Village Life Ltd v Hanne

[2008] NSWDC 291

CITATION:	Village Life Ltd v Hanne [2008] NSWDC 291
HEARING DATE(S):	2 December 2008
JUDGMENT DATE:	3 December 2008
JURISDICTION:	Civil
JUDGMENT OF:	Murrell SC DCJ
CATCHWORDS:	PROCEDURE- Costs - Appeals from costs assessor - Role of costs assessor - "Fair and reasonable amount of costs for the work concerned"
LEGISLATION CITED:	Civil Procedure Act 2005 Legal Profession Act 2004 Uniform Civil Procedure Rules 2005
CASES CITED:	Ryan v Hansen [2000] NSWSC 354 Skalkos v T&S Recoveries Pty Ltd [2004] NSWCA 281
PARTIES:	Village Life Ltd (First plaintiff) Peter Hanne (First defendant) Richard Vernon (Second defendant)
FILE NUMBER(S):	4529/08
COUNSEL:	L Menzies (for the plaintiff) Castle (for the defendants)
SOLICITORS:	C Brierley (for the plaintiff)

JUDGMENT
Background

1. Peter Hanne & Associates Pty Ltd and Richard Vernon brought Supreme Court proceedings against Village Life Ltd. Hanne and Vernon decided to discontinue the proceedings as it was more appropriate to institute proceedings in the Federal Court. The Supreme Court granted leave to discontinue the proceedings.

2. There was a dispute as to the costs of the Supreme Court proceedings. Hanne and Vernon argued that, as the proposed Federal Court proceedings concerned "materially identical factual matters", the costs of the Supreme Court proceedings should be costs in the cause of the proposed Federal Court proceedings. The Court disagreed. On 12 October 2007, the Court ordered that Hanne/Vernon pay Village Life's costs of the proceedings. Subsequently, Hanne and Vernon commenced Federal Court proceedings.

3. Village Life applied for an assessment of the Supreme Court costs. The costs assessor disallowed much of the claim for disbursements ($35,342 disallowed, $19,780 allowed) and professional costs ($7,723 disallowed, $9,736 allowed) on the basis that the disallowed amounts pertained to "ongoing benefit work", i.e. work that would benefit the Federal Court proceedings. He allowed the fair and reasonable costs of the Supreme Court proceeding "to the extent that such costs have been thrown away by commencement of each proceedings in the Supreme Court".

The Issue

4. Pursuant to s 384 (1) of the Legal Profession Act 2004, Village Life appealed, claiming that the costs assessor erred in law by disallowing much of its ordinary costs and limiting costs to "costs thrown away".

5. The issue is the extent of a costs assessor's discretion under s 364 of the Legal Profession Act.

The Legislative Scheme

6. Section 98 of the Civil Procedure Act 2005 gives the courts a wide discretionary power in relation to costs. It provides:

"98 (1) Subject to the rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." (emphasis added)

7. A person who is liable to pay or is entitled to receive costs as a result of an order for the payment of an unspecified amount of costs made by a court or tribunal may apply for an assessment of the whole or any part of those costs: Section 353 Legal Profession Act.

8. Subject to exceptions that are irrelevant for present purposes, costs will follow the event and will be assessed on the ordinary basis unless it appears to the court that some other order should be made: Part 42 rules 42.1 and 42.2 Uniform Civil Procedure Rules2005. If a plaintiff discontinues proceedings then, unless the court otherwise orders, the plaintiff must pay the defendant's costs: Part 42 rule 42.19(2).

9. Section 3 of the Civil Procedure Act provides that a reference to the assessment of costs on the "ordinary basis" means the basis set out in section 364(1) and (2) of the Legal Profession Act. Section 364 provides:

"364(1) In conducting an assessment of legal costs payable as a result of an order made by a court or tribunal, a costs assessor must consider:
(a) whether or not it was reasonable to carry out the work to which the costs relate, and
(b) whether or not the work was carried out in a reasonable manner, and
(c) what is a fair and reasonable amount of costs for the work concerned.

(2) In considering what is a fair and reasonable amount of legal costs, a costs assessor may have regard to any or all of the following matters:
(a) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter,
(b) the complexity, novelty or difficulty of the matter,
(c) the quality of the work done and whether the level of expertise was appropriate to the nature of the work done,
(d) the place where and circumstances in which the legal services were provided,
(e) the time within which the work was required to be done,
(f) the outcome of the matter." (emphasis added)

10. The costs assessor may also consider proportionality, i.e. whether there is a reasonable relationship between the costs and the value and importance of the subject matter in issue: Skalkos v T&S Recoveries Pty Ltd [2004] NSWCA 281.

Decision

11. Hanne contended that s 364 (2) does not exhaust the matters that a costs assessor may consider. He argued that, in considering "the outcome of the matter", a costs assessor may consider events that occurred after work was done. In this case, it was permissible for the costs assessor to consider the fact that "the proceedings were not disposed of by their discontinuance" but "were merely recommenced in another forum" so that "much of the work done in Supreme Court proceedings was not wasted" by the discontinuance.

12. The costs assessor lacked the power to limit costs to "costs thrown away".

13. First, there can be no doubt that, pursuant to the broad discretion conferred by s 98 of the Civil Procedure Act, the Court was entitled to reject Hannes claim that the order for Supreme Court costs should reflect his intention to commence virtually identical proceedings in the Federal Court. That decision was an exercise of the Court’s power to determine "to what extent costs are to be paid": section 98 (1)(b). A costs assessor is not an officer of the Supreme Court: section 390 (4) Legal Profession Act;Ryan v Hansen [2000] NSWSC 354. Consequently, a costs assessor cannot exercise the discretionary power in s 98. He or she cannot, in effect, review a decision that a court is empowered to make under s 98. The assessor's role is to assess the costs payable "as a result of" a court order. The statutory scheme in relation to the ordering and assessment of costs is that the court determines the basis upon which costs are to be paid and the assessor quantifies the payment. The discretion conferred by s 364(2) must be read down accordingly.

14. Second, pursuant to s 364(1)(c), the assessor is required to determine "what is a fair and reasonable amount of costs for the work concerned". The matters set out in s 364(2) may be taken into account insofar as they are relevant to a fair and reasonable amount of costs for the work concerned. Section 364(2) does not entitle an assessor to consider those matters insofar as they may be relevant to a fair and reasonable amount of costs in a more general sense.

15. Third, when s 364(2)(f) refers to "the outcome of the matter" it refers to the outcome of the proceedings (or, perhaps, the part of the proceedings) the subject of the assessment (or, perhaps, the relevant part of the assessment). The assessor is not thereby empowered to consider the relationship between the parties generally, let alone the possible outcome of other proceedings between the parties.

16. This decision is remitted to the costs assessor and I order that the costs assessor re-determine the application.