Rodwell v Hutchinson - [2010] WASCA 197

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: RODWELL -v- HUTCHINSON [2010] WASCA 197

CORAM: PULLIN JA
NEWNES JA
MURPHY JA

HEARD: 10 AUGUST 2010

DELIVERED : 14 OCTOBER 2010

FILE NO/S: CACV 161 of 2009

BETWEEN: ALAN STANLEY RODWELL
JAN ALETHEA ROBERTSON
Appellants
AND
ANTHONY JOHN HUTCHINSON
Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :GOETZE DCJ
Citation  :RODWELL & ANOR -v- HUTCHINSON [2009] WADC 180
File No  :BRO APP 1 of 2008

Catchwords:

Practice and procedure - Indemnity costs - Whether Magistrates Court has power to award indemnity costs - Whether Magistrates Court has power to make special order as to costs under s 215(2) of Legal Practice Act 2003 (WA)

Legislation:

Legal Practice Act 2003 (WA), s 210, s 215, s 221
Magistrates Court (Civil Proceedings) Act 2004 (WA), s 25

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellants: In person (Ms J A Robertson)
Respondent: Ms M L Coulson

Solicitors:

Appellants: In person
Respondent: Eagle & Partners

Case(s) referred to in judgment(s):

Colgate‑Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95
Grassby v The Queen [1989] HCA 45; (1989) 168 CLR 1
Knight v FP Special Assets Ltd (1992) 174 CLR 178
PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301
Re JJT; Ex parte Victoria Legal Aid [1998] HCA 44; (1998) 195 CLR 184
Re Malley SM; Ex Parte Gardner [2001] WASCA 83
Rodwell v Hutchinson [2009] WADC 180
Sansom Nominees Pty Ltd v Meade [2005] WASC 9(S)
Unioil International Pty Ltd v Deloitte Touche Tohmatsu [No 2] (1997) 18 WAR 190

PULLIN JA: I agree with Newnes JA.
NEWNES JA: This is an appeal from a decision of Goetze DCJ in the District Court dismissing the appellants' appeal from the decision of a magistrate who refused to award indemnity costs to the appellants following their success in proceedings in the Magistrates Court: Rodwell v Hutchinson [2009] WADC 180. The appellants contend that the primary judge erred in finding that the Magistrates Court had no power to award indemnity costs.

Background

The appellants brought proceedings in the Magistrates Court claiming the sum of $45,755.58 for work carried out on a property owned by the respondent and located at Waterbank, north of Broome. While the work was carried out the appellants resided in a shed on the property. It appears the respondent did not contest the amount claimed by the appellants for the work but counterclaimed an amount of $47,600 by way of rental for the appellants' occupation of the shed. The action went to trial on 27 September 2007.
In a reserved decision delivered on 5 December 2007, the magistrate rejected the respondent's assertion that there was an agreement the appellants would pay for their occupation of the shed. His Honour noted that there was little documentation to support the existence of such an agreement. He considered that it was unlikely that the respondent, the principal and licensee of a real estate agency, would have had no record of the rental agreement if there had been one. His Honour also noted that the respondent had made no demand for rent until the relationship between the parties had soured and final demand had been made by the appellants for the balance of the monies owing by the respondent for the work. In the meantime, without raising the question of rent, the respondent had paid to the appellants an amount of $5,000 in respect of the work while he was 'still assessing the validity of the final accounts submitted'.
His Honour gave judgment for the appellants in the sum of $45,755.58 and interest, and dismissed the respondent's counterclaim.
The appellants sought an order for indemnity costs. The magistrate declined to make such an order on the ground that he had 'no inherent jurisdiction to make an order for indemnity costs'. He made an order that the respondent pay the appellants' costs to be assessed.

The appellants appealed to the District Court against the refusal of the magistrate to award indemnity costs.

The decision of the primary judge

The primary judge considered that any power of the Magistrates Court to award indemnity costs would have to be provided by statute. He concluded there was no such provision. His Honour found that the effect of s 25 of the Magistrates Court (Civil Proceedings) Act 2004 (WA) is that the amount of any costs ordered to be paid by an unsuccessful party is to be determined under the applicable costs determination made under (then) the Legal Practice Act 2003 (WA). Section 215(2) of the Legal Practice Act enabled the court to make a special costs order where the amount allowable under a legal costs determination was inadequate because of the unusual difficulty, complexity or importance of the matter, but there was otherwise no power in the Magistrates Court to go beyond that determination. His Honour observed that in the present case it was not suggested that the matter was of unusual difficulty, complexity or importance within the meaning of s 215(2) of the Legal Practice Act. (I should mention that the Legal Practice Act has since been repealed and replaced by the Legal Profession Act2008 (WA). The equivalent provision to s 215(2) of the Legal Practice Act is s 280(2) of the Legal Profession Act.)
His Honour noted that the position as to indemnity costs was different in the Supreme Court by reason of s 37 of the Supreme Court Act 1935 (WA) and O 66 r 11(1) of the Rules of the Supreme Court 1971 (WA) and, in the District Court, by virtue of s 64 of the District Court of Western Australia Act 1969 (WA). Those provisions gave the Supreme Court and the District Court respectively, a general discretion.
A submission that s 11 of the Magistrates Court (Civil Proceedings) Act provided the court with the power to award indemnity costs was rejected by the primary judge. That provision, relevantly, provides that the Magistrates Court has such powers as are 'incidental to and necessary for the exercise of the jurisdiction conferred on it by s 6 and of the jurisdiction referred to in s 8 [of the Magistrates Court (Civil Proceedings) Act]'. His Honour found that costs were not matters which were incidental to or necessary for the exercise of that jurisdiction.
The primary judge also rejected a similar contention based on s 11(2)(b) of the Magistrates Court (Civil Proceedings) Act, which provides that the Magistrates Court may grant 'any remedy or relief in respect of a claim within [its] jurisdiction ... that the Supreme Court could grant if the claim had been made to that court'. His Honour concluded that costs were not part of the 'remedy or relief'. His Honour also rejected submissions advanced on behalf of the appellants that the relevant costs determination permitted a successful party to recover an amount greater than the determination in circumstances where the successful party had entered into a costs agreement with their lawyer.

Grounds of appeal

It is unnecessary to set out the grounds of appeal. The only issue on the appeal was whether the primary judge erred in law in holding that the magistrate did not have jurisdiction to award indemnity costs.

Disposition of the appeal

It is clear that if the Magistrates Court has power to award indemnity costs that power must be grounded in statute. The Magistrates Court as a creature of statute has only such jurisdiction and powers as are conferred on it, expressly or by necessary implication, by statute: see Grassby vThe Queen [1989] HCA 45; (1989) 168 CLR 1.
It is therefore convenient to turn first to s 25 of the Magistrates Court (Civil Proceedings) Act which deals with costs in the Magistrates Court. It is, so far as relevant, as follows:
(1)The Court may order a party to a case to pay the whole or a part of another party's costs in the case.
(2)A successful party is entitled to an order under subsection (1) that the whole of its costs in the case be paid by the unsuccessful party, unless the Court considers there is good reason not to make such an order or subsection (5) applies.
...
(7)The amount of any costs to be paid is to be determined by the Court unless the parties concerned agree on the amount.
(8)The amount of any costs to be paid in respect of work done by a legal practitioner in conducting any proceedings in the case is to be determined under the applicable costs determination.
(9)If the Court orders the costs of a self‑represented party to be paid by another party, the Court may order that the whole or a part of the expenses or losses incurred by the self‑represented party in or in connection with conducting the case be included in the costs.
(10)If the Court is satisfied that due to the acts or omissions of a legal practitioner, whether personally or through an employee or agent ‑
(a)costs have been incurred improperly or without reasonable cause; or
(b)costs have been wasted by undue delay or by any misconduct or default,
the Court may order all or any of the following ‑
(c)the legal practitioner to be wholly or partially disentitled to costs from the legal practitioner's client;
(d)the legal practitioner to repay to the legal practitioner's client the whole or a part of any costs that the legal practitioner has been paid by the client for items other than disbursements;
(e)the legal practitioner to pay to the legal practitioner's client the whole or a part of any costs that the client is ordered to pay to another party;
(f)the legal practitioner personally to indemnify any party other than the lawyer's client against the whole or a part of the costs payable by the indemnified party.
Under s 3 of the Magistrates Court (Civil Proceedings) Act, 'applicable costs determination' meant, at the relevant time, the legal costs determination in force under s 210 of the Legal Practice Act (now under s 275 of the Legal Profession Act).
Section 48(2)(q) of the Magistrates Court (Civil Proceedings) Act provides that the Magistrates Court may make rules regulating the making of orders as to costs and the determination of the amount of costs. Such rules are contained in pt 15 of the Magistrates Court (Civil Proceedings) Rules 2005 (WA). Those rules provide the procedure to be followed where the costs are to be assessed pursuant to an order for costs. The rules, which are succinctly stated, follow a familiar form. In substance, where an order for costs is made by the court, the successful party may file and serve a bill of costs in the approved form. If, within 21 days of service of the bill, the other party objects to any item in the bill, the costs must be assessed at a hearing before a registrar. Where no objections are lodged the registrar may assess the costs in the absence of the parties. In either event, the registrar must give a certificate of the assessment to the parties. There are also detailed provisions dealing with the way in which the value of the claim is to be determined for the purposes of assessing costs.
However, neither the Magistrates Court (Civil Proceedings) Act nor the Magistrates Court (Civil Proceedings) Rules 2005 provide for the amount of costs that a party is entitled to recover under an order for costs. At the relevant time that was dealt with under the Legal Practice Act. It is necessary to turn to the relevant provisions of that Act.
Section 207 of the Legal Practice Act established the Legal Costs Committee. Section 210(2) of that Act empowered the Legal Costs Committee to make costs determinations regulating the remuneration of legal practitioners in respect of contentious business in, amongst others, the Magistrates Court. The time within which, and the procedure by which, costs determinations were to be made and reviewed were dealt with in s 208 to s 214. Section 215 (see now s 280 of the Legal Profession Act) provided, relevantly, as follows:
(1)Subject to sections 221 [dealing with cost agreements] and 241 of this Act and section 14 of the Legal Aid Commission Act 1976 ‑
(a)the taxation of bills of costs of legal practitioners, as between legal practitioner and client or party and party; and
(b)any other aspect of the remuneration of legal practitioners the subject of a determination,
is regulated by a legal costs determination in force under section 210.
(2)Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed.
(3)Nothing in subsection (1) is to be construed as limiting the power of a court, a judicial officer or a taxing officer of a court to determine in any particular case before that court or judicial officer the amount of costs allowed.
In respect of party and party costs, the substantive effect then of s 215 was that the legal costs of proceedings were to be determined pursuant to any applicable costs determination made under s 210, subject to the power of the court to exceed the limits in the costs determination in the specific circumstances set out in s 215, and without derogating from the power of the court to determine costs outside the costs determination in a particular case.
I should say that there is, in my view, no inconsistency between s 215(1) of the Legal Practice Act and s 25(8) of the Magistrates Court (Civil Proceedings) Act. On the contrary, there is some duplication. Section 215(1) provides, in effect, that costs, both on a party and party basis and (subject to the costs agreement provisions of s 221) as between solicitor and client, are regulated by the applicable costs determination. Section 25(8) of the Magistrates Court (Civil Proceedings) Act provides, in effect, that in the Magistrates Court party and party costs are regulated by the applicable costs determination. The latter Act is silent on the question of solicitor and client costs, leaving those to be regulated solely by the Legal Practice Act. I will come in due course to the reasons that I consider s 25(8) of the Magistrates Court (Civil Proceedings) Act deals only with party and party costs.
The Legal Costs Committee had made two costs determinations under the Legal Practice Act which were relevant to the proceedings before the magistrate. The first was published in 2005 and the second in 2006. In each determination the following provision appears in the schedule:
9.Scale of costs
Unless a practitioner has made a written agreement as to costs with a client under the provisions of section 221 of the Legal Practice Act 2003 the costs of or in relation to a party to an action or other proceeding (inclusive of GST and Counsel fees but exclusive of other disbursements) ‑
(a)recoverable from one party by another party; or
(b)payable by a party to that party's own practitioner,
shall not exceed the amount set out in the Table to this clause.
The determinations thus reiterated in substance the effect of s 215(1) of the Legal Practice Act.
Where a party had entered into a costs agreement with their lawyer under s 221 of the Legal Practice Act, the lawyer was entitled (subject to certain statutory safeguards) to charge that party in accordance with the costs agreement without being limited by the amounts set out in the costs determination. But I think it is clear that while the fact that a party had entered into a costs agreement with their lawyer affected their liability to their own lawyer, it did not, of itself, affect the amount that the party was entitled to recover from the unsuccessful party under an order for party and party costs. Even where it had entered into a costs agreement, a successful party was not entitled to recover more than the amount specified in the costs determination unless it persuaded the court either that a special costs order should be made under s 215(2) of the Legal Practice Act or, if it was available, that an order should be made for indemnity costs.
Where a special order as to costs under s 215(2) of the Legal Practice Act or (if applicable) an indemnity costs order was made, the limitations on the amounts recoverable as set out in the costs determination did not apply to the extent they were varied by the terms of the order. But the total amount recoverable was still limited by the amount for which the successful party was liable to its own lawyer. Costs are purely compensatory in nature, whatever the basis upon which they are awarded, and a party is not entitled to recover an amount greater than their liability to their own lawyer. Where the successful party had entered into a costs agreement, that principle had statutory force in s 221(3) of the Legal Practice Act, which provided, in effect, that a party who obtained an order for costs was not entitled to recover from another party an amount greater than the amount that the first party was liable to pay their own lawyers under the costs agreement.
As Pullin J (as his Honour then was) pointed out in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [24], if a properly formulated special costs order is made there will generally be little need for an indemnity costs order to recover costs incurred in excess of the costs determination. Indeed, generally an indemnity costs order will not be made unless it is shown that some part of the costs will not be covered by an order for party and party costs or by a special costs order: Unioil International Pty Ltd v Deloitte Touche Tohmatsu [No 2] (1997) 18 WAR 190, 193; Flotilla Nominees [11], [24] ‑ [26].
That does not mean that indemnity costs orders have no place. While it will often be the case that the costs recovered under an indemnity costs order would not be significantly different to the costs recovered under a special costs order made under s 215(2) of the Legal Practice Act (or now under s 280 of the Legal Profession Act), the two are not always coterminous. The circumstances which would justify the making of an order for indemnity costs are not necessarily the same as the circumstances which would justify a special order as to costs 'because of the unusual difficulty, complexity or importance of a matter'. The commencement of a simple and straightforward, but manifestly hopeless, claim, or the unreasonable refusal of an offer to compromise an otherwise unexceptional action, are two obvious examples where an indemnity costs order might be appropriate but a special costs order might not.
A question which arose in the course of argument on the appeal was whether the Magistrates Court had power to make a special costs order under s 215(2) of the Legal Practice Act. In my view, it did. Section 215(2) was expressed in general terms to apply in any case where a court or judicial officer was of the opinion that the amount of costs allowable under a costs determination made under s 210 of the Legal Practice Act was inadequate for the reasons there specified. The definition of 'court' in s 206 of the Legal Practice Act was plainly wide enough to include the Magistrates Court. I do not consider there is any inconsistency between s 25(8) of the Magistrates Court (Civil Proceedings) Act, which provides that the amount of costs is to be determined under the applicable costs determination, and the general dispensing power granted to the courts (including the Magistrates Court) under s 215(2), in effect, to exceed, in certain specified circumstances, the limits of a costs determination. I should say, however, that it appears no application was made by the appellants in the Magistrates Court for a special costs order under s 215(2) so it is unnecessary to decide the point.

The question on the appeal is whether the Magistrates Court had power to make an order that the respondent pay costs on an indemnity basis.
It is well‑established that an indemnity costs order will only be made in exceptional circumstances: Re Malley SM; Ex Parte Gardner [2001] WASCA 83. It is impossible to set out exhaustively the circumstances in which a court would make an indemnity costs order and it would be unwise to attempt to do so. Whether an order for indemnity costs is appropriate must depend upon the particular circumstances of the case. But such an order will most often be made in cases where there has been improper or unreasonable conduct on the part of a party or that party's legal advisors. In such circumstances it marks the court's disapproval of the conduct. In Colgate‑Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233 ‑ 234, the following examples of circumstances where an order for indemnity costs might be appropriate were given:
(a)the making of allegations of fraud knowing them to be false, and the making of irrelevant allegations of fraud;
(b)evidence of particular misconduct that causes loss of time to the court and the other parties;
(c)the proceedings were commenced or continued for some ulterior motive;
(d)the proceedings were commenced or continued in wilful disregard of known facts or clearly established law;
(e)the making of allegations that ought never to have been made or the undue prolongation of a case by groundless contentions;
(f)an unreasonable refusal of an offer to compromise the action; and
(g)in circumstances where a contempt of court has been committed.
In the present case, the magistrate found that he had 'no inherent jurisdiction' to make such an order. I think by that he meant that no such power arose by implication under statute. It is clear that, as a creature of statute, the Magistrates Court has no inherent jurisdiction.
It was submitted by the appellants that the power to award indemnity costs arose under at least two heads. First, s 25(7) of the Magistrates Court (Civil Proceedings) Act enabled the court to determine the amount of any costs to be paid by the unsuccessful party. That, it was contended, was a separate power which was not constrained by the applicable costs determination. Secondly, s 215(3) of the Legal Practice Act enabled a court to determine costs outside the applicable costs determination in a particular case.
It is convenient to take s 25(7) of the Magistrates Court (Civil Proceedings) Act first. As s 25 is the grant of power to a court the words should be given a liberal construction unless there is something in them to indicate to the contrary: Knight v FP Special Assets Ltd (1992) 174 CLR 178, 205; PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301, 313; Re JJT; Ex parte Victoria Legal Aid [1998] HCA 44; (1998) 195 CLR 184 [41], [128].
In determining the effect of s 25(7), the provision must be read in its context. The Magistrates Court (Civil Proceedings) Act is, as the long title to the Act makes clear, an Act 'relating to the civil jurisdiction of, and civil proceedings in, the Magistrates Court'. Section 25 is contained in pt 3, dealing with the general procedure of the court, and is concerned with the powers and procedures of the court in relation to the costs of proceedings in the court. Section 25(1) empowers the court to order a party to pay the whole or part of another party's costs in the proceedings. Section 25(2) goes on to give statutory effect to the usual rule that a successful party shall be entitled to an order for costs unless the court considers there is good reason not to make such an order. Section 25(3) provides that an order as to costs may be made even if the case is outside the court's jurisdiction and s 25(4) provides that an order as to costs may be made at any stage of the proceedings. Section 25(5) and (6) are concerned with costs in cases which fall within the minor cases jurisdiction of the court.
The determination of the amount of costs that the successful party is entitled to recover under an order for costs is dealt with in s 25(7) ‑ s 25(9). Section 25(7) provides that the court is to determine the amount of costs unless the parties agree. Section 25(8) provides that the amount of costs to be paid in respect of work done by a legal practitioner in the conduct of proceedings is to be determined under the applicable costs determination. Section 25(9) provides that where a self‑represented party obtains an order for costs, the court may order that expenses or losses incurred by that party in connection with the conduct of the case be included in the costs.
I do not accept the appellants' submission that s 25(7) can be read as a separate general power to make an award of costs, unconstrained by s 25(8). Rather it is evident that s 25(7) is concerned only with the means by which the amount of costs in any case is to be determined, namely by the court. In that connection, s 25(7) is clearly wide enough to permit the court to fix the amount of costs in an appropriate case, but equally clearly there will be many cases where the costs will have to be subject to a process of assessment, or taxation, in the usual way. In the latter case, s 48(2)(q) of the Magistrates Court (Civil Proceedings) Act enables the court to make rules regulating the manner in which the amount of such costs is to be determined and, as I have mentioned, such rules now exist in pt 15 of the Magistrates Court (Civil Proceedings) Rules. But whether the amount of costs is fixed or taxed by the court, the amount of costs to be paid to the successful party is, by virtue of s 25(8), to be determined under the applicable costs determination.
It is convenient to mention at this point three further, alternative, submissions made by the appellants. It was submitted that s 25(8) is simply concerned with costs as between solicitor and client and does not limit the power of the court to make an order for party and party costs outside the limits in the applicable costs determination. I do not accept that submission. In my view, in its context it is clear that s 25(8) refers to party and party costs under an order for costs.
It was also submitted by the appellants that s 25(2) of the Magistrates Court (Civil Proceedings) Act enables the Magistrates Court to make an order for indemnity costs. It appears that that submission was based on the proposition that the words 'the whole of its costs' in s 25(2) encompassed an order for costs on an indemnity basis. In my view, when read in its context it is clear that s 25(2) is simply intended to give statutory effect to the usual rule as to costs and must be read subject to s 25(8). The submission must be rejected.
The appellants further submitted that the decision in Sansom Nominees Pty Ltd v Meade [2005] WASC 9(S) was authority that a power to award indemnity costs was to be found in s 215(2)(d) of the Legal Practice Act. I do not, however, read that case as authority for such a proposition. There EM Heenan J was dealing with a contention that an application for indemnity costs did not fall within leave which had been reserved to the parties to apply for a special order as to costs. In concluding that the application fell within the reservation of leave, his Honour considered that a special costs order under s 215(2) was no different in practical effect to an indemnity costs order, as both were necessarily compensatory only in nature. His Honour did not decide that s 215(2)(d) was a separate head of power enabling courts to award indemnity costs. I might add that, in any event, the construction contended for by the appellants would not assist them. As I have already pointed out, before an order can be made under s 215(2)(d) the court must be satisfied that such an order is appropriate because of the 'unusual difficulty, complexity or importance of [the] matter'. At no stage have the appellants argued that the matter was of that nature.
It is necessary then to turn to s 215(3) of the Legal Practice Act. As mentioned earlier, s 215(3) provides that 'nothing in [s 215(1)] is to be construed as limiting the power of a court' to determine the amount of

costs in a particular case. In my view, s 215(3) does not, of itself, confer any power on a court to determine costs otherwise than in accordance with the applicable costs determination. It simply provides, in effect, that nothing in s 215(1) derogates from any power the court otherwise has to determine costs outside the applicable costs determination. The power of a court to do so, if it exists, must be found elsewhere. No such power exists in the Magistrates Court. On the contrary, s 25(8) of the Magistrates Court (Civil Proceedings) Act provides that in the Magistrates Court costs are to be determined under the applicable costs determination.

Accordingly, I do not consider that s 215(3) of the Legal Practice Act assists the appellants.

Conclusion

In my view, the primary judge correctly found that the magistrate had no power to award indemnity costs. I would therefore dismiss the appeal.
MURPHY JA: I agree with Newnes JA.