Thompson v Desmond and Insurance Australia Limited
[2015] ACTMC 6
•15 December 2015
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Thompson v Desmond & Insurance Australia Limited |
Citation: | [2015] ACTMC 6 |
Hearing Date(s): | 1 December 2015 |
DecisionDate: | 15 December 2015 |
Before: | Magistrate Morrison |
Decision: | See [40], [43], [49] |
Category: | Costs |
Catchwords: | CIVIL LAW – costs – review of deputy registrar’s decision on assessment – jurisdiction of deputy registrar – relevance of offer and reasonableness of plaintiff’s refusal to costs assessment when no special costs order made – point in time at which deputy registrar’s assessment of whether costs incurred fair and reasonable to be made – powers of deputy registrar to determine facts |
Legislation: | Court Procedures Rules 2006 (ACT) |
Cases: | Brennand v Hartung and Best Practice Education Group Ltd [2014] ACTSC 326 |
Parties: | Justin Dowling Thompson (plaintiff/respondent) |
Representation: | Counsel Solicitors |
File Number: | CS 219 of 2012 |
MAGISTRATE MORRISON:
Background
The proceedings between the parties were resolved by way of a consent judgment for the plaintiff in an amount of $70,000.00. The formal order of the Court does not record against whom the judgment is entered but nothing turns on that for present purposes. The Court order goes on to require the defendants to pay the plaintiff’s costs to be agreed or assessed.
The plaintiff applied for an assessment of costs. A bill of costs was prepared. A notice of objection was filed. In the course of the assessment the deputy registrar, who may exercise the powers of the registrar by virtue of rule 5(4) of the Court Procedures Rules 2006 (ACT) identified 2 points raised in objections and which he described as novel.
He invited written submissions on them on the basis that they needed to be determined as preliminary questions. The parties agree that the document which is Exhibit A accurately records the decision of the deputy registrar following those written submissions. In it he describes the 2 points raised in objections in this way:
Point 1:
The defendants object that the Bill of Costs does not represent fair and reasonable costs having regard to the mandatory offer made five months prior to settlement and accepted only on the week prior to the hearing.
It is obvious that the deputy registrar understands the objection to relate to costs for work performed between when the mandatory final offer was made and when acceptance of the offer for that amount took place. I refer to the relevant work in these reasons as the disputed work.
Point 2:
The insurer’s solicitors advised the plaintiff’s solicitors by letter dated 3 June 2013 that in their view, the economic loss report and addendum letter of Geoffrey Davis, Macquarie Reporting Service, both dated 4 November 2013 were not a reasonable disbursement and that they intended to dispute payment at the resolution of the claim.
Again it is obvious that the deputy registrar understands that the objection is based upon the reasons put forward by the appellant for its objection to the report and not simply that notice had been given that an objection would be raised. I refer to the report in these reasons as the loss report.
The 2 points of objection were decided against the defendants. They sought reconsideration pursuant to rule 1851 and the decision on that reconsideration went against them also. The parties agree that Exhibit C accurately records the deputy registrar’s reasons on the reconsideration decision.
The present proceedings seek review of the deputy registrar’s decision pursuant to rule 1855. They should probably have been commenced by way of application in proceedings under Part 6.2 of the rules rather than by way of appeal under Part 5.2 but no objection to form was taken.
Approach to review
The role required of me is one of review. The approach to be taken was considered by Refshauge J in Brennand v Hartung and Best Practice Education Group Ltd,[i] where His Honour said this:
92. The approach to be taken to a review of the decision of a registrar or deputy registrar assessing costs or on a reconsideration has been considered a number of times. Although these decisions were made concerning O 65 R 66 of the Supreme Court Rules 1937 (ACT), r 1855 of the Court Procedures Rules has sufficient similarity to consider that the principles already decided apply. Gallop J said in Ongania v Trimboli (Unreported, Australian Capital Territory Supreme Court, Gallop J, 20 May 1983) at p 2:
It is now well established that the Court will review a decision of a taxing officer when it is contended that he has proceeded upon a wrong principle, for the purpose of determining the principle which should be applied; and an error in principle may occur both in determining whether an item should be allowed and in determining how much should be allowed. Where no principle is involved and the question is whether the taxing officer has correctly exercised a discretion which he possesses and is purporting to exercise, the Court is reluctant to interfere (Western Australian Bank v Royal Insurance Co (1908) 7 CLR at p 388; Clark, Tait & Co v Federal Commissioner of Taxation [1931] HCA 26; (1931) 47 CLR 142 at pp 145-6; Australian Coal and Shale Employees’ Federation v The Commonwealth [1953] HCA 25; (1953) 94 CLR 621 per Kitto J at 629; and Peile v Nobel (Australasia) Pty Ltd [1966] VicRp 60; (1966) VR 433 per Starke J at p 436. This has been the principle which has guided this Court in the review of taxations of Bills of Costs see, for example, Ronald Keith Ely by his next friend Christopher Finnegan v Ralf Ballschmieter (an unreported decision of Blackburn J, as he then was, delivered 5 September 1975).
93. In Ely by his next friend Finnegan v Ballschmieter (Unreported, Australian Capital Territory Supreme Court, Blackburn J, 5 September 1975) at p 6, Blackburn J held that the principles of review, set out in House v The King [1936] HCA 40; (1936) 55 CLR 499, are the principles to be applied.
94. This has been the approach for a long time. See, for example, Kores v Franzi (Unreported, Australian Capital Territory Supreme Court, Fox J, 5 February 1971) at p 33 and Tarrant v Lier (Unreported, Australian Capital Territory Supreme Court, Fox J, 5 February 1968) at pp 62-3.
95. More recently, but also under the previous rules, it appears that the same approach has been taken by Higgins J in Bennett v Seaman (1993) 117 ACTR 1 at 8 and, even more recently, by his Honour in Macphillamy v Vizovitis [2003] ACTSC 60 at [32].
96. I see no reason why the same approach should not be followed for the exercise of the Court’s jurisdiction under r 1855 of the Court Procedures Rules and, indeed, every reason why it should be followed.
I adopt the approach just described. In that context the decision of the deputy registrar and his reasons are important.
The deputy registrar’s decision
In his decision in the first instance, the deputy registrar made reference to the power of a court to make what are special costs orders where a Calderbank offer has been made. He went on to say:
The inception and development of Calderbank offers was carried out by the Courts. It appears to me the whether a Mandatory Final Offer can be styled as some type of Calderbank offer is irrelevant as, to my mind the term ‘Calderbank’ is a term of art describing a scheme designed to encourage parties to settle matters as early in proceeding as is reasonable.
However, one aspect that particularly concerns me is the words used by master Harper in Graham Ronald Kemp v Michael J Ryan & Anor (supra) where it was said a paragraph 18: ’18. A further ingredient of the Calderbank scheme as it has developed is that the onus is on the offeror to establish to the satisfaction of the Court that in all the circumstances the failure of the opponent to accept the offer was unreasonable; Evans Shire Council v Richardson (No2) (2006) NSWCA 61 at 26.’
I cannot imagine a procedure I could use as a Taxing Officer to establish whether in all the circumstances the failure of the opponent to accept the offer was unreasonable. To attempt to do this when the matter was purportedly resolved by consent order without having access to the full range of the powers of the Court is to my mind not possible.
Similarly the submission that I can attempt to find to my satisfaction that the of the report from Macquarie Reporting Services, is based on the contention that it was obtained on the basis of assumptions in respect of which the Plaintiff did not have supporting evidence, would require me to have access to a range of powers and procedures that are simply not available to me.
I therefore reject the submissions to the extent that I, as a Taxing Officer can resolve these two particular disputes in a fair and just manner. (errors and omissions reproduced)
His decision on reconsideration included the following at paragraph 31:
31“ ..... the powers of a registrar are defined in Division 2 of the Rules. Rule 1800 (2) states that the costs must be assessed by the registrar. There appears to me to be an essential difference in an award of costs by a court, and the awarding of any costs that are the subject of an assessment.
32Having regard to the distinction it appears to me that the determination of an award of costs emanating from a Calderbank offer, or an ‘economic loss report’ clearly into a category that is the preserve of the courts. Therefore a registrar does not have the jurisdiction to hear and determine these matters. (errors and omissions reproduced)
From that record of the reasons given by the deputy registrar, I conclude that he declined to consider the merits of the objections raised on either point on the basis that he had no power or jurisdiction to do so. Counsel for the appellant said that the deputy registrar “denied himself jurisdiction” which I treat as another way of saying the same thing. That then is the statement of principle which the appellant must demonstrate to be wrong for the purposes of the review, but it must be looked at in conjunction with the reasons given by the deputy registrar.
As to point one, the deputy registrar appears to have concluded that he had no power or jurisdiction because it was not his role to form a view on the reasonableness or otherwise of the plaintiff’s rejection of the original mandatory final offer.
As to point 2, in his original decision the deputy registrar appears to base his conclusion (of no power or jurisdiction) on his inability to form a view about whether the plaintiff’s evidence justified the assumptions on which the loss report was commissioned. The deputy registrar refers to that inability to do so by reference to the need for “access to a range of powers and procedures” which he says were not available to him.
In his reconsideration reasons the deputy registrar lumps together both point 1 and point 2 in saying that he regards the determination of costs emanating from a Calderbank offer, or an ‘economic loss report’ clearly into a category that is the preserve of the Courts. The respondent, on my understanding of the submissions put to me, takes a somewhat subtly different view of the effect of the reasons given by the deputy registrar. My conclusion however is that his reasons on the reconsideration decision in effect restate those he gave at first instance as just set out.
The arguments of the parties are well set out in the written outlines before me. Counsel were unable to locate any directly relevant authorities.
Point 1 - submissions
The submissions of the appellant in relation to point 1 can be summarised in this way:
(a)The deputy registrar has a statutory obligation under rule 1751(2) to consider whether the disputed costs were fair and reasonable. The meaning to be given to the words which follow in the rule – that is – for the attainment of justice or for enforcing or defending the rights of the party – must be considered having regard to the subsequent acceptance by the plaintiff of the second defendant’s offer in the same amount as the mandatory final offer some 5 months earlier.
(b)Rule 1761 sets out a list of matters the deputy registrar was required to take into account in assessing costs. One of those is:
(e) the interests of the parties.
(c)The second defendant is a compulsory third party insurer and “issues of the affordability and sustainability of the scheme are important”. That observation was made to introduce a submission in the following terms:
And so the interest of the appellants in the particular question to be decided is one of wider interest and in practical terms your Honour, if the registrar is correct, then every time the court orders costs in favour of a plaintiff in a motor accident’s matter, there is no power to determine whether the amount charged is fair and reasonable, rather if the registrar is correct, it must simply be allowed. And we say that can’t be the correct statement of law and that the power granted to the registrar is wide.
The respondent’s argument on point 1 is relatively straightforward. It is that the terms of the order made at the finalisation of the proceedings - being what might be described as the usual order for costs without limitation or reservation - do not leave any room for reading the order down by reference to offers or counter-offers made at some earlier time.
Point 1 - consideration
The answer to the contest over point 1 is to be found in analysis of the temporal aspect of the assessment required of the deputy registrar under the rules.
Rule 1751(2) speaks in terms of the registrar allowing “all costs that the registrar considers were fair and reasonable for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed.”
The approach traditionally taken to the assessment of costs looks to what are “necessary or proper” costs but nothing turns on that for present purposes.
The temporal aspect of the assessment required is referred to in Law of Costs[ii] at paragraph 16.17 in these terms:
What is ‘proper’ (or ‘necessary’) must be judged by reference to the circumstances existing when the work was done, not in relation to the eventual state of the circumstances at the trial. Hindsight is not the proper test.
The authority quoted for that proposition is Bartlett v Higgins.[iii] The facts bear mention. The plaintiff brought an action claiming relief in certain money lending transactions. He was an officer in the militia who had volunteered for military service in South Africa in the conflict which became known as the Boer War. He was expecting an order to leave for South Africa at any time on 2 days notice. A superior officer had told him that he was certain to go and gave him 3 days leave to settle his private affairs. The plaintiff applied for and obtained an order for examination with the costs of the examination being costs in the cause. Examination of the plaintiff took place over 2 days but as matters transpired the plaintiff had not received orders requiring him to proceed to South Africa by the time the action came on for trial. He attended for the trial but at the outset the defendant submitted to a judgment in effect conceding the whole of the plaintiff’s claim and with the defendant “to pay the plaintiff’s costs of this action”. The taxing master disallowed the costs of the examination on the basis that “(t)he examination of the plaintiff was useless and the costs of it were thrown away. The plaintiff never went to South Africa and he attended the trial.”
The Rules of the Supreme Court 1883 (UK) dealing with costs are not reproduced in the decision of the Court of Appeal but I infer that they were in unremarkable form. The appeal was allowed. Stirling L.J. dealt with the question before the Court in this way:
In my judgment, it is not correct to say that costs are not to be allowed because in the ultimate event they turn out to have been unnecessary. The taxing master must not consider whether they have been “necessary” having regard to the event, but whether they “.... have been necessary or proper for the attainment of justice” – that is I think necessary or proper having regard to the state of things at the time the examination was ordered. That, it seems to me, is the time with reference to which the propriety of incurring the costs should be considered.”
The principle outlined in Bartlett v Higgins[iv] has been applied in Australia – see Grant v Australian Knitting Mills at 115 per Murray CJ.[v]
Despite the difference in nomenclature, there is no basis for concluding that the assessment process required of a deputy registrar under the Court Procedures Rules 2006 (ACT) is relevantly any different to that of a taxing officer under a taxation of costs regime.
The argument raised by the appellant seeks to have the deputy registrar make his assessment of the work done by the solicitor having regard to the ultimate outcome – that is the ultimate acceptance by the plaintiff of the settlement offer leading to the consent judgment. In doing so the appellant invites the deputy registrar, impermissibly, to look beyond the state of things at the time the disputed work was done.
During the period when the disputed work was done, an offer had been made by the second defendant and not accepted by the plaintiff. The duty of the solicitor was to get the matter ready for hearing. The assessment under rule 1751(2) is to be made having regard to that state of things and not (in the absence of any special costs order) having regard to the ultimate outcome by way of the settlement reached and the consent judgment entered.
The broader interests of insurers in the affordability and sustainability of the compulsory third party scheme in the Territory are valid, but they cannot over-ride the fundamental approach required to be taken to the point in time at which a decision is to be made for the purposes of assessing party and party costs in the usual way. Of course a special costs order may be made by a court in many forms including by way of directing that costs in relation to some identified matter or after some identified point in time are not to be recovered. The identified interests of insurers can be met by the way in which the terms of comprise agreements and consent judgments are crafted.
As I have already found, the decision of the deputy registrar on point 1 was based upon a conclusion that, as a matter of principle, he had no power or jurisdiction to decide the objection because it was not his role to form a view on the reasonableness or otherwise of the plaintiff’s rejection of the original mandatory final offer.
For the reasons given my conclusion is that his determination is required, as a matter of principle, to be based upon his assessment of what is fair and reasonable (for the stated purposes in rule 1751) having regard to the state of things at the time the costs were incurred. It may be that a determination based upon this principle will produce the same outcome as the deputy registrar’s decision, but the deputy registrar’s decision did not apply the principle so expressed. It follows that his decision was based upon a wrong principle.
Point 2 - submissions
The second point calls for different considerations.
The appellant’s submission is that the obligation cast on the deputy registrar under rule 1751(2) to consider whether costs were fair and reasonable requires him to form a view on the very matter in respect of which he says he has no power to do so. He cannot fulfil the statutory obligation without doing so. (I mention as an aside at this juncture that this objection, unlike point 1, does not ask the deputy registrar to have regard to the manner in which the proceedings were ultimately resolved.)
The respondent’s argument on point 2 is not so clear. In submissions Mr Crowe SC acknowledged that the argument before the deputy registrar had, to use his expression “gone off the rails a bit”. He went on to say that the deputy registrar appeared to understand that he was being asked to embark upon a hearing as to the admissibility of the loss report had the matter proceeded to a hearing, and that, insofar as that was his decision, he was correct. I do not agree that the deputy registrar saw his role in terms of the strict admissibility of the loss report from an evidentiary point of view, but to the extent that he interpreted the objection as asking him to stand in the shoes of a judge at hearing, that was the very argument put before him in the plaintiff’s written submissions to him.
Point 2 - consideration
I have set out at paragraph 12 and 13 of these reasons the conclusion I have reached as to the deputy registrar’s reasons for his decision on point 2. That is, in summary, that he had no power or jurisdiction because he was unable to determine the objection without “access to a range of powers and procedures” which were not available to him.
Ms Castle for the appellants is correct when she submits that rule 1751(2) imposes a statutory obligation on the deputy registrar to determine whether claimed costs are fair and reasonable for one of the purposes stated in the rules.
The reasons expressed by the deputy registrar for his conclusion that he had no power to make that determination in relation to the commissioning of the loss report do not deal in detail with his understanding of the “powers and procedures” available to him.
It is useful to start by considering those powers and procedures.
Rule 1760 sets out the powers available when assessing costs. They include:
(a)directing a party to produce a document;
(b)requiring a party to subpoena a witness to attend a hearing or produce a document or thing;
(c)examining witnesses and taking evidence;
(d)giving directions about the conduct of the assessment.
The powers so given are extensive, but I suspect rarely used. In almost all cases there will be little if any dispute as to background facts necessitating resolution by a deputy registrar in the formal manner provided for by the rule. Most taxation of costs takes place by way of submissions being made by the parties’ representatives against the background of undisputed facts. Where some clarification is required or there is a difference as to the meaning to be attached to some letter or report the document is usually simply handed over to the taxing officer. The process was mentioned by Refshauge J in Brennand v Hartung and Best Practice Education Group Ltd [vi] in these terms:
“.... I note that evidence is usually given informally before the registrar on taxation (see Kores v Franzi Unreported, Australian Capital Territory Supreme Court, Fox J, 5 February 1971 at p 33) and this desirable practice should continue ...”
It is important however to bear in mind that the role of the deputy registrar is to determine whether costs were “fair and reasonable for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed” having regard to the state of things at the time the costs were incurred. It follows that in almost all cases any factual determination required of the deputy registrar will be as to the state of things at the time the costs were incurred and will not require the deputy registrar to make any determination which attempts to predict an outcome at hearing.
Having made those observations about the powers available to the deputy registrar, it is not clear to me that the deputy registrar needed to invoke any of them to determine the objection put before him about the loss report.
The defendants’ written submissions to the deputy registrar dated 20 November 2014 set out the factual basis upon which the objection to the loss report is based at paragraphs 22 to 32. In short the defendants say that the report was commissioned on the basis that the report author was directed to make certain assumptions about the plaintiff’s loss of working capacity, and there was no proper basis for those assumptions having regard to the medical evidence then in the plaintiff’s possession. According to the defendants, in the absence of any evidentiary basis for the assumptions the report author was asked to make, the projections in the loss report were purely speculative and the costs of obtaining it were not fair and reasonable.
A number of things are apparent from the plaintiff’s submissions in response filed 16 December 2014:
(a)First, the contents of the loss report are not in dispute, and nor are the assumptions the report author was asked to make;
(b)Secondly, the medical evidence which was in the plaintiff’s possession at the time the report was commissioned is not in dispute.
No factual determination was required of the deputy registrar in relation to either of those matters.
The plaintiff’s submissions to the deputy registrar assert (at paragraph 23) that, contrary to the defendants’ submissions, the contents of the report of Dr Leu do support the assumptions the report author was directed to make. To the extent that the submission in that paragraph raises a factual dispute requiring any determination by the deputy registrar it is not something requiring the exercise of any formal procedural powers – the deputy registrar can simply read the doctor’s report and form his own view.
The plaintiff also submitted that the defendants’ objection goes to only one of 14 assumptions the report author was directed to make. That is not an assertion which appears to require any factual determination. The deputy registrar can see for himself what assumptions the report author was directed to make and one would expect the extent to which the report’s conclusion relies upon any one assumption to be apparent from the process of calculation disclosed in the report.
Based on the material before me, I cannot see that there is any other relevant factual determination required of the deputy registrar but that will be a matter for him having regard to what is raised by the parties when the assessment is referred back to him.
The plaintiff’s written submissions to the deputy registrar went on to challenge the defendants objection by arguing that the assumptions on which the loss report were based were never tested in court and that the defendants were asking him to perform a function that only a trial judge could perform. For the reasons given earlier that submission is misconceived and directs attention away from the proper role of the deputy registrar under rule 1751.
Put simply, the role of the deputy registrar was, and remains, to determine whether the costs of obtaining the loss report were fair and reasonable (for one of the purposes set out in the rule) having regard to the state of things at the time the costs were incurred.
For the reasons given the deputy registrar’s decision in relation to point 2 was also based upon a wrong principle.
Orders
The parties did not ask that I exercise the powers of a registrar in relation to the items in the bill of costs under objection.
The other powers on review are set out in rule 1855(5). The decision of the deputy registrar was limited to the 2 points dealt with in these reasons, but was in effect expressed as a single decision. That decision should be set aside and the bill of costs returned to the deputy registrar for reconsideration in accordance with these reasons.
As to costs of the application before me, I order that the respondent pay the appellants’ costs. I stay the order for 14 days and further order that it not take effect if, within that time, a party notifies my associate that the matter is to be re-listed to seek some other costs order.
I certify that the preceding fifty-two [52] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Magistrate Morrison.
Associate: Anna Carlander
Date: 15 December
[i] [2014] ACTSC 326.
[ii] G E Dal Pont, Law of Costs, (LexisNexis Butterworths, 3rd ed, 2013).
[iii] [1901] 2 KB 230.
[iv] [1901] 2 KB 230.
[v] [1937] SASR 113.
[vi] [2014] ACTSC 326.
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