Randall Pty Ltd v Willoughby City Council
[2009] NSWDC 118
•8 May 2009
Reported Decision:
District Court
CITATION: Randall Pty Ltd v Willoughby City Council [2009] NSWDC 118
This decision has been amended. Please see the end of the judgment for a list of the amendments.HEARING DATE(S): 4 and 5 May 2009
JUDGMENT DATE:
8 May 2009JURISDICTION: District Court Civil Jurisdiction
Costs Assessment Appeals ListJUDGMENT OF: Johnstone DCJ at 1 DECISION: 1. The appeal is allowed. I set aside the certificates of the Review Panel.
2. I remit the decision of the Review Panel to the Manager Costs Assessment and order that the application for review be re-determined in accordance with these reasons, either by the original Review Panel or at her discretion by a fresh panel.
3. Costs orders in accordance with paragraph 63.CATCHWORDS: COSTS - appeal from decision of a costs review panel in respect of an assessment of party/party costs payable under orders of the Land and Environment Act and the Court of Appeal - whether the grounds raised matters of law arising in the proceedings as required for an appeal as of right under s 384 of the Legal Profession Act 2005 - whether the reasons were adequate LEGISLATION CITED: Legal Profession Act 2005
Legal Profession Regulation 2005
Civil Procedure Act 2005CASES CITED: Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278
Beale v Government Insurance Office (1997) 48 NSWLR 430
Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd (1998) 43 NSWLR 728
Honest Remark Pty Ltd v Allstate Explorations NL [2008] NSWSC 439
Firth v Westbury [1999] NSWSC 372
Kells v Mulligan [2002] NSWSC 769
Cassegrain v CTK Engineering; Cassegrain v Cassegrain [2008] NSWSC 457
Chapmans Ltd v Yandells [1998] NSWSC 195
Strinic v Singh [2009] NSWCA 15
Levy v Bergseng [2008] NSWSC 294
Kennedy-Miller Television Pty Ltd v Lancken (unreported NSWSC 1. 8.1997)
Advanced Gaming Technologies Pty Ltd v Ahern [1999] NSWSC 45
Wende v Horwath (NSW) Pty Limited [2008] NSWSC 1241
Gorczynski v A WM Dickinson and Son [2005] NSWSC 277
Turner v Pride [1999] NSWSC 850
Smith v Dwyer [1999] NSWSC 114
Madden v NSW Insurance Ministerial Corp [1999] NSWSC 196
Skalkos v Assaf [2002] NSWSC 1221
Bouras v Grandelis [2005] NSWCA 463PARTIES: Randall Pty Ltd t/as The Monkey Bar Car Park (Plaintiff)
Willoughby City Council (Defendant)FILE NUMBER(S): 5056/08 COUNSEL: Ms M Castle (Plaintiff)
Ms J McDonald (Defendant)SOLICITORS: Moloney Lawyers (Plaintiff)
Mallesons Stephen Jaques (Defendant)
JUDGMENT
The proceedings and the issues
1. This is a costs assessment appeal under s 384 of the Legal Profession Act 2004 (the LPA 2004) from the decision of a Review Panel in relation to the proper amount of party/party costs that the plaintiff is required to pay to the defendant Council pursuant to orders of the Land and Environment Court and the Court of Appeal in respect of proceedings between them.
2. The plaintiff was ordered to pay the Council’s costs in three sets of proceedings:
· Order of the Land and Environment Court made on 17 February 2004 in proceedings No 10071 of 2004.
· Order of the Court of Appeal made on 27 June 2005 in proceedings No 40551 of 2004.
· Order of the Land and Environment Court made on 4 November 2004 in proceedings No 41220 of 2004.
This was a “differential” order under which the plaintiff was ordered to pay the Council’s costs other than costs:
(a) The subject of an order made in January 2005;
(b) In relation to an alleged breach of orders made under s 121B of the Local Government Act;
(c) Incurred in relation to evidence of surveys and interviews with person using the Monkey Bar Car Park.
3. The parties were unable to reach agreement as to the quantification of the party/party costs for which the plaintiff is liable, and the Council made an application for assessment to the Manager Costs Assessment. The Manager referred the application to a Costs Assessor who made a determination of the fair and reasonable amount of the costs payable in a sum of $363,428.67 (s 367A) and issued a certificate dated 16 March 2008 setting out his determination (s 368). His certificate was accompanied by a statement of reasons (s 370). The plaintiff was dissatisfied with the determination of the Costs Assessor and made an application for a review by a panel (s 373). The Manager referred the application to a Review Panel constituted by 2 other costs assessors (s 374), which then affirmed the determination of the Costs Assessor (s 375). The Review Panel issued a certificate dated 2 July 2008. The Review Panel’s certificate was accompanied by a statement of reasons (s 378).
4. The plaintiff’s appeal relates to the Review Panel’s review of the determination of the Costs Assessor, and to the adequacy of its reasons. The plaintiff seeks an order that the certificate of the Review Panel be set aside and that the matter be remitted to the Review Panel to be determined according to law.
5. An appeal in relation to a decision of a Review Panel constituted under the LPA 2004 may only be brought under s 384, without leave, in respect of matters of law arising in the proceedings to determine the application.
6. The issues arising from the grounds of appeal that require decision may be summarised as follows:
(1) Whether the Review Panel erred in law in its review of the determination of the Costs Assessor.
(2) Whether the Review Panel erred in law in interpreting and applying the order of the Land and
Environment Court dated 4 November 2005.
(3) (a) Was the Review Panel required to give any reasons at all?
(b) Is the adequacy of reasons a matter of law arising in the proceedings to
determine the application?
(c) Did the Review Panel fail to give adequate reasons?
The Panel’s review of the determination of the Costs Assessor
7. There are two grounds of appeal upon which the plaintiff relies to assert that the Review Panel failed to properly perform its statutory function in conducting its review of the Costs Assessor’s determination:
(1) The first complaint is that the Review Panel did not conduct the review in accordance with its statutory function as required by s 375(2) of the LPA 2004. The particulars state:
“Whilst purporting to determine the application in a manner that a costs assessor would be required to determine it, the reasons of the Costs Review Panel read in toto reveal that it treated the review as an appeal from the decision of the costs assessor, contrary to law and authority.”
(2) The second complaint is that the Review Panel failed to apply its mind to which professional costs were fair and reasonable and which costs were not; instead agreeing that the Costs Assessor’s general global reduction of about $25,000 from the professional costs claimed was correct. The particulars state:
“As the costs assessor did not indicate which items he allowed and disallowed, the Review Panel cannot have known which costs were allowed and which were disallowed. Yet the Panel purported to disallow or reduce claims in certain circumstances: paragraph 4(b)(iv) – page 5 – of the reasons of the Costs review Panel states, ‘The Review Panel has disallowed or reduced claims where it was not reasonable to carry out the work, where the work was not carried out in a reasonable manner and where the amount claimed is more than fair and reasonable for the work concerned’. The Panel then concluded, ‘Overall, the Review Panel agrees with the Costs Assessor’s approach to the Assessment. The Review Panel adopts the Costs Assessors Reasons’: paragraph (b)(xi). The two statements are logically inconsistent”
8. These complaints, when analysed and distilled having regard to the written and oral submissions, are in substance complaints as to the Costs Assessor’s determination and reasons that the Review Panel failed to properly address in its review and its reasons.
9. In my view, if the complaints in respect of the underlying assessment are made out, the proper course for the Review Panel was to set aside the Costs Assessor’s determination and substitute its own determination under s 375(2) of LPA 2004.
10. Both parties addressed the operation of s 375 in their submissions and raise questions of construction and interpretation that need to be considered. That section relevantly provides:
“General functions of panel in relation to review application
(1) A panel constituted under this Subdivision may review the determination of the costs assessor and may:
(a) affirm the costs assessor’s determination, or
(b) set aside the costs assessor’s determination and substitute such determination in relation to the costs assessment as, in their opinion, should have been made by the costs assessor who made the determination that is the subject of the review.
(2) For the purposes of subsection (1), the panel has, in relation to the application for assessment, all the functions of a costs assessor under this Part and is to determine the application, subject to this Subdivision and the regulations, in the manner that a costs assessor would be required to determine an application for costs assessment.
(3) However, the assessment is to be conducted on the evidence that was received by the costs assessor who made the determination that is the subject of the assessment and, unless the panel determines otherwise, the panel is not:
(a) to receive submissions from the parties to the assessment, or
(b) to receive any fresh evidence or evidence in addition to or in substitution for the evidence received by the costs assessor.”
11. The plaintiff contended that the Review Panel entertained an appeal when it should have determined the application in a manner that a Costs Assessor would be required to determine it as required by s 375(2). The defendant contended that the occasion for the application of s 375(2) did not arise.
12. In support of its contention the defendant submitted that s 375(2) only operates if and when the Review Panel has set aside the Costs Assessor’s determination under s 375(1)(b) and proceeds to substitute its own determination. Similarly, s 378 only operates in respect of a determination made by the Review Panel under s 375(2), such that a Review Panel is only required to issue a certificate where it has re-determined the application for assessment. The Review Panel is only required to issue a statement of reasons and any supplementary information required by the regulations under s 380 where a certificate has been issued under s 378. The defendant submits, therefore, that where the Review Panel merely affirms the Costs Assessor’s determination under s 375(1)(a), reasons are not mandatory. It argues that this is promotive of the stated purpose of Parliament to deliver a ‘faster, easier and cheaper system of review’.
13. The defendant’s submission is based on the proposition that the review required under s 375 is to be undertaken in two separate stages. The first stage involves a review of the determination of the Costs Assessor following which the Review Panel may either affirm or set aside the determination. In doing so, it makes a decision, not a determination. This distinction in terminology is deliberate, as is evidenced in the appeal provisions at s 382, s 384 and s 385. In the context of this legislation the two words are not intended to be synonymous: Firth v Westbury [1999] NSWSC 372 at [19].
14. The two stage process to be undertaken by the Review Panel was recognised and confirmed by Associate Justice Malpass in Honest Remark Pty Ltd v Allstate Explorations NL [2008] NSWSC 439 at [8] - [13]:
“8. Subsection (1) enables a panel to review the determination of a costs assessor. In so doing, it may either affirm the determination or set it aside. If it takes the second of the two options, it may substitute its determination (being a determination which, in the opinion of the panel, was one that should have been made by the costs assessor).
9. Subsection (2) thereof confers upon the panel, in relation to the application for assessment, all the functions of a costs assessor (given under Part 3 of the Act). It also requires the panel to determine the application (subject to Subdivision 5 of that Part and Regulations) in the manner that a costs assessor would be required to determine it.
10. Subsection (3) provides that the assessment process is to be conducted on the evidence that was received by the costs assessor. It is not to receive submissions from the parties or any, inter alia, fresh evidence unless it determines otherwise.
11. For present purposes, the provisions of subs (3A) and (4) have no significance. I will later make a brief reference to them.
12. This structure reveals an intention that the first task for the panel is to conduct the review. Subject to any relevant statutory provision, rule or regulation, this is generally done by way of having a “second look” at the determination of the costs assessor. Such a process will see the panel having regard to the material that was before the costs assessor and the reasons for the determination.
13. After the review has been undertaken, the panel then has the two options set forth in (a) and (b) of subs (1).”
15. In the context of the present appeal, it is clear that the Review Panel only undertook the first stage of the process. It follows that the plaintiff’s grounds of appeal must fail insofar as they complain that the Review Panel did not conduct the review in accordance with its statutory function as required by s 375(2) of the LPA 2004, because it never got that far. The question then becomes, did the Review Panel undertake the first stage of the review under s 375(1) adequately, and were its reasons adequate, assuming it was required to provide any reasons at all.
16. What now falls to be considered in these proceedings is the practical effect of that two stage process of review, and what is required of the Review Panel when undertaking the first stage of the review, namely deciding whether to affirm or set aside the determination of the Costs Assessor. There is no relevant statutory provision, rule or regulation that informs what Associate Justice Malpass describes as “a second look”, except the Form that has been promulgated pursuant to which a review application is initiated. Obviously the decision will involve something different from the full re-determination contemplated by s 375(2).
17. I agree with Associate Justice Malpass that the review pursuant to which a decision either to affirm or set aside the determination of the Costs Assessor will involve the Review Panel in having regard to the material that was before the Costs Assessor and the reasons for the determination. Ultimately, the nature and extent of the review required will depend upon the exigencies and circumstances of any particular matter and it would be inappropriate to attempt to articulate a definitive test. Nevertheless, the examination of the material that was before the Costs Assessor, and the reasons, should be critical and not perfunctory. That involves, as a minimum, an evaluation of the costs claimed, whether in bill form or otherwise, an analysis of the objections and any submissions in reply, and an independent consideration of whether the Costs Assessor adequately considered the issues that arose. That includes an examination of whether the reasons of the Costs Assessor were adequate to address those issues.
18. It was submitted for the defendant that this first stage of the review process only requires the Review Panel to consider the matters raised by the review applicant in the review application. I disagree. I accept that any matters that are raised in the review application will necessarily need to be analysed and the reasons of the Costs Assessor examined in that regard, and addressed by the Review Panel in its own reasons. But I do not consider that the first stage of the review is limited to such matters, and the Review Panel is required to consider the totality of the underlying determination in the way that I have described: Turner v Pride [1999] NSWSC 850.
19. A careful reading of the reasons of the Review Panel reveals that it did not conduct the first stage of the review in the manner contemplated by s 375(1) as articulated by Associate Justice Malpass. This is evident from its failure to consider the totality of the underlying determination and to address any meaningful reasons to matters other than those raised by the review application. In paragraph (b)(i) of its reasons the Review Panel states:
“Master Malpass (as he then was) in Kells v Mulligan and Anor [2002] NSWSC 769 (particularly paragraphs 24 to 27) indicated that the function of a Review Panel is to conduct a review as opposed to entertaining an appeal and that (the) purpose of the Application for Review is to indicate to the Panel those items in respect to which the Review Applicant seeks reassessment.”
I have re-read that judgment and I am unable to find any statement to the effect that the review application is determinative of the matters the Review Panel is required to ‘re-assess’, either in [24] - [27] or elsewhere. It is also to the point that Kells v Mulligan arose out of the determination of a practitioner/client costs dispute, not a dispute as to party/party costs pursuant to a court order.
20. There were other indicators. In paragraph (b)(viii) of its reasons the Review Panel states:
“The Review Panel has conducted the review without consideration as to the approach of the Costs Assessor to the Costs Assessor’s Determination but on the basis of the documents before the Costs Assessor.”
Whilst this approach is no doubt appropriate for a second stage re-determination under s 357(2), it is the wrong approach to the process required as to the decision to be made in respect of the first stage of the review.
21. The Review Panel also said, at paragraph (b)(xxi) of its reasons:
“Overall, the Review Panel agrees with the Costs Assessor’s approach to the Assessment. The Review Panel adopts the Costs Assessor’s Reasons.”
Two points arise from this statement. The first is that such a catch-all assertion is insufficient to cure any deficiency in the first stage of the review. Second, by adopting the totality of the Costs Assessor’s reasons, the Review Panel infects its own reasons with any shortcomings in the reasons of the Costs Assessor.
22. I come finally to the nub of the plaintiff’s complaint, namely the inadequacies in the determination as conducted by the Costs Assessor, and in particular the adequacy of his reasons.
23. I had thought that the extent of the obligation to give reasons in costs assessment matters had been authoritatively settled by the Court of Appeal in Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278 at [43] - [45]. It is to be noted that decision related to the former legislation, but nothing turns on that, and also related to reasons of a Review Panel that had in fact set aside the determination of the Costs Assessor, but nor does anything turn on that distinction. The balancing act in considering the sufficiency of a statement of reasons “involves the adoption of, at the least, a minimum standard which places the parties in a position to understand why the decision was made sufficiently to allow them to exercise any right of appeal”.
For the sake of completeness, I set those paragraphs out in full:
“43. The extent of the obligation…is informed by the general law concerning the duty of judicial officers to give reasons for their decisions discussed in cases such as Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, Mifsud v Campbell (1991) 21 NSWLR 725 and Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430. The extent of a judicial officer’s duty depends on the circumstances. Whether or not a costs assessor and a panel are acting administratively or judicially, which was left open in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd, the extent of their duties must take into account the different nature of their task and their roles as legal practitioners bringing to bear their experience and judgment in evaluation of what work was reasonable and what is a fair and reasonable amount of costs; but it is also moulded by the basis for the obligation to give reasons in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd, thereafter taken up by the legislature.
44. The reasons must be such that a party dissatisfied with the costs assessor’s or panel’s determination “should have a real and not largely illusory right of appeal”. These words in Attorney-General of New South Wales v Kennedy Miller Television Pty Ltd at 735 were qualified by “in regard to questions of law at least”, but in my respectful opinion they apply equally to questions of fact: questions of whether the time engaged or an hourly rate are reasonable can be very important, and although subject to leave s 208M permitted an appeal on those questions. The filter for an appeal as to fact is the Court’s decision as to leave, not the cost assessor’s or panel’s expression of reasons, and whether leave should be granted can only be decided if it is known why the determination was made.
45. The delay and expense of an excessively onerous obligation to provide reasons is material, particularly when assessment of costs by costs assessors was intended to provide a faster, easier and cheaper system. In my opinion, however, the observations of Meagher JA in Beale v Government Insurance Office of New South Wales at 444 are applicable; that the balancing act in considering the sufficiency of a statement of reasons “involves the adoption of, at the least, a minimum standard which places the parties in a position to understand why the decision was made sufficiently to allow them to exercise any right of appeal”.
24. Particularly relevant in the present appeal are statements in the lead judgment of Giles JA in Frumar at [59] - [63] where the reasons of the Costs Assessor were criticised for their failure to identify what work, by reference to items, was disallowed:
“59. … it can not be seen what work the costs assessor thought was or was not reasonable work to be carried out, including by way of coordination work and reporting work, or its relationship to the work in the items in the bill of costs.
60. The panel’s reasons do not make good these difficulties in the costs assessor’s reasons. They add to them. The panel endorsed the costs assessor’s reasons as setting out the basis for his determination, and his approach of assessing the bill of costs “as a whole” (under Ground 5), but in conducting its own assessment arrived at a relatively precise amount of $63,833 in lieu of the round figure. It can not be seen what work in the items in the bill of costs the panel thought was unreasonably carried out, or what work it thought was reasonable work to be carried out independently of the itemisation in the bill of costs and its relationship to the work in the items in the bill of costs. Maybe it accepted that the hourly rates were reasonable and applied them, but it did not say so: at least on the surface, in making its own assessment the panel could have applied different hourly rates.”
25. These principles were applied by White J in Cassegrain v CTK Engineering; Cassegrain v Cassegrain [2008] NSWSC 457: see generally [85] - [92], but in particular at [92]:
“Where the costing of such work is made by reference to adjustments to items in a bill of costs, it is essential for the assessor or the panel to quantify the adjustments made in respect of costs that are disputed. That does not necessarily entail a line-by-line taxation of a bill. But it does require specification of what are disputed costs, for example, by reference to costs of a certain kind, and an explanation of what costs were allowed, or what was the amount of reduction from claimed costs, in respect of costs of that kind. In my view, the costs assessor’s reasons and the panel’s reasons for allowing solicitors’ profit costs in the sum of $119,859.95 are inadequate.”
26. The plaintiff contends that the Costs Assessor failed to satisfy the requirements for adequate reasons as explained in these decisions. It was submitted (at paragraph 45):
“The reasons of the Costs Assessor in this matter do not reveal what work he thought it was or was not reasonable to be carried out. The Costs Assessor makes no reference to any specific item of professional costs which he has disallowed. In fact, it appears that he did not carry out the exercise of identifying the work he considered reasonable. Rather, the Costs Assessor appears to have made an overall assessment that about $25,000 of professional costs were not fair and reasonable and therefore allowed $190,000 in professional costs…”
27. In oral submissions Counsel for the plaintiff pointed to a series of instances that it was submitted demonstrate the inadequacies in the reasons of the Costs Assessor such that the parties were not placed in a position to understand what costs were allowed or disallowed sufficient to allow them to exercise any right of appeal. She pointed to several broad categories of items to which the plaintiff had objected to support the contention. In respect of certain categories the complaint was that the category was not dealt with at all. As to others, the complaint was that it was not possible to discern from the reasons provided what costs were allowed or disallowed because the amount deducted in respect of particular categories was not differentiated, and there was no cross reference between categories and items, either by way of the nomination of the items affected, or by way of example. Rather, the Costs Assessor simply grouped them together in a global total.
28. Before turning to the reasons of the Costs Assessor, it is appropriate to consider the nature and extent of the rights of appeal from a Costs Assessor or a Review Panel, and to understand that there are significant limitations, irrespective of the amount involved. The appeal provisions appear at s 382, s 384 and s 385:
“382 Appeal against determination of panel
(1) Subdivision 6 (Appeals) [which includes s 384 and s 385] applies in relation to a decision or determination of a panel …as if references in Subdivision 6 to a costs assessor were references to the panel.
Appeal against decision of costs assessor as to matter of law
(1) A party to an application for a costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the District Court, appeal to the Court against the decision.
(2) After deciding the question the subject of the appeal, the District Court may, unless it affirms the costs assessor’s decision:
(a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or
(b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application.
(3) On a re-determination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.
Appeal against decision of costs assessor by leave
(1) A party to an application for a costs assessment relating to a bill may, in accordance with the rules of the District Court, seek leave of the Court to appeal to the Court against the determination of the application made by a costs assessor.
(2) A party to an application for a costs assessment relating to costs payable as a result of an order made by a court or a tribunal may, in accordance with the rules of the court or tribunal, seek leave of the court or tribunal to appeal to the court or tribunal against the determination of the application made by a costs assessor.
(3) The District Court or court or tribunal may, in accordance with its rules, grant leave to appeal and may hear and determine the appeal.
(4) An appeal is to be by way of a new hearing and fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.
(5) After deciding the questions the subject of the appeal, the District Court or court or tribunal may, unless it affirms the costs assessor’s decision, make such determination in relation to the application as, in its opinion, should have been made by the costs assessor.”
29. Thus, appeals as of right are limited to matters of law arising in the proceedings. Otherwise, leave to appeal is required under s 385 and leave is only given in cases where justice requires it: Chapmans Ltd v Yandells [1998] NSWSC 195. There are no ‘‘rigid or exhaustive criteria’’: Bussutil v Holder (unreported, NSWSC, 7 November 1996). A common ground used to be that the amount allowed is unreasonable on its face: NSW Insurance Ministerial Corp v Kirkwood (unreported, NSWSC, Master Greenwood, 8 November 1996). However, it is now likely that such a ground would fail, unless the matter has first been reviewed by a Review Panel: Chapmans Ltd v Yandells [1999] NSWCA 361.
30. In the case of party/party costs there is a further complication in that leave to appeal on grounds other than matters of law arising in the proceedings may only be sought from the Court which made the order for costs: see Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278 at [17] and [40]. This means that a dissatisfied party may be put to an election whether to appeal to the District Court under s 384, or to another court under s 385. It behoves the Costs Assessor and the Review Panel, therefore, to give reasons that enable that election to be made.
31. I now turn to consider the reasons of the Costs Assessor. The critical part of his reasons is on the fourth page under the heading “General Objection 6” and it reads (emphasis added):
“I do not intend to deal with each objection to each item in the bill. I make the following comments as examples so that the parties know the manner in which I have assessed the costs.
Where the Objection is that the claim is excessive I have assessed the bill on the basis of what work was reasonably performed and on the basis of a fair and reasonable charge for the work.
I understand that the times claimed in the bill come from the Cost’s Applicant’s solicitors’ time records. Most of the times claimed are in my view fair and reasonable and all of the work is reasonably performed.
The work was done by various personnel supervised by a partner and this is a reasonable way of conducting such litigation. On occasions there has been unreasonable duplication that has occurred to suit the needs of the solicitor or the client. Such duplication is not reasonable and has not been allowed. Where costs have been incurred unreasonably because of inexperience of the practitioner those costs have not been allowed….
If work is unreasonably duplicated then I have reduced the assessment accordingly.
It is reasonable for a partner to attend hearings and conferences with counsel and in a matter that is complex and multi issued as this one was for another solicitor to also attend court and some such conferences. Where engaging multiple solicitors is not reasonable I have disallowed that work and reduced the costs accordingly.
Overall I assess that there are about $25,000.00 of professional costs that are not fair and reasonable for costs reasonably incurred claimed in the bill and that an appropriate amount for professional fees is therefore $190,000.00 inclusive of GST.”
32. The plaintiff complains about the global nature of the reductions, as to which “not a single item ‘disallowed or reduced’ was identified.” In addition to the matters that do appear in the reasons, the plaintiff complains about a number of items or categories of items that were the subject of objections that the Costs Assessor failed to deal with at all. The examples cited were:
· Items that involved an over reliance on counsel.
· Items outside the scope of the costs order.
· Items involving work done at too senior a level such as to attract an unreasonably high charge out rate for the category of work involved.
· Items that were excluded by the differential order (c) of the Land and Environment Court made on 4 November 2004 in proceedings No 41220 of 2004, relating to ‘surveys and interviews’.
33. In my view, the failure of the Costs Assessor to refer to certain categories of items that were the subject of objections does not render the plaintiff’s right of appeal illusory, because it may be assumed, logically, that all such items were allowed. I am more concerned as to the global reduction by reference to categories of items that were not differentiated either by way of amount, category by category, or by reference to particular items. That failure did, in my view, render the plaintiff’s rights of appeal illusory, because it would not be possible to demonstrate to the appellate court, with sufficient precision, what costs were allowed and what costs were disallowed. Accordingly, the reasons do not reach the minimum standard contemplated in Frumar.
34. For all these reasons I am satisfied that the Costs Assessor’s reasons were inadequate. What follows from that is that the Review Panel was unable to decide, by reference to those reasons, whether the determination of the Costs Assessor was adequately conducted such as to enable it to affirm the determination, because it was impossible for it to undertake an independent consideration of whether the Costs Assessor adequately considered the issues that arose in relation to the disputed costs.
35. In my view the only proper course in those circumstances was for the Review Panel to decide, by way of the first stage of the review under s 375(1), to set aside the Costs Assessor’s determination and substitute such determination as in the opinion of the panel members should have been made by the Costs Assessor, in the manner that a Costs Assessor would be required to determine an application for costs assessment.
36. The defendant next submitted that the plaintiff did not demonstrate an error of law that justifies disturbing the decision, and cites a passage from Associate Justice Malpass in Honest Remark Pty Ltd v Allstate Explorations NL [2008] NSWSC 439 at [24]:
“The onus borne by the plaintiff is not merely to demonstrate error as to a matter of law arising in the proceedings to determine the application but also to demonstrate that any such error is material to the determination.”
37. I agree with the statement of principle, but for the same reasons that the Review Panel was unable to decide by reference to the reasons of the Costs Assessor whether his determination was adequately conducted, the error here was material.
38. For these reasons I am unable to affirm the decision of the Review Panel and the appeal should be allowed.
39. The defendant submitted that in the event that I did not affirm the decision of the Review Panel then this Court (that is, me) should proceed under s 384(2)(a) and make such determination in relation to the application for review as, in my opinion, should have been made by the Review Panel. I was provided with a chronology of the proceedings and urged to bring what has been long and protracted litigation between these parties to as speedy a resolution as possible.
40. Counsel for the plaintiff did not dispute the Court’s power to make the determination, and it was conceded that it could be done on the papers already before me, that being the totality of the material that was before the Review Panel.
41. Nor was it submitted that the Court did not have the relevant judicial knowledge to make the determination. It was common ground that to undertake the determination would not amount to the error on the part of the trial judge identified in Strinic v Singh [2009] NSWCA 15.
42. But the proposition that this particular judge might undertake the determination was not supported by Counsel for the plaintiff. It was submitted that my knowledge and experience in matters of costs and costs assessment might somehow infect my capacity to undertake the determination. I do not regard that submission as sound.
43. Nevertheless, because of the way the outcome of the appeal has fallen out, in my view the appropriate course is not for me to undertake the determination, but for the Review Panel to determine the original application for assessment under s 375(2).
44. I should also add that the defendant did not demonstrate any particular prejudice. Presumably interest is running on the unpaid costs, or if it isn’t the defendant has the option of applying to the Land and Environment Court for an order under s 101(4) of the Civil Procedure Act 2005. It is also open to the defendant to obtain an Interim Certificate as to the undisputed portion of the costs claimed and recover that part of its costs.
45. I will, therefore, remit the decision of the Review Panel and order that the application for review be re-determined in accordance with these reasons.
Other issues
46. It follows that I do not need to decide the other issues identified, but for the sake of completeness I will state my views on those issues in short form.
47. The first of the other issues arises from Ground 5 of the Further Amended Summons. The plaintiff’s complaint is that the Review Panel erred in law in interpreting and applying the orders of the Land and Environment Court made on 4 November 2004 in proceedings No 41220 of 2004, in particular the costs excluded under (c) of that order. I am not persuaded that either the Review Panel or the Costs Assessor made any error of law in the interpretation or application of the order. The Costs Assessor correctly referred to and applied the order. As to the adequacy of his reasons in relation to items objected to by reason of the order, I have dealt with that question and it may be assumed that he allowed all the items objected to in that category.
48. The next issue was whether a Review Panel is required to give reasons at all when it merely affirms the determination of the Costs Assessor under s 375(1). The defendant submitted that in these circumstances no reasons are required to be given. The argument is elaborated in the written submissions at paragraphs 49 - 59, and in the Supplementary Submissions. It is not necessary for me to summarise these submissions, because it seems to me trite that reasons are required, having regard to the decision in Frumar as discussed above. The absence of reasons would render futile any right of appeal.
49. The exercise that the Review Panel is required to undertake in relation to the first stage of the review is a separate and distinct exercise that is to be conducted quite differently from an assessment. This is evident from my discussion above as to what is involved in that part of the exercise. That is not to say that the overall quantum of the costs does not require review, but it does not require assessment.
50. The next question to arise is whether the reasons of the Review Panel were adequate. For the reasons already given I find that they were not. I make the following observations for the guidance of Review Panels. First, the nature of the reasons a Review Panel should provide as to the first stage of the review will be quite different from those then required in the second stage if the determination of the Costs Assessor is set aside. Thus a Review Panel undertaking the first stage of the review under s 375(1) should make it clear that is what it is doing and tailor its reasons accordingly. If, and only if, the Review Panel decides to set aside the determination will it need to provide a second set of reasons in relation to the re-determination, in accordance with s 380. Those reasons will need to be provided in the same way as the reasons of a Costs Assessor undertaking an assessment in respect of an application for assessment. I will say something more later in these Reasons about the nature and extent of the reasons a Costs Assessor is required to provide.
51. In the present case, it will not be necessary for the Review Panel to give reasons in relation to the first stage of the review, because I have done that in these Reasons. The Panel should formally set aside the determination of the Costs Assessor and then proceed to substitute its own determination under s 375(1)(b) in accordance with s 375(2) and (3), and provide reasons as required under s 380.
52. The final issue is whether the failure of a Review Panel to give adequate reasons is a “matter of law arising in the proceedings to determine the application” such as to ground an appeal as of right under s 384. The defendant submitted that is not matter of law arising in the proceedings to determine the application. The proposition is that the reasons are given after the application is determined, and unless the Review Panel sets aside the determination of the Costs Assessor and re-determines the application for assessment, all it does is affirm the determination of the Costs Assessor.
53. In my view the argument is flawed. When s 384 is read in the way s 382 requires it to read, it provides:
"(1) A party to an application for a costs assessment who is dissatisfied with a decision of a panel as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the District Court, appeal to the Court against the decision."
Read that way, the application referred to is the application for review, not the application for assessment, and the dissatisfied party may appeal against the decision of the Review Panel whether to affirm or set aside the determination, as to which the adequacy of reasons is a matter of law: see Levy v Bergseng [2008] NSWSC 294 at [50] and [63] - [77].
54. In conclusion it is appropriate that I set out some general comments about the nature and extent of the reasons required of a Costs Assessor in relation to an assessment of costs.
55. The determination of whether costs are reasonable involves questions of fact that turn on the circumstances of the particular matter being assessed: Skalkos v Assaf [2002] NSWSC 1221 at [13]. Costs assessment based on a criterion of what is fair and reasonable necessarily leaves significant room for discretion: Bouras v Grandelis [2005] NSWCA 463 at [130]. The provision of reasons in respect of the process of costs assessment is inextricably linked with the expert role of the Costs Assessor, who draws upon accumulated knowledge and experience: see R v Milk Board; Ex parte Tomkins [1944] VLR 187 at 197; [1944] ALR 388. The assessment of fairness and reasonableness of legal costs may be derived from previous experience or knowledge otherwise gained: see Skalkos v Assaf [2002] NSWSC 1221 at [16].
56. The requirement is only to provide limited reasons: see the second reading speech to the Legal Profession Amendment (Costs Assessor) Act 1998. The explanation need only state the essential ground upon which the decision rests. The determination is not in the nature of a judgment by a Court. Thus, lengthy and elaborate reasons are not required, provided the essential ground on which the decision rests is articulated. Ultimately, the question of sufficiency of the explanation has to be dealt with on a case-by-case basis: see Madden v NSW Insurance Ministerial Corp [1999] NSWSC 196 at [16].
57. There is no prescribed format for disclosure of the reasoning process, and it may be discernible from a combination of sources, including the correspondence, written submissions, application and objections: see Smith v Dwyer [1999] NSWSC 114.
58. The assessment process is an assessment in which Costs Assessors must bring to bear their experience and judgment as legal practitioners and evaluate what work was reasonable and what is a fair and reasonable amount of costs: per Giles JA in Frumar v The Owners of Strata Plan 36957 [2006] NSWCA 278.
59. It is a matter of judgment for a Costs Assessor to decide how much detail is required in any particular assessment. My own views, based on the decided cases, are as follows:
· It is necessary to assess the whole of the costs, and this will involve the need for an explanation as to how the overall assessment was dealt with: Turner v Pride [1999] NSWSC 850. It is, however, preferable that items in a bill that are disallowed, or reduced, be identified or cross-referenced by number.
· Lengthy or elaborate reasons are not required. In most cases a word or two may suffice: Gorczynski v A WM Dickinson and Son [2005] NSWSC 277 at [21]. See also Wende v Horwath (NSW) Pty Limited [2008] NSWSC 1241 at [55] - [60].
· In a determination involving substantive relief, such as a decision that a provision in a costs agreement is unjust, the explanation will need to be more fulsome, sufficient to disclose what was taken into account and how the decision was made: see Advanced Gaming Technologies Pty Ltd v Ahern [1999] NSWSC 45 and Gilles v Eliades & Giakoumelos [2008] NSWSC 70.
60. Finally, I observe that the assessment process is not a taxation on an item-by-item basis. Taxation was the “overly formal, legalistic and complex” process the assessment scheme was introduced to replace, with a view to a “faster, easier and cheaper system”. Thus, I do not agree with the proposition that a Costs Assessor should refer to and individually deal with each and every item disputed. Nor do I agree with the submission of Counsel for the plaintiff that a process such as that suggested by Sperling J in Kennedy-Miller Television Pty Ltd v Lancken at first instance (unreported NSWSC 1. 8.1997) that a Costs Assessor might on request provide a marked-up copy of the bill with short notations indicating how each item was dealt with. It was that type of approach that the legislature spurned by the introduction of the Legal Profession Amendment (Costs Assessment) Act 1998. The second reading speech very clearly indicates that Costs Assessors are only required to provide limited reasons for their determinations and Review Panels are only required to provide short statements of reasons.
Costs of the appeal
61. With one exception, the costs of the appeal should follow the event: r 42.1 of the UCPR; unless some other order is appropriate. I will give leave to the parties to make an application if it is considered that some other order should be made.
62. The exception relates to the defendant’s costs wasted by reason of the amendments by the plaintiff of its summons. This occurred on two occasions. I don’t know whether any additional costs were incurred by the defendant in this regard but if there were, then in my view the plaintiff should pay those costs. But I will likewise give leave to make an application if it is considered that some other order should be made.
Disposition
63. The appeal is allowed and I make the following orders:.
(1) I set aside the certificates of the Review Panel.
(2) I remit the decision of the Review Panel to the Manager Costs Assessment and order that
the application for review be re-determined in accordance with these reasons, either by
the original Review Panel or at her discretion by a fresh panel.
(3) I direct the entry of judgment accordingly.
(4) I order the defendant to pay the plaintiff’s costs except as to any costs incurred by the
defendant but wasted by reason of the amendments made by the plaintiff to the Summons.
The costs payable pursuant to this order are to be agreed, or assessed on the ordinary
basis. The defendant’s entitlement to costs may be set-off against its liability for the plaintiff’s costs.
(5) I give leave to the parties to apply in writing for some other order or orders in substitution
for or in addition to these costs orders, provided any such application is made within 7
days, specifying the order sought. I will deal with any such applications separately from
the substantive appeal, on written submissions in chambers.
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