 the Preston interests ultimately abandoned further attempts to file new pleadings. Instead, the Preston interests raised for the first time the issue of the application of Limitation Act 1969, ss 14 and 63 to the Firm’s recovery upon its bills of costs. The Preston interests then alleged for the first time that the applicable limitation period had expired by 1998 and the proceedings had become futile.

24. The April 2002 Points of Claim that the Preston interests filed were listed for hearing in August 2011. But some of the issues for hearing (namely, the hourly rates applicable to the provision of the Firm’s legal services) were settled at mediation. In September 2011 the Court determined that, contrary to his denial of liability, the first plaintiff Mr Preston was personally liable in respect of all the bills rendered by the Firm.

25. In September 2011 the Court directed the Manager, Costs Assessment, to refer the assessment of the Firm’s bills of costs to an accredited costs assessor pursuant to the 1994 Act, s 206. This order was in lieu of the Court’s July 1996 orders referring the bills of costs for assessment under the 1994 Act, s 206(1). This September 2011 referral assumed the terms of the retainer as found by the Court and as agreed during the mediation. The Preston interests’ application for leave to appeal against the September 2011 orders was dismissed in March 2012. The Preston interests’ various subsequent interlocutory applications in the Court of Appeal were also dismissed.

26. But it emerged in August 2012 that the original bills of costs, applications for costs assessment and supporting documentation could not be located by the Court. And by December 2013 it was clear that the missing material had been administratively destroyed. In May 2013 the Court ordered the parties to agree on what had constituted these documents so that the costs assessment could proceed. In February 2014 the Court noted that the parties had agreed on the substance of the bills of costs and directed the parties to take steps to reproduce the form of those bills.

27. The Preston interests subsequently advanced Statements of Issues concerning the remaining issues for determination in these proceedings. These included the present Limitation Act issues.

28. In February 2015, the Preston interests filed a Motion seeking a declaration that the Firm’s entitlement to costs the subject of the bills of costs was extinguished by the Limitation Act. Between March and June of that year, the parties filed Points of Claim and Points of Defence in relation to the Limitation Act issues.

29. During the initial hearing of the Motion in October 2015, because it was evident that it was seeking final rather than interlocutory relief, the Court directed that the Motion be converted into a Summons, which was duly filed in December 2015. From time to time throughout these reasons the proceedings so commenced in 2015 are sometimes referred to as “the 2015 proceedings” in a way that distinguishes them from the earlier proceedings.

30. The Parties’ Contentions. The parties’ contentions may be briefly summarised. The plaintiff, Mr Preston and his company, Constructions, contend that the Firm has not sued them for the legal fees claimed. They seek a declaration, initially propounded by motion, and then by leave through the filing of an Amended Summons: that by the operation of Limitation Act, ss 14 and 63, any entitlement the defendants may have once had to the payment of the Firm’s costs has been extinguished. Ordinarily, the Preston interests would be taking such a limitation point in the role of defendants. But after the Preston interests filed their Summons seeking bills of costs and other relief, as earlier indicated, the Firm did not commence separate proceedings, a circumstance that led to the present Limitation Act argument.

31. The defendants raise several answers to the Limitation Act issue. First, they contend that no pleaded limitation point has been raised either in the proceedings, or in the costs assessments. Secondly, they contend that raising the limitation issue now, some 16 years after the claimed expiry of the applicable limitation period, is an abuse of process. Thirdly, they submit Mr Preston and Constructions elected not to raise, or alternatively have waived their right to rely upon, the expiry of the limitation period. Fourthly, the defendants assert, that the operation of the alleged limitation period is displaced by one or more of three separate species of estoppel: an issue estoppel; a common assumption estoppel; or, an estoppel by encouragement, election or waiver.

32. Mr J. Svehla of counsel, instructed by Diamond Conway Lawyers, appears for the plaintiffs. Mr B. Zipser of counsel, instructed by Livingstone & Company Lawyers, appears for the defendants. The Court has been much assisted on the present application by the careful submissions of the counsel and solicitors on both sides. Their diligent work has simplified the gathering and recording of the relevant history of this matter.

The Changing Legal Profession Legislation

33. The structure of the legislation applying to the taxation or assessment of costs and their recovery by legal practitioners in this State changed three times in the course of these proceedings. When the bills of costs in question in these proceedings were first issued in 1992 the applicable legislation was Part 11 of the Legal Profession Act 1987 (“the 1987 LPA”).

34. On 1 July 1994 important amendments to the 1987 LPA came into force. The Legal Profession Reform Act 1993 introduced a system of costs assessment by costs assessors, to replace the former system of Court-administered taxation of costs. The Legal Profession Reform Act, enacted a new Part 11 into the 1987 LPA, commencing on 1 July 1994. In these reasons this amending legislation, operating from 1 July 1994, is referred to “1994 Amendments”. Transitional provisions introduced with the 1994 Amendments and associated regulations, preserved the operation of the 1987 LPA in respect of bills of costs issued before the commencement of the 1994 Amendments: 1987 LPA, Schedule 8, Part 7.

35. When the Legal Profession Act 2004 (“2004 LPA”) was passed, the costs assessment regime changed again. The 2004 LPA commenced on 1 October 2005. The 2004 LPA repealed the 1987 LPA. But the savings provisions in Schedule 9. Clause 18(1) of the 2004 LPA preserved the application of Part 11 of the 1987 LPA, as amended by the 1994 Amendments.

36. Finally, the passing of the Uniform Legal Profession Legislation in 2014 (the Legal Profession Uniform Law ApplicationAct 2014 (“the Application Act”), Part 7 and the Legal Profession Uniform Law 2014 (“the Uniform Law”), Part 4.3, led to further changes to the costs assessment regime. The operation of the 2004 LPA was preserved in respect of matters being conducted under the 2004 LPA by the Application Act, Schedule 9, Part 1 and the Uniform Law, Schedule 4, Part 1 and the regulations made thereunder.

An Agreed Chronology in Narrative Form (“the Agreed Narrative”)

37. At a pre-trial directions hearing on 13 October 2015, the Court ordered the parties to produce an agreed chronology in narrative form, setting out the main procedural steps in the litigation, the material changes to applicable legislation, and the relevant agreed facts. As the parties were familiar with the history of the proceedings, they readily agreed to produce a joint narrative.

37. The parties completed that exercise. What follows immediately in these reasons is the parties’ agreed narrative chronology of the procedural steps, applicable law and the facts relevant to the issues presently before the Court, as formulated and agreed by them. It is called in these reasons “the agreed narrative”.

38. The Court has had to resolve a small number of disputes about the text of the agreed narrative, principally in relation to factual matters. Where those disputes are resolved is made clear in the text of the agreed narrative, the whole of which represents the Court’s findings in the proceedings. The Court has also included a very limited number of additional findings that were missing from the original agreed narrative.

39. After completion of the factual narrative these reasons make some supplementary factual findings, make further reference to the applicable legislation and undertake an analysis of the legal issues the parties have raised. This overview of these proceedings should be treated as a convenient summary of the history of the proceedings, taken from the agreed narrative, which contains the Court’s detailed findings.

The Agreed Narrative

Relationship between the Plaintiffs and Defendants and Nature of the Proceedings

41. The first plaintiff, John Clement Preston (“Mr Preston”), and companies of which he was a director, which included the second plaintiff, Western Suburbs Constructions Pty Ltd (formerly Preston Erections Pty Ltd) (“Constructions”), were clients of the legal firm known as MD Nikolaidis & Co, Solicitors (“the Firm”) for whom the Firm performed legal services for approximately ten years from about April 1984 until 1992.

42. The second defendant, Leon Nikolaidis (“Mr Nikolaidis”), a partner of the Firm, was the principal point of contact with Mr Preston and his companies.

43. In early October 1992, Mr Preston and his companies terminated the retainer of the Firm for performing legal services.

44. After the Firm’s retainer was terminated, on or about 16 October 1992, the Firm sent a letter to Mr Preston enclosing a document titled “Summary of Accounts” stating that $95,749.40 was owing. The “Summary of Accounts” summarised the amounts owing in 22 bills from the Firm to Mr Preston dated between 20 February 1992 and 15 October 1992. The letter added that Mr Preston could collect his files once he paid the Firm $95,749.40.

45. Thereafter, between 17 October 1992 and July 1993, there were certain written communications between Mr Preston and the Firm which did not resolve:

1. payment by Mr Preston of the Firm’s fees in the amount of $95,749.40; and

2. delivery to Mr Preston of the Firm’s legal files.

46. One communication was a letter from the Firm to Mr Preston dated 26 October 1992 in which the Firm wrote:

“... we shall prepare itemised bills of costs referable to all amounts outstanding ... They will be submitted for payment. If payment is not received, legal proceedings will be instituted without further notice.”

47. The Firm did not prepare itemised bills of costs or institute legal proceedings prior to August 1993.

24 August 1993: The Plaintiffs Commence the Proceeding

48. As a consequence, the plaintiffs, Mr Preston and Constructions, commenced the Proceeding, namely Supreme Court of New South Wales Equity Division proceeding case no. 1993/23395 (“Proceeding”), by filing the summons on 24 August 1993 (“Summons”).

Relief Sought in the Summons

49. The Summons sought orders as follows:

“1. ORDERS pursuant to section 208 of the Legal Profession Act 1987, that Bills of costs be delivered by the Defendants to the Plaintiff:

(a)   In respect of the matters set out in Schedule A hereto;

(b)   Alternatively, in respect of such of the matters set out in Schedule A hereto wherein accounts were rendered by the Defendants to the Plaintiff within twelve (12) months of the commencement of these proceedings.

2. ORDERS pursuant to section 199 and section 200 of the Legal Profession Act 1987, that there be referred for taxation:

(a)    The matters set out in Schedule A;

(b)    Alternatively, such of the matters set out in Schedule A as the court deems appropriate.

3. AN ORDER pursuant to section 208 of the Legal Profession Act 1987, that the Defendants deliver up to the Plaintiffs, on such terms, if any, that the Court deems appropriate, the Plaintiff’s documents in the matters of:

(a)   P R & L M Moore T/as Sunrise Pools v. John Preston

(b)   Western Suburbs Constructions Pty Ltd v. Monier Ltd and Anor.

(c)    J C Preston Pty Ltd (In Liquidation) and Others v. Geoffrey K Strong – Supreme Court (NSW)

(d)    J C Preston Pty Ltd (In Liquidation) v. Neil King – Supreme Court (NSW).

4.   AN ORDER that accounts be taken:

(a)   Of payments made to the Defendants for Defendants’ costs, and the disbursement or application of such payments, in respect of the matters set out in Schedule A, from 1 January 1989 to 30 October 1992;

(b)   Of the payment of $50,000.00 into the Defendants’ trust account, in or about July 1989 and the disbursement or application hereof, in respect of the matter Western Suburbs Constructions Pty Limited (formerly Preston Erections Pty Limited) and G K N Australia Limited.

5.   That for the purposes of the orders sought in paragraph 4 above, directions be given as to the manner of taking the said accounts.

6.   AN ORDER that the matters referred to in paragraphs 4 and 5 above be referred to the Master, Equity Division, to take accounts, and make inquiries to enable such accounts to be taken.”

50. Schedule A annexed to the Summons listed twenty client assignments undertaken by the defendants for the plaintiffs and other persons.

51. The statutory framework within which the Summons was filed principally comprised:

1. Legal Profession Act 1987 (NSW) (“1987 LPA”), Part 11 prior to the repeal and substitution of Part 11 with effect from 1 July 1994; and

2. The Supreme Court Rules 1970, Part 52 Division 7.

9 November 1993: Orders made by Hulme J for the Defendants to deliver the Plaintiffs Bills of Costs

52. On 9 November 1993, Hulme J delivered reasons for judgment (“Hulme J November 1993 Judgment”); and made orders (“Hulme J November 1993 Orders”) as follows:

“1.    I order that the defendants do deliver to the plaintiffs on or before Thursday 10 November bills of costs in respect of the matters numbered three, four, five, seven, ten, thirteen, fourteen and fifteen on the document entitled ‘Summary of accounts owing’ initialled by me and placed with the papers.

2.    I order that the defendants do deliver to the plaintiffs on or before Tuesday, 30 November, bills of costs in respect of the other matters or groups of matters in that summary of accounts owing.

3.    I direct that the defendants within fourteen days serve on the plaintiffs an affidavit annexing a copy of their office and trust account records of the matters listed in schedule A to the summons herein.”

53. The document entitled “Summary of accounts” initialled by Hulme J referred to in order 1 of the Hulme J November 1993 Orders was a photocopy of the “Summary of Accounts” which was attached to the 16 October 1992 letter from the Firm to Mr Preston referred to above (“Hulme J November 1993 Schedule”).

54. Table 1 below identifies the 16 matters in the Hulme J November 1993 Schedule:

A	B	C	D
Hulme J November 1993 Schedule No.	Matter	Amount of each unpaid Firm invoice in the matter	Total amount of all unpaid Firm invoices in the matter
1	Elwens Matter	$100	$100
2	State Bank Matter	$9,286.50 $5,084 $3,000	$17,370.50
3	King Matter	$10,884.90 $2,218	$13,102.90
4	Roach Matter	$1,199 $637	$1,836
5	Four M.J. Matter	$6,142 $1,175 $3,078	$10,395
6	Lombe Matter	$2,032	$2,032
7	Skygram Matter	$2,050	$2,050
8	Sunrise Matter	$1,535	$1,535
9	Sandman Matter	$1,998	$1,998
10	Mevon Matter	$25,898.50	$25,898.50
11	Constructions Matter	$727.50	$727.50
12	Strong Brown Matter	$13,335	$13,335
13	Favelle Matter	$1,005	$1,005
14	Fred Jeffrey Trucks Matter	$776	$776
15	Hekeik Matter	$1,760	$1,760
16	Hume Computers Matter	$1,028	$1,028
Total	$95,749.40

55. At that point, therefore, the Court had taken steps to ensure that bills of costs in taxable form were brought into existence in relation to all 16 matters referred to in the Hulme J November 1993 Schedule and which Hulme J stood over to 6 December 1993 “with a view to making an order for taxation of such bills of costs” in the Summons.

16 December 1993: The Hulme J December 1993 Orders

56. On 15 December 1993, Hulme J delivered reasons for judgment (“Hulme J December 1993 Judgment”).

57. By the morning of 16 December 1993, the defendants had served on the plaintiffs the bills of costs (“Bills”) in the 16 matters.

58. The matter of taxation of the Bills directed by the Hulme J November 1993 Orders to be prepared was dealt with by Hulme J on 16 December 1993 when Hulme J made orders (“Hulme J December 1993 Orders”) that included the following:

“1.    Order that there be referred for taxation the Defendants’ bills of costs in respect of the matters listed in the schedule to the summons herein filed on 24 August 1993.

2.    Order that, conditional upon there first being filed in court a written undertaking to the court given by such expert that

(i)    he will use such access to the defendants’ files, solely for the purposes of taxation of bills of costs relating thereto;

(ii)    he will insure that any copies taken of documents in the files are used solely for the purposes of taxation of bills of costs relating thereto; and

(iii)    he will ensure that, as long as any copies he takes of documents in all times;

the Defendants on reasonable notice make available to a costs expert appointed by the plaintiffs all of their files in respect of the matters listed in the schedule to the summons herein, such access to commence not later than 31 January 1994.”

3 February 1994: Hulme J February 1994 Orders

59. The Proceeding was next before the Court on 3 February 1994 when Hulme J made certain orders for the filing and service of affidavits in relation to “paragraphs 4, 5 and 6 of the plaintiffs’ Summons dated 23 August 1993” (“Hulme J February 1994 Orders”), which concerned the prayers for relief sought by the plaintiffs in the Summons for the taking of accounts in relation to payments which the plaintiffs, and other companies controlled by Mr Preston, had made to the defendants from 1 January 1989 to 30 October 1992 (“Hulme J February 1994 Orders”).

March 1994: Service of amended Bills

60. Between late February 1994 and late March 1994, the defendants served on the plaintiffs amended Bills in some of the 16 matters.

First part of 1994: The Plaintiffs’ Solicitor and Costs Expert Inspect the Firm’s files Relating to the 16 Matters

61. Subsequent to the Hulme J December 1993 Orders, in the first part of 1994, Mr Timothy Ryback, costs consultant and expert engaged by the plaintiffs (“Ryback”), together with the then solicitor of the plaintiffs, attended the offices of the Firm on a number of occasions to inspect the Firm’s files relating to the 16 matters.

62. The plaintiffs contended that the immediate previous paragraph of the agreed narrative should contain a statement that Mr Rybak attended the offices of the Firm “without Mr Preston who was not permitted to attend in light of the Hulme J December 1993 Orders”. But the Court declines to make this finding as the Court does not accept that the Hulme J December 1993 Orders required Mr Preston not to attend and whether or not he did attend does not seem to be a finding material to the Court’s reasoning.

9 June 1994: The Hon. D. Needham QC Appointed Referee to take Accounts

63. After several extensions of the timetable set on 3 February 1994, the matter came before Hulme J on 9 June 1994 and his Honour dealt with a notice of motion filed by the defendants on 27 May 1994 seeking the appointment of a referee:

“to take accounts of payments made to the defendants for the defendants’ costs, and the disbursements or application of such payments, in respect of the matters set out in Schedule A to the summons dated the 17th of September 1993”.

64. Upon the hearing of that notice of motion, Hulme J made a number of orders (“Hulme J June 1994 Orders”) , including for the appointment of the Hon. D. Needham QC (formerly Needham J) to be appointed referee for the purpose of the taking of such accounts:

“Pursuant to Part 72, r(2)(1) refer to Mr G D Needham, QC the account and objections referred to in paragraph 3 below for inquiry and report.”

65. It is clear from the reference in order 1 of the Hulme J June 1994 Orders to “paragraph 3 below” – and from the terms of the notice of motion dated 27 May 1994 of the defendants - that the referee was to take an account of receipts and payments as between the plaintiffs and the defendants named in the Summons and that these orders were made by reference to the claims in paragraphs 4, 5 and 6 of the Summons.

66. At the end of 1994, therefore, the matter of preparation of bills of costs and taxation of costs had become the subject of the Hulme J November 1993 Orders and the Hulme J December 1993 Orders; while the matter of an account had become the subject of the reference out ordered in the Hulme J June 1994 Orders.

67. The first aspect, arising under paragraphs 1, 2 and 3 of the Summons, had been dealt with by orders for the preparation of bills of costs in relation to the relevant solicitor-client matters, an order for taxation of those bills and an order allowing access to the defendants’ files to a “costs expert” retained by the plaintiffs, no doubt to assist the plaintiffs in preparing their case in anticipation of proceedings before a taxing officer.

68. The second aspect, concerning the taking of an account, covered by paragraphs 4, 5 and 6 of the Summons, had been referred out to a referee, namely Needham QC, for the taking of the relevant accounts.

69. After the Hulme J June 1994 Orders were made, the defendants, although not envisaged or required by the Hulme J June 1994 Orders, commissioned Armstrong Wily, chartered accountants, to prepare the D.R.A.W. Report. The D.R.A.W. Report calculated that the plaintiffs were indebted to the defendants in the amount of $116,168.55.

1 July 1994: Replacement of System of Taxation of Costs with System of Assessment of Costs

70. The Legal Profession Reform Act 1993 No. 87 introduced, with effect from 1 July 1994, a system of assessment of costs by legal practitioners appointed by the Chief Justice to be costs assessors, to replace the system of taxation of costs, which involved the delivery of bills of costs, notification of objections and taxing of the bills by an officer of the court. The Legal Profession Reform Act 1993 No. 87 effected this and other amendments concerning legal costs by repealing and substituting the Legal Profession Act 1987, Part 11. As explained below, in July 1996 the Court made orders in the Proceeding as a consequence of the introduction of the system of assessment of costs from 1 July 1994.

71. At the same time, that is, 1 July 1994, the Legal Profession Regulation 1994 commenced. Part 9 Division 3, inter alia, contained transitional provisions associated with the replacement of the system of taxation of costs with a system of assessment of costs.

72. Relevantly, clause 38(3) in Legal Profession Regulation 1994, Part 9, Division 3 stated:

“If, however, application is made on or after 1 July 1995 (whether for the taxation or assessment of costs), the costs are to be assessed in accordance with new Part 9 of the Act. However, the former taxation principles apply to any such assessment and that Part is to be construed accordingly.”

[Emphasis added].

14 October 1994: Hulme J October 1994 Orders

73. On 14 October 1994, Hulme J amended the Hulme J June 1994 Orders in relation to the taking of accounts (“Hulme J October 1994 Orders”).

15 November 1994: Plaintiffs no longer pursue the reference before the Hon. D. Needham QC

74. On about 15 November 1994, the plaintiffs informed the defendants that the Plaintiffs no longer pursued the reference before the Hon. Needham QC for taking of accounts by a letter dated 15 November 1994, from Mr Torrence Edward Kitamura, solicitor of Osborne Kitamura Lawyers (“Kitamura”), the then solicitor for the plaintiffs in the Proceeding, to the Firm (“Kitamura/the Firm 15 November 1994 Letter”).

75. The Kitamura/the Firm letter dated 15 November 1994 letter read, in part, as follows:

“I confirm my telephoned advice on 11th November 1994 that, in consequence of the books of your firm being made available pursuant to the orders made on 9th June 1994, confirmed on 12th October 1994, my clients’ accountants have been able to reconcile payments made by my clients to your firm with particular accounts for professional work. It is quite apparent that, in the absence of this examination such reconciliation would have been impossible. Because the reconciliation was effected it will now be unnecessary for the parties to incur the expense of pursuing the reference.

Would you please let me know by return that I may inform Mr Needham QC accordingly.

With reference to paragraph 2 of your letter dated 7th November 1994 I confirm Mr Zwar’s advice on 11th November 1994 that the document headed ‘Confirmation of retainer’ is the only document evidencing an agreement as to a fee rate between your firm and my clients.

I expect to be filing and serving objections to your bills of costs shortly. They are now in the final stages of preparation.”

76. The plaintiffs contended, and the defendants disputed, that the agreed narrative should at this point include words to the following effect “The Kitamura letter expressly states that the plaintiffs’ accountants have been able to reconcile payments made by the plaintiffs to the Firm only”. But the Court declines to include these words in the findings as the Kitamura/Firm 15 November 1994 letter speaks for itself.

77. As a consequence of the matters stated in the Kitamura/Firm 15 November 1994 Letter, at a practical level, the taking of accounts and reference before the Hon. D. Needham QC was at an end, although the orders revoking the reference were not made until mid-1996.

6 December 1994: Plaintiffs’ December 1994 Objections served on the Defendants

78. On or about 6 December 1994, Kitamura served on the Firm Objections to 15 of the 16 Bills. The Objections, which were 133 pages in length, challenged or put in issue the retainer on which the Firm relied: see, for example, pages 2, 3, 19 and 27 of the Objections.

28 February 1995: Orders and judgment of Hulme J

79. On 28 February 1995:

1. there was a hearing before Hulme J;

2. Hulme J delivered reasons for judgment (“Hulme J February 1995 Judgment”);

3. Hulme J made orders to give effect to the Hulme J February 1995 Judgment (“Hulme J February 1995 Orders”).

80. The Hulme J February 1995 Orders were:

“(1)   I confirm existing orders for costs.

(2)   Except insofar as orders have previously been made thereon, I dismiss the summons.

(3)   I make no order as to costs.”

81. The Hulme J February 1995 Orders were made in the context of the Hulme J February 1995 Judgment. At the commencement of the Hulme J February 1995 Judgment, Hulme J stated:

“By summons filed on 24 August 1993 the plaintiffs sought orders against their former solicitors firstly for the delivery of bills of costs in respect of identified matters, and secondly that those bills be referred for taxation, thirdly for the delivery up of the plaintiffs’ documents in four specified matters, and fourthly an order for the taking of accounts. The summons contained ancillary prayers.”

82. In relation to the first two orders in the Summons (delivery of Bills and referral of them for taxation), Hulme J stated:

“The plaintiffs were successful in respect of prayers 1 and 2 in the summons…”.

and:

“It was on 16 December 1993 that I ordered that there be referred for taxation the defendant’s bills of costs, I having, prior to that time, ordered the production of such bills.”

83. In respect of prayer 3 in the Summons (delivery up of certain of the plaintiff’s Documents), Hulme J stated that he had dealt with this in the hearing on 9 November 1993:

“On the topic of order 3 the plaintiff sought the unconditional delivery of files; the defendants resisted that unless they were paid their costs. The conclusion at which I arrived was that the plaintiff should pay something of the order of a third of the sum claimed, or a little more, and provide security for another third, or a little more.

I regard the plaintiffs as the losers on that application as it was debated…”.

84. In relation to prayer 4 of the Summons (taking of accounts), Hulme J stated:

“The fourth order sought was for the taking of accounts. That issue arose in the context of a claim by the defendants that the plaintiffs were indebted to them in the sum of some $97,000 and the plaintiffs were denying in effect any indebtedness, although the taking of accounts was directed to ascertain the situation.

Ultimately orders were made for the production by the defendants of a detailed statement of financial transactions with their clients, for the inspection of the defendant’s files by or on behalf of the plaintiffs, and for the reference of the question of accounts to Mr Needham QC.

Consequent upon the interlocutory orders made, the defendants engaged Armstrong Wily & Co to prepare a report analysing the various financial transactions which had occurred between the parties. The conclusion at which that firm arrived was that the defendants [should read plaintiffs] were indebted to the plaintiff [should read defendants] on those accounts – which I interpolate did not reflect any taxation of bills – in an amount of some $116,000, an amount which will be noted exceeds that which the defendants were claiming. The sum of $116,000 seems to have been arrived at after holding against the defendants the absence of some records of matters which the accountants would have expected.

Following upon the plaintiffs’ receipt of that report and consideration of the matter by accountants or other persons engaged on their behalf, the plaintiffs indicated they would no longer pursue the topic of their reference before Mr Needham. I think the only proper inference to be drawn from the plaintiffs’ conduct in this regard is that the plaintiffs were conceding that the defendants’ claim for some $97,000 was, on the basis which was then advanced, correct. Again I interpolate, this is without any taxation.”

85. In relation to Hulme J’s statement that “the plaintiffs were conceding that the defendants’ claim for some $97,000 was ... correct”, Mr Preston’s position is that he did not make, and never made, such a concession. Mr Preston’s position then and now is that he is not liable for the monies claimed by the defendants. The defendants dispute Mr Preston’s denial. This issue is dealt with later in these reasons.

86. Finally, Hulme J stated:

“The issues on prayers 3 and 4 of the summons as they have been raised before me, do not depend upon the ultimate result of taxation.”

Barrett J explains the legal effect of the Hulme J December 1993 Orders, Hulme J June 1994 Orders and Hulme J February 1995 Orders in the Barrett J March 2010 Judgment

87. One of the questions which Barrett J had to consider, which was the subject of the hearing before his Honour in December 2009, and formed part of the Barrett J March 2010 Judgment, was:

“Whether orders made in the past disposed of the proceedings in their entirety, so that there is nothing left requiring adjudication.”

88. In order to determine this question his Honour reviewed, and considered in detail, the history of the Proceeding from its commencement until the making of the Hulme J February 1995 Orders. In the Barrett J March 2010 Judgment, his Honour considered and interpreted the effect of the:

1. Hulme J December 1993 Orders;

2. Hulme J June 1994 Orders; and

3. Hulme J February 1995 Orders,

in the Barrett J March 2010 Judgment at [56]-[61]:

“56    In relation to the first of these questions, I am of the opinion that orders made in the past disposed of the proceedings in part but not in their entirety. It is true that the orders made by R S Hulme J on 28 February 1995 included the following:

‘Except in so far as orders have previously been made thereon, I dismiss the summons.’

57    At an earlier point, however, his Honour had made two orders of significance. On 16 December 1993, he ordered that ‘there be referred for taxation’ the identified bills of costs. On 9 June 1994, he referred to a referee ‘for inquiry and report” what were described as “the account and objections referred to in paragraph 3 below’. That paragraph 3 contained directions for the preparation of a detailed account of moneys received by ‘the Defendants’ from ‘the Plaintiffs’ and of the disbursement of and dealings with those moneys, with provision for “the Plaintiffs” to notify their objections and ‘any items in dispute’.

58    The effect of those two orders was to set in train two separate processes directed towards a final determination of the state of the account between the plaintiffs and the solicitors. This was obviously with a view to the determination of the claims advanced by the summons, as set out at paragraph [4] above. The need to determine those claims remained extant when R S Hulme J made the orders of 28 February 1995. Order (2) of that date quoted at paragraph [17] above was, by its terms, in the nature of a residual order – in the sense that it dealt with matters not already dealt with in some other way. It therefore did not operate to cut across the processes that had already been set in train to determine the liability of the plaintiffs to the defendants for costs and the state of account between the plaintiffs and the defendants as their solicitors.

59    It is clear that there was an expectation on the part of R S Hulme J that the processes set in train by his orders would determine both those matters – subject, of course, to adoption by the court of the report to be prepared by the referee in respect of the second matter; and with the possibility that the court might decline to adopt the report or might adopt it with modifications. As at 28 February 1995, however, his Honour stated that a position had been reached where the taxation of costs was proceeding but neither party wished to pursue the reference to the Honourable G D Needham QC; also that the plaintiffs had conceded, in respect of paragraph 4 of the summons (that is, the claim for an order that accounts be taken), that the defendants’ claim for “some $97,000” was “correct” (with the question of taxation of costs still left to one side). The letter of 15 November 1994 referred to at paragraph [18] above supported the conclusion that the parties had reached a compromise on the account aspect.

60    The court thus noted on 28 February 1995 that agreement between the parties had produced a result where the plaintiffs were to pay a stated sum to the defendants and there was no need for an account. It was that conclusion that led R S Hulme J to say, “the plaintiffs have lost the issue raised by order 4 in the ultimate”. The order than made dismissing the summons “[e]xcept in so far as orders have previously been made” must therefore be taken to have extended to the claim in paragraph 4 of the summons, that is, the claim for an order than accounts be taken. That part of the proceedings was, at that time, concluded and the claims in the summons were, at least to that extent fully adjudicated.

61    What is perfectly clear, however, is that the adjudication of 28 February 1995 did not touch upon or affect the part of the relief claimed in the summons that was concerned with the quantification of solicitor-client costs. When R S Hulme J made what was, in a sense, a residual order of dismissal on that day, the orders of 9 November 1993 and 16 December 1993 were extant with respect to the question of quantification of costs. As a consequence, the proceedings remained alive in relation to the claims in paragraphs 1 and 2 of the summons. I say this because of the effect the orders of 9 November 1993 and 16 December 1993 actually had, having regard to the statutory scheme then in force.”

89. In relation to Barrett J’s reference at [59] to a concession made by the plaintiffs, Mr Preston’s position is that he never made such a concession. In relation to Barrett J’s statement at [60] that “the plaintiffs were to pay a stated sum to the defendants”, Mr Preston disagrees that he had to pay a stated sum to the defendants. Mr Preston’s position then and now is that he is not liable for the monies claimed by the defendants. The defendants disagree with Mr Preston’s position. This disagreement reflects with one of the issues in the proceedings, an issue dealt with in the reasons below.

90. Also, following the hearing in the Proceeding on 25 and 26 August 2011 before Black J, his Honour delivered reasons for judgment on 13 September 2011 (“Black J September 2011 Judgment”). Black J stated at [12]:

“As Barrett J observed in paragraphs [57]-[59] of the 2010 judgment, the matters that remained in the proceedings were, from 28 February 1995 on, only the taxation of costs. Barrett J also noted that the dismissal of the balance of the proceedings on 28 February 1995 did not affect that part of the relief claimed in the Summons that was concerned with quantification of solicitor-client costs ie the orders sought pursuant to LPA s 208 (as to delivery of Bills of Costs to Mr Preston) and pursuant to LPA ss 199-200 (as to the reference of those bills to taxation) (at [61]).”

18 April 1995: The Plaintiffs’ Objection to the Bill in the Strong Brown Matter served on the Defendants

91. On or about 18 April 1995, Kitamura served on the Firm the plaintiffs’ Objection to the defendants’ Bill in the Strong Brown Matter and, as a consequence, the plaintiffs had now served the plaintiffs’ Objections to all of the defendants’ 16 Bills.

1995 and Early 1996: Progress of Taxation of the 16 Bills

92. As stated above, on or about 6 December 1994, Kitamura served on the Firm Objections to 15 of the 16 Bills. Apart from service by Kitamura of the final Objection or about 18 April 1995, throughout 1995 and early 1996 neither the plaintiffs nor the defendants took steps to progress the taxation of the 16 Bills.

93. On 22 March 1996, the Firm on behalf of the defendants wrote a letter to the Taxing Officer of the Court to formally ask that the taxation of the file be undertaken by the Supreme Court, in circumstances where the plaintiffs had “raised an issue as to the retainer” (which issue was raised in the Objections served by the plaintiffs on the defendants in December 1994). The Firm’s letter continued:

“It is our understanding that a Costs Assessor pursuant to the amended legislation does not have judicial power to make a determination as to the existence or otherwise of a retainer. We understand a determination can be made in connection with the quantum of a retainer, but not whether or not a retainer is in existence.

Accordingly, we formally ask that the matter be listed before a Taxing Officer of the Supreme Court with a view to establishing a time table having regard to the matters raised in the Objections. We undertake to pay the appropriate filing fee.”

February to July 1996: Application by Plaintiffs for Assessment of Interlocutory Costs Orders in their Favour and Consequential Events

94. As part of the Hulme J December 1993 Orders, Hulme J ordered:

“Order the Defendants are to pay the Plaintiffs’ costs of the appearance on 10 December 1993 and of today [16 December 1993] on a solicitor/client basis.”

95. After the Hulme J February 1995 Orders were made, the plaintiffs took steps to have these costs order and some other costs orders in their favour assessed. On 16 February 1996, the plaintiffs served a bill of costs on the defendants as a step towards having their costs assessed.

96. On 14 March 1996, the defendants filed a notice of motion (“Defendants’ March 1996 Motion”) in the Proceeding seeking an order:

“That the application for assessment of Party/Party Costs presented by the First and Second Plaintiffs on or about 16th February 1996 be consolidated with the taxation of all bills rendered by the Defendants to the First and Second Plaintiffs and filed in these proceedings herein.”

97. The language used by the defendants in this notice of motion reflected the fact that, in respect of the defendants’ bills of costs, orders had been made for the bills to be taxed under a system of taxation which existed up until 30 June 1994, while the plaintiffs’ application for assessment of some interlocutory costs orders in their favour was made under the system of assessment which commenced on 1 July 1994.

98. The third defendant, Mr Michael Zwar swore an affidavit on 13 March 1996 in support of the defendants’ March 1996 Motion (“Zwar March 1996 Affidavit”).

99. The Zwar March 1996 Affidavit indicated that the defendants sought an order that the plaintiffs’ assessment of some interlocutory costs orders in their favour “be consolidated” with the taxation of the 16 Bills and be “dealt with before a taxing master”.

100. The Zwar March 1996 Affidavit, inter alia, stated:

“The Defendants have sought taxation of bills of costs rendered to the First and Second Plaintiffs and filed during the course of the proceedings.

Objections have been received from the Plaintiffs and in order to finalise the taxation, it will be necessary to determine as a preliminary issue the retainer between the parties in connection with work done on behalf of both the First and Second Plaintiffs and other companies associated with the First and Second Plaintiffs.”

101. On 3 May 1996 Kitamura swore an affidavit in relation to the Defendants’ March 1996 Motion. He stated, inter alia:

“I refer to the affidavit filed in support of the motion by Michael John Zwar sworn 13 March 1996. I agree that as part of the taxation of the Bills of Costs it will be necessary to determine as a preliminary issue the retainer between the parties. No date has been allocated for the determination of this preliminary issue although this issue will in all likelihood be determined by a Judge of the Court rather than a Taxing Officer.”

102. On 17 May 1996, Mr Zwar swore a further affidavit in support of the Defendants’ March 1996 Motion (“Zwar 17 May 1996 Affidavit”). Mr Zwar stated, inter alia:

“The Defendants have requested this Honourable Court to undertake taxation of the Bills of Costs presented by the Defendants to the Plaintiffs in December 1993 and January/February 1994.

Annexed hereto and marked with the letter ‘A’ is a true copy of a letter dated 22nd March 1996 to the Taxing Officer of the Supreme Court of New South Wales.

At present it appears that the cost division of this Honourable Court is reluctant to undertake taxation of files due to amendments to the Legal Profession Act which took effect from July 1994. I am advised by the Taxation Registry that no further taxations are being conducted by the Court.

An order was made by His Honour, Mr Justice Hulme on that the Bills filed in Court be taxed.

Annexed hereto and marked with the letter ‘B’ is a true copy of His Honour’s order dated 16th December 1993.”

103. In May 1996, Mr Leonard Hattersley, solicitor, the assessor who had been appointed to conduct the assessment of the plaintiffs’ costs awarded in the Proceeding in the plaintiffs’ favour, up to 28 February 1995, when the Hulme J February 1995 Order was made, sent written communications to the parties stating he was proceeding with the assessment.

104. On 10 May 1996, Mr Hattersley wrote a letter to the Firm stating:

“The Proper Officer of the Supreme Court of New South Wales has assigned to me pursuant to the Legal Profession Act 1987 the determination of the application for assessment of costs filed by Messrs Thomas Osborne Kitamura Solicitors on behalf of the applicants…”

105. As at May 1996, Mr Hattersley was a “costs assessor” within the meaning of section 173(1) of the 1987 LPA, namely:

“a person appointed as a costs assessor under Division 6”.

106. To be a costs assessor, Mr Hattersley had to be appointed a costs assessor by the then Chief Justice of the Supreme Court of New South Wales.

107. On 30 May 1996, the defendants filed and served a notice of motion in the Proceeding seeking an order that Mr Hattersley “be restrained until further order from conducting any further assessment in connection with the Bill of Costs delivered by the first and second respondents [plaintiffs] dated 13 March 1996.” The Motion was returnable before Hulme J on 31 May 1996.

108. In the meantime, on 31 May 1996, Mr Hattersley informed the defendants’ solicitor that he had completed the assessment and he issued a certificate of determination in respect of his assessment.

109. Around 4 June 1996 the defendants served an amended notice of motion (“Defendants’ Amended May 1996 Motion”) seeking an order that “the enforcement of any judgment taken out by the applicants [plaintiffs] be stayed until further order of the taxation of the respondents’ bills of costs delivered to the applicant in December 1993 and January 1994 be concluded”.

110. In support of the Defendants’ Amended May 1996 Motion, Mr Zwar swore an affidavit dated 31 May 1996 (“Zwar May 1996 Affidavit”).

111. The parties filed and served further affidavits in relation to the Defendants’ Amended May 1996 Motion, including the following affidavits:

1. Mr Zwar sworn 4 June 1996;

2. Kitamura sworn 3 July 1996;

3. Michelle Castle, solicitor and costs consultant, sworn 4 July 1996;

4. Mr Zwar sworn 17 July 1996;

5. Kitamura sworn 24 July 1996.

25 July 1996: Hearing, Reasons for Judgment and Orders of Young J

112. The Defendants’ Amended May 1996 Motion came before Young J as duty judge for hearing on 25 July 1996. After a contested hearing, Young J:

1. delivered reasons for judgment (“Young J July 1996 Judgment”); and

2. made orders (“Young J July 1996 Orders”).

113. In the Young J July 1996 Judgment, his Honour stated:

“As I understand it, there are orders for costs both ways. The costs which are due to Mr Preston or his enterprises are finalised and are either a judgment of the court or about to be a judgment of the court. The costs that may be payable the other way are still to be determined. Because of delay, and it would seem principally the delay of the solicitors, the bill was not in such a form that an application was made before 1 July 1995 for taxation

Regulation 80 under the Legal Profession Act probably operates to amend the order that was made by Hulme J before 1 July 1994 as to taxation, so that under regulation 80(3) the costs that are to be assessed in accordance with the new Pt 11 of the Act, but the former taxation principles apply.

Mr Sirtes, for the plaintiff client, says that that causes injustice unless “principles” are defined as including procedures. Mr Sirtes argued for that construction but, with great respect, it is an almost impossible argument.

Principles of taxation are well understood and they do not include the method of hearing, or the procedures involved. It refers to the matters of law and to substantive practice which have been applied by taxation experts and are set out in Mr Saddington’s book and other places.

Mr Sirtes then says that if regulation 80(3) applies his client will suffer additional expense because the new procedures are far more expensive than the ones under the previous legislation. If that is so, and it may well be, then that is a result of a deliberate decision of the legislators and the executive government, rather than anybody else’s fault.

… The … bills of costs now have to be considered by the appropriate official. They will need to be dealt with by assessment and the assessor will apply the principles of taxation.”

114. Young J’s reasons for judgment concerning this issue were given effect to by order 3 of the Young J July 1996 Orders, namely:

“3. Direct the proper officer of the court to refer to Mr L Hattersley solicitor the Defendants’ Bills of Costs for assessment pursuant to section 206 of the Legal Profession Act 1987.”

115. Young J made order 3 of the Young J July 1996 Orders in the context of the 1987 LPA, s 206(1), which provided:

“The proper officer of the Supreme Court is to refer each application for assessment to a costs assessor to be dealt with under this Division.”

116. Young J directed “the proper officer of the court” to refer the 16 Bills for assessment pursuant to section 206 of the 1987 LPA to Mr Hattersley as Mr Hattersley was:

1. a “costs assessor” within the meaning of the 1987 LPA; and

2. the costs assessor to whom the plaintiffs’ application for assessment of their costs in respect of costs ordered in their favour by Hulme J had been referred.

117. The Young J July 1996 Judgment also dealt with the issue of the terms of the retainer between the plaintiffs and the defendants which had arisen by this time, as referred to in the Zwar March 1996 Affidavit, amongst others, in the following terms:

“There is an issue between the parties not that the solicitors were retained by the client, but as to the terms of the retainer. It seems sensible to isolate that issue and refer it to the decision of the same person who makes the assessment of costs.”

118. Young J gave effect to this in orders 4, 5 and 6 of the Young J July 1996 Orders which provided:

“4.   I refer the question of the terms of the Defendants’ retainer by the Plaintiff to Mr L Hattersley for inquiry and report.

5. Liberty to the Referee and the parties to approach the court for directions under Part 72 Rule 8 on three days’ notice.

6.   The Defendant undertakes to provide the Plaintiffs’ solicitors and its costs assessors with access to the files on reasonable notice for a period of 6 weeks.”

119. Thus, the issue of the question of the terms of the defendants’ retainer by the plaintiffs was referred to Mr Hattersley, not as a costs assessor under the then new Part 11 of the 1987 LPA, but as a referee under Supreme Court Rules 1970, Part 72 rule 8.

120. Young J also granted the defendants the restraining order they sought. Order 1 of the Young J July 1996 Orders was:

“1.   Order that the Plaintiffs be restrained until further order of the court from enforcing or seeking to enforce the certificate of Mr L Hattersley in relation to the costs payable pursuant to orders of Hulme J.”

Defendants’ Bills and Plaintiffs’ Objections had to be redone to procedurally conform with the forms and requirements for assessment of costs under the Legal Profession Act 1987 (NSW)

121. It only became apparent, when dealing with the Court after the Young J July 1996 Orders were made, that the Court required the:

1. defendants’ Bills; and

2. plaintiffs’ Objections,

in the 16 matters had to be redone to procedurally conform with the forms and requirements for an assessment of costs under the 1987 LPA as amended.

122. As a consequence, Mr Zwar, on behalf of the defendants, had to take steps to amend the defendants’ Bills in the 16 matters so that they conformed with Mr Zwar’s understanding of the procedural requirements for assessment of costs under the 1987 LPA, as amended.

123. This occurred in two tranches:

1. the first, the Bills in 10 of the 16 matters, which Mr Zwar filed with the Court on 1 November 1996, on behalf of the defendants;

2. the second, the Bills in the remaining 6 matters, which Mr Zwar caused to be filed with the Court on 20 January 1997, on behalf of the defendants.

124. Mr Zwar, on behalf of the defendants, ascertained that the assessment procedures in the 1987 LPA required a separate costs assessment proceeding to be commenced by way of an application for assessment of costs (“Applications”) for the Bills in each of the 16 matters.

November 1996 to March 1997: Filing of Bills and Referral to Costs Assessor

125. At the very end of October 1996 or on 1 November 1996, Mr Zwar, on behalf of the defendants, prepared Bills in 10 of the 16 matters as follows:

1. a coversheet was prepared which complied with the Form then applying in relation to assessment of costs arising from the 1994 amendments to the 1987 LPA, which replaced taxation of costs with assessment of costs, which took effect on or about 1 July 1994;

2. the coversheet:

1. identified the parties as the plaintiffs and the defendants, conformable with the way in which this was done for a proceeding filed in the Court at that time;

2. provided for filing with the Court in the 1996 year by stating in the top left hand corner “1996”;

3. left a space before “1996” for the Registry of the Court to hand write in the matter number, in accordance with the then practice in the preparation of a court document, initiating a proceeding with the Court;

3. the coversheet did not identify which of the 16 matters the assessment of costs related to as the pro forma cover sheet was used for each of the 16 matters;

4. sufficient copies of the coversheet were printed so that there was one coversheet for each of the 10 of the 16 matters:

5. Mr Zwar signed each coversheet; and

6. behind each coversheet were attached the Bills in 10 of the 16 matters which had been served on the plaintiffs on 15 December 1993.

On paragraph 2(a) of each of the coversheets was typed:

“The costs which are the subject of this application were included in my bill of costs dated 15 December 1993 a copy of which is attached. The bill was given to the client on 15 December 1993 in the following manner:

Forwarded to new solicitor”.

126. On 1 November 1996, the defendants attended and filed with the Registry of the Court the defendants’ Bills in 10 of the 16 matters identified in Table 2 below, in respect of which the defendants paid the applicable filing fee and a separate costs assessment file number was entered by the Registry of the Court in respect of each of the 10 matters, as identified in Table 2:

Table 2: The 10 November 1996 Applications, with Attached Bills

A	B	C	D	E	F
Item No.	Cost assessment file number	Division	Matter	Filing Fee	Hulme J November 1993 Schedule No.
1.	91256/1996	CL	Strong Brown	$200.95	12
2.	91257/1996	CL	Constructions Matter	$155.97	11
3.	91258/1996	CL	Skygram Matter	$100	7
4.	91259/1996	CL	Roach Matter	$100	4
5.	91260/1996	CL	Lombe Matter	$100	6
6.	91261/1996	CL	Four M.J. Matter	$100	5
7.	91262/1996	CL	Sunrise Matter	$100	8
8.	91263/1996	CL	King Matter	$100	3
9.	91264/1996	CL	Hume Computers Matter	$100	16
10.	91265/1996	CL	Favelle Matter	$157.80	13
11.	Total	$1,214.72

127. On or about 6 November 1996, the Registry of the Court served sealed copies of the Applications, together with the attached Bills, in 10 of the 16 matters filed by the defendants on 1 November 1996.

128. On 11 December 1996, the plaintiffs filed Objections to the Bills attached to the Applications in 10 of the 16 matters filed by the plaintiffs with the Registry of the Court on 1 November 1996.

129. By 14 January 1997, in circumstances where the Defendants had not filed a response to the Objections within the requisite 21 day period, Ms Lena Ruggero, Proper Officer, Costs Assessment of the Court referred to Mr Hattersley for costs assessment the Applications, together with the attached Bills and Objections, 10 of the 16 matters in respect of the Applications filed by the Defendants on 1 November 1996.

130. On 20 January 1997, the defendants’ solicitor attended the Registry of the Court and filed the Applications, together with the attached Bills, in the remaining 6 of the 16 matters, identified in Table 3 below:

Table 3: Applications, with attached Bills, in the remaining 6 of the 16 Matters

A	B	C	D	E	F
Item No.	Cost assessment file number	Division	Matter	Filing Fee	Hume November Schedule 1993 No.
1.	90104/1997	CL	Mevon Matter	$288	10
2.	90112/1997	CL	Elwens Matter	$100	1
3.	90113/1997	CL	State Bank Matter	$176	2
4.	90114/1997	CL	Sandman Matter	$100	9
5.	90115/1997	CL	Fred Jeffrey Trucks Matter	$100	14
6.	90116/1997	CL	Hekeik Matter	$100	15
Total	$864

131. On 21 January 1997, Ms Ruggero notified the plaintiffs, and provided to them sealed copies of, the defendants’ applications, with the attached Bills, in respect of the remaining 6 of the 16 matters, which the defendants had filed in the Court Registry on 20 January 1997 and informed the plaintiffs that they had 21 days from receipt of such notice to file any Objections to such Bills.

132. On 17 February 1997, the plaintiffs filed Objections with the Court Registry in respect of the Bills in the remaining 6 of the 16 matters.

133. In about late March 1997, the defendants, not having filed any response to the plaintiffs’ Objections to the Bills in the remaining 6 of the 16 matters, these six Applications, with the attached Bills and Objections, were referred to Mr Hattersley for costs assessment.

134. In the Objections filed by the plaintiffs to the Bills attached to the Applications in:

1. 10 of the 16 matters, filed by the plaintiffs with the Registry of the Court on 11 December 1996; and

2. the remaining 6 of the 16 matters, filed by the plaintiffs with the Registry of the Court on 17 February 1997,

the plaintiffs continued to raise the issue as to the retainer.

April 1997 to May 2010: No Steps Taken in relation to the Quantification of the Amount of the Defendants’ Costs the Subject of the 16 Bills

135. From the time of the referral of the 16 Applications together with the attached Bills and Objections, in respect of the 16 matters, to Mr Hattersley for costs assessment, no steps were taken in relation to the quantification of the defendants’ costs in respect of the Bills in the 16 matters until after 11 May 2010.

1998 and 1999: Dispute concerning terms of retainer

136. There was a very live issue between the plaintiffs and the defendants in relation to the question of the defendants’ retainer by the plaintiffs. In the period from 27 February 1998 to 22 October 1998, there were a series of written communications between Mr Hattersley and the legal representatives for the parties on the question of the retainer. In a letter from Mr Hattersley to the legal representative for the plaintiffs dated 27 February 1998, Mr Hattersley stated that, during an inspection of some files at the offices of the Firm, he had come across a copy of a letter dated 19 April 1984 which appeared to assist the defendants’ position on the dispute between the parties concerning the retainer (“19 April 1984 Letter”). Mr Hattersley suggested in his letter that, subject to receiving submissions from the parties in relation to the 19 April 1984 Letter, he was “in the position where I will be able to conclude each assessment and to issue a Certificate of Determination as to Costs in each matter”.

137. In his letters dated 6 April 1998 to the legal representatives for the parties, Mr Hattersley observed that the process undertaken by a costs assessor was “totally paper driven” and that there were “no avenues available for me [Mr Hattersley] to hear and see any witnesses giving evidence scrutinised and tested through cross‑examination”. Mr Hattersley then wrote:

“Accordingly I would encourage the parties or one of them to seek directions and declarations from the Court so as to establish what were the precise terms and conditions of the solicitors’ retainers from time to time.

As a costs assessor appointed for the purposes of Part 11 of the Act I do not have any authority or entitlement to myself commence proceedings in the Supreme Court to seek directions, declarations or judicial advice.

…

However, as I have previously indicated I believe this case is one where the directions and declarations of the Court are essential for the just resolutions of the disputes.

…”

138. On 4 November 1998, Mr Nikolaidis swore an affidavit in the Proceeding (“Mr Nikolaidis’ November 1998 Affidavit”).

139. Mr Nikolaidis’ November 1998 Affidavit annexed a letter dated 12 June 1998 from the Firm to Mr Hattersley which, inter alia, stated:

“As you know Justice Young some considerable time ago referred to you certain questions for determination. It has always been our understanding that the reference to you of these issues was as a referee pursuant to the provisions of Part 72 of the Rules. It had nothing to do with the Court’s assignment to you of the taxation of costs pursuant to the Legal Profession Act. Accordingly as a referee you enjoyed the powers and authorities which Part 72 of the Rules conferred on referees.

…

As a referee appointed by the Court if you had any doubt about your role or position you are entitled to approach the Court for directions or alternatively seek to have the appointment of you as a referee determined and other referees appointed.

The appointment of you as a referee to determine the retainer issue has nothing to do with your ultimate assessment as to the reasonableness or otherwise of the costs. It follows accordingly the issues raised in the fourth paragraph of your letter to Messrs Wheelers of 6 April do not seem to be relevant. You may determine your own procedure.

….”

140. Mr Nikolaidis’ November 1998 Affidavit annexed a further letter dated 21 October 1998, from Mr Hattersley the plaintiffs’ then solicitors, Wheelers, copied to the Firm for the defendants. In this letter, Mr Hattersley referred to various correspondence from Wheelers between 24 June and 28 August 1998, and then, inter alia, stated:

“… Having spent a considerable number of hours endeavouring to progress each one of the above assessments [identified as applications for assessment of costs numbers 91255/96 to 91257/96, 91259/96 to 91264/96, 90112/96 to 90116/96 inclusive and 90104/96] to the stage where they are now all held in abeyance, I found it difficult to revisit the files.

Suffice it to say, each one of the above assessment applications requires a decision to be made as to what were the terms of solicitors’ retainers, when was such retainer made, between whom it was made and so forth. Bills of costs have been prepared and I believe I have inspected most if not all of the solicitors’ files. …

I reported the present state of each of the assessments to the Proper Officer of the Supreme Court of New South Wales on 1 June 1998 in the following terms:

‘Each one of the “Preston” assessment applications raises the question “what were the terms and conditions of the retainer by Preston (or any one of his various entities) of the Nikolaidis firm to provide legal services and upon what basis was the firm to be remunerated for providing services?

I am hopeful that one day the court will make some declaratory orders dealing with the retainer whereupon I will be able to conclude these assessment applications.’”

141. The Proceeding was listed before Young J on 5 November 1998, at which time, inter alia, Mr Nikolaidis’ November 1998 Affidavit was read.

142. As a consequence of the difficulties which Mr Hattersley faced, on 5 November 1998, Young J ordered (“Young J November 1998 Orders”) that:

“The order of 25 July 1996 referring to [sic] question of retainer to Mr Hattersley for inquiry and report be set aside.”

143. As part of the Young J November 1998 Orders, Young J:

“directed that the plaintiffs file and serve points of claim “on the issue of the terms of the retainer by 25 November 1998, that points of defence be filed and served by 9 December 1998”, and that any affidavits to be relied on by the defendants in the matter of the terms of the retainer be filed and served by 23 December 1998, with any affidavits of the plaintiffs in reply to be filed by 10 February 1999.”

144. The Proceeding came back before Young J on 18 February 1999. His Honour extended the timetable set on 5 November 1998 with respect to determination of the terms of the retainer so that the deadline for the final step was 7 June 1999 and the matter was to come back to court for mention on 17 June 1999. On that date, the timetable was extended to a date in September 1999 and the Proceeding was stood over to 27 September 1999 for mention. There was yet another extension of the timetable so that the last step was due to be taken by 6 December 1999 and the matter was to come back to court on 13 December 1999.

145. There were also a number of affidavits filed in the Proceeding in relation to the question of retainer, including the affidavits of:

1. Russell Clark Wheeler, solicitor of Wheelers, the then solicitor for the plaintiffs, sworn on 15 September 1998;

2. Mr Nikolaidis sworn on 15 October 1998;

3. Mr Nikolaidis’ November 1998 Affidavit.

2000 to 2002: Plaintiffs’ Notice of Motion and Continuing Dispute Concerning Terms of Retainer

146. On 26 July 2000, Mr Preston filed a notice of motion seeking leave to amend the Summons. The proposed amendments appeared from a form of amended summons annexed to the notice of motion which, in the usual way, showed the amendments by underlining. There were three proposed amendments, namely, the addition of eleven new plaintiffs (as third to thirteenth plaintiffs), the addition of Mr Zwar as a defendant and the addition of a prayer for an order “that any sums found, by virtue of the taxation and accounts referred to herein, to have been overpaid by any or all of the plaintiffs to the defendants be repaid”.

147. The amendment application was heard and determined by Master McLaughlin on 25 August 2000. After referring to the parties and the relief sought by the Summons as originally filed, the Master said:

“9.   I have been informed that on 28 February 1995 final orders were made by Hulme J in the terms of prayers 1 and 2 in the summons, and that otherwise the summons was dismissed. I have not been informed as to whether his Honour’s order was ever entered.

10.   There is a most voluminous file in this matter, the contents of which were the subject of comment by Young J on 25 July 1996, when his Honour said:

‘It is really absurd that it should have taken the amount of paper that has been created and the amount of delay that has occurred.’

11.   Since the matter came before Young J more than four years ago a considerable quantity of additional paper has been created in the matter. From what I have been told -- and I would emphasise that no evidence has been placed before the Court by affidavit or otherwise in support of the present notice of motion – the plaintiffs were formerly clients of the defendants, who are solicitors. It would appear from the judgment of Young J on 25 July 1996 that there is a dispute (described by his Honour as ‘a squabble’) between solicitor and client as to costs.

12.   The amended summons (which by the notice of motion presently before me the first plaintiff seeks to file) seeks the relief sought in the original summons together with a further prayer for relief which is consequential upon the earlier prayers for relief originally sought. That additional prayer for relief is ‘an order that any sums found by virtue of the taxation and accounts referred to herein to have been overpaid by any or all of the plaintiffs to the defendants be repaid’.

13.   More significantly, however, is the fact that the amended summons includes upon its entitlement the names of eleven additional plaintiffs (being described as referring to one to thirteen plaintiffs respectively) and the name of an additional natural person included in the description of the defendants. I have been informed by Counsel for the defendants that the additional person was in fact joined as a defendant many years ago at an early stage in the proceedings and that such additional joinder at this stage is not necessary. More significantly to the present application if the proposed joinder of the eleven additional plaintiffs.

14. The first plaintiff seeks to ground his present application upon the provisions of Part 20 rule 1 of the Supreme Court Rules. That rule relates to amendment of any document in the proceedings. It does not expressly relate to the joinder of parties. The addition of parties is the subject of express provision in Part 8 of the Rules, in particular Part 8 rule 8.

Accordingly, if I may succinctly state what my reasoning process is. Firstly, that the cause of action alleged by the plaintiff does not exist. Secondly, if it did exist it is only still the remedy that was formerly called quantum meruit. Thirdly, that even if it did exist it would still be caught be s 14(1)(a) of the Limitation Act 1969.

[39] In disposing of Mr Lenin’s application regarding the costs assessment proceedings, Bell J noted that Mr Coshott had appealed against the decision of Neilson DCJ. In fact, the appeal had been determined on 20 June 2007, the day before Bell J published her decision. The Court of Appeal dismissed the appeal: Coshott v Lenin [2007] NSWCA 153. That is the decision relied upon by the plaintiff in the present case. The court held that Mr Coshott’s belated claim for remuneration, “however packaged”, was barred by the Limitation Act: at [14] per Mason P; Spigelman CJ and Campbell JA agreeing at [1] and [19] respectively.

[40]   The decision of the Court of Appeal ought to have been brought to the attention of Bell J before her Honour published her decision the following day. Ironically, the result appears to be that, whilst Mr Coshott succeeded in defeating Mr Lenin’s application to restrain the costs assessments process as being based on extinguished debts, Mrs Coshott’s present application to restrain a like process is not defeated by that line of jurisprudence.

[41]   In my view, the defendants’ submissions in the present case misconceive the juridical foundation of the costs assessment system. A solicitor’s entitlement to lodge an application for a costs assessment is not a source of right or title in itself. It is an aspect of the regulation of the legal profession under the Legal Profession Act 1987. The Act creates an administrative mechanism for quantifying legal costs in a variety of circumstances, some of which raise no limitation issue (such as costs ordered by a court). To the extent that it provides for the assessment of costs payable under contract, I do not think it alters the fundamental nature of the right and title to those costs.

[42]   Support for that view may be found in the decision of the English Court of Appeal in Coburn v Colledge [1897] 1 QB 702 at 705–706, where Lord Esher MR said:

Before any enactment existed with regard to actions by solicitors for their costs, a solicitor stood in the same position as any other person who has done work for another at his request, and could sue as soon as the work which he was retained to do was finished, without having delivered any signed bill of costs or waiting for any time after the deliver of such a bill. Then to what extent does the statute alter the right of the solicitor in such a case, and does the alteration made by it affect or alter the cause of action? It takes away, no doubt, the right of the solicitor to bring an action directly the word is done, but it does not take away his right to payment for it, which is the cause of action. The Statute of Limitations itself does not does not affect the right to payment, but only affects the procedure for enforcing it in the event of dispute or refusal to pay. Similarly, I think s 37 of the Solicitors Act, 1843, deals, not with the right of the solicitor, but with the procedure to enforce that right.

[43] I have concluded that, subject to s 208J(3), the making of an application for a costs assessment under the Legal Profession Act 1987 does not immunise the right and title of a solicitor to bring a claim in contract for unpaid legal fees from the application of the Limitation Act.”

290. The Court agrees with her Honour’s conclusion at [43]. Her Honour then turned to the procedure for filing a certificate of assessment which she considered at [44] – [49] as follows:

“Procedure for filing a certificate of assessment

[44] In my view, however, the position of the solicitor is plainly protected upon the filing of a certificate of assessment in accordance with s 208J(3). I have concluded that the two judgments were properly obtained and are not liable to be set aside. The procedure allowed for is to file the certificate “in the office or registry of a court having jurisdiction to order the payment of that amount of money”. The effect of filing is that, without further action, the certificate is taken to be a judgment of that court for the amount of unpaid costs determined by the costs assessor.

[45]   It is necessary also to consider the provisions of the Civil Procedure Act and the Uniform Civil Procedure Rules. Section 133 of the Civil Procedure Act provides that a judgment may not be enforced until it has been entered in accordance with the rules. The section expressly extends to any award of which a certificate may be filed or registered in the court under any other Act or law. Accordingly, the combined effect of s 208J(3) of the Legal Profession Act 1987 and s 133 of the Civil Procedure Act is that a certificate, upon filing in the registry of a court, is taken to be a judgment of the court but is not enforceable until it has been entered in accordance with the rules.

[46] Rule 36.10(1) of the Uniform Civil Procedure Rules provides:

A costs assessor’s certificate:

(a)   may be filed in the proceedings to which it relates, or

(b)   may be filed in fresh proceedings, whether in the same court or another court.

[47]   In my view, the sensible reading of those provisions, taken together, is that in a case where there is no existing proceeding to which the certificate relates, the filing of the certificate is taken to be or to commence a fresh proceeding (in which the only step required to render the judgment enforceable is for it to be entered in accordance with the rules).

[48] As already noted, the problem remains that there is no occasion for the client to plead the limitation defence, and that is an anomaly. It may be noted, however, that s 208J(3) applies “in the case of an amount of costs that has not been paid”. In my view, an implicit premise of its application is the existence of a binding obligation to pay (which would not include a debt that had been extinguished under the Limitation Act due to the passage of time).

[49]   The practical solution is that the client has the opportunity to raise the limitation point during the assessment and, if it is not accepted by the assessor, to seek review or appeal.”

”

291. Somewhat similar issues arose in this case concerning the pleading of the taking of the limitation point but it has squarely been taken both by the Points of Claim served early in 2015 and by the filing of the February 2015 Motion and the commencement of the 2015 proceedings. Those processes satisfy the requirements of Limitation Act, s 68A to the requirement to plead the limitation point.

292. McCallum J then considered the question “Have the defendants brought an action on the cause of action?” and at [50] – [52] her Honour said as follows:

“Have the defendants brought an action on the cause of action?

[50]   The defendants submitted, in the alternative, that if costs assessments are subject to the Limitation Act, it is sufficient compliance that the application for assessment is lodged within six years of the cause of action occurring to the solicitor. It was noted in that context that the definition of “action” in the Limitation Act is an inclusive definition: s 11(1).

[51] Separately, Mr Turner submitted that s 68A(2) of the Limitation Act assists, since it refers to a judicial tribunal as including a court or person authorised to bind the parties to proceedings by a decision on a question arising in the proceedings. That submission overlooks the remaining words of s 68A(2). A “judicial tribunal” within the meaning of that section must be authorised to bind the parties by a decision as to whether or not a right or title has been extinguished under division 1 of Pt 4 of the Limitation Act. Mr Turner did not submit that a costs assessor has power to bind the parties by a decision as to that issue. I do not find any support for Mr Turner’s submission in s 68 A.

[52]   The short answer to that contention is that it is the underlying right and title to the debt, and not the cost assessment process, which is subject to the Limitation Act. Mr Turner acknowledged that a costs assessment is a non-curial proceeding. I am not satisfied that the lodging of an application for a costs assessment amounts to bringing an action on a cause of action within the meaning of the Limitation Act.”

293. I respectfully agree with her Honour’s conclusion in [52]. This case, in my view, is indistinguishable in principle from the facts McCallum J considered in Coshott v Barry: there were no proceedings commenced by the defendants within the applicable limitation period (apart from the costs assessment applications) and the costs assessments were not complete to the point of resulting in the entry of judgment.

294. Her Honour then drew her conclusion, at [53], that the solicitors’ right and title to the debts quantified in the four certificates that had not been filed was extinguished. But her Honour rejected the argument that the certificates issued by the costs assessors are ultra vires or that the costs assessors had no jurisdiction to issue them. Her Honour concluded that the certificates may serve broader purposes than enforcement of a debt: they may be relevant to the enforcement of a lien claimed by the client’s files. But her Honour did indicate that in respect of an incomplete assessment in respect of an extinguished debt “a costs assessor could properly decline to undertake the assessment” (at [55]).

295. Her Honour’s observations that the costs assessment is not ultra vires may have relevance in these proceedings to questions of the further assessment of costs of the assessment and what consequential relief is appropriate in this case. These are matters for future debate after the parties have had an opportunity to consider these reasons.

296. The Firm seeks to repel the application of Coshott v Barry in part by reference to observations of Sackville AJA in Windsurf Holdings at [105] – [107]. There the Court of Appeal was considering the definition of “action” in the Limitation Act (Qld), s 5 which is in substantially similar terms to the definition in the Limitation Act, s 11. Where his Honour said in a judgment (agreed by Beazley JA (as her Honour then was) and Bell JA (as her Honour then was)):

“[105] The definition of “action” in s 5 of the Limitation Act (Qld) is broad, in that it includes “any proceeding in a court of law”. This definition was taken from s 31 of the Limitation Act 1939 (UK) (“Limitation Act (UK)”). The English Court of Appeal has attributed the inclusion of this definition to the fact that many of the proceedings dealt with by the Limitation Act (UK), such as actions for foreclosure and redemption, were commenced by originating summons and not by the filing of a writ: WT Lamb & Sons v Rider [1948] 2 KB 331at 335 and 338 per curiam; Tonkin v Johnson [1999] 1 Qd r 318 at 325 per McPherson JA (with whom Williams and Cullinane JJ agreed).

[106]   Whatever the historical reasons for including the definition of “action” in the Limitation Act (UK), it has received a broad construction. Thus in China v Harrow Urban District Council [1954] 1 QB 178, the Court of Appeal held that the issue of a distress warrant as a means of recovering rates was an “action” within the definition. This was so notwithstanding that it was settled law that no action lay for the recovery of rates and that the only method for recovery was that laid down in the Poor Relief Act 1601, namely by application to the justices for a distress warrant: at 183 per Lord Goddard CJ. The language used in the definition showed that it was intended to apply to proceedings “to which the term ‘action’ would be inapplicable”: at 185 per Lord Goddard CJ. The Court was not troubled by the apparent inaptness of the expression “cause of action” in the equivalent to s 11 of the Limitation Act (Qld), when applied to proceedings for a distress warrant to enforce an obligation to pay rates. Although there was no cause of action in the usual sense, there was a “cause of proceeding in a court of law”: at 187 per Sellers J.

[107] The approach taken in China v Harrow UDC is consistent with Lord Denning MR’s observation, in another context, that “any application to the court, however informal, is a ‘proceeding’”: Harkness v Bell’s Asbestos and Engineering Ltd [1967] 2 QB 729 at 735. It was held in that case that an application for leave to extend time was “a proceeding” in its own right and thus attracted a power to cure irregularities in “proceedings”.”

297. But the Court of Appeal in Windsurf Holdings was not considering the point in issue both in this case and in Coshott v Barry. Sackville AJA’s observations seem to be predicated upon an action or a proceeding taking place “in a Court”. But the point in McCallum J’s analysis is that a costs assessment is an administrative process, not an application in the Court.

298. This deals with the Firm’s primary argument that the defendants have commenced “an action” within time under the Limitation Act. But the defendants pursued a number of secondary arguments that in my view are not persuasive but require brief analysis and consideration.

(2) The Character of the 1993 Proceedings?

299. Drawing upon paragraph [58] of the Barrett J March 2010 Judgment the Firm submits that the whole context and purpose of the 1993 proceedings was “directed towards a final determination of the state of the account between the plaintiffs and the solicitors”. The submission is put in a number of different ways but in substance amounts to a contention that the 1993 proceedings themselves together with the Young J July 1996 Orders referring the bills of costs for assessment were in substance a kind of action for an account stated upon which the defendants, the Firm, could now maintain and rely upon as an action brought within the applicable limitation period. In my view there are several flaws with this argument.

300. The 1993 proceedings were not brought by the defendants. They were brought by the plaintiffs. The 1993 proceedings are not an action “brought on the cause of action” such that the “expiration of the limitation period does not affect the right or title of the plaintiff to the debt, damages or other money” (emphasis added) within Limitation Act, s 63(2). Limitation Act, s 63(2) contemplates, as might be expected, that the person with the cause of action must bring the action in question, as a plaintiff. That is not what has happened here and the Firm cannot claim the benefit of Limitation Act, s 63(2).

301. The Firm’s submissions somewhat blur the procedural reality of these proceedings by suggesting that really the Court is considering a kind of cause of action in account stated of the well-known type: Camillo Tank SS Co Ltd v Alexandria Engineering Works (1921) 38 TLR 134. But this is not such a case and never was. As Barrett J comprehensively analysed in the Barrett J March 2010 Judgment ([56] – [61]), all that remained of these proceedings after their general dismissal was the quantification of solicitor/client costs, the subject of paragraphs 1 and 2 of the Summons. The referral out had been cancelled. The client was no longer asserting that any of the bills of costs had been paid on mutual account. The sole issue remaining was a process of administrative quantification. But that process was incomplete when the Firm’s cause of action in contract expired without the Firm having commenced its own proceedings.

302. This is not an unjust result. It was open to the Firm to put on a Cross-claim for legal fees in the proceedings pending the outcome of the costs assessment.

303. The Firm’s argument that the Hulme J February 1995 Judgment involves some kind of finding that the plaintiffs owed the defendants $97,000 is in my view a misconstruction of the Hulme J February 1995 Judgment. In the controversial sentence in question “I think the only proper inference to be drawn from the plaintiffs conduct in this regard is that the plaintiffs were conceding that the defendants’ claim for sum $97,000 was, on the basis which was then advanced, correct” is merely in my view a recording of the obvious fact in context that the Preston interests were no longer seeking on an account to contend that they had partly paid some of these bills on a running account. It is not a finding that $97,000 is then owing from client to solicitor. The statement is clearly qualified by his Honour’s observation that his statement is made on the basis “this is without any taxation” which mean that all of the relevant arguments may be fielded on taxation to reduce the amount owing potentially even to nil.

304. Nor can it be said that there is any admission on the Preston interests path that they owed $97,000 to the Firm. The only possible evidentiary basis for such an admission is the letter of 15 November 1994 which in my view contains no such admission. In any event Hulme J does not appear to be expressly referring to that letter but is simply referring to the plaintiff’s withdrawal from the reference before the Hon. D. Needham QC.

(3) Election, Waiver and Estoppel, Abuse of process and Inherent Jurisdiction

305. It only remains for the Court to deal with a number of supplementary arguments advanced by the Firm. It is sufficient to deal with these in general terms.

306. The Firm argues that it is an abuse of process for the Preston interests to raise the limitation issue 16 years after the limitation period expired citing Rogers v The Queen (1994) 1 CLR 251. But in my view, all that has happened in this case is that the Preston interests have been advised after the lifting of the lengthy stay in the proceedings to take this point which was not argued before either Barrett J or Black J or any of the other judges who have dealt with these proceedings after the lifting of the stay. Far from being an abuse of process, the Preston interests’ current application takes advantage of an available legal right.

307. The same can be said for the estoppel points argued against the Preston interests. The limitation point was taken late but nothing in the Preston interests conduct in my view expressly represented that such a limitation point would not be taken at an earlier time.

308. Finally, it was argued that a taxation of the costs might occur in the Court’s inherent jurisdiction: Attard v James Legal Pty Ltd [2010] NSWCA 41. But this argument did not really address the fundamental problem that the cause of action is extinguished, whatever the mechanism might be used for its enforcement.

(4) Ancillary issues

309. Two ancillary issues arise. The first is whether in the further consideration of the residue of these proceedings a costs capping order can be made. The second issue is whether these proceedings are suitable for the making of a specific gross sum costs order.

310. Costs Capping. The parties have each expended substantial financial and personal resources in the proceedings. The parties estimated in oral submissions that the amount spent on each side over the past 24 years may even be $1.5 million. The Firm initially sought $95,749.40 from the Preston interests. The parties’ conduct in the proceedings has been far from proportionate.

311. The Court asked the parties whether a costs capping order should be made under Uniform Civil Procedure Rules 2005 (“UCPR”), r 42.4. The Court may under UCPR, r 42.4, either on a party’s application or at its own motion, specify the maximum costs recoverable by one party from another. UCPR, r 42.4 provides:

“42.4   Power to order maximum costs

(1)   The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another.

(2)   A maximum amount specified in an order under subrule (1) may not include an amount that a party is ordered to pay because the party:

(a)   has failed to comply with an order or with any of these rules, or

(b)   has sought leave to amend its pleadings or particulars, or

(c)   has sought an extension of time for complying with an order or with any of these rules, or

(d)   has otherwise caused another party to incur costs that were not necessary for the just, quick and cheap:

(i)   progress of the proceedings to trial or hearing, or

(ii)   trial or hearing of the proceedings.

(3)   An order under subrule (1) may include such directions as the court considers necessary to effect the just, quick and cheap:

(a)   progress of the proceedings to trial or hearing, or

(b)   trial or hearing of the proceedings.

(4)   If, in the court’s opinion, there are special reasons, and it is in the interests of justice to do so, the court may vary the specification of maximum recoverable costs ordered under subrule (1).”

312. The object of that rule is to keep the legal costs that parties expend on litigation proportionate to the importance and complexity of the matters in issue. Civil Procedure Act 2005 (“CPA”), s 60 reinforces that purpose. CPA, s 60 states that in any proceedings, “the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute”. The function of this provision is to “put in the Court’s hands a brake on intemperate and disproportionately expensive conduct of proceedings”: Sherborne Estate (No. 2):Vanvalen v Neaves [2005] NSWSC 1003; 65 NSWLR 268 (“Sherborne Estate”) at [29] (Palmer J). The effect of the provisions (CPA, s 60 and UCPR, r 42.4) together is to endorse proportionality as central to the just and efficient conduct of civil proceedings: Lownds v Home Office [2002] 4 All ER 775.

313. In Sherborne Estate at [24], Palmer J concluded that UCPR, r 42.4(1) allowed an order capping the maximum costs recoverable to be made only in advance of a hearing, but not after the hearing. His Honour concluded that on the basis that subrules (2)-(4) only make sense upon that construction. But the Court of Appeal in Nudd v Mannix [2009] NSWCA 327 (“Nudd”) held that the Court did have the power to make an order capping costs at the end of a hearing. Handley AJA (with whom McColl JA and MacFarlan JA agreed) said that that power to make an order capping costs, even retrospectively, was expressly conferred by UCPR, r 42.4(1).

314. The jurisdiction to make retrospective costs capping orders should be carefully exercised. The parties will have a general expectation that, if successful in the proceedings, they will be able to substantially recover their costs. But that expectation must be tempered by a recognition that UCPR, r 42.4 powers have long been available and may be exercised.

315. The Court may not be precluded from making an order under UCPR, r 42.4 even at this late stage, if such an order would serve a useful purpose. Neither party sought such an order at the hearing. But now the Court has given judgment the position may have changed. The Court grant of liberty to apply encompasses one or other party seeking to put submissions on this issue.

316. Specific Gross Sum Costs Orders. This application was carefully argued but strongly contested. As these proceedings already show, these parties have immense capability to protract arguments about costs assessment. Costs orders have not yet been made; they are a matter for further argument. It is desirable for the parties to bring these proceedings to an end. If final costs orders were to be made after this judgment, further arguments may be reduced if the Court were to make a specified gross sum costs order under CPA, s 98(4)(c).

317. The principles for the making of specified gross sum costs orders instead of assessed costs are now well settled. CPA, s 98(4)(c) is expressed in general terms and is not limited to cases of a particular class or type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006. The power to award a CPA, s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119.

318. Such orders are not uncommonly made in situations, where the party against which costs orders have been made is not of financial substance and substantial further costs would be expended in assessing the costs orders so made: Hamod v New South Wales [2011] NSWCA 375 at [816] – [818].

319. This is not obviously such a case. But this jurisdiction is potentially apt here for other reasons. The Court has just given judgment on a costs assessment that has lasted a generation. Generating another costs assessment between these parties carries clear risks.

320. Therefore, if and when costs orders are made, the Court would consider making a gross sum costs order under CPA, s 98(4)(c). The Court has not decided it will make such an order, or indeed what costs orders it will make. One or other party may seek a special costs order. But either side may wish to apply to take advantage of the Court’s useful CPA, s 98(4)(c) jurisdiction in due course.

Conclusions and Orders

321. For the reasons given above, the Court has decided to make the declarations the plaintiffs seek in the 2015 proceedings. That should be enough to bring the 1993 proceedings to an end. Any further steps on the costs assessment would be futile. Even if the costs assessments were allowed to proceed, the defendants can neither bring them to completion in the form of a judgment, nor bring any further action for recovery of any final quantification of their 1992 bills of costs on assessment, as any such action would be barred by Limitation Act ss 14 and 63.

322. The plaintiffs also seek the return of their files to them. Whether that order is still pressed and, if so, how it should be formulated are unclear. The files may have no significance any more. The Court will give the parties an opportunity to see if they can yet agree on consequential orders for the return of the plaintiffs’ files or on some other mutual resolution of this issue. If they cannot agree, the Court will consider any remaining contest on this issue.

323. The plaintiffs have been substantially successful. Costs would normally follow the event. And the plaintiffs seek costs and interest on costs. But this case has its unique features and, as mentioned above, one or other party may seek a special costs order. So the Court will provide an opportunity to hear the parties’ submissions about costs.

324. The Court therefore makes the following declarations, orders and directions:

1. Declare that the defendants’ entitlement to costs the subject of the bills of costs referred to in the orders made by the Court on 13 February 2014 in proceedings No 1993/23395 is extinguished by the operation of Limitation Act 1969, ss 14 and 63.

2. Direct the parties to consult and to bring in further short minutes of order to deal with any consequential relief and otherwise to give effect to these reasons;

3. If the parties cannot agree on a form of short minutes of order to meet the requirements of order (2), then they are ordered to provide their respective draft orders to the Court by 5.00pm on 6 December 2017;

4. Appoint 8 December 2017, or such other mutually convenient date as the parties arrange with my Associate, for further directions in relation to hearing argument about any consequential orders and issues of costs; and

5. Grant liberty to apply.

Amendments

20 November 2017 - [284] change entitle to title

[286] defndant's solicitors to defendant solicitors'

[289] Set to Sit, quoting McCallum J

[292] defendant's to defendants

[294] the broader purposes and enforcements to "broader purposes than enforcement"

[201] and [313] McFarlan JA to Macfarlan JA

Decision last updated: 20 November 2017