Steicke v Connolly & Co - [2017] SASC 99

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
STEICKE v CONNOLLY & CO
[2017] SASC 99
Judgment of Judge Dart a Master of the Supreme Court
3 July 2017
PROCEDURE - COSTS - TAXATION - PRINCIPLES OF TAXATION
Taxation of costs pursuant to the Legal Practitioners Act 1981 - whether legal practitioner entitled to claim costs - legal practitioner's claim for costs allowed - taxation proceeded on a lump sum basis.
Legal Practitioner’s Act 1981 s 42; Supreme Court Act 1935 s 114; Supreme Court Civil Rules 2006 r 264(5)(a), referred to.
Guss v Veenhuizen (No 2) (1976) 136 CLR 47; London Scottish Benefit Society v Chorley, Crawford & Chester (1884) 13 QBD 872, applied.
Beach Petroleum NI and Claremont Petroleum NI v Malcolm Johnson and Ors [1995] FCA 1250; Cachia v Hanes & Anor (1994) 179 CLR 403; Dobree & Ors v Hoffman (1996) 18 WAR 36; Milne & Ors v Attorney-General for the State of Tasmania & Ors (1956) 95 CLR 460; Oshlack v Richmond River Council (1998) 193 CLR 72; Osborne v Kelly (1999) 75 SASR 392; Rogers v Roche & Ors [2017] QCA 145, considered.

STEICKE v CONNOLLY & CO
[2017] SASC 99
JUDGE DART:

These reasons deal with the fixing of the respondent’s costs of this proceeding by way of a lump sum adjudication.
The applicant sought a taxation of the respondent’s solicitor’s costs pursuant to Section 42 of the Legal Practitioner’s Act 1981. The action was commenced in 2013. The subject legal work was itself performed in 2011 and remains unpaid for.
The respondent was required to prepare a long form bill to permit the taxation to proceed. The amount claimed in the long form bill, based on the Supreme Court Scale, was $32,173.38. In addition to that, the respondent claimed an entitlement to interest. On 16 September 2014 I ordered that an interim allocator issue in the amount of $20,054.65, being the invoiced amount. I did so because it seemed unlikely, in the circumstances, that the applicant would tax off sufficient from the claim in long form bill to reduce the amount due below that figure. Notwithstanding the issuing of the allocator in 2014, that amount remains unpaid.
On 10 March 2017 the matter was struck out for want of prosecution and the applicant was ordered to pay the respondent’s costs of the action.[1] The costs order made was that the applicant pay the respondent’s costs of the action on a party/party basis up to and including 16 September 2014 and thereafter on a solicitor and own client basis. I also directed that the costs be adjudicated on a lump sum basis. [2]
[1] Reasons published on 14 March 2017, FDN35.
[2] Supreme Court Civil Rule 264(5)(c).
The respondent filed an affidavit on 4 April 2017 setting out her claim for costs. There have been a number of attendances since that time. The respondent’s claim for costs is as follows:
1$14,337.03, being solicitor’s costs on a party/party basis (up to 16 September 2014).
2Solicitor’s costs on a solicitor and own client basis of $20,869.50 (up until 27 March 2017).
3Counsel fees from 28 May 2015 to 27 March 2017, $24,627.90.
4Counsel fees since 28 March 2017, $2,000.
5Pre-debt judgment interest from 2011 to 16 September 2014, $4,980.87.
The total of the claim is therefore $66,815.30.
The aim of all civil litigation is, or at least should be, to obtain the best net result in the particular circumstances of a matter. This action demonstrates what can occur if parties stray from that approach. The respondent’s claim for costs of the action is more than three times the original amount she invoiced the applicant in 2011.
Basis of an award of costs
There is an issue that arises in this taxation that does not normally arise. It is necessary to appreciate the usual basis on which a costs order is made. In Milne & Ors v Attorney-General for the State of Tasmania & Ors the High Court, in a joint judgment, said as follows: [3]
It is a general rule that a wholly successful defendant should receive his costs unless good reason is shown to the contrary, and no reason to the contrary was shown in this case.
[3] (1956) 95 CLR 460 at 477.
The normal approach is that the unsuccessful party indemnifies the successful party in respect of the legal costs incurred in participating in litigation. In Oshlack v Richmond River Council McHugh J said as follows in respect of the question of indemnity: [4]
The expression the “usual order as to costs” embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
[4] (1998) 193 CLR 72 at [67].
A particular issue arises in a situation where a solicitor acts for him or herself. That is the position here. The solicitor’s work in respect of the taxation has been performed by the solicitor herself, rather than by engaging an external solicitor. Counsel was retained and no issue arises in respect of counsel fees. The issue is, of course, whether there is an entitlement to an indemnity for costs when there is no obligation to pay a third party for the costs of representation. The applicant says the respondent has no entitlement to an award of costs for the legal work performed by her.
The position, for a considerable period, has been that a solicitor acting for him or herself is entitled on a taxation to the same costs as if he or she had employed a solicitor. That position was first stated in the Court of Appeal in the case of London Scottish Benefit Society v Chorley, Crawford & Chester.[5] Bowen LJ said: [6]
Professional skill and labour are recognised and can be measured by the law; private expenditure of labour and trouble by a layman cannot be measured. It depends on the zeal, the assiduity, or the nervousness of the individual. Professional skill, when it is bestowed, is accordingly allowed for in taxing a bill of costs; and it would be absurd to permit a solicitor to charge for the same work when it is done by another solicitor, and not to permit him to charge for it when it is done by his own clerk. The question before us does not depend on the privileges of a solicitor.
[5] (1884) 13 QBD 872.
[6] London Scottish Benefit Society v Chorley, Crawford & Chester (1884) 13 QBD 872 at 877.
The so-called Chorley exception to the indemnity rule was adopted and applied by the High Court in Guss v Veenhuizen (No 2).[7]There has been some criticism of the rule and a suggestion that it is not the law in Australia.[8] There was also some criticism of the exception by the High Court in Cachia v Hanes & Anor.[9] The accepted position is that, despite the criticism, the Court did not overrule the decision in Guss v Veenhuizen. As recently as last week, the Court of Appeal in Queensland held that the so-called Chorley exception remained the law in that state. [10] Fraser JA, with whom the other judges concurred, said:[11]
Unless and until the High Court decides to the contrary or the regulatory scheme is reformed in a material way, where a costs order is made by a court under s 15 of the Civil Proceedings Act 2011 against a party to a proceeding in favour of another party who is an Australian lawyer entitled to practice in the court, the lawyer is entitled to recover costs described in applicable items in the relevant scale of costs.
[7] (1976) 136 CLR 47.
[8] See for example Dobree & Ors v Hoffman (1996) 18 WAR 36.
[9] (1994) 179 CLR 403.
[10] Rogers v Roche & Ors [2017] QCA 145.
[11] Rogers v Roche & Ors [2017] QCA 145 at [31].
I propose to proceed on the basis that the Chorley exception is the law in this State. One further issue does arise in respect of the Chorley exception, however. The respondent has claimed her costs on the usual hourly rate that she charges to a client. That basis was adopted by her in relation to the solicitor/client portion of the solicitor’s costs. The party/party costs are claimed on the Supreme Court Scale.
The Chorley exception is an exception to the rule that costs are indemnity whereby a litigant is entitled to be indemnified for legal costs incurred. The exception extends the entitlement to claim costs to a solicitor litigant. There is nothing in the authorities which suggest that a solicitor litigant should obtain any advantage in respect of the basis on which costs are to be adjudicated. In my opinion, the respondent is entitled to an adjudication of costs on a solicitor/client basis, as per the order, but calculated on the Supreme Court Scale. That would be the usual position in respect of a litigant who was not a solicitor.
The costs order provided that the respondent is entitled to costs on a solicitor/client basis after 16 September 2014. The definition for that is found in Supreme Court Civil Rule 264(5)(a):
(5)In exercising its general discretion as to costs, the Court may—
(a)award costs as between solicitor and client (that is, on the basis that the party will be fully reimbursed for costs incurred by the party in the conduct of the litigation to the extent that the party entitled to the costs shows them to have been reasonably incurred); or
The onus is on the party entitled to costs to establish reasonableness. It is intended to allow for a more generous provision for costs than is the case in respect of party/party costs, which has historically been a fairly austere allowance.
I directed that the costs be adjudicated on a lump sum basis, given the unfortunate history of this matter. In Beach Petroleum NI and Claremont Petroleum NI v Malcolm Johnson and Ors Von Doussa J said as follows: [12]
In Leary v Leary (1987) 1 All ER 261 the Court of Appeal considered an English rule of court which permitted the award of a gross sum instead of taxed costs. The principles upon which that power should be exercised are there discussed. The purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation. The power is appropriate to be used in complex cases. An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place, but the power must be exercised judicially and after giving the parties an adequate opportunity to make submissions on the matter (see p 265d).
[12] [1995] FCA 1250 at [6].
The comments of Von Doussa J are particularly apposite in this matter. The proceedings for a taxation of the initial costs have proceeded for almost four years. Delay and aggravation would no doubt continue if the adjudication process in respect of the finalising costs orders were to proceed in the ordinary way.
Pre-judgment interest
The respondent also seeks an award of interest in respect of the period from the date when payment of the subject invoice fell due, to the date on which the interim allocatur was ordered. The power to award interest is found in s 114 of the Supreme Court Act 1935, which provides as follows:
114—Interest on judgment debts
(1)All money, including costs, payable under any judgment or order shall bear interest at the rate from time to time prescribed by the rules of court.
(2)The interest shall be computed from the following times:
(a)in the case of money other than adjudicated costs, from the time specified in the judgment or order, and if no time is so specified from the date of the judgment or order;
(b)in the case of adjudicated costs, from the date of the certificate of the adjudicating officer by whom the costs were adjudicated or an earlier date specified by the adjudicating officer in the certificate.
The provision allows for interest to run from a period prior to the certificate (allocatur) of a taxing officer. In Osborne v Kelly his Honour Doyle CJ said: [13]
It is also pertinent to bear in mind that the function of an award of interest on damages prior to judgment has been said to be “to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period.”: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663. I proceed on the basis that the purpose of an award of interest on costs is the same. That is, that interest is awarded to compensate the plaintiff for the fact that the plaintiff has been without the use of the plaintiff's money.
[13] (1999) 75 SASR 392 at [32].
In my view, it is appropriate that there be an award of interest from the date that the invoice fell due. The evidence before the Court disclosed the fact that, on a number of occasions, the applicant advised the respondent that she would attend to payment of the invoice. Initially no issues in respect of the invoice were raised. The factual circumstances that led to the issuing of these proceedings was that the respondent issued proceedings in the Magistrate's Court in respect of the unpaid invoice due to the applicant’s failure to pay. That matter was listed for trial. The day before the trial in the Magistrate's Court this proceeding was issued. It had the effect of thwarting the Magistrate's Court trial which was adjourned.
Consideration of the issues
The applicant raised a number of objections to the claim for costs. They are as follows:
1The amount claimed for drawing the long form bill is excessive.
2The hourly rate claimed in respect of the solicitor/client portion of the bill is excessive.
3Solicitors’ fees for attending at court with counsel are excessive.
4Fees for preparing two specified affidavits are excessive.
5Some aspects of the counsel fees are excessive.
The respondent accepts that the fee for drawing the long form bill of costs is excessive. It appears to be an error. The party/party portion of the respondent’s claim for costs I would allow in the amount of $7,500.
In respect of the solicitor own client portion of the costs, I accept the submissions of the applicant that the hourly rate charged is excessive and should be reduced to the rate of the Supreme Court Scale. I also accept that some attendances with counsel at Court should be charged at the lower rate on the Court Scale. Having regard to the submissions of the parties, and adopting a broad-brush approach, I would allow that portion of the bill in the amount of $16,500.
The next item is counsel fees. All counsel fees were incurred during the period for which the respondent is entitled to costs on a solicitor/client basis. In the main, I accept the appropriateness of the claim for counsel fees. The hourly rate charged by counsel appears to be within the range contemplated by the Guide to Counsel Fees. Again, adopting a broad-brush approach, I would reduce counsel fees to $21,000 plus GST. There appears to be no basis to reduce the claim for counsel fees since 28 March 2017. I would allow those in the amount of $2000 plus GST.
The claim for interest is calculated on the interest rates provided in the Rules. As mentioned above, the interest is claimed on the basis of the amount allowed in the interim allocatur from the invoice should have been paid until the awarding of an interim allocatur on 16 September 2014. The interest calculation I allow in the amount claimed, being $4980.87.
I will hear the parties in respect to the form of the orders.