Spencer v Coshott

[2021] NSWCA 235

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Spencer v Coshott [2021] NSWCA 235

Hearing dates:

7 September 2021

Date of orders:

8 October 2021

Decision date:

08 October 2021

Before:

Bell P at [1]
Emmett AJA at [2]
Simpson AJA at [14]

Decision:

1. Leave granted to rely on the proposed amended summons provided to the Court on 7 September 2021;

2. The orders of the District Court of 19 February 2021 set aside;

3. The Certificates of the review panel of 17 July set aside;

4. The respondent pay the applicant’s costs of the appeal to the District Court and of the application to this court;

5. Within seven days of the date of these reasons, the applicant file and serve any evidence on which he proposes to rely in support of the application that costs be quantified as a lump sum, and the quantum thereof, together with any submissions (not exceeding five pages) in support of such an application;

6. Within seven days thereafter, the respondent file and serve any evidence and submissions in reply.

Catchwords:

COSTS — Chorley exception — where party represented by incorporated legal practice of which he was the principal and sole director and shareholder — whether primary judge erred in denying solicitor applicant costs payable to incorporated legal practice — Bell Lawyers Pty Ltd v Pentelow

JUDICIAL REVIEW — what constitutes “the record” for the purposes of error of law on the face of the record

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Legal Profession Uniform Application Act 2014 (NSW)

Supreme Court Act 1970 (NSW), s 69

Supreme Court Rules 1970 (NSW)

Cases Cited:

Ahern v Aon Risk Services Australia Ltd [2021] NSWCA 166

Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 372 ALR 555

Burrows v Macpherson & Kelley Lawyers (Sydney)Pty Ltd [2021] NSWCA 148

Cachia v Hanes (1994) 179 CLR 403; [1994] HCA 14

Coshott v Spencer [2016] NSWDC 43

Coshott v Spencer [2017] NSWCA 118

Coshott v Spencer [2018] HCATrans 81

Coshott v Spencer (High Court, Keane J, 11 September 2019, unrep)

Craig v South Australia (1995) 184 CLR 163; [1995] HCA 58

Guss v Veenhuizen [No 2] (1976) 136 CLR 47; [1976] HCA 57

Hamilton v Whitehead (1988) 166 CLR 121; [1988] HCA 65

Hockey v Yelland (1984) 157 CLR 124; [1984] HCA 72

Keith Spencer v Ronald Coshott, unreported, District Court, 19 September 2021

Khera v Jones [2006] NSWCA 85

London Scottish Benefit Society v Chorley (1884) 13 QBD 872

McIlraith v Ilkin [2007] NSWSC 1052;

McMahon v John Fairfax Publications Pty Ltd (No 8) [2014] NSWSC 673

Salomon v Salomon Ltd & Co Ltd [1897] AC 22

United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15

Category:

Principal judgment

Parties:

Keith Spencer (Applicant)
Ronald Coshott (Respondent)

Representation:

Counsel:
M Castle/A Bailey (Applicant)
J O’Sullivan (Respondent)

Solicitors:
Nexus Lawyers (Applicant)
A Segal & Legal (Respondent)

File Number(s):

2021/142329

 Decision under appeal 

Court or tribunal:

District Court of NSW

Jurisdiction:

Civil

Date of Decision:

19 February 2021

Before:

Curtis ADCJ

File Number(s):

2020/293294

HEADNOTE

[This headnote is not to be read as part of the judgment]

The applicant, Mr Spencer, is the principal and the sole director and shareholder of an incorporated legal practice, Kejus Pty Ltd. Kejus represented relatives of the respondent, Mr Coshott, in proceedings the costs of which were the subject of proceedings in the District Court, in this Court and in the High Court. The proceedings in this Court, which were brought by Mr Coshott, were dismissed with costs in 2017. Mr Spencer then applied for assessment of those costs, which were assessed by a costs assessor. Mr Coshott then sought review of the assessment by a review panel, which disallowed such costs claimed by Mr Spencer as were attributable to “profit costs”, or professional costs of Kejus. Mr Spencer appealed against this decision to the District Court.

The primary judge dismissed the appeal. In so doing, his Honour referred to the decision of Keane J in refusing a further review of decision of the taxing officer in the proceedings before the High Court, but considered that the attention of Keane J had not been drawn to authorities concerning the “lifting” of the corporate veil in cases of “incongruity” or “injustice”. These authorities were said to support the existence of an “agency principle”, the application of which to the facts of the present case the primary judge considered justified treating Mr Spencer as self-represented. His Honour also expressly accepted the review panel’s application of Bell Lawyers.

In this Court, Mr Spencer sought judicial review of the decision of the District Court, asserting error of law on the face of the record. A preliminary issue arose as to the content of “the record”.

The Court held (per Simpson AJA, Bell P and Emmett AJA agreeing):

In respect of what is taken to be “the record”:

Even on the most stringent test, the judgment of Keane J in Coshott v Spencer and the reasons of the review panel were, in this case, incorporated by reference in the reasons of the primary judge: at [61].

Ahern v Aon Risk Services Australia Ltd [2021] NSWCA 166, considered.

In respect of whether the record disclosed error of law on its face:

In departing from the approach taken by Keane J and disregarding the effect of the distinct legal personalities of Mr Spencer and Kejus, which was the foundation for Keane J’s determination, the primary judge fell into error: at [62].

The primary judge misquoted the Victorian Court of Appeal in United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15. Even if the misquotation is taken to be “a mere slip”, the primary judge fell into error in any event in treating the case – which concerned a partnership, not an incorporated legal practice – as relevant to the issues to be determined in the instant case: [66].

The primary judge’s express acceptance of the reasoning of the review panel, which relied on an incorrect reading of Bell Lawyers, also constituted error: at [67].

Finally, the primary judge’s reliance on McIlwraith v Ilkin [2007] NSWSC 1052 and McMahon v John Fairfax Publications Pty Ltd (No 8) [2014] NSWSC 673 constituted an error. Neither case implicitly accepted, as the [primary judge said each did, an “agency principle in relation to costs of an incorporated legal practice”: at [71], [75].

Judgment

1. BELL P: I agree with the reasons of and orders proposed by Simpson AJA.

2. EMMETT AJA:

Introduction

The question in this appeal is whether the applicant, Mr Keith Spencer, who is a solicitor, is entitled to recover from the first respondent, Mr Ronald Coshott, professional fees charged to Mr Spencer by Kejus Pty Ltd (Kejus), which carries on practice as a solicitor under the name “Spencer & Co Legal”. Mr Spencer is the sole director and shareholder of Kejus. The professional fees in question were charged to Mr Spencer by Kejus for acting on his behalf in other proceedings in this Court between Mr Spencer and Mr Coshott, in which Mr Coshott was ordered to pay Mr Spencer’s costs.

3. On 19 February 2021, for reasons given ex tempore on that day and subsequently reduced to writing, an acting judge of the District Court (the primary judge) concluded that Mr Spencer was not entitled to recover from Mr Coshott the costs that he owes to Kejus. Mr Spencer now seeks judicial review of that decision of the primary judge under s 69 of the Supreme Court Act 1970 (NSW) (the Supreme Court Act).

Background

4. On 31 May 2017, this Court ordered Mr Coshott to pay Mr Spencer’s costs of proceedings brought by Mr Coshott in this Court. Mr Spencer delivered a bill of costs and Mr Coshott sought to have the bill assessed. On 10 April 2020, Ms Kerry Hogan-Ross, cost assessor, determined costs in the sum of $91,374.02. That sum included professional fees of $45,312.96.

5. By application for review dated 16 June 2020, Mr Coshott sought review of that determination by a review panel. On 17 July 2020, the review panel published a certificate of determination allowing total costs of $35,604.73. That sum did not include any amount for professional fees. The review panel concluded that the cost assessor erred in allowing Mr Spencer to recover from Mr Coshott profit costs charged to him by Kejus for legal services provided to him by Kejus in connection with the proceedings in this Court.

6. Mr Spencer appealed to the District Court from the determination by the review panel. By his amended summons of 10 December 2020, Mr Spencer sought an order that the certificate of determination issued by the review panel on 17 July 2020 be set aside on the ground that the review panel erred in law in so far as it misconstrued and misapplied the decision of the High Court in Bell Lawyers Pty Ltd v Pentelow [1] in finding that Mr Spencer was not entitled to recover from Mr Coshott the costs for legal services provided by himself or his firm of solicitors.

   1. See Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 372 ALR 555.

7. The primary judge found that Mr Spencer is a solicitor who provides legal services through his incorporated legal practice, Kejus, of which Mr Spencer is the sole director and shareholder. His Honour found that Mr Spencer entered into a binding costs agreement with Kejus in relation to the proceedings in this Court in which he was successful and that, as a natural person, Mr Spencer remains liable to pay the legal fees of Kejus in the event, for example, that Kejus were to be sold, wound up or put into administration. His Honour accepted that, in those circumstances, denial of Mr Spencer’s right to claim legal fees from an unsuccessful litigant may result in injustice. Nevertheless, his Honour was persuaded “by principle and the balance of authority” that, in the circumstances of the case, the decision of the review panel was correct. In reaching that conclusion, the primary judge, in effect, ignored the distinction between Mr Spencer, as an individual and a litigant, on the one hand, and his corporation, Kejus, on the other.

The proceedings in this Court

8. Section 69(1) of the Supreme Court Act relevantly provides that, where formerly the Court had jurisdiction to grant any relief or remedy or do any other thing by way of writ of any description, the Court continues to have jurisdiction to grant that relief or remedy without issuing any such writ and is to grant that relief or remedy or do that thing by way of judgment or order under the Supreme Court Act and the Supreme Court Rules 1970 (NSW). If this Court is satisfied that the ultimate determination of a court or tribunal in any proceeding has been made on the basis of an error of law that appears on the face of the record of the proceedings, the Court has jurisdiction to quash the ultimate determination of the court or tribunal and, if the Court determines that, as a matter of law, only one particular determination should have been made by the court or tribunal, jurisdiction to make such judgment or orders as are required for the purpose of finally determining the proceedings. Mr Spencer contends in this Court that there was an error of law on the face of the record of the proceedings in the District Court.

9. As a general rule, a self-represented litigant may not obtain any recompense for the value of his or her time spent in litigation. However, an exception to the general rule was recognised in the case of a self-represented litigant who happened to be a solicitor, who could recover his or her professional costs of acting in the litigation. [2] That exception was regarded as anomalous and has been said to be “an affront to the fundamental value of equality of all persons before the law”, such that it should not be recognised as part of the common law of Australia. [3]

   2. London Scottish Benefit Society v Chorley (1884) 13 QBD 872.

   3. See Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 372 ALR 555 at [1], [3] and [39].

10. Thus, if Mr Spencer acted for himself in relation to the litigation in this Court, rather than by retaining Kejus, he would not have been able to recover professional fees as part of the costs payable by Mr Coshott as a consequence of this Court’s order for costs in favour of Mr Spencer as litigant. However, that is not this case. As unattractive and unnatural as “the metaphysical bifurcation” between an individual and a corporation of which he is the sole shareholder and director may appear, [4] that distinction is recognised by the law. Mr Spencer was not acting for himself. Rather, Kejus was acting for him. It was not suggested that the arrangement between Mr Spencer and Kejus was a sham. Rather, the primary judge found that there was a binding costs agreement between Mr Spencer and Kejus.

    4. Coshott v Spencer (High Court, Keane J, 11 September 2019, unrep) at [13].

11. In a different but related dispute between Mr Spencer and Mr Coshott concerning costs, Keane J, in dealing with an application by Mr Coshott for an order to review a taxation of costs in the High Court, observed that it may be quite artificial that an individual may render services for a corporation, of which that individual is a sole shareholder and director, at the same time as the corporation provides those services for the same individual as a client of the corporation. Nevertheless, his Honour said, that is the logical consequence of the well-established principle that the legal personality of a corporation is separate from that of the individual who controls the corporation. [5] Accordingly, Keane J said, an individual who is the sole director and shareholder of a corporation may contract with that corporation for the provision of services by it so as to give rise to an obligation to pay for those services. [6]

    5. See Salomon v Salomon Ltd & Co Ltd [1897] AC 22.

    6. See Hamilton v Whitehead (1988) 166 CLR 121 at 128.

12. Thus, the legal question now raised was, on one view, resolved by the observations made by Keane J. However, it has not been suggested in these proceedings that the determination by Keane J gave rise to an issue estoppel as between Mr Spencer and Mr Coshott as to that question.

Conclusion

13. I have had the advantage of reading in draft form the reasons of Simpson AJA for concluding that Mr Spencer has demonstrated that there was an error of law on the face of the record of the District Court. I agree with her Honour’s reasons and the orders proposed by her Honour.

14. SIMPSON AJA: By summons filed on 19 May 2021 the applicant, Keith Spencer, seeks, pursuant to s 69 of the Supreme Court Act 1970 (NSW), judicial review of orders made in the District Court on 19 February 2021: Keith Spencer v Ronald Coshott, unreported, District Court, 19 February 2021 (“the primary judgment”). The proceeding in the District Court was an appeal under s 83 of the Legal Profession Uniform Application Act 2014 (NSW) (“Uniform Law Application Act”). That appeal was against the decision of a review panel constituted under the Uniform Law Application Act with respect to the assessment, under Pt 7 Div 2-4 thereof, of the costs payable pursuant to an order of this Court made under s 98 of the Civil Procedure Act 2005 (NSW). The issue for present determination concerns the quantification of the costs that may be allowed pursuant to a costs order following the decision of the High Court in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 93 ALJR 1007 (“Bell Lawyers”) in circumstances where the beneficiary of the costs order is a solicitor who was represented in litigation by an incorporated legal practice of which he was the principal and sole director and shareholder. The costs in question were ordered by this Court in Coshott v Spencer [2017] NSWCA 118, to which further reference will be made below.

15. On the hearing of the application Mr Spencer sought leave to file an amended summons, which expanded and clarified the orders sought. Partial objection was taken to the proposed amendment. It will be necessary in due course to deal with the amendment application.

16. The power conferred on courts to order one litigant to pay costs incurred by another is purely statutory. The relevant source of power to award costs is s 98 of the Civil Procedure Act, which provides, in subs (1), that:

• costs are in the discretion of the court,

• the court has full power to determine by whom, to whom, and to what extent costs are to be paid; and

• the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

17. The term “costs” (in relation to proceedings) is defined in s 3(1) to mean “costs payable in or in relation to the proceedings” and to include “fees, disbursements, expenses and remuneration”. The “general principle” (Bell Lawyers at 60, per Gageler J) is that costs are awarded:

“…by way of indemnity (or more accurately, partial indemnity) for professional costs actually incurred in the conduct of litigation”:

18. As a general rule, notwithstanding the broad terms of s 98(1), a self-represented litigant may not be recompensed, by way of a costs order, for the value of time or skill expended in the litigation: Bell Lawyers at [1], citing Cachia v Hanes (1994) 179 CLR 403 at 410-411; [1994] HCA 14; Guss v Veenhuizen [No 2] (1976) 136 CLR 47 at 51; [1976] HCA 57.

19. In 1884 the Court of Appeal of England and Wales created an exception (long known as “the Chorley exception”) to the general rule so that a self-represented litigant with the benefit of a costs order who happens to be a solicitor may recover professional costs of acting in the litigation: London Scottish Benefit Society v Chorley (1884) 13 QBD 872.

20. Until the 2019 decision in Bell Lawyers, the Chorley exception survived in this country, notwithstanding doubts expressed about its applicability: see, for example, Cachia v Hanes, where it was described as “somewhat anomalous”, and its justification “somewhat dubious”, “unconvincing” and “questionable”. It was finally put to rest in Bell Lawyers when the High Court declared that the Chorley exception is not part of the common law of Australia. Accordingly, a solicitor who acts for himself or herself and who has the benefit of a costs order is no longer able, under that costs order, to be compensated for time or skill expended in professional work in the litigation.

21. There remain, however, pockets of doubt which have not been disposed of by the decision in Bell Lawyers. One of these is the extent (if any) to which the abrogation of the Chorley exception applies where the solicitor litigant is represented by an incorporated legal practice of which he or she is the principal and the sole director and shareholder. That is this case. The plurality judgment in Bell Lawyers explicitly recognised and left open this outstanding question. Their Honours (Kiefel CJ, Bell, Keane and Gordon JJ) said:

“50.   A decision by this Court that the Chorley exception is not part of the common law of Australia would not disturb the well established understanding in relation to in-house lawyers employed by governments and others, that where such a solicitor appears in proceedings to represent his or her employer the employer is entitled to recover costs in circumstances where an ordinary party would be so entitled by way of indemnity.

51.   Whether the same view should be taken in relation to a solicitor employed by an incorporated legal practice at which he or she is the sole director and shareholder stands in a different position. It might be queried whether such a solicitor has sufficient professional detachment to be characterised as acting in a professional legal capacity when doing work for the incorporated legal practice. And it might be queried whether costs claimed by an incorporated legal practice for work of its sole director and shareholder are within the expansive view of indemnity that has been adopted in the authorities.

…

52.   The resolution of this question may require close consideration of the legislation which provides for incorporation of solicitors’ practices and the intersection of that legislation with the provisions of the Civil Procedure Act [2005 (NSW)] in light of the general rule; and so the resolution of this question may be left for another day, when all the legislation that bears on the question has been the subject of argument.

53.   It is sufficient for present purposes to say that whether or not an incorporated legal practice that is a vehicle for a sole practitioner should be able to obtain an order for costs for work performed by its sole director and shareholder is ultimately a matter for the legislature. Whether the Chorley exception is part of the common law of Australia is a matter for this Court.”

Background

22. Mr Spencer is a solicitor of the Supreme Court of NSW. He is the principal and the sole director and shareholder of an incorporated legal practice, Kejus Pty Ltd (“Kejus”), which trades under the name “Spencer & Co Legal”. In 2013 Spencer & Co Legal was retained to represent members of the Coshott family (not including the respondent, Ronald Coshott) in Federal Court litigation. Mr Coshott undertook some or all of the responsibility for payment of the fees and costs involved in the litigation. Spencer & Co Legal rendered bills of costs to members of the Coshott family. Disputes arose with respect to the costs charged. Those disputes have given rise to a saga of litigation between Mr Coshott and Mr Spencer in the District Court, in this Court and in the High Court. Some of the following background facts are drawn from judgments given in those proceedings. Almost invariably Mr Coshott has been unsuccessful, with the result that numerous costs orders have been made against him and in favour of Mr Spencer. It is the quantification of some of the costs recoverable by Mr Spencer that is the subject of the present application. That question arises as set out below.

23. In 2014, notwithstanding that he was neither a party to the Federal Court litigation nor a client of Spencer & Co Legal, Mr Coshott applied under the then applicable legislation (the Legal Profession Act 2004) for assessment of the bills of costs rendered by Spencer & Co Legal, on the basis that (he asserted) he was a “third party payer” within the meaning of s 302A of that Act. He took this course because the members of the Coshott family who were clients of Spencer & Co Legal, and to whom the bills of costs had been rendered, and who would therefore have been entitled to apply for assessment, had failed to do so within the time allowed by the Legal Profession Act.

24. The costs assessor rejected Mr Coshott’s application, finding that Mr Coshott was not a “third party payer” and had no standing to apply for assessment of the costs ordered against those members of the Coshott family who were parties to the litigation and clients of Spencer & Co Legal. Mr Coshott appealed to the District Court against that decision. The appeal was dismissed with costs: Coshott v Spencer [2016] NSWDC 43. By summons filed in this Court Mr Coshott sought judicial review of that decision. Two issues were litigated: whether the costs assessor had jurisdiction to determine Mr Coshott’s status as a “third party payer”; and whether Mr Spencer was entitled, under the then prevailing understanding that the Chorley exception applied in NSW, to recover costs in circumstances where he had, in effect, acted as his own lawyer. No attention was paid to the precise circumstances in which Mr Spencer provided legal services: Bell Lawyers had not been decided, and the distinction between self-representation by a solicitor (as an individual) and representation of a solicitor by a wholly owned incorporated legal practice was yet to emerge. Mr Coshott failed on both issues and the summons was dismissed: Coshott v Spencer [2017] NSWCA 118 (“Coshott v Spencer (CoA 2017”). This Court held that it was bound by previous authority to apply the Chorley exception: see [107], [112]; Guss v Veenhuizen (No 2); Atlas Corporation v Kalyk [2001] NSWCA 10; Khera v Jones [2006] NSWCA 85.

25. Mr Coshott sought and was granted special leave to appeal to the High Court. On 10 May 2018, after the appeal had proceeded for some time, the grant of special leave was revoked with costs: Coshott v Spencer [2018] HCATrans 81. Delivering the reasons of the Court for revoking the grant of special leave, Kiefel CJ said that the Court was of the view that the case was not a suitable vehicle to consider whether the Chorley exception should be maintained, because a threshold question – whether Mr Spencer had in fact acted for himself (as distinct from being represented by Spencer and Co Legal, or Kejus) had not previously been litigated. Mr Coshott was ordered to pay Mr Spencer’s costs of both the special leave application and the appeal.

26. Spencer & Co Legal rendered bills of costs to Mr Spencer for its representation of him in the High Court proceedings. Pursuant to the costs orders, Mr Spencer sought to recover those costs from Mr Coshott.

27. The bills of costs were assessed under Pt 57 of the High Court Rules, and reviewed in accordance with the procedures so provided. The costs allowed included costs for professional work performed by Mr Spencer. Mr Coshott then sought a further order of review in relation to certain items in each of the bills of costs allowed by the taxing officer. That application came before Keane J. Mr Coshott argued that Mr Spencer was under no liability, as a client and respondent to the proceedings, to pay for work performed by him but provided by Kejus (through Spencer and Co Legal) as the solicitor on the record because Mr Spencer had not engaged Kejus to act on his behalf in the proceedings. On 11 September 2019 Keane J dismissed each application and ordered Mr Coshott to pay the costs thereof: Coshott v Spencer, 11 September 2019 (“Coshott v Spencer, (HCA 2019”).

28. The decision of Keane J, being in relation to costs assessed under the High Court Rules, in proceedings in the High Court, has no direct bearing on the present application. The reasoning is, however, highly material. It is apparent that Keane J accepted, as a fact, that Mr Spencer had retained Kejus to represent him in the proceedings ( that is, the High Court proceedings) and had agreed to pay Kejus’ costs of doing so, and that he had performed the work he did in his capacity as principal of Kejus.

29. His Honour added:

“15.   It may be said that it is quite artificial that an individual may render services for a corporation of which he or she is a sole shareholder and director at the same time as the corporation provides those services for the same individual as a client of the corporation. It may fairly be said that this ‘meta-physical bifurcation’, as it was described by Bray CJ in R v Goodall [(1975) 11 SASR 94 at 99-100] is as unattractive as it is unnatural. But as Bray CJ also recognised, it is ‘the logical consequence of Salomon’s Case’ [Salomon v Salomon & Co Ltd [1897] AC 22], in which the House of Lords affirmed that the legal personality of a corporation is separate from that of the individual who controls the corporation. And so an individual who is the sole director and shareholder of a corporation may contract with that corporation for the provision of services by it so as to give rise to an obligation to pay for those services”. (italics added; some internal citations omitted)

30. On 13 March 2019 Mr Spencer applied for assessment of the costs payable to him pursuant to the costs order of this Court in Coshott v Spencer (CoA 2017). Those costs were to be assessed under Part 7 of the Uniform Law Application Act: see cl 59 of the Legal Profession Uniform Regulation. On 10 April 2020 a costs assessor assessed the costs payable by Mr Coshott to Mr Spencer at $91,374.02 and issued a Certificate of Determination of Costs accordingly. The amount assessed included a significant component attributable to professional work done by Mr Spencer himself. A separate Certificate of Determination of Manager’s Assessment Costs was issued, in the amount of $2,539.35, also payable by Mr Coshott.

31. Mr Coshott sought review of the assessment. On 17 July 2020 a review panel issued, in substitution for the Certificate of the costs assessor, a Certificate of Determination of Review. The review panel assessed the costs to which Mr Spencer was entitled at $35,604.73, disallowing such costs claimed by Mr Spencer as were attributable to “profit costs”, or professional costs of Spencer & Co Legal. The review panel considered that Mr Spencer was, by reason of the decision in Bell Lawyers, not entitled to costs for legal services provided by himself “or by his firm of solicitors”. This was incorrect. As is clear from [50]-[53] of the reasons of the plurality (extracted above at 21), Bell Lawyers did not decide that a solicitor litigant is not entitled to costs of legal services provided by “his firm of solicitors” (at least where the “firm” is a corporation). That was the very question left open. The error on the part of the review panel is significant, as will appear.

32. The review panel also issued a separate Certificate of Review Panel Costs in the amount of $3,370.13, payable by Mr Spencer.

33. By summons filed in the District Court on 12 October 2020, pursuant to s 89 of the Uniform Law Application Act Mr Spencer appealed against the decision of the review panel. In an amended summons filed on 10 December 2020, he identified the grounds on which he asserted error in the reasoning of the review panel. These included asserted misconstruction and misapplication of the decision in Bell Lawyers and failure to apply the decision of Keane J in Coshott v Spencer (HCA 2019). The grounds also asserted factual error by the review panel.

34. The primary judge dismissed the appeal and ordered Mr Spencer to pay Mr Coshott’s costs. It is those orders that are the subject of the present application for judicial review.

The primary judgment

35. As indicated above, the orders of the District Court were that the proceeding (that is the appeal from the assessment of the review panel) be dismissed and that Mr Spencer pay Mr Coshott’s costs of that proceeding. The effect of the order dismissing the appeal was to confirm the Certificate of the review panel and, accordingly, to deny Mr Spencer recovery of professional costs for work undertaken by himself as principal of Spencer & Co Legal.

36. The reasons given by the primary judge were brief. He began by noting (at [1]):

“Mr Spencer is a solicitor who provides legal services through an incorporated legal practice, Kejus Pty Ltd, trading as Spencer & Co Legal. He is the sole director and shareholder of this corporation.”

37. His Honour then (at [18]) noted (as an established fact) that Mr Spencer had:

“…entered a binding costs agreement between himself and Kejus in relation to the appellate proceedings in which he was successful.”

38. He then recorded some of the history outlined above. Under the heading “Principle” he said:

“8.   The High Court in Pentelow [Bell Lawyers] identified two vices created by the Chorley exception. The first was that it created a conflict between the duty and the interest of a self-represented lawyer. The second was that it permitted a self-represented lawyer [to] be recompensed for his time in circumstances where another professional or layman would not, creating inequality before the law.

9.   These vices remain unaddressed if a lawyer interposes a wholly owned corporation between himself as a vehicle to claim his costs.”

39. Under the heading “Authority” the primary judge referred to the decision of the High Court revoking the grant of special leave, and to the decision of Keane J dismissing Mr Coshott’s application for review of the taxation of the costs in the High Court proceedings (Coshott v Spencer (HCA 2019)). He acknowledged (at [12]) that Keane J had reached his decision:

“…by a conventional application of the principles established by Salomon v Salomon … .”

but considered that Keane J’s attention did not appear to have been drawn to authorities to the effect, as he put it, that:

“13.   …the corporate veil may be lifted in certain cases to avoid incongruity or injustice …”

40. His Honour added:

“Various courts have resorted to the law of agency holding that the corporate veil may be lifted where an individual has such a degree of effective control over a corporation that the corporation should be held to be an agent of the individual.”

41. His Honour then cited three authorities, which, he said:

“…implicitly accept the agency principle in relation to the costs of an incorporated legal practice.”

42. The primary judge then proceeded on the basis that what he called “the agency principle” could be, and had been, applied to circumstances where a solicitor litigant is represented by a legal corporation of which he or she is a director and shareholder.

43. The authorities to which his Honour referred were McIlraith v Ilkin [2007] NSWSC 1052; McMahon v John Fairfax Publications Pty Ltd (No 8) [2014] NSWSC 673 and United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15 (“United Petroleum”). Of United Petroleum the primary judge said (at [16]):

“The Victorian Court of Appeal in [United Petroleum] applied Pentelow to disallow the professional costs of a self-represented law partnership. The Court said, ‘there is no reason why a [sic] incorporated solicitor should be permitted to recover in circumstances where an individual solicitor cannot’.” (emphasis added)

This purported quotation from United Petroleum was an inaccurate version of what the Victorian Court of Appeal said, which was (at [108]):

“…there is no reason why a firm of solicitors should be permitted to recover in circumstances where an individual solicitor cannot.” (emphasis added)

44. This error, also, is significant, as, again, will be seen in due course.

45. The primary judge then noted “possible reasons to the contrary”, which, in the context in which the remark appears, I take to mean to the contrary of a conclusion that the company is the agent of the individual director or shareholder justifying the lifting of the corporate veil.

46. The “possible reasons to the contrary” included that Mr Spencer had entered into a binding costs agreement with Kejus, and that, therefore, he had a continuing liability as a natural person to pay the legal fees owing to Kejus, even in the event of sale, administration or liquidation of the company (Kejus). In those circumstances, the primary judge said, denial of Mr Spencer’s right to claim legal fees from an unsuccessful litigant might result in injustice and be “compounded if the solicitor has no beneficial interest in the incorporated legal practice” (because a purchaser, administrator or liquidator of Kejus could insist on the payment by Mr Spencer and the costs billed).

47. However, his Honour discarded those “possible reasons to the contrary” of applying what he called “the agency principle” because the contingencies they represented did not exist in the present case – that is, there was (apparently) no contemplated sale, administration or liquidation of Kejus and the potential injustice did not arise. Although he did not say so expressly, it is, I think, apparent that his Honour considered that Mr Spencer had such a degree of control over Kejus that Kejus was, effectively, his agent.

48. His Honour concluded (at [19]):

“I am persuaded by principle and the balance of authority that in the circumstances of this case the decision of the review panel was correct.”

He therefore made the orders set out above.

The relief sought

49. Relief under s 69 of the Supreme Court Act is available to correct jurisdictional error or error of law on the face of the record. Although initially Mr Spencer asserted both jurisdictional error and error of law on the face of the record, after receiving (and apparently being persuaded by) submissions filed on behalf of Mr Coshott, he abandoned reliance on jurisdictional error and confined himself to asserting error of law on the face of the record.

50. Subsections (3) and (4) of s 69 of the Supreme Court Act provide:

“(3)   The jurisdiction of the Court to grant any relief or remedy in the nature of a writ of certiorari includes, if the Court is satisfied that the ultimate determination of a court or tribunal in any proceedings has been made on the basis of an error of law that appears on the face of the record of the proceedings—

(a)   jurisdiction to quash the ultimate determination of the court or tribunal, and

(b)     if the Court determines that, as a matter of law, only one particular determination should have been made by the court or tribunal, jurisdiction to make such judgment or orders as are required for the purpose of finally determining the proceedings.

(4)     For the purposes of subsection (3), the face of the record includes the reasons expressed by the court or tribunal for its ultimate determination.”

“the record”

51. There is no clear definition of what, for the purposes of s 69(3), constitutes “the record”. The parties were at odds as to what, in this case, may properly be taken to constitute the record.

52. In Craig v South Australia (1995) 184 CLR 163; [1995] HCA 58, the High Court held that, at common law, the reasons for decision and the transcript of the proceedings do not form part of the record (a position, so far as reasons for the decision go, that has been reversed by the enactment of subs (4) of s 69); and that the determination of the precise documents that constitute the record is a matter for the court hearing the application for review. The Court recognised that the court or tribunal making the decision under review may, by reference, incorporate into “the record”, for example, the transcript of the proceedings and the reasons (or parts thereof) for the decision. Ordinarily, however, “the record” will comprise no more than the documentation that initiates the proceedings (thereby providing the jurisdiction of the tribunal), the pleadings (if any) and the adjudication: see Hockey v Yelland (1984) 157 CLR 124; [1984] HCA 72 (cited in Craig at p182).

53. Mr Coshott argued for a record limited to the reasons given by the primary judge for the decision and the orders he made (thereby omitting the summons that initiated the appeal). Mr Spencer argued for a more expansive set of documents, to include:

• the amended summons filed in the District Court commencing the appeal;

• the orders made by the District Court on 19 February 2021;

• the reasons for judgment of the District Court;

• the certificates of determination of the review panel;

• the certificates of determination of the costs assessor;

• the reasons of the review panel;

• the judgment of Keane J of 11 September 2019;

• the transcript of proceedings in the High Court of 10 May 2018, in which the grant of special leave was revoked;

• a costs agreement made between Mr Spencer and Kejus;

• the application for review of the costs assessor’s certificate;

• the application for assessment;

• the certificates and reasons of the original costs assessor.

54. Which, if any, of those documents can properly be held to constitute “the record” will depend, to some extent at least, on analysis of the reasons for the primary judge. Of particular importance are the reasons of the review panel for disallowing the professional costs that Mr Spencer claimed as payable to Spencer and Co Legal (or Kejus).

55. As mentioned above, there is no clear delineation of what constitutes “the record” for the purposes of s 69 of the Supreme Court Act. The differences of opinion in this Court in that respect have, most recently, been expressed in Ahern v Aon Risk Services Australia Ltd [2021] NSWCA 166 (“Ahern”). A particular area of contention that has emerged is where the orders of which review is sought are (as here) orders made on appeal from an inferior tribunal. The area of contention is whether, and if so, the extent to, and the circumstances in, which the reasons of the inferior tribunal form part of the record. In this case, that is the reasons of the review panel. Section 69(4) makes clear that the reasons of the court making the order under review are part of the record; the question is whether the reasons of the tribunal from which the appeal was brought to that court form part of the record.

54. As it happens, the decision in Ahern also concerned an appeal to the District Court from a certificate of a review panel in relation to the assessment of costs. However, the operative legislation was the Legal Profession Act 2004.

55. Meagher JA (at [53]) considered that, unless the reasons of the inferior tribunal are “incorporated” into the judgment under review, they are not part of the record; White JA took the opposite view – both the certificate of the review panel and its reasons, without more, are part of “the record” (at [120]). As the issue was not, in that case, determinative (because with or without the reasons of the inferior tribunal there was no error), Brereton JA preferred not to reach a final conclusion, although his discussion of the issue is illuminating.

56. Little attention has been paid to “the incorporation of documents into reasons as part of the statutorily extended record” (Ahern at [27] per Meagher JA). It is therefore necessary to go back to the High Court decision Craig. In Craig, it having been held that the reasons for decision do not constitute part of the record, the consideration of incorporation was directed to those very limited documents that were held to constitute the record – the initiating process, the pleading and the adjudication. That the record now includes the reasons for decision raises the question of whether the reasons for decision under review can, by reference, incorporate other documents (as can the adjudication). In Ahern, after considering three possible answers to that question, Meagher JA (at [30]) preferred the view that:

“… the principles which govern incorporation into the common law record by reference in formal orders are to apply equally to reasons as part of the statutorily extended record.”

I share his Honour’s preference in that respect.

59. While, in Craig, the High Court accepted that “the record” could be augmented by the incorporation of documents that would not otherwise form part of the record, that possibility is not open ended. A “merely introductory or incidental reference” would be insufficient to bring about incorporation. The High Court limited what is or may be incorporated to:

“… so much of the reasons or transcript of proceedings as is referred to in the formal order in a way which brings about its incorporation as an integral part of the order and ‘the record’.”

That formulation is adaptable to incorporation of other documents by reference in the reasons for judgment.

Error of law on the face of the record

60. A preliminary question that must be answered is what is to be taken as constituting the record. Uncontroversially, the record includes the amended summons by which the appeal to the District Court was initiated, and the reasons given and the orders made by the primary judge. Of the contested documents, only two call for determination. The first, and most important, is the reasons given by the review panel for disallowing the professional costs claimed by Mr Spencer. The second is the judgment of Keane J in Coshott v Spencer (HCA 2019).

61. On the view of White JA in Ahern, the reasons of the review panel are, without more, to be treated as part of the record. On the view of Meagher JA, they are not, unless incorporated. I am spared the invidious task of refereeing between two members of this Court. That is because I am persuaded that, even on the most stringent test of incorporation, the reasons of the review panel were, in this case, incorporated by reference in the reasons of the primary judge. The express declaration by the primary judge at [19] that, in the circumstances of this case, the decision of the review panel was correct is sufficient to require that the reasons of the review panel be treated as part of “the record” as having been incorporated as an integral part of the reasons and the orders. The proper interpretation of [19] is that the primary judge adopted as his own the reasons of the review panel.

62. I am also of the view that the judgment of Keane J in Coshott v Spencer (HCA 2019) was incorporated by the primary judge’s reference to the conclusion and reasoning contained therein. The judgment of Keane J is material as part of the authoritative reasoning of a superior court. That, of itself, does not involve incorporation. But the primary judge went further, and reached his determination by departing from that reasoning. Not every judgment cited in reasons will become part of the record; in this case, what the primary judge saw as an omission on the part of Keane J to have regard to the possibility of going behind the corporate status of Kejus operated significantly on his ultimate determination. The judgment of Keane J is “an integral part of the order[s] and ‘the record’.”

63. On the basis that the reasons of the review panel and the judgment in Coshott v Spencer (HCA 2019) are part of the record, four distinct errors of law are discernible in the reasons given by the primary judge. The first lies in his Honour’s approach to the corporate status of Kejus. Although his Honour recognised that Keane J had dismissed Mr Coshott’s application for review of the High Court costs assessment by “a conventional application of the principle established by Salomon”, he considered that Keane J had failed to appreciate a possible basis for going behind Kejus’ corporate status, that being that Kejus was, in truth, Mr Spencer’s agent. His Honour therefore departed from the approach taken by Keane J and disregarded the effect of the distinct legal personalities of Mr Spencer and Kejus, which was the foundation for the disposition by Keane J of the application with which he dealt. In the light of Coshott v Spencer (HCA 2019) and [50]-[53] of Bell Lawyers, it was an error to disregard the corporate status of Kejus. .

64. The second error lies in the misquotation of a sentence from the judgment of the Victorian Court of Appeal in United Petroleum. What was before the court in that case was a claim for professional costs for legal services rendered by members of an unincorporated partnership that constituted “a firm of solicitors”, Herbert Smith Freehills (shortly known as “Freehills”), which was the successful party in litigation brought against it by United Petroleum. After discussion of the various judgments in Bell Lawyers, the court held, in effect, that the reasoning in the majority judgments extended to unincorporated partnerships and that the partners of Freehills were therefore not entitled to recover profit costs for the time and work expended. The position of an unincorporated partnership representing itself in litigation was not relevantly different from that of an individual solicitor who represented himself or herself in litigation. The court then considered whether employee solicitors of a legal firm (partnership) should be treated in the same way as employed “in house lawyers” of government and client (non-legal) corporations (recognised in [50] of Bell Lawyers as outside the abrogation of the Chorley exception) for the cost of whose services their employers remain able to claim under a costs order. The court rejected the proposition, saying (at [120]):

“In substance it would, anomalously, allow firms of solicitors to recover for their own time spent in the litigation.”

65. What is important about United Petroleum for the purpose of the present case is that the decision says nothing about the entitlement of a successful litigant who happens to be a solicitor and who acts through an incorporated legal practice of which the solicitor is the principal, sole director and shareholder, to recover costs incurred in the litigation by retaining, or acting through, the incorporated legal practice.

66. Counsel for Mr Coshott argued that the misquotation of [108] of the United Petroleum should be seen only as “a mere slip”. Some support for this is to be found in the immediately preceding sentence in which his Honour referred to Freehills as a “self-represented partnership”. That may be so, but it is little comfort to Mr Coshott. If, indeed, his Honour recognised that the Victorian Court of Appeal was speaking of a “self-represented partnership” and not an “incorporated solicitor”, the decision was irrelevant to the issues for determination, and reliance on it was misplaced. Either way, the reference to United Petroleum denotes error of law: either his Honour misunderstood the import of the decision in United Petroleum and hence misapplied it, or his reliance on it was misplaced because it had no bearing on the issue he had to determine.

67. The third error lies in the finding that the review panel’s decision was correct. In adopting that finding as correct the primary judge must be taken also to have adopted the reasoning that led to the decision. The reasoning of the review panel was an integral part of the reasons for the decision of the primary judge. That reasoning, as I have said above, was legally incorrect and represents a misunderstanding of what was decided in Bell Lawyers. It follows that the decision of the primary judge was also legally incorrect, and the orders made in the application of incorrect principles.

68. The fourth error lies in the primary judge’s reliance on “the balance of authority” as supporting the concept of “the agency principle” in relation to the costs of an incorporated legal practice and the decision of the review panel. As indicated above, three authorities were cited in the judgment, which must be taken to be the authorities to which his Honour referred in [19]. One was United Petroleum, with which I have just dealt. The others were McIlraith v Ilkin and McMahon v John Fairfax Publications. Neither supports the application of “the agency principle”, the conclusion of the review panel, or the conclusion of the primary judge.

69. In McIlraith Mr McIlraith sued Mr Ilkin, a solicitor. Mr Ilkin was represented by a solicitor corporation of which he was “the” director and the solicitor. In the passage relied on by the primary judge Brereton J said (at [11]):

“Strictly speaking, Mr Ilkin did not act for himself; a solicitor corporation of which he is the director was the solicitor. However, I have attributed no significance to this distinction, and have proceeded on the basis that Mr Ilkin is to be regarded as having acted as his own solicitor.”

70. That passage has to be seen in the context of the judgment. The reason Brereton J attributed no significance to the “distinction” can be seen from what followed. His Honour considered whether, on the assumption that Mr Ilkin acted as his own solicitor, the Chorley exception applied. His Honour concluded, after considering various approaches to that question, that the Chorley exception did apply. It was not, therefore, necessary to determine whether Mr Ilkin should be treated, notwithstanding the intervention of the corporate solicitor, as having represented himself. Even if he had, he would have been entitled to the benefit of the exception to the general rule created by the decision in Chorley.

71. Brereton J’s decision did not, as his Honour claimed, “implicitly accept the agency principle in relation to the costs of an incorporated legal practice.”

72. The second decision to which his Honour referred was that of McCallum J in McMahon. A greater degree of complexity attends that case, which arose in the context of a partly successful claim in defamation brought by Mr McMahon. The question of costs then arose. Initially, the solicitor on the record was identified as Mr Quah-Smith of Ardent Legal Pty Ltd. Subsequently, the solicitor on the record was named as “Bryan Francis McMahon [the plaintiff] of Ardent Legal Pty Ltd”. Ardent Legal Pty Ltd was a company of which Mr McMahon’s wife was at all times a director, and of which Mr McMahon subsequently became a director, and of which he was an employee entitled (in the event that he reached an annual target of professional fees rendered and collected) to a fee sharing arrangement. The issue for McCallum J’s determination was whether Mr McMahon had any obligation to pay fees to Ardent Legal Pty Ltd.

73. McCallum J concluded, (at [57]):

“…that professional services provided by Mr McMahon to himself should be treated as work undertaken by a solicitor litigant, while services provided by Mr Quah-Smith should be regarded as having been provided by the separate corporate entity, Ardent Legal.”

74. At [68] she held that Mr McMahon was “properly characterised as a solicitor litigant”, and therefore entitled to the benefit of the Chorley exception.

75. This was not an implicit acceptance of an “agency principle in relation to costs of an incorporated legal practice” and affords no support to that proposition nor to the conclusion of the review panel or the primary judge.

76. Each of the four errors appears on the face of the record.

The consequence of these conclusions

77. Error of law on the face of the record having been established, the question that arises is what orders ought now be made. In his original summons Mr Spencer sought the following orders:

“1.   Set aside the orders made by the District Court on 19 February 2021.

2. Alternatively, remit the matter to the District Court to be dealt with in accordance with s 384 of the Legal Profession Act 2004.

3.    Remit the matter to the Review Panel for determination in accordance with law.”

78. By his proposed amended summons, Mr Spencer would seek the following orders:

“1.   Set aside the orders made by the District Court on 19 February 2021.

1A.   Set aside the Certificates of Determination issued by the Review Panel.

1B.   Order that the Respondent pay the Applicant’s costs of the District Court Appeal.

1C.   Order that the Respondent pay the Applicant’s costs in this Court.

1D.   Order that the costs the subject of orders 1B and 1C be determined by this Court on a lump sum basis, on the papers.

2. Alternatively, remit the matter to the District Court to be dealt with in accordance with s 384 of the Legal Profession Act 2004.”

79. The remittal orders sought, purportedly under s 38 of the Legal Profession Act 2004 are plainly inappropriate, but, having regard to the view to which I have come, it is unnecessary to explore that further.

80. There can be little argument against the proposition that, in light of the erroneous approach by the primary judge, the orders of the primary judge must be set aside. It is what (if any) other orders should be made that is now in question.

81. Mr Coshott did not object to the amendment of the summons by the addition of proposed grounds 1B and 1C. He did object to the addition of grounds 1A and 1D. In my opinion practical justice, and the dictates of ss 56 and 58 of the Civil Procedure Act, will be served by permitting the amendments sought.

82. As set out above, by s 69(3)(b) of the Supreme Court Act, if this Court determines that, as a matter of law, only one particular determination should have been made by the District Court, it has jurisdiction to make such judgment or order as is required for the purpose of finally determining the proceedings. For the purposes of determining whether “only one particular determination should have been made” by the District Court this Court is entitled to go beyond such material as constitutes “the record” and look to the whole of the evidence that was before the District Court. That being so, I am of the view that, in the proper application of the law to the facts as found by the primary judge, only one determination was open, and this Court should exercise the jurisdiction conferred by s 69(3)(b), allow the appeal to the District Court, and set aside the Certificate of Determination issued by the review panel.

83. It is necessary to explain that conclusion. Merely to set aside the orders of the primary judge would leave in place the Certificate of the review panel and the appeal to the District Court, which would have to be reheard. But since I have concluded that the primary judge ought to have found error in the reasoning of the review panel, so to order would not be conducive to the expeditious disposition of the proceedings.

84. Two important findings of fact, each of which has been set out above, are fundamental to the decision: (i) that Mr Spencer is a solicitor who provides legal services through an incorporated legal practice of which he is the sole director and shareholder and (ii) that Mr Spencer entered into a binding costs agreement with Kejus in relation to the proceedings to which the costs order relates.

85. This is precisely the situation left open in the passages of Bell Lawyers extracted in the opening of these reasons.

86. To determine whether the costs of professional services sought by Mr Spencer are recoverable within the terms of the costs order made by this court in Coshott v Spencer (CoA 2017), it is necessary to return to the source of authority for the order. That is s 98(1) of the Civil Procedure Act and the definition of “costs” in s 3 thereof. The question is whether, in the circumstances, the bill of costs rendered by Spencer and Co Legal to Mr Spencer represents “costs payable in or in relation to the proceedings”.

87. Significant guidance is to be obtained in the answer to that question by reference to the recent decision of this Court in Burrows v Macpherson & Kelley Lawyers (Sydney)Pty Ltd [2021] NSWCA 148.

88. The facts in Burrows were more complex. Two incorporated legal practices, related, were involved: M&K Sydney (formerly known as “Macpherson Kelley”, and M&K Lawyers Group. M&K Sydney was a wholly owned subsidiary of M&K Lawyers Group.

89. Ms Burrows retained M&K Sydney to act for her in Family Court proceedings. Subsequently she brought proceedings against M&K Sydney alleging (it seems) breach of duty. M&K Sydney was represented in the proceedings by M&K Lawyers Group. Ms Burrows’ claim failed and she was ordered to pay M&K Sydney’s costs, assessed as a lump sum. Ms Burrows sought leave to appeal against (inter alia) the order for lump sum costs. She argued that the abolition of the Chorley exception by the High Court in Bell Lawyers meant that M&K Sydney was not entitled to the costs of the professional services rendered to it by M&K Lawyers Group. She sought to equate the position of a company acting for its wholly owned subsidiary with the position of an individual acting for himself or herself (see [76]–[78] in the judgment of Leeming JA.)

90. All members of the Court, in differently expressed reasons, rejected Ms Burrows’ contentions. Meagher JA essentially founded his conclusion on the language of the definition of “costs” in s 3(1) of the Civil Procedure Act. Costs were “payable” when M&K Sydney (as a client) incurred a liability to M&K Lawyers Group as legal services provider, for the professional costs incurred in the defence of the proceedings brought against M&K Sydney by
    Ms Burrows. Meagher JA drew support from [44] of the plurality judgment in Bell Lawyers where their Honours (in explaining why the Chorley exception is inapplicable) said:

“’Remuneration’ is simply not a word which is apt to include the notion of payment to a person by himself or herself for work done by himself or herself.”

91. That was said in the context of the second half of the s 3(1) definition, which provides that the term “costs” “includes … remuneration”. The reasoning is equally applicable to the first half of the definition: the notion of costs that are “payable” is not apt to include costs payable by a person to himself or herself for work done by himself or herself.

92. Meagher JA accepted that, if Ms Burrows’ contention that M&K Sydney and M&K Lawyers Group were to be regarded as “one and the same legal entity”, there would be no “costs payable” in terms of the definition. The position would be the same as an individual representing himself or herself. But the underlying proposition could not be established: there was no basis in the evidence for disregarding the legal reality of the separate incorporated legal practices.

93. Leeming JA reached a similar conclusion, saying (at [133]):

“Thus the critical point which is dispositive of these grounds of appeal is the failure of Ms Burrows’ submission that M&K Lawyers Group is to be equated to M&K Sydney. The result is that the costs attributable to work done by employed solicitors of M&K Lawyers Group, which company was acting for M&K Sydney, are recoverable. Far from casting any doubt about the recoverability of costs in those circumstances, Bell Lawyers confirms as has long been the case that those costs are recoverable.“

94. After reviewing the legislation which, only since 1990, has permitted incorporation of legal practices, White JA concluded (at [161]):

“It is clear that Parliament intended solicitors to enjoy all the benefits of being able to conduct a legal practice through a company provided appropriate professional indemnity insurance was maintained.”

95. It is true that some doubts have been expressed about the legitimacy of excluding from the abrogation of the Chorley exception circumstances such as here exist where the incorporated legal practice is, at least, closely aligned with the litigant it represents. In Burrows White JA at ([150]-[155]) referred to three reasons given in Bell Lawyers for abolishing the Chorley exception and said that all applied in Burrows. (The three reasons were the lack of independence of the legal practice in providing representation to its principal, the potential for solicitor litigants to profit from the conduct of the litigation, and the inequality created by putting solicitors in a privileged position over other self-represented litigants.) But those grounds, his Honour said, were advanced in Bell Lawyers as reasons for rejecting an exception to the “indemnity principle”: that is (as I understand it) the principle that costs are awarded as indemnity for costs incurred and payable. They did not entrench on the indemnity principle itself unless the separate legal personalities of M&K Sydney and M&K Group Lawyers were to be disregarded. Leeming JA said (at [109]):

“…aspects of the reasoning which led to the joint judgment reserving the position of incorporated sole practitioners might seem apposite to the case where the conduct for which the incorporated practice is sued was the conduct of a particular employed solicitor, and that solicitor acts in defence of the incorporated practice.”

96. In Coshott v Spencer (HCA 2019) Keane J commented on the artificiality and even unattractiveness of the notion that an individual could render services to a wholly owned corporation at the same time as the corporation provided those same services to the individual.

97. The most obvious doubt is that expressed in the plurality judgment in Bell Lawyers itself, in the paragraphs I have extracted at the commencement of these reasons. The question was raised at [51], with tentative reasons given why the abolition of the Chorley exception should not be taken further and applied to costs claimed by an incorporated legal practice for work of (and for) its sole director and shareholder. But (at [52]) their Honours expressly declined to embark on the resolution of that question, deferring it to another day when “all the legislation that bears on the question has been the subject of argument.”

98. In Burrows (at [135]-[136]) Leeming JA touched on the possibility of abuse by deliberate incorporation of a solicitor’s practice in order to avoid the consequences of Bell Lawyers in the event that a favourable costs order was obtained – and also on the means by which such a strategy might be countermanded.

99. The question having been raised expressly in this case, this Court does not have the luxury of deferring consideration to another day, even though no attention was paid in the argument to the legislation to which their Honours referred.

100. The answer lies in [53] of Bell Lawyers. The plurality considered that:

“… whether or not an incorporated legal practice that is a vehicle for a sole practitioner should be able to obtain an order for costs for work performed by its sole director and shareholder is ultimately a matter for the legislature.”

101. I interpret that to mean that the existing law that recognises the separate legal personality of a corporation, including an incorporated legal practice, is to be applied unless and until the legislature intervenes (or consideration of the already existing legislation dictates a different result).

102. The findings by the primary judge that Mr Spencer, as a solicitor, provides legal services through Kejus, and that Mr Spencer had entered a binding costs agreement with Kejus, conclude the issues. The professional costs rendered to Mr Spencer by Spencer and Co Legal (or Kejus) are, within the meaning of s 3(1) of Civil Procedure Act, “costs payable” by Mr Spencer to Spencer and Co Legal. They are therefore within the costs order made by this Court. Recovery of those costs is not precluded by anything in Bell Lawyers.

103. There being no other order that ought, as a matter of law, have been made by the primary judge, this Court should, pursuant to s 69(3)(b) of the Supreme Court Act, order that the appeal to the District Court be allowed and the Certificate of the review panel set aside. That order would have the effect of reinstating the certificate of the costs assessor. Omitted from that certificate are the costs of the review by the review panel.

104. Since, by his amended summons, Mr Spencer also seeks a lump sum costs order (something that cannot, in the absence of evidence, immediately be decided but to which I am, having regard to the history set out above, favourably disposed), the orders I propose are:

1. leave granted to rely on the proposed amended summons provided to the Court on 7 September 2021;

2. the orders of the District Court of 19 February 2021 set aside;

3. the Certificates of the review panel of 17 July 2020 set aside;

4. the respondent pay the applicant’s costs of the appeal to the District Court and of the application to this Court;

5. within seven days of the date of these reasons, the applicant file and serve any evidence on which he proposes to rely in support of the application that costs be quantified as a lump sum, and the quantum thereof, together with any submissions (not exceeding five pages) in support of such application;

6. within seven days thereafter, the respondent file and serve any evidence and submissions in reply.

**********

Endnotes

Amendments

14 October 2021 - Typographical error in [31]

22 October 2021 - Typographical error in [106]

27 October 2021 - Typographical error in orders on cover sheet "certificate" changed to "certificates".

17 November 2021 - corrected formatting and paragraph numbering

Decision last updated: 17 November 2021