Weingart v Leanne Cain & Associates (No 2)
[2018] VSC 245
•18 May 2018
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COSTS COURT
S CI 2017 00431
| DAN WEINGART | Applicant |
| v | |
| LEANNE CAIN & ASSOCIATES | Respondent |
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JUDGE: | Wood AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 February 2018 |
DATE OF JUDGMENT: | 18 May 2018 |
CASE MAY BE CITED AS: | Weingart v Leanne Cain & Associates (No 2) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 245 |
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COSTS - Entitlement to interest on refund of legal costs paid and reduced on review under Legal Profession Act 2004 – Consideration of sections 60 & 101 Supreme Court Act 1986 and rule 63.11 Supreme Court (General Civil Procedure) Rules 2015
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Ms S Cherry | Debra Paver |
| For the Respondent | Mr M La Pirow | Leanne Cain & Associates |
HIS HONOUR:
These proceedings arise from a review of the respondent’s legal costs conducted pursuant to s 3.4.38 of the Legal Profession Act 2004 (‘Act’). On 22 February 2018 an interim decision and reasons were published in this matter.[1] A number of issues were addressed in those reasons including: the scope of the costs agreement; the discount to be applied pursuant to s 3.4.17(4) of the Act for the respondent’s non-compliance with disclosure obligations under the Act; and a prima facie finding that the respondent is liable for the costs of this proceeding.
[1]Weingart v Leanne Cain & Associates (2018) VSC 242.
Upon publication of the interim decision and reasons, the parties were unable to agree on the final figure to be refunded by the respondent to the applicant, and the applicant requested an opportunity to advance further argument in relation to the question of costs of the proceeding based on offers made. There is a formal Offer of Compromise and two Calderbank offers by the applicant to be considered. Orders were made on 22 February 2018 for remaining issues, including the question of costs, to be determined on written submissions and/or affidavits and a timetable was set for the provision of same.
The applicant filed an affidavit of Debra Michelle Paver sworn 5 March 2018 and a written submission dated 5 March 2018. The respondent filed a written submission on 29 March 2018.
In relation to the sum to be refunded by the respondent, the analysis of the applicant was that the respondent sought overall costs of $139,471.90 for acting for the applicant and the reduced sum of $114,552.14 was ultimately allowed. This was calculated as a 17.87% reduction. Taking into account sums paid, at a minimum, a refund of $21,550.74 was said to be owing. A sum for interest was also contended for and this issue is addressed below commencing from paragraph 12.
Whether costs have or have not been reduced by 15% or more can be significant for the question of the costs of the proceeding (s 3.4.45(2)(a) of the Act). The percentage reduction is academic in this case as the determination has already been made that prima facie the respondent is liable for costs for reasons other than the precise percentage reduction.[2]
[2]Weingart v Leanne Cain & Associates (2018) VSC 242 at [35]–[36].
The respondent’s analysis in relation to the refund figure concluded that the sum is $21,439.63. The difference between the parties is therefore only $111.11. A further hearing would need to be convened to scrutinise the underlying figures and resolve the basis of the differential. To do so for the sum involved cannot be justified under the Civil Procedure Act 2010 and does not warrant such an exercise. I propose to accept the respondent’s refund figure of $21,439.63 on the basis that additional work, not charged for, was performed by the respondent for and on behalf of the applicant and had this work been charged for a figure well in excess of $111.11 would have been allowed on taxation.
Turning now to the costs of the proceedings, the applicant’s material contains details of three offers said to be relevant.
The first is a Calderbank offer made 1 December 2016 prior to the initiation of this proceeding on 9 February 2017. Indemnity costs are sought from 3 December 2016 on the basis that the offer was to accept a refund of $25,000. This is said to be a more favourable position for the respondent once interest (calculated at $2,302.68 to 5 March 2018) and costs are factored in. I largely accept the respondent’s submission in relation to this offer. In my view the respondent did not act unreasonably by not accepting the offer at the time. For example, there were no proceedings on foot (so no formal notice of objection by the applicant was in existence) and no mediation had been held. It would also not have been reasonable to expect the respondent to pay that sum to the applicant at that point when interest and costs were components of that sum.
The next offer was a formal Offer of Compromise dated 26 July 2017. The offer was that the applicant accept $10,000 as a refund plus costs on a standard basis. The offer was after the mediation, and after receipt of the formal notice of objection (which flagged the argument about the costs agreement not covering the family violence intervention order work and the non-compliance with disclosure obligations). The Offer of Compromise was a generous one having regard to the ultimate result. The respondent’s liability for costs of the proceeding was also both highly likely and apparent, at the time of the offer, given the respondent’s non-compliance with its disclosure obligations under the Act and the likely impact of s 3.4.46(2)(b) of the Act. I do not accept the respondent’s argument that it was not unreasonable to reject the offer because if an order were made in the terms offered that the applicant would not ordinarily be entitled to their costs.[3]
[3]Respondent’s Submission on Costs of Taxation filed 29 March 2018 [26]–[32].
The third offer was the second Calderbank offer made on 7 August 2017. The offer repeated the willingness of the applicant to accept a $10,000 refund with the question of the applicant’s costs to be determined by the Costs Court. From the exhibited correspondence that followed the offer, the respondent was only interested in accepting the offer if the costs of both parties were left for determination by the Costs Court. The applicant confirmed that was not the basis of the offer of 7 August 2017 so the matter was not resolved.
This second Calderbank offer becomes academic because in my view the formal Offer of Compromise was a generous one and it should have been accepted by the respondent. The applicant is entitled to standard costs to that point and indemnity costs from 11am on 28 July 2017, being the second business day after the offer was made.[4]
[4]Supreme Court (General Civil Procedure) Rules 2015 r 26.08(2)(b).
In relation to interest, the applicant’s submissions are founded on two premises. First that a refunded figure is a judgment debt. Secondly, that s 101(1) of the Supreme Court Act 1986 is confined to the party and party taxation of costs of a proceeding and the costs at hand are costs which are in fact the subject matter of a proceeding. The applicant relies on s 60 of the Supreme CourtAct1986 to support an argument for interest on the refund from the date of issue of these proceedings, namely the Summons for Taxation, seeking review under the Act. In other words, the application to seek a review of legal costs charged and paid is to be characterised as an application for an unspecified sum to be refunded, in effect one for the recovery of a debt. The debt being an over payment of the respondent’s entitlement to charge. Accordingly, the applicant seeks penalty interest on the necessary refund from the date that the proceedings were issued up until the date of that determination (ie, judgment for the debt) pursuant to s 60(1) of the Supreme Court Act 1986 and thereafter from the date of determination until payment pursuant to s 101(1) of that same Act.
The rate sought is 10% on the sum of $21,550.74 from 9 February 2017, being $2,302.68 to 5 March 2018 and thereafter at $5.90 per day.
Sections 58 and 60(1) of the Supreme Court Act 1986 provide as follows:
Interest to be allowed when debts or sums certain recovered
58(1)If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.
(2)Subsection (1) does not authorise the computation of interest on any bill of exchange or promissory note at a higher rate than the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 if there has been no defence pleaded.
(3)A debt or sum payable or a date or time is to be taken to be certain if it has become certain.
Interest in proceedings for debt or damages
60(1)The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.
The respondent’s submission in reply takes issue with these proceedings being classified as an action to recover a debt, or damages or one based in trover, trespass to goods or policy of insurance.[5] It is of note that ss 58, 59 and 60 are general provisions in relation to the ‘Court’, that is the Supreme Court, and make no specific mention of Costs Court proceedings.
[5]Respondent’s Submission on Costs of Taxation filed 29 March 2018 [9]–[10] picking up the language of ss 58, 59 and 60 of the Supreme Court Act 1986.
The respondent relies on s 101(1) of the Supreme Court Act 1986 which makes specific reference to the Costs Court. The underlying premise of the respondent’s position is that s 101(1) is not confined to party and party legal costs of a proceeding. The section provides as follows:
Every judgment debt carries interest at the rate for the time being fixed under s 2 of the Penalty Interest Rates Act 1983 from the time the judgment was given or, in the case of costs which are assessable by the Costs Court, from the date of the order of the Costs Court stating the result of the assessment or such other date as the Court orders (emphasis added).
In other words, an order for a refunded sum after an assessment by the Costs Court is characterised by this section to be something other than a ‘judgment debt’. The specific reference to interest is restricted to running from the date of quantification of the assessed sum by the Costs Court. That date would be from today on that analysis. There is nothing in that section which empowers the Costs Court to order interest from the date of initiation of the proceedings.
These review proceedings are brought under the Act. The Act confers upon the Costs Court the jurisdiction to review these costs,[6] and includes provisions in relation to the liability for costs of those Cost Court proceedings.[7] Costs of a proceeding in a Court is traditionally a matter for a Court, its establishing legislation and the exercise of a discretion. There are no provisions relating to interest on the refund of any overpayment after a successful review. The only provisions in the Act dealing with interest relate to interest payable to lawyers in relation to unpaid bills.[8]
[6]Section 3.4.38(5).
[7]Section 3.4.45.
[8]Sections 3.4.9(1)(f), (1A) and (1B) and 3.4.21.
The respondent has not argued that the Act ‘covers the field’ in relation to review of costs proceedings or that the absence of a provision dealing with interest on any refund entitlement of a client evinces an intention of the parliament that there be no such entitlement. The presence of s 101(1) in the Supreme Court Act 1986 clearly deals with interest on costs taxed by the Costs Court, albeit in a limited way.
It might seem an unusual result if a lawyer was entitled to interest on unpaid costs but a client is not entitled to interest on a sum demanded and paid and then assessed as an overpayment. This might be seen as inconsistent with the status of the Act as being in the nature of consumer protection legislation but the parliament clearly considered the question of interest on legal costs and chose to restrict provisions to interest on unpaid legal bills. There can be no dispute that the respondent has had the benefit of what amounts to an overpayment since March 2016, when the last of the rendered bills was paid.
Neither party relies on any authority in their written submissions.[9] There are some interstate authorities in Western Australia and Queensland dealing with the question of interest on overpayment of legal costs but they are not directly on point although the conclusions reached in those particular cases are that interest does not run on an overpayment from the date it as made. Interest was determined to run from quantification. They are referred at paragraphs 27 to 30 below.
[9]The applicant does refer to Hunt v RM Douglas (Roofing) Ltd [1991] 3 All ER 823 but only to distinguish it on the basis that it was confined to party and party legal costs of a proceeding.
Under the Supreme Court Act 1986 interest potentially runs from the initiation of a proceeding if any of ss 58 to 60 have application ‘ unless good cause is shown to the contrary’. However, that particular Act has numerous specific references to the Costs Court and its establishment, jurisdiction and powers. As outlined above, s 101(1) is one such provision with specific application to the Costs Court. It states that interest arises ‘….in the case of costs which are assessed by the Costs Court, from the date of the Order of the Costs Court stating the result of the assessment….’
Rule 63.11(1) Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) is relevant once the quantification of any refund occurs. The Rule states:
If costs are taxed otherwise than under a judgment or order for costs, an order of the Costs Court for payment of any amount found to be due may be enforced in the same manner as a judgment for the payment of money.
This makes it clear that a taxed sum is not a judgment debt, but can be enforced in the ‘same manner’ as one. This proceeding for a review under the Act cannot be classified as a proceeding to recover a debt so as to enliven ss 58 or 60 of the Supreme Court Act 1986.
To utilise the wording of r 63.11(1), in this proceeding the costs have been taxed ‘otherwise than under a judgment or order for costs’. Specifically they have been reviewed under the Act – not under a ‘judgment or order for costs’. The term ‘taxation’ is defined in r 63.1 to include ’review’ (the term utilised in the Act) and ‘assessment’ (the term utilised in s 101 of the Supreme Court Act 1986). The Act, at s 3.4.38, refers to these proceedings as a ‘review’ of costs. The totality of all these specific provisions (and absence of any provision in the Act in relation to interest) leads to the conclusion that in a Costs Court matter interest is only payable from quantification of the refund.
One further point can be made in relation to the notion that a review of costs under the Act is a proceeding for the recovery of a debt. This is a misnomer when the practical considerations arising from the scheme of the Act are considered. The review is of ‘the whole or any part of legal costs’.[10] ‘Legal costs’ are defined as amounts a person ‘has been, or may be charged by, or is or may be liable to pay.’[11] In practice legal costs are often unpaid and refund is not in issue. The Act provides that a review can be made even if the costs have been partly paid.[12] Reviews are often launched when the bills sought to be reviewed are gross sum bills. The ultimate result might be an increase in costs[13] rather than a decrease, once itemised bills are prepared and taxed.
[10]Section 3.4.38(1).
[11]The Act s 1.2.1.
[12]The Act s 3.4.38(3).
[13]The Act s3.4.43.
For the sake of completeness, and while considering different statutory regimes, Registrar Boyle in LM v K Lawyers (No 3) (‘LMK’),[14] was faced with a scenario where a refund was due after taxation under the Legal Practice Act 2003(WA). Section 240(3) of that Act was in similar terms to Victorian r 63.11(1), namely that a taxation result could be enforced ‘as if it were a judgment of the Supreme Court’, and s 32 of the Supreme Court Act (WA) was in similar terms to s 60(1) of the Victorian Supreme Court Act, namely that interest can be payable on the judgment for a sum of money - although the WA provision was from the date of cause of action rather than initiation of proceedings.
[14][2016] WASC 204.
The Registrar concluded that the quantification of the refund sum was not a judgment of the Court for an amount of money. Although it was not necessary to do so, the Registrar then went further to conclude that the taxing officer was not the Supreme Court. I have reached a similar conclusion here, that the ‘Costs Court’ is different to the Supreme Court for the purposes of considering ss 60(1) and 101(1) of the Supreme Court Act 1986.
In Golden WestResources Ltd v Maxim Litigation Consultants[15] La Miere J also considered s 240(3) of the Legal Practice Act 2003 (WA) and other provisions and reached the same conclusion as Registrar Boyle in LMK, namely that a certificate of taxation was not a judgment of the Supreme Court. His Honour also considered s 243 of that Act which specifically covered refund of overpayments and provided for enforcement under s 240.
[15][2016] WASC 384.
In Re Gould,[16] McPherson ACJ exercised a discretion not to award interest from the date of overpayment until quantification of same, in the ‘interests of justice’.[17] In that case there was legislation that enabled a taxing officer to allow interest on client money ‘in the hands of the solicitor improperly retained by him’.[18] His Honour reviewed older authorities and outlined some of the factors to be considered when exercising the discretion.[19]
[16][1992] 2 Qd.R.377.
[17]Ibid 383 line 34.
[18]Solicitors Act 1891 s 17.
[19]Re Gould [1992] 2 Qd.R.377, 382 commencing from line 21.
Even if any of ss 58 to 60 of the Supreme Court Act 1986 had application, there would be a discretion that could be exercised to not order interest if there was good cause. In this case I would have exercised such a discretion if it were available. As outlined in paragraph 6 above, considerable work was performed by the respondent without charge. This work was not part of the taxation but it is described in the document entitled Consolidated Bill. Based on the experience of the items that were charged and taxed, some of that work would have been allowed and recoverable by the respondent if charges were made. The applicant has been favoured by the approach taken by the respondent. Further, some of the delay between the hearing in February 2018 and publication of these reasons today has been the result of my absence on leave. The respondent ought not to be penalised by interest as a result of that delay. As a matter of justice between the parties the applicant ought not recover interest even if there was a prime facie entitlement to it.
The respondent is to pay by way of refund the sum of $21,439.63 to the applicant together with costs of the proceeding on a standard basis up until 11am on 28 July 2017 and thereafter on an indemnity basis, such costs to be taxed in default of agreement.
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