Ventrice v Joneal Pty Ltd

[2009] VCC 685

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
DAMAGES AND COMPENSATION LIST

GENERAL DIVISION

Case No. CI-08-00633

Lina Ventrice	Plaintiff
v
Joneal Pty Ltd	Defendant

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JUDGE:	Her Honour Judge Davis
WHERE HELD:	Melbourne
DATE OF HEARING:	25 May 2009
DATE WRITTEN SUBMISSIONS	3 and 12 June 2009 (plaintiff); 5 June 2009 (defendant)
RECEIVED:
DATE OF RULING:	1 July 2009
CASE MAY BE CITED AS:	Ventrice v Joneal Pty Ltd
MEDIUM NEUTRAL CITATION:	[2009] VCC 685

COSTS RULING

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Catchwords: COSTS RULING – Rule 26.08 – plaintiff’s application for indemnity costs order - Legal Profession Act 2004 – Section 3.4.28 – whether plaintiff entitled to an order to “uplift” of 25% in fees pursuant to a conditional costs agreement between her and her solicitors.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr C. Thompson	Nowicki Carbone
For the Defendant	Mr C. Grainger	Wisewoulds
HER HONOUR:

1          The plaintiff commenced proceedings against the defendant for damages in respect of an injury suffered on 11 February 2007 when she slipped and fell on the dance floor of the reception centre occupied by the defendant.

2          On 19 May 2009, I handed down judgment for the plaintiff, assessing damages in the sum of $91,746.00.

3          Following judgment, counsel for the plaintiff, Mr Thompson, indicated that the plaintiff was seeking an order for indemnity costs, which order was to include “uplift fee” of 25%, such fee having been included in the conditional costs agreement entered into between the plaintiff and her solicitors. I invited the parties to make written submissions on the matter of costs. The plaintiff’s written submissions were received on 3 June. The defendant’s written submissions were received on 5 June. The plaintiff’s written submissions in reply were received on 10 June 2009.

4          The parties agreed that the orders to be made should include an order that there be judgment for the plaintiff in the sum of $91,746 together with $3,050 damages in the nature of interest, with a stay of 28 days for payment. The parties also agreed that there should be liberty to apply (although the defendant’s proposed Minutes of Orders provided for general liberty to apply, while those of the plaintiff confined liberty to apply to matters arising out of the costs order). There was a minor difference in the order proposed by each party in relation to the cost of preparation court books (although this was not addressed by the written submissions).

5          The parties disagreed about indemnity costs, any “uplift fee”, certification for two counsel, the quantum of counsels’ fees, and reserved costs from 21 January and 10 March 2009.

6          The plaintiff seeks an order for indemnity costs including a direction that costs be assessed on the basis of 25% above Scale D except to the extent that any charge seems to the Registrar to be of unreasonable amount or unreasonably incurred, certification for two counsel (with Senior Counsel’s daily fee to be fixed at $5,500 and Junior Counsel’s fee of brief to be fixed at $2750.00). In relation to Senior Counsel, an order is sought in respect of 10 March 2009 before Her Honour Judge Cohen; 6 hours of conferences at $550 per hour; and 2 hours preparation of submissions as to damages following conclusion of the case at $550 per hour. In relation to junior counsel, an order is sought in respect of 21 January and 10 March 2009, 6 hours of conferences at $175 per hour, 2 hours for preparation of damages submissions and 5 hours for preparation of costs submissions, all at $275 per hour. The plaintiff also seeks an order for the costs reserved on 21 January 2009 and 10 March 2009.

7 The defendant resists all the orders sought. It says that indemnity costs should not be awarded in this case because the plaintiff did not place the defendant in a position where it could adequately assess the offer made under Rule 26.08. It says that no “uplift” order should be made because this is properly a matter for taxation and also because the fee agreement in this case also related to investigation and pursuit of the plaintiff’s superannuation entitlements. It says that the certification should be for one counsel only, on a fee and refresher basis; alternatively, the appropriate rate for counsels’ fees, if certification for two counsel is granted, is in the range of $5,000 for Senior Counsel and Scale for junior counsel, on a fee and refresher basis. The defendant also seeks its costs of 21 January and 10 March 2009.

Indemnity costs

8 Rule 26.08 provides for the cost consequences of the failure of a party to accept an offer of compromise of the claim. By sub-rule (1) it is provided that the rule specifically applies to an offer of compromise which has not been accepted at the time of verdict or judgment.

9 Rule 26.08(2) provides:

.

Where an offer of compromise is made by a plaintiff and not accepted by the defendant and the plaintiff obtains a judgment on the claim to which the offer relates, no less favourable to him than the terms of the offer, then unless the court otherwise orders the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim taxed on a solicitor and client basis

10 The purpose of Rule 26.08(2) is to give a plaintiff in an action for damages arising out of bodily injury “some position of standing or strength in any negotiations for settlement of his or claim against the defendant, which in the majority of cases, has a corporate body…standing behind it” [1].

[1]             See Connolly v Skratulja, Supreme Court of Victoria, No 534 of 1990, McDonald J, 2 March 1993.

11        The Plaintiff submits that she is entitled to an order for indemnity costs pursuant to Rules 26.08 and 63A.16 of the County Court Civil Procedure Rules 2008, unless the court orders otherwise. She says that she made an Offer of Compromise (which referred to Order 26) on 17 December 2008 (“the Rules Offer”) for a sum of $30,000 plus costs which was not accepted by the Defendant, and that the sum of damages awarded to the her upon judgment is greater than the amount offered. She also says that on order for indemnity costs carries with it the presumption that the party in whose favour the costs order is made is entitled to payment of all costs incurred unless they are unreasonable in amount or have been unreasonably incurred, and that it is for the unsuccessful party to satisfy the Registrar that the costs claimed are unreasonable[2].

[2]             The plaintiff relied on the case of Hazeldene’s Chicken Farm v VWA (No 2) (2005) 13 VAR 435

12 The defendant says that Rule 26.08 does not displace the common law and the Court retains a discretion to award costs on an ordinary basis and should award costs on that basis. The defendant says that the Rules Offer was not a Calderbank offer and did not refer to an application for indemnity costs, and that the Court should consider the reasonableness of its rejection of the Rules Offer. It says that the plaintiff’s actions in amending its Statement of Claim to allege an additional ground of breach; saying it would produce the wedding video; providing particulars of attendant care heads of damage; serving a bundle of additional medical records as well as further medical reports dated February 2009 from Mr Kudelka and Mr Lewi, made it impossible for the defendant to adequately assess the Rules Offer. Alternatively, the defendant says that if there is a finding in favour of the Rules Offer, then in light of the subsequent amendment to the plaintiff’s pleadings, any costs ought to be ordered on a solicitor and client basis.

13        The Offer of Compromise dated 17 December 2008 was in the following terms:

THE PLAINTIFF offers to compromise their claim for THIRTY
THOUSAND DOLLARS AND ZERO CENTRE ($30,000), plus costs.

THIS OFFER OF COMROMISE IS SERVED in accordance with Order 26 of the County Court Rules of Procedure in Civil Proceedings 1999 and the time the offer is open to be accepted by the defendant is limited to 14 days after service of the offer.

14        The defendant rejected this offer by correspondence dated 19 December 2008.

15        On the authorities[3], in the ordinary case, the ordinary provision under R26.08 will apply, that is, the successful offeror will receive the benefit of an order for indemnity costs unless the Court otherwise orders. There is no requirement in the Rules for a Rules Offer to spell out the indemnity costs consequences of rejection of the offer, as these consequences as specified in Rule 26.08 itself.

[3]             See Aljade v OCBC [2004] VSC 351 per Redlich J. at [46] where His Honour contrasted the formal offers under Order 26 with the position in the case of a Calderbank offer, where there will be no presumption of a “special costs order”. See also Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725.

16 Nothing in my view flows from the fact that Rule 63A.34A does not, in its terms, contemplate indemnity costs, for that Rule is prefaced with the words “Subject to the provisions of these Rules” and Rule 26.08 is clearly a more specific provision of the Rules.

17        In my opinion, the matters raised by the defendant do not warrant depriving the successful offer of the benefit of the order for indemnity costs, for a number of reasons. I note that by the time of the plaintiff’s Rules Offer, the time for discovery and interrogation had passed and the defendant had served extensive subpoenas for documents and medical records. The defendant had also required the plaintiff to submit to a further medical examination by an expert who had examined her prior to her injury. The defendant was in possession by then of the plaintiff’s Particulars of Special Damage dated 10 December 2008, which included details of the claim for unpaid voluntary assistance damages. The Offer was rejected outright by the defendant by letter dated 19 December 2008. There is no evidence before me of any counter-offer by the defendant, nor of any application to the Court for an extension of time within which to accept the plaintiff’s offer. I note that the Rules Offer was only two thirds of the amount allocated for general damages by the Court, and that the defendant made no submissions in relation to this figure in its final address. I also note that the medical expenses awarded on their own exceeded the offer made.

25% Uplift fee

18        Along with an order for indemnity costs, the plaintiff seeks a direction that “such costs include a 25% uplift above the costs normally payable on Scale D except to the extent that any charge seems to the Registrar to be of unreasonable amount or unreasonably incurred”.

19        The basis for this application is that the defendant be made to pay the 25% “uplift” in her fees, which arises as a consequence of her having entered into a conditional fee agreement with her solicitors, which is permitted under s 3.4.27 and s.28 of the Legal Profession Act 2004 (“the Act”).

20        There have been a number of decisions of County Court judges dealing with the issue of the fees uplift. Counsel for the Plaintiff urged me to take the approach by Her Honour Judge Cohen in Paterno v Hookey[4] over the earlier approach taken by Judge Dove[5] and Judge Shelton[6]. Counsel for the defendant submitted that the entitlement of the plaintiff to seek fees pursuant to a fee agreement is properly a matter for taxation and urged me not to give the direction sought by the plaintiff.

[4] [2007] VCC 707

[5]             Conduit v Lisa Lodge Pty Ltd [2006] VCC 1832

[6]             Pate v Buckley & Clarson Holdings Pty Ltd & Rochecouste [2006] VCC 1269

21 Section 3.4.2 of the Act defines “uplift fee” as follows:

Uplift fee means additional legal costs (excluding disbursements) payable under a costs agreement on the successful outcome of the matter to which the agreement relates.

22 Section 3.4.28(1) provides that “a conditional costs agreement may provide for the payment of an uplift fee”. Section 3.4.28(4)(b) of the Act provides that “the uplift fee must not exceed 25% of the legal costs (excluding disbursements) otherwise payable”. Where the conditional costs agreement relates to a litigious matter, section 3.4.28(4)(a) of the Act provides that no uplift fee may be included unless the law practice “has a reasonable belief that a successful outcome of this matter is reasonably likely”. The balance of the section provides that a conditional costs agreement which allows for an uplift fee must include the basis of calculation (as well as an explanation of the major variables that will affect this calculation) and an estimate (or range of estimates) of the uplift fee.

23        The Conditional Fee Agreement is dated 17 April 2007 and contains, relevantly, the following clauses:

1. OUR CHARGES this matter will be charged as outlined in the Disclosure Statement, namely County Court of Victoria scale of costs (“D”).

2. YOUR LIABILITIES outcome of this matter on County Court of Victoria scale of costs (“D”) plus on (sic) uplift fee of 25%. All necessary or proper disbursements will be incurred by this law practice on your behalf. Interim bill for legal costs payable will be given at suitable breaks in the matter and a final bill of costs will be given at the conclusion of the matter.

24 Clause 2 of the Disclosure Statement required by Section 3.4.9 of the Act is in the following terms:

2. Uplift Fee costs charged including paid disbursements. It was not a percentage of the amount you receive if you settle your case or are awarded a sum by the Court. An uplift is warranted because we will only charge legal costs if there is a successful outcome in this matter and we pay all necessary and proper disbursements.

25 I consider that the words of section 3.4.28(1) of the Act, in allowing an “uplift fee”, contemplate that this fee is part of legal costs generally. This is because the provision refers to the uplift being on the legal costs “otherwise payable” under the conditional costs agreement on the successful outcome of the matter to which those costs relate. The basis of such an agreement is that some or all of the fees will not be payable at all by the client if the client does not succeed. There will only be costs “otherwise payable” under the agreement if there is a successful outcome. In other words, the uplift is part of the fees otherwise payable.

26 I consider that if an uplift fee is charged pursuant to a valid costs agreement in accordance with the Act, it should not be excluded as a matter of course from an order for indemnity costs.

27        However, just because the legislation authorises agreements to include an uplift fee not exceeding 25%, it does not automatically follow that it may not be unreasonable to charge such a premium either at all or at 25% in the individual circumstances of each case or perhaps of each item. It will be a matter for the taxing Registrar to determine whether the plaintiff’s costs are unreasonably incurred or of an unreasonable amount.

28        Rule 63A.30.1 provides:

…on a taxation on an indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred.

29        Rule 63A.30.1 makes it clear that a plaintiff entitled to the benefit of an indemnity costs order is entitle to recoup all costs incurred by him or her in respect of the litigation, unless the Registrar finds that the costs are of an unreasonable amount or have been unreasonably incurred.

30        If a plaintiff is liable for legal fees at an uplifted amount pursuant to a conditional costs agreement, the uplifted fees constitute a cost incurred by that plaintiff. If a plaintiff is entitled to indemnity costs, he or she is entitled to recover those fees from the party against whom the indemnity costs order has been made, unless, upon taxation, the Registrar takes the view that the costs are of unreasonable amount or have been unreasonably incurred.

31        I therefore propose to give the direction sought by the plaintiff as part of Order 2.

Counsel’s fees

32        The plaintiff submitted that the test in this case, assuming indemnity costs are ordered, will be all costs unless of unreasonable amount or unreasonably incurred. It was submitted that it was appropriate at the time of briefing to retain two counsel, including senior counsel, that the case was fiercely contested on every issue, to judgment and beyond, and that in the circumstances the Court should certify for the amounts sought by the plaintiff.

33        The defendant submitted that neither the issues nor the volume of material warranted the retention of two counsel and that the appropriate rate for Senior Counsel was in the range of $5,000 and junior counsel at Scale. In addition, it was submitted that the usual basis of fee and refresher was appropriate, as the plaintiff had not suggested any reason why daily fees would be appropriate in this case.

34        I consider that in the circumstances of this case, where many issues remained live to judgment and beyond, that it was appropriate at the time of briefing for two counsel, including senior counsel, to be retained. I consider it appropriate to certify for Senior Counsel’s fee on brief in the amount of $5,500, which is in the range conceded to be appropriate by the defendant. Having regard to the seniority of junior counsel, I consider it appropriate to certify for his fee on brief in the amount of $2,750. However, as no basis was advanced by the plaintiff establishing the appropriateness of charging daily fees, I consider it appropriate to certify counsels’ fees on the usual basis of fee and refreshers .

35        The defendant made no submission concerning the amounts sought for conferences and preparation by plaintiff’s counsel, and I will certify according to the plaintiff’s submissions in this regard.

Reserved Costs: 21 January and 10 March 2009

36        The plaintiff says that the defendant should pay her costs of the adjournment on 21 January 2009 because the defendant was aware since 16 December 2008 of the allegation that tables were on the dance floor and its solicitor should have promptly obtained instructions in this regard so as to be ready for trial on 21 January 2009. In addition, the plaintiff says that if indemnity costs are ordered, such an order should include the plaintiff’s costs of the adjournment in any event, as all costs of the trial were rendered necessary by the defendant’s rejection of the offer of compromise. The defendant says that there is no reason why the court should depart from the usual principle provided by Rule 63A.17 that a party amending the pleading pays the other party’s costs of the adjournment of and occasioned by the amendment.

37        The plaintiff seeks her costs of 10 March 2009 on the basis that the difficulty was caused by Dr Lewi going to Tasmania without telling the plaintiff’s solicitors and despite previously apparently being available. In addition, the plaintiff said that her position was that Dr Lewi could be heard by video link but if not, the plaintiff was ready to conduct the case in accordance with Her Honour’s ruling. The plaintiff also says that an order for indemnity costs should carry these costs of the plaintiff because they flowed from the unreasonable rejection by the defendant of the Offer of Compromise. The defendant seeks its costs of the day on the basis that the trial could not proceed because of delay occasioned due to the need to secure the attendance of Dr Lewi.

38        I have already decided that it is appropriate in this case to order indemnity costs in favour of the plaintiff, for the reasons outlined above. I consider that this order should also carry the plaintiff’s costs of the adjournments on 21 January and 10 March 2009. If the defendant had accepted the plaintiff’s Offer of Compromise made on 17 December 2008, the matter would not have proceeded to trial at all, and the reserved costs would not have been incurred.

Court Books

39        I propose to make the usual order for Court Books, which is for the first copy to be paid on Scale with subsequent reasonable copies to be at commercial rates to be taxed in default of agreement by the Registrar.

Stay
40	I note that in the plaintiff’s answering submissions, it was submitted that the stay for payment on the judgment amount should now be 14 days instead of the 28 days suggested in earlier submissions, on the basis that some 14 days had already elapsed since the announcement of judgment. I received no further submission from the defendant objecting to this suggestion, and I will therefore make the order in the terms sought by the plaintiff.
41	I propose to make orders in the following terms:

1.  There is judgment for the plaintiff in the sum of $91,746 together with $3,050 damages in the nature of interest, with a stay of 14 days for payment of those sums.

2.   The defendant is to pay the plaintiff’s costs, including reserved costs, to be taxed on an indemnity basis. I direct that such costs include a 25% uplift above the legal costs normally payable on Scale D except to the extent that any charge seems to the Registrar to be of unreasonable amount or unreasonably incurred.

3.  Certify for 2 counsel at trial, with fee on brief for senior counsel at $5,500 on a fee and refresher basis, including 10 March 2009 before her Honour Judge Cohen; 6 hours of conferences at $550 per hour, and 2 hours of preparation of submissions as to damages following conclusion of the case at $550 per hour. Certify for junior counsel at $2,750 on a fee and refresher basis including 21 January and 10 March 2009; 6 hours of conferences at $275 per hour; 2 hours for preparation of damages submissions and 5 hours for preparation of costs submissions, all at $275 per hour. Counsel may need to calculate the number of refreshers to be referred to in the final orders.

4.  Certify for the reasonable costs of the filing, preparation and service of the plaintiff’s court books, 1 copy at scale and any subsequent copies at commercial rates to be determined by the Registrar.

5.   Liberty to apply as to any matter arising out of this order for costs.