Trevorrow v State of South Australia (No 7) - [2008] SASC 5

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
TREVORROW v STATE OF SOUTH AUSTRALIA (No 7)
[2008] SASC 5
Judgment of The Honourable Justice Gray
1 February 2008
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - CONDUCT OF PARTIES - UNNECESSARY PARTIES AND APPEARANCES - SEVERANCE OF CLAIM OR DEFENCE
Plaintiff successful in claim for damages - plaintiff sought an order that defendant pay the costs of the proceedings on a party and party basis - before trial plaintiff had indicated that he would rely on anthropological evidence - defendant obtained anthropological expert's report - plaintiff did not rely on anthropological evidence - plaintiff abandoned a pleaded cause of action - whether a funding arrangement meant that the plaintiff was under no liability to pay his solicitor - whether defendant should be awarded costs for preparing anthropological expert's report - whether defendant should be awarded costs for preparing for a pleaded cause of action that was later abandoned - Held: defendant to pay plaintiff's costs to be taxed - costs are awarded on an indemnity basis - plaintiff is liable to pay his solicitor's costs - question of awarding costs to defendant for preparing anthropological expert's report to be determined on taxation - defendant entitled to costs expended on abandoned cause of action.
Cachia v Hanes (1994) 179 CLR 403; Harold v Smith (1860) 5 H & N 381; (1860) 157 ER 1229; Gundry v Sainsbury [1910] 1 KB 645; Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495; Backhouse v Judd (1925) SASR 395; Angas Pty Ltd v Ilich Motor Company Pty Ltd (1992) 37 FCR 65; Johnson Tiles P/L & Anor v Esso Aust P/L & Ors (No. 2) [2003] VSC 212; O’Keeffe v Hayes Knight GTO Pty Ltd (2005) 218 ALR 604; Wentworth v Rogers (2006) 66 NSWLR 474, considered.

TREVORROW v STATE OF SOUTH AUSTRALIA (No 7)
[2008] SASC 5
Civil
GRAY J
Introduction

On 1 August 2007, the plaintiff recovered judgment in the amount of $525,000.00 against the State of South Australia.[1] The making of declarations and the questions of interest and costs were reserved. I have, earlier today, published reasons for making an award of a lump sum in lieu of interest in the amount of $250,000.00.[2] I now publish my reasons for the cost orders I propose to make.
[1] Trevorrow v State of South Australia (No 5) (2007) 98 SASR 136.
[2] Trevorrow v State of South Australia (No 6) [2008] SASC 4.
The plaintiff sought an order that the State pay the costs of the proceedings on a party and party basis. The State opposed the making of any costs order in favour of the plaintiff. It was contended that the plaintiff was under no liability to his solicitors for costs and accordingly was not entitled to any indemnity from the State. It was also submitted that on two discrete issues, the plaintiff should pay the State’s costs in any event. The State further submitted that if costs were to be ordered in favour of the plaintiff and no order were made in favour of the State on those two discrete issues, then the plaintiff should not recover costs with respect to those discrete issues.
Affidavit evidence was tendered by both parties on the question of costs. There was no cross-examination of the deponents. The affidavits disclose that the State became aware of a funding arrangement between the Commonwealth Government and the Aboriginal Legal Rights Movement relevant to these proceedings. The State’s requests for particulars of the arrangement led to the filing of affidavits on behalf of the plaintiff.
Joanna Richardson gave evidence in the substantive proceedings in which she described receiving instructions to act as the solicitor for the plaintiff. The proceedings identified Ms Richardson as the solicitor acting for the plaintiff. The proceedings also disclosed that Ms Richardson was from the Aboriginal Legal Rights Movement. There was no relevant challenge to her testimony.
In her affidavit in support of the plaintiff’s application for costs, Ms Richardson deposed, inter alia, as follows:
I am instructed to act on behalf of the plaintiff in this matter.
In the period since 1994 the plaintiff applied to Aboriginal Legal Rights Movement Inc and then the Aboriginal & Torres Strait Islander Commission, the Aboriginal and Torres Strait Islander Services and the successor entity, the Indigenous Law and Justice Branch of the Commonwealth Attorney General’s Department, and was granted, assistance with the costs of litigation of this claim.
The assistance provided was conditional in that, amongst other things, should the plaintiff’s claim be successful, he was obliged to repay to the Commonwealth Attorney General’s Department all funds that had been advanced, although should the costs awarded be less than the full amount that had been advanced the Department may accept a lesser amount depending upon the amount of compensation received, if any, the decision of the court to reduce the costs to be paid and any other matter affecting the amount of costs recovered. These conditions are set out in Appendix A of the Commonwealth Attorney General’s Department Indigenous Test Case Guidelines, a document which is available to the public …
The plaintiff has not entered into any separate agreement or arrangement as to his liability for costs with me, nor with Aboriginal Legal Rights Movement Inc, nor with the Indigenous Law and Justice Branch of the Commonwealth Attorney General’s Department.
The guidelines for the Indigenous Test Case promulgated by the Australian Government were tendered. The guidelines set out the criteria for the obtaining of funding from the Commonwealth Attorney General’s Department with respect to indigenous test case funding. The guidelines also set out the procedure to be followed when applying for funding and the conditions upon which funding may be granted. Specific conditions included an obligation to repay in the event that a judgment is recovered. The guidelines specifically contemplated an amount of costs being awarded by the court to a successful claimant. The guidelines do not provide or suggest that the plaintiff is relieved from any liability to his solicitor.
The Indemnity Principle
In Cachia v Hanes[3], Mason CJ, Brennan, Deane, Dawson and McHugh JJ reviewed the well established indemnity principle and observed:
It has not been doubted since 1278, when the Statute of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation.
This proposition was first clearly articulated in Harold v Smith[4] where Bramwell B said:
Costs as between party and party are given by the law as an indemnity to the person entitled to them: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. Therefore, if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained. Of course, I do not say there are not exceptional cases, in which certain arbitrary rules of taxation have been laid down; but, as a general rule costs are an indemnity, and the principle is this, – find out the damnification, and then you find out the costs which should be allowed.
[3] Cachia v Hanes (1994) 179 CLR 403 at 410 (footnotes omitted).
[4] Harold v Smith (1860) 5 H & N 381 at 385; (1860) 157 ER 1229 at 1231.
In Gundry v Sainsbury,[5] a plaintiff was successful but was refused his costs of the trial. The plaintiff had agreed with his solicitor that he should not have to pay the solicitor any costs. The Court of Appeal held that he could not recover party and party costs on the basis of the indemnity principle. Cozens-Hardy J commented that if the plaintiff had recovered a costs order, he would have received a “bonus” which “is contrary to justice and to common sense and also to the law as laid down in Harold v Smith”.[6]
[5] Gundry v Sainsbury [1910] 1 KB 645.
[6] Gundry v Sainsbury [1910] 1 KB 645 at 649.
In Adams v London Improved Motor Coach Builders Ltd,[7] the plaintiff brought an action for wrongful dismissal. He was successful and was awarded costs. The defendant contended that the plaintiff was not entitled to recover costs as his union had retained the solicitors in the case and it was the union to which the solicitors looked for payment. The Court of Appeal rejected the argument. Bankes LJ observed:[8]
When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs.
[Emphasis added]
[7] Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495.
[8] Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 at 501.
In Backhouse v Judd,[9] Judd, an inspector for the Society for the Prevention of Cruelty to Animals, made a complaint against Backhouse. Backhouse was convicted, fined, and ordered to pay certain costs to Judd. An appeal was dismissed. Backhouse was ordered to pay the costs of the appeal.
[9] Backhouse v Judd (1925) SASR 395.
On taxation, objection was taken to the entire bill on the ground that Judd was not entitled to recover any costs. It was argued that Judd was not liable to the solicitor or counsel who appeared. This submission was rejected at first instance and on appeal. On appeal, Angas Parsons J referred to the earlier English authorities, including Adams, and observed that the solicitor and counsel had represented Mr Judd as prosecutor in the proceedings. They had acted for Mr Judd, and they did so under the ordinary terms applicable to a person who employs someone to do professional work on his behalf – namely, that Mr Judd should remunerate them. Angas Parsons J observed:[10]
There is nothing in the evidence that I can find which shews it was ever contemplated or considered that in no event should Judd be liable to his solicitor, Mr Abbott, or to his counsel, Mr Smith and Mr Abbott.
…
The facts are similar to those which one would expect in a case where an insurance company undertakes the conduct of proceedings instituted by the assured or against him, not do they differ, in my opinion, from those where an information is laid by a member of the police force for whom counsel is briefed by the Law Department. In such a case, although the police officer accepts the services of such counsel, and would not contemplate that in any event he would be left to pay the costs, yet the proper inference to be drawn is that liability therefor, in the absence of a bargain to the contrary, is not to be taken to be negatived, and in every-day practice such an informant may be awarded costs if successful.
[10] Backhouse v Judd (1925) SASR 395 at 401-403.
In Angas Pty Ltd v Ilich Motor Company Pty Ltd,[11] following a detailed review of the authorities, French J concluded:
[T]he decision in Adams is clear authority for the proposition that the indemnity principle will permit recovery of costs by a successful party who is under a legal liability to his solicitors to pay them even though the likelihood of being called upon to do so is remote.
[Emphasis added]
[11] Angas Pty Ltd v Ilich Motor Company Pty Ltd (1992) 37 FCR 65 at 72.
The same approach was adopted by Gillard J in Johnson Tiles P/L & Anor v Esso Aust P/L & Ors (No. 2).[12] This was a class action for damages arising out of an incident which shut down gas supplies in Victoria for two weeks. There were three represented classes in the action: business users, domestic users and workers. Johnson Tiles established Esso’s liability to business users, but failed on the facts in its individual claim for damages. Johnson Tiles had a “no win, no fee” arrangement with its solicitors. Esso argued that Johnson Tiles was not entitled to an order for costs because, under its “no win, no fee” arrangement, it was not liable to Esso for costs. It was pointed out that Johnson Tiles had failed in its individual action, even though it had succeeded in establishing liability for the class it represented. Gillard J held that Johnson Tiles was entitled to an order for costs:[13]
In the present case, the “No Win No Fee” agreement dealt with the claims brought by the plaintiffs in their own name. The agreements did not deal with their obligation in relation to the proceedings overall in which they also represented members of particular groups of gas customers and stood-down workers. The relationship between the plaintiffs and their solicitors is a client-solicitor retainer. The evidence satisfies the court that in relation to their personal claims they would not be liable for any costs if they failed in respect to their claims. But the agreements did not address their liability for costs in relation to the representative aspect of the proceeding. It cannot be said, therefore, that under no circumstances was either plaintiff not liable for costs.
In my opinion, the plaintiffs are entitled to recover those costs which are attributable to issues which related to the claims of the business users.
[Emphasis added]
[12] Johnson Tiles P/L & Anor v Esso Aust P/L & Ors (No. 2) [2003] VSC 212.
[13] Johnson Tiles P/L & Anor v Esso Aust P/L & Ors (No. 2) [2003] VSC 212 at [126]-[127].
The decision in Johnson Tiles was followed in O’Keeffe v Hayes Knight GTO Pty Ltd,[14] where the successful party had brought proceedings with the support of a litigation funding arrangement. Nicholson J observed:
The principle of whether costs should be awarded to a funded party is one on which a number of authorities were cited to the Court. In Johnson Tiles, Gillard J relied on the indemnity principle stated in Gundry v Sainsbury … to the effect that if there is an agreement between the client and the solicitor that in no circumstances will the client be liable for costs whatever the outcome of the proceeding, there is no liability to the solicitor by the client and, if successful in the litigation, the unsuccessful party is not obliged to pay any costs … Gillard J noted that the indemnity principle has not been applied to deny a successful litigant costs in cases where it was not established that the successful litigant would not have to pay costs under any circumstances. Reference was made … to the decision in Adams v LondonImproved Motor Coach Builders Ltd … where Bankes LJ said … that liability would not be excluded merely because a trade union undertook to pay the plaintiff’s costs and that it was necessary to go further and prove that under no circumstances was the plaintiff to be liable for costs.
[Emphasis added]
[14] O’Keeffe v Hayes Knight GTO Pty Ltd (2005) 218 ALR 604 at [40].
The New South Wales Court of Appeal in Wentworth v Rogers[15] had occasion to review the application of the indemnity principle in the context of conditional costs agreements. Santow JA took the view that the indemnity principle should be applied with flexibility rather than as a rigid rule. In particular he considered that the indemnity principle was capable of accommodating conditional fee agreements:[16]
[T]he indemnity principle is not immutable, and should be applied flexibly rather than made into a rigid rule ... . This was said as long ago as 1902 by Walker J in New Pinnacle Group Silver Mining Co v Luhrig Coal and Ore Dressing Appliances Co … . It has been frequently affirmed since, most recently by the Court of Appeal in Dyktynski v BHP Titanium Minerals Pty Ltd … . There, by analogy with the nominal party cases, a party who successfully conducted litigation for the benefit of his solicitor was not denied recovery from the other party by the indemnity principle. There was in reality no bonus to the successful party, nor punishment of the unsuccessful one, invoking the rationale for the rule articulated 150 years ago by Bramwell B in Harold v Smith … .
…
The general law governing the indemnity principle with its emphasis on flexibility is, in my opinion, quite capable of accommodating conditional fee agreements of this kind. It should do so recognising the importance of such agreements in promoting access to justice which may otherwise be unaffordable. The residual undertaking to pay, though qualified, strengthens the case for conformance with the indemnity principle. It is reasonable, not just in this ferocious litigation but more generally, to recognise in a costs agreement that the unsuccessful party who is subject to a costs order may delay or defeat recovery. Hence predicating payment on successful recovery is not unreasonable. In the words of Bramwell B this gives no unjustified bonus to the successful party nor does it impose any punishment on the losing one, so as to invoke the rationale behind the indemnity principle.
[15] Wentworth v Rogers (2006) 66 NSWLR 474.
[16] Wentworth v Rogers (2006) 66 NSWLR 474 at [50], [54].
Basten JA considered the indemnity rule and observed:[17]
The indemnity principle has been held to operate in two circumstances which might not obviously fall within its terms. The first is where the lawyers will be paid for their services, but not, as a matter of practice, by the client. Examples of that situation include cases where the litigant is indemnified by an insurer, by an association, such as a trade union, of which the litigant is a member, or where legal aid is obtained: see, for example, R v Archbishop of Canterbury …, Adams v London Improved Motor Coach Builders Ltd …, Electrical Trade Unions v Tarlo … and Johnson v Santa Teresa Housing Association … . In each case, the primary liability was held to be that of the litigant or client and hence the indemnity principle was satisfied. In other circumstances, a lawyer may be employed by the litigant, either a trading corporation or some similar body, or the Crown. In such cases it has again been accepted that the litigant incurs costs, although questions may arise as to the amount which can be recovered … .
[17] Wentworth v Rogers (2006) 66 NSWLR 474 at [104].
From these authorities, the following principles can be discerned of relevance to the present proceedings:
-the indemnity principle is the guiding principle concerning the recovery of costs;
-the indemnity principle allows for an indemnity if there is a liability of the claimant to his or her solicitor;
-in the absence of any express agreement, the retainer of a professional person to act will normally give rise to an implied agreement for the payment of reasonable professional fees and disbursements;
-the onus is on the party seeking to avoid an order to establish that there is no liability on the part of the claimant to his or her solicitor for costs;
-the fact that the solicitor is employed by a Crown law office or some other agency or institution or corporate employer does not preclude the making of a costs order; and
-the indemnity principle is a flexible principle, designed to allow for a just and fair result.
Application of the Principles
The unchallenged evidence of Ms Richardson established that she was instructed by the plaintiff to act as his solicitor. Although it appears that there was no express agreement for the payment for her professional services, in the circumstances, it was to be implied that the plaintiff would be liable to meet Ms Richardson’s reasonable professional charges as well as disbursements incurred. This implication arose from the plaintiff instructing Ms Richardson to act for him in the proceedings.

It is apparent that conditional financial assistance was made available through the Aboriginal Legal Rights Movement who in turn had received an advance of monies from the Commonwealth Attorney General’s Department. That arrangement, as discussed earlier, required repayment in the event of a successful claim. The funding arrangement specifically envisaged the recovery of costs by a successful claimant.
In the present proceedings, the application of the indemnity principle allows the plaintiff to recover costs. It has not been established that the plaintiff had no liability to his solicitor to pay costs. To the contrary, the evidence establishes an implied agreement on the part of the plaintiff to pay Ms Richardson’s reasonable costs. This liability for costs arises from the plaintiff’s retainer of Ms Richardson to act as his solicitor. Assistance with immediate funding was provided by the Commonwealth Attorney General’s Department. However, this funding did not release the plaintiff from his obligations to Ms Richardson. The arrangements for funding allowed for assistance but required repayment.
The plaintiff has succeeded in his claim. There is no evidence in the present proceedings that there was an agreement between the plaintiff and his solicitor that he would not be liable, under any circumstances, to pay costs. The plaintiff remained liable for costs.
Costs should be awarded in the plaintiff’s favour. The existence of a funding arrangement between Aboriginal Legal Rights Movement and the Commonwealth Attorney General’s Department does not affect the entitlement of the plaintiff to an order for costs against the State.
The Discrete Issues
The State sought a costs order in its favour in respect to two discrete issues.
It was said that in the preparation for the trial, the plaintiff indicated that he would rely on anthropological evidence and, in consequence, the State obtained appropriate expert advice. However, shortly before trial, the plaintiff indicated that the anthropological evidence would not be presented as part of his case. The State sought the costs thrown away on this issue. In the alternative, it was submitted that there should be no order for costs on this issue. It is difficult on the information before the Court to ascertain whether it was appropriate for the plaintiff to obtain anthropological advice. Such an inquiry may have been entirely appropriate. It may have been a reasonable course to follow. I am not prepared to make an order in favour of the State on this issue. However, it will be for a taxing master to reach a conclusion as to whether such an inquiry was appropriate and whether the costs and expenses incurred are properly recoverable by the plaintiff on taxation
The second matter related to the abandonment of a pleaded cause of action. At one time it was pleaded that the State breached a duty of care said to be owed to the plaintiff while he was in institutional care. This plea was later abandoned. The plaintiff accepted that the State was entitled to its costs thrown away by reason of the abandonment of this plea.
Conclusion
It is appropriate, having regard to the above reasons, to make the following orders:
-The plaintiff pay the State its costs thrown away by the plea in paragraph 280 of the statement of claim, and the abandonment of that plea.
-Save as aforesaid, the State pay the plaintiff his costs of the proceedings to be taxed on a party and party basis.