Smoel and Wooster v Piper Alderman (No 3)
[2020] VSC 176
•15 April 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S CI 2014 01696
| KERRYN LINDA SMOEL and SUSAN CAROLYN WOOSTER (in their capacity as trustees of the Morris Family Superannuation Fund) | Applicants |
| v | |
| PIPER ALDERMAN | Respondent |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 September 2019 |
DATE OF JUDGMENT: | 15 April 2020 |
CASE MAY BE CITED AS: | Smoel & Wooster v Piper Alderman (No 3) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 176 |
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PRACTICE AND PROCEDURE – Jurisdiction of Costs Court – Whether Court should consider informal applications for non-party costs within Costs Court proceeding – Where applicants seek determination of certain issues upon referral to trial judge sitting in Costs Court proceeding – Winn v Garland Hawthorn & Brahe [2006] VSC 476 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr P Lovell | Castra Legal Costing Pty Ltd |
| For the Respondent | Mr D Collins QC and Ms S Cherry | Piper Alderman |
HER HONOUR:
This is a Costs Court proceeding brought by the applicants in their capacity as the trustees of the Morris Family Superannuation Fund (‘the MFSF’), as non-associated third party payers, to obtain an assessment of the costs of the respondent, Piper Alderman, in defence of the proceeding S CI 2012 36963 (‘the superannuation proceeding’). In the superannuation proceeding, the applicants were plaintiffs in their personal capacities. Piper Alderman was not a party but was solicitor on record for the defendants.
By written submissions filed in this proceeding, the applicants seek the following orders:
(a) First, that the costs (or some part of the costs) incurred by them in their personal capacities as the plaintiffs in the superannuation proceeding, not as trustees of the MFSF, be paid by the respondent;
(b) Second, that the defendants’ costs of the superannuation proceeding paid out of the MFSF to the respondent be reimbursed by the respondent to the applicants as trustees of the MFSF;
(c) Third, that other costs paid out of the MFSF to the respondent be reimbursed to the applicants as trustees of the MFSF.
The respondent submits that the application cannot and should not be permitted to proceed by way of informal application in this Costs Court proceeding.
On 5 September 2019, the Court heard the parties in relation to the following questions:
(a) whether the applicants’ applications under s 29 of the Civil Procedure Act 2010 (‘the CPA’) and r 63.23 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the SCR’) in relation to the costs of the superannuation proceeding (‘the superannuation costs’) are properly made in this proceeding or must be made in the superannuation proceeding; and
(b) whether the applicants’ application for recovery of costs other than costs of the superannuation proceeding (‘the non-superannuation costs’) can be made in this proceeding.
Procedural background
In Wooster v Morris, the applicants, as plaintiffs in the superannuation proceeding, obtained personal costs orders against the defendants in that proceeding.[1] The Court ordered that, ‘subject to the consideration by the parties’, the defendants in that proceeding pay the plaintiffs’ costs of and incidental to the proceedings, including all reserved costs and the costs of a special referee.[2]
[1]Wooster v Morris [2013] VSC 594.
[2]Ibid [97(c)] (McMillan J).
Mrs Morris, one of the former trustees, died on 24 September 2013. In 2011, Mrs Morris had been replaced as trustee by Upper Swan Nominees Pty Ltd (‘Upper Swan’), a company of which she was the sole director and shareholder. Upper Swan was subsequently deregistered on 28 January 2015.
On 10 April 2014, the applicants commenced this Costs Court proceeding by filing a summons for taxation of costs.
At an early stage, one of the many disputes between the parties was whether the Costs Court had jurisdiction to make the orders sought by the applicants in their summons under the Supreme Court Act 1986 (‘the SCA’). That question was referred by Associate Justice Wood to a Judge for directions under r 63.51 of the Supreme Court (General Civil Procedure) Rules 2005 (‘the former SCR)’).
In Smoel & Wooster v Piper Alderman; Smoel & Wooster v DLA Piper,[3] the Court concluded that the applicants had standing to seek review of the costs of the respondent, and that the Costs Court had jurisdiction to assess the costs that were the subject of the summons. The Court also concluded that findings made in the superannuation proceeding were binding and effective on the parties in this proceeding.
[3][2015] VSC 256.
The Court made orders on 30 October 2015, noting a referral pursuant to r 63.51, and provided, inter alia:
1.The applicants and the [MFSF] have standing to issue their summons for taxation dated 10 April 2014 to review each of the respondent’s bills of costs (‘the bills’) as per the tax invoices listed in the schedule of invoices attached to the summons.
2.The Costs Court has jurisdiction to hear the summons for taxation and to review the bills, subject to these orders.
3.In conducting any costs review in this proceeding, the Costs Court is bound by the findings and decision made in the superannuation proceeding, including the finding that the former trustees of the MFSF were not entitled to an indemnity for their legal costs out of the MFSF whether arising, paid or payable in respect of, or incidental to the superannuation proceeding, including the special reference therein.
…
8.At the conclusion of the taxation (or any settlement or other determination of the costs quantum thereof), the applicants, as plaintiffs in their capacity as trustees of the MFSF, have leave to apply to the Court in the superannuation proceeding for any further orders or directions pertaining to the costs of the superannuation proceeding and the liability of any person for payment thereof.
Subsequently, in Smoel & Wooster v Piper Alderman (No 2), the Court determined the question of whether certain tax invoices constituted itemised bills for the review of the Costs Court in this proceeding.[4] That decision was upheld on appeal.[5]
[4][2016] VSC 237.
[5]Piper Alderman v Smoel & Wooster [2017] VSCA 42.
In 2017, the parties agreed to consent minutes for the conduct of the costs review. Although the minutes were forwarded to the Court, orders were not made until 29 January 2019. The orders included the following:
1.Without derogation to order 8 of the orders of 30 October 2015, the Costs Court review the respondent’s itemised bills to determine the allowable amount of the costs and disbursements thereby charged which are referable to the superannuation proceeding.
Over a period of eight days in 2017, the Costs Court conducted a review of the respondent’s bills of costs to the former trustees of the MFSF (‘the costs review’). At the conclusion of the costs review, the parties agreed the total amounts allowed for the superannuation proceeding and the total remaining legal costs that had been invoiced.
On 20 August 2018, following the costs review, the Costs Court made orders, inter alia, that:
1.Subject to the applicants’ rights under r 63.23 of the [SCR], the costs of the superannuation proceeding are taxed and allowed in the sum of $161,021.19.
2.Any application pursuant to r 63.23 is to be referred back to Justice McMillan.
3.Any application that the respondent refund moneys paid by the superannuation fund is referred back to Justice McMillan
It is the above referrals, presumed to be pursuant to r 63.51, that gave rise to the orders on 13 February 2019, the hearing in September 2019, and these reasons.
On 29 November 2018, the Costs Court made orders for the payment of the costs of the costs review.
On 29 January 2019, the Court made the abovementioned orders replicating the consent minutes.
On 13 February 2019, the Court ordered,[6] inter alia, that:
[6]The timetable for filing in the orders was subsequently varied by consent.
B. The Paid Costs of the Non-Superannuation Matters:
2.On or by 4.00 pm on 15 March 2019 the Respondent file and serve any submissions and any affidavits or evidence in support thereof pertaining to the Respondent’s right and entitlement to charge and receive payments from the MFS Fund for the following legal costs:
a. the sum of $72,231.47 being the amount billed by the Respondent to the MFS Fund and paid the MFS Fund for the “non-superannuation matter” described as “MFT” in [Wooster v Morris [2013] VSC 594];
b. the sum of $82,476.03 being the amount billed by the Respondent to the MFS Fund and paid by the MFS Fund for the “non-superannuation matter” described as “50% MFT” in the Ruling;
c. the sum of $1,134.10 being the amount billed by the Respondent to the MFS Fund and paid by the MFS Fund for the “non-superannuation matter” described as “Miscellaneous” in the Ruling;
d. the sum of $3,034.55 being the amount billed by the Respondent to the MFS Fund and paid by the MFS Fund for the “non-superannuation matter” described as “Personal” in the Ruling.
3. On or by 4.00 pm on 15 April 2019 the Applicants file and serve any submissions in reply and any affidavits or evidence in support thereof pertaining to the Applicants’ right and entitlement to recover the amounts from the Respondent described in order 2(a) to 2(d) above, together with penalty interest on and from the date of payment of each applicable invoice.
4. On or before 4.00 pm on 29 April 2019 the Respondent file and serve any submissions in response and any affidavits or evidence in support thereof pertaining to the Respondent’s right and entitlement to charge and receive payments from the MFS Fund described in orders 2(a) and 2(d) above.
C.The Applicants’ Rule 63.23 Claims
5.On or by 4.00 pm on 15 March 2019 the Applicants’ file and serve any submissions and any affidavits or evidence in support thereof pertaining to the Applicants’ rights under Rule 63.23 of the Supreme Court (General Civil Procedure) Rules 2015 in respect of the costs allowed to date by the Judicial Registrar in the superannuation proceeding.
6. On or by 4.00 pm on 15 April 2019 the Respondent file and serve any submissions in reply and any affidavits or evidence in support thereof disputing the Applicants’ rights under Rule 63.23 of the Supreme Court (General Civil Procedure) Rules 2015 in respect of the costs allowed to date by the Judicial Registrar in the superannuation proceeding.
7. On or by 4.00 pm 29 April 2019 the Applicants file and serve any submission in response and any affidavits or evidence in support thereof pertaining to the Applicants’ rights under Rule 63.23 of the Supreme Court (General Civil Procedure) Rules 2015 in respect of the costs allowed to date by the Judicial Registrar in the superannuation proceeding.
By written submissions filed 30 April 2019, the applicants seek the three categories of costs relevant to these reasons.
Applicants’ case
Superannuation costs
The applicants seek the following costs pursuant to r 63.23 of the SCR and, in relation to some claims, the CPA:
(a) Costs or disgorgement flowing from the respondent’s knowing receipt of moneys transferred in breach of trust, constituting:
(i) Costs allowed by the Judicial Registrar in the sum of $161,021.19;
(ii) Costs paid by the MFSF (but not billed by the respondent) in the sum of $24,300 for the superannuation proceeding;
(iii) Costs of the applicants in the superannuation proceeding of $342,475;
(b) Wasted costs flowing from actions of the respondent pertaining to advice over the deceased’s Member Information Statement;
(c) All costs billed by the respondent and allowed by the Judicial Registrar on and from the date of the applicants’ writ and statement of claim in the superannuation proceeding, due to the respondent’s failure to consider or pursue an application under O 54 of the former SCR;
(d) Funds inappropriately received by the respondent from the MFSF following Court orders made on 10 April 2013;
(e) Wasted costs relating to a conflict issue raised and subsequently withdrawn by the respondent;
(f) Penalty interest on the above amounts.
The applicants submit that the respondent should pay the above costs pursuant to various sections of the CPA on the basis that the respondent breached its overarching obligations.
In relation to the costs under sub-paragraphs (b), (d) and (e) above, the applicants submit that these claims relate only to a specific step or specific steps within the superannuation proceeding, rendering them well within the jurisdiction of the Costs Court to determine.[7]
[7]Citing Winn v Garland Hawthorn & Brahe [2006] VSC 476, [18] (Kaye J).
The costs sought in sub-paragraphs (a) and (c) above are far more sweeping. The applicants accept that the normal procedure is for the trial judge to hear any application for non-party costs,[8] and that the respondent submits that procedure ought be followed via summons in the superannuation proceeding. The applicants submit that, nevertheless, the Costs Court may deal with these claims for reasons including:
[8]Citing UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd [2004] VSC 105, [60] (Habersberger J).
(a) The trial Judge throughout this lengthy Costs Court proceeding was the trial Judge in the superannuation proceeding.
(b) The respondent was so closely connected with the superannuation proceedings that it ought not suffer any injustice by reference to any facts and findings made in the superannuation proceeding.
(c) To require a separate (and somewhat repeated) pleading of the applicants’ wasted costs claims within the superannuation proceeding would be unnecessarily costly, duplicative and harsh for the applicants who have already suffered significant loss (by the non-recovery of full costs) in the superannuation proceeding.
(d) It would not be a procedural departure from the requirements of r 63.23 for the trial Judge to hear those claims in a Costs Court proceeding.
Non-superannuation costs
These are costs paid by the MFSF but not relating to the superannuation proceeding. They include costs for work performed variously for Mrs Morris, Upper Swan, and Upper Swan as trustee of the MFSF. Invoices for this work were annexed to the summons for taxation filed 10 April 2014. The invoices have been partly paid by the MFSF.
The applicants submit that order 1 of the 29 January 2019 orders reflect the Court’s intention to ascertain the true amount of the superannuation costs and the true amount of the non-superannuation costs.
It is beyond dispute that the respondent’s 23 bills of costs paid by the MFSF, purportedly for superannuation costs, contained many items of non-superannuation costs.
On the question of the applicants’ standing, it is submitted:
(a) It is clear from the applicants’ summons for taxation that the applicants sought to have the Costs Court assess the fair and proper superannuation costs, and then have the respondent refund any excess costs or non-superannuation costs paid by the MFSF.
(b) The applicants accept that their summons does not entitle them to ‘tax’ any non-superannuation costs ‘in the context of any non-superannuation matter’. However, this does not mean that the MFSF is to remain burdened by the non-superannuation costs, many of which were unidentified until the taxation.
(c) The orders of the Judicial Registrar made 20 August 2018 show that the final decision as to any costs refund or other treatment of the non-superannuation costs would best be left to the learned trial Judge.
(d) In order 1 of the orders of 30 October 2015, the Court found that the applicants had standing to issue their summons to review each of the bills of costs. The January 2019 orders are no different in effect. The applicants’ standing was based on the finding that the MFSF was a non-associated third party payer of the bills.
(e) The respondent’s submission that the MFSF is not a third party payer in relation to the non-superannuation costs ‘ignores the complex and conflated nature of the bills and the confusion thereby created by the respondent’.
Under the heading of the applicants’ standing, the applicants make a number of other submissions, largely concerning the billing methods and knowledge of the respondent in relation to the manner in which its costs were being paid. These are not relevant to the questions considered in these reasons.
Respondent’s case
The respondent seeks that the summary application in this proceeding be dismissed. In relation to the superannuation costs, the respondent seeks that the dismissal be without prejudice to the applicants’ right to make those applications in the superannuation proceeding. In relation to the non-superannuation costs, the respondent submits that the applicants should commence a separate proceeding should they wish to pursue those claims.
The respondent submits that the applications should not be permitted to proceed by way of informal applications in the Costs Court proceeding for the following reasons:
(a) The applications go well beyond the scope of the orders of 13 February 2019.
(b) The Costs Court has no jurisdiction to determine them.
(c) The applicants should discretely articulate the basis on which they make each of the applications, and the costs which they claim should be paid or reimbursed in respect of each of those grounds.
(d) The failure to properly articulate the basis of each of the applications, and the costs sought on each of the grounds relied upon, denies the respondent a fair opportunity to identify and prepare evidence it might rely upon and to know the arguments it is required to meet.
(e) The failure to properly articulate each of the applications and the grounds for it, and the making of the applications in the Costs Court Proceeding, might prejudice the ability of the respondent to obtain indemnity under policies of insurance.
(f) The failure to make the applications in the correct proceedings and in a proper form potentially prejudices the ability of the respondent to identify claims for indemnity or contribution which should be pursued against other parties, and potentially gives rise to the risk of multiplicity of proceedings and inconsistent findings.
Superannuation costs — as plaintiffs in the superannuation proceeding
The respondent submits that the applicants should make this application in the superannuation proceeding in their personal capacity, not as trustees of the MFSF.
The respondent refers to the Court’s decision in 2015:
I accept that the Costs Court has no jurisdiction to deal with issues of liability for payment of the legal costs — that is, whether the MFSF is able to recover from the former trustees, either from Upper Swan as trustee of the MFSF or from its former directors, or even from the respondents. In my view, these are inter partes issues that are to be determined otherwise than through an application for a review of costs.[9]
[9]Smoel & Wooster v Piper Alderman; Smoel & Wooster v DLA Piper (n 3) [57] (McMillan J).
It is noted that the orders of 30 October 2015 in this proceeding expressly gave leave to the applicants to apply to the Court in the superannuation proceeding for any further orders or directions pertaining to the costs of that proceeding and any liability of any person for payments thereof.
The respondent then sets out the basis upon which it would anticipate opposing such an application, were it properly brought in the superannuation proceeding. It is unnecessary to repeat those submissions.
Superannuation costs — reimbursement of costs paid by MFSF
The respondent accepts that this application is within the scope of the 13 February 2019 orders, insofar as the application is made pursuant to r 63.23 and subject to the submissions below.
Insofar as the applicants rely on the respondent’s knowing receipt of payments made in breach of fiduciary duty, they do not expressly allege that the breach involved fraudulent or dishonest conduct. Regardless, such claims should be made in separate proceedings.
The respondent submits that any application in relation to the superannuation costs is limited, by both the orders on taxation and order 1(a) of the 13 February 2019 orders, to the taxed and allowed amount of $161,021.19 — that being the total figure paid to and retained by the respondent in relation to its solicitor-client superannuation costs.
The respondent accepts that it is sometimes appropriate for the Costs Court to consider allegations of negligence against a solicitor and to make reductions to allowed solicitor-client costs where appropriate. It is submitted that this is not such a case, as the allegations raised by the applicants are so broad, even in relation to the superannuation costs paid by the MFSF, as to require determination other than in the context of the Costs Court. It is well established that where the allegation goes beyond individual items and is said to impact the costs as a whole, that is not within the jurisdiction of the Costs Court and must be pleaded in a separate proceeding.[10]
Non-superannuation costs
[10]Citing Winn v Garland Hawthorn & Brahe (n 7); UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (n 8).
The respondent makes two main submissions regarding the review of non-superannuation costs in this proceeding:
(a) First, the applicants do not have standing in this Costs Court proceeding in relation to non-superannuation costs as against the respondent; and
(b) Second, the Costs Court does not have jurisdiction to deal with these costs, which are inter partes issues concerning liability for payment (as opposed to reasonableness of charge).
Regarding the first submission on standing, the respondent submits:
(a) The powers and functions of the Costs Court are set out in s 17D of the SCA. The non-superannuation costs are not costs in a proceeding and so do not come within s 17D(1)(a)–(e). Rather, they are solicitor-client costs that could only fall within the scope of s 17D(1)(f), which required a valid application for review under div 7 of pt 3.4 of ch 3 of the Legal Profession Act 2004 (‘the LPA’).
(b) Such an application may only be brought by one of those classes of persons set out in the exhaustive list in s 3.4.38 of the LPA.
(c) One such class is ‘third party payers’, which includes both associated and non-associated third party payers. A non-associated third party payer is not a client but is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client (whether arising under contract, legislation, or otherwise), and that obligation is owed to the client or another person, but not the law practice.[11]
[11]Legal Profession Act 2004 (Vic) s 3.4.2A.
(d) The Court has previously determined that the MFSF was a non-associated third party payer in relation to the superannuation costs by virtue of its (former) obligation to its former trustees under a right of indemnity.[12] That right, the Court determined, had subsequently been lost.
[12]Smoel & Wooster v Piper Alderman; Smoel & Wooster v DLA Piper (n 3) [56], [60].
(e) On one view, the Court went on to find that the applicants, as the ‘new trustees’ of the MFSF, were non-associated third party payers in relation to the entirety of the bills. This is because they were found to have standing to seek a review of the costs that were the subject of the summons,[13] which expressly includes all costs contained in the bills annexed to it. If that is correct, then the applicants must also have been third party payers.
[13]Ibid [72].
(f) The above conclusion is supported by the Court’s orders on 30 October 2015, which stated that ‘the applicants and the MFSF have standing to review each of the respondent’s bills as per the tax invoices in the schedule of invoices attached to the summons’.
(g) The taxation was conducted on the basis that the applicants only had standing in relation to the superannuation costs.[14]
[14]Smoel & Wooster v Piper Alderman (Supreme Court of Victoria, Gourlay JR, 29 November 2018) [8], [39].
(h) It remains unclear whether the Court has made any determination as to whether the applicants are third party payers in relation to the non-superannuation costs.
(i) If the applicants are (or have been) non-associated third party payers in relation to the non-superannuation costs, then by definition they have (or had) a legal obligation for those costs to the client.
(j) If the applicants are not non-associated third party payers in relation to the non-superannuation costs, then they had and have no obligation to pay those costs but also have no standing before the Costs Court in relation to those costs.
(k) The respondent also submits that, regardless of whether the applicants are third party payers, the Court should follow the decision of the Western Australian Court of Appeal in Iron Mountain Mining Ltd v K&L Gates.[15] In that case, their Honours found that there must exist an ‘extant obligation to pay at the time the assessment application is made’.[16] Plainly, no such obligation exists here.
[15][2016] WASCA 166.
[16]Ibid [29] (Martin CJ, Murphy and Mitchell JJA).
Regarding the second submission on jurisdiction, the respondent submits:
(a) The Costs Court has already determined that it has no jurisdiction to deal with issues of liability for payment (as opposed to reasonableness of charge), which is an inter partes issue to be determined other than in the context of an application for a review of costs.[17]
[17]Smoel & Wooster v Piper Alderman; Smoel & Wooster v DLA Piper (n 3) [57].
(b) The applicants have previously confirmed that they do not seek any such orders from the Costs Court.[18]
(c) The application for information as to ‘any right and entitlement to charge and receive’ non-superannuation costs has no utility in this proceeding, and can be no more than a fishing expedition.
(d) If the applicants wish to argue or seek a determination as to liability, particularly in relation to the non-superannuation costs that have not even been the subject of review, they should do so in the appropriate forum against the appropriate person and on a properly articulated and pleaded case.
[18]Ibid [57], [59].
The respondent makes further submissions in compliance with order 2 of the orders of 8 February 2019, but it is not necessary to set those out in these reasons.
Consideration
The issue that falls for consideration is limited to whether the applicants’ two informal applications for costs are properly made in this proceeding or should be made elsewhere. The merit of those applications is not in question.
Division 2B of the SCA provides for the establishment, composition, powers and functions of the Costs Court. The judicial officers of the Costs Court who have, at various times, presided over this proceeding are Associate Justice Wood and Judicial Registrar Gourlay. At several points, I have received referrals for directions from the Costs Court pursuant to r 63.51 of the SCR on questions arising on the review.
The first such referral resulted in the Court’s 2015 judgment, where it was found:
The issues raised in the summonses are not as broad as those canvassed in the respondents’ submissions. I accept that the Costs Court has no jurisdiction to deal with issues of liability for payment of the legal costs — that is, whether the MFSF is able to recover from the former trustees, either from Upper Swan as trustee of the MFSF or from its former director, or even from the respondents. In my view, these are inter partes issues that are to be determined otherwise than through an application for a review of costs.
However, it has been made clear by the applicants that no orders of these kinds are being sought from the Costs Court.[19]
[19]Ibid [57]–[58].
The Court made orders consistent with the above finding and further ordered:
8.At the conclusion of the taxation (or any settlement or other determination of the costs quantum thereof), the applicants, as plaintiffs in their capacity as trustees of the MFSF, have leave to apply to the Court in the superannuation proceeding for any further orders or directions pertaining to the costs of the superannuation proceeding and the liability of any person for payment thereof.[20]
[20]Emphasis added.
Following judgment, the respondent correctly submits that the applicants, as trustees, proceeded with the taxation as though they were standing in the shoes of the former trustees against their own solicitors.
Importantly, the finding was made on the basis that the applicants were non-associated third party payers, where the relevant legal obligation was to the client and not the law firm. Had the finding been that the applicants were associated third party payers, as they submitted at one stage, then the relevant legal obligation would have been owed to the law firm, and nature of the review may have differed.
The Costs Court ruling following the review found:
The applicants have applied to review the legal costs charged for the Superannuation proceeding only and they have no right to review the charges made for the other matters. Both parties agree that the issue of whether the other costs were properly paid from the superannuation fund does not part [sic] of the costs review and is a matter for another Court.[21]
[21][2018] VSC 452, [8], [39] (Gourlay JR).
As evidenced by the above, the Court has at every stage of this proceeding clarified for the parties the scope of the costs review proceeding.
The Costs Court orders made on 20 August 2018, following the review, appear to be the source of some confusion. Those orders, as set out at [14], refer to me the non-superannuation costs issues and the r 63.32 superannuation costs issues. They should not be read as an indication from the Court that applications relating to those referred costs would be properly made in this proceeding, but merely as a referral from the Costs Court of matters that did not form a part of the review.
The applicants’ submission regarding the non-superannuation costs is confusing and somewhat misguided. At the hearing, counsel confirmed that it has always been the applicants’ position that they have no right to tax, ‘in a pure sense’, the non-superannuation costs in the context of a non-superannuation matter. That is, the applicants had no standing to seek that the fees charged for non-superannuation work be reduced on the basis that they were not reasonable — for example, by removing certain line items for unnecessary work. However, counsel then submitted that those non-superannuation costs should simply be ‘taxed off’ the respondent’s bills of costs as they should not have been there in the first place. In reference to the Costs Court finding that this is a matter ‘for another Court’, it is submitted that that was a reference to a determination by a trial Judge within this proceeding. This is plainly not correct. As stated, a trial Judge may receive referrals for directions on questions of taxation pursuant to r 63.51, but those questions are heard within the Costs Court proceeding and limited to the subject matter thereof. A trial Judge cannot simply sit ‘with a Costs Court hat on’, as submitted, and determine issues outside the scope of the Costs Court proceeding by virtue of the fact that they are a trial Judge and not a Costs Court Judge.
Regarding the non-superannuation costs, the authority cited by both parties is the judgment of Kaye J in Winn v Garland Hawthorn & Brahe.[22] His Honour summarises the authorities as follows:
(1) The fact that an objection to a bill of costs may involve an allegation of a negligent error or oversight on the part of a solicitor does not mean that it is not a proper objection to be dealt with on a taxation of costs.
(2) On the other hand, when the nature, extent and effect of the objections go beyond an allegation of negligence in respect of a specific step, or specific steps taken by the solicitors, but relate to the conduct of the whole proceeding, then those matters would not be appropriate grounds for objection to a bill of costs but, rather, ought to be raised in separate proceedings between the client and the solicitors.
(3) There is no sharp line of distinction between what is, and what is not, a matter which is a proper for taxation in accordance with the above principles. The number, nature, variety and extent of the allegations made by the client in objecting to the bill are relevant to determining that question.[23]
[22](n 7).
[23]Ibid [18].
As set out at [20] above, the objections raised by the applicants are many and varied, and extend to seeking reimbursement for all costs billed by the respondent and allowed by the Judicial Registrar from the date the superannuation proceeding was commenced. Clearly, these fall beyond the type of objections that may properly be dealt with in a review of costs.
The Court has determined that the r 63.32 and CPA claims relating to the superannuation costs should be determined upon a formal application being made in the superannuation proceeding. The applicants should make any such application in their personal capacity, as they were as plaintiffs in that proceeding.
As for the non-superannuation costs, the applicants’ course of action will depend on the nature of their claims. It may be that they also can be determined by application within the superannuation proceeding. However, if those claims extend to the type of knowing receipt claim foreshadowed in the applicants’ submissions, they would be more appropriately brought in a fresh proceeding, which would likely be heard together with the applications in the superannuation proceeding.
The Court appreciates that this finding will create some duplication and further delays for the parties and, in particular, for the applicants. However, much of the substantive work has already been undertaken, and it is likely of assistance that the costs review, incidentally or otherwise, appears to have quantified the non-superannuation costs they are seeking. There is, however, no risk of ‘parallel litigation’, as the applicants submitted, between the Costs Court and the superannuation proceeding — the Costs Court review is complete and substantive orders were made.
The Court makes the following orders:
(a) The applicants’ summary application for a non-party costs order that the respondent reimburse the solicitor-client costs of the defendant (incurred in its capacity as trustee of the Morris Family Superannuation Fund) in the superannuation proceeding is dismissed, without prejudice to their right to make that application in the superannuation proceeding.
(b) The applicants’ summary application for a non-party costs order that the respondent pay their inter partes costs as plaintiffs in the superannuation proceeding is dismissed, without prejudice to their right to make that application in the superannuation proceeding.
(c) The applicants’ summary application that the respondent reimburse legal costs paid to it in relation to any matter other than the superannuation proceeding is dismissed, without prejudice to any right they may have to seek to recover those costs in other proceedings.
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