Wende v Horwath (NSW) Pty Limited - [2008] NSWSC 1241

No judgment structure available for this case.

CITATION: Wende v Horwath (NSW) Pty Limited [2008] NSWSC 1241

HEARING DATE(S): 12 November 2008

JUDGMENT DATE :
28 November 2008

JUDGMENT OF: James J

DECISION: 1. Summons dismissed.
2. Plaintiffs to pay defendant's costs of the summons.

CATCHWORDS: Legal practitioners — assessment of costs — Legal Profession Act 2004 s.384 and s.385 — appeal from assessment panel whether global approach to assessment by panel — whether sufficient reasons given by panel

LEGISLATION CITED: Legal Profession Act 2004

PARTIES: Herbert Wende (First Plaintiff)
Margaret Wende (Second Plaintiff)
Mark Lloyd (Third Plaintiff)
Horwath (NSW) Pty Limited (Defendant)

FILE NUMBER(S): SC 10517/08

COUNSEL: JL Sharpe (Plaintiffs)
SF Hughes (Defendant)

SOLICITORS: Leitch Hasson Dent Solicitors (Plaintiffs)
Heidtman & Co (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JAMES J

FRIDAY 28 NOVEMBER 2008

10517/08 HERBERT WENDE & 2 ORS v HORWATH (NSW) PTY LIMITED
JUDGMENT

1 HIS HONOUR: This is an appeal and an application for leave to appeal pursuant to ss 384 and 385 of the Legal Profession Act 2004 (“the Act”) against a decision of a panel of costs assessors who made a determination of the costs payable by the plaintiffs to the defendant under costs orders made by courts. The plaintiffs in the proceedings in this court are Herbert Wende, Margaret Wende and Mark Lloyd. In this judgment I propose to refer to the plaintiffs as “the Wendes”. In some of the documents which were admitted into evidence these parties are referred to as “the Berghofen parties”. The defendant in the proceedings in this Court is Horwath (NSW) Pty Limited, which I will refer to as “Horwath”.

2 For the purposes of the present appeal and application for leave to appeal a volume of nearly 200 pages described as an “evidence book” was admitted into evidence. The evidence book contained copies of some of the documents brought into existence in the course of the protracted disputes between the Wendes and Horwath. It is unnecessary, in order to decide the present proceedings, for me to go into all the details of these disputes but some account is required by way of a background.

Background

3 Horwath was retained by either the Wendes or solicitors acting for them to provide expert reports in litigation in the District Court to which the Wendes were parties. The fees charged by Horwath for providing the reports were not paid.

4 Horwath brought proceedings in the Local Court against the Wendes to recover their outstanding fees. In these proceedings the Wendes filed a defence and a cross-claim against Horwath.

5 In the proceedings in the Local Court Wendes brought at least two applications. These applications were, or included, an application that Horwath provide further and better particulars of a pleading it had filed in the Local Court proceedings and an application that the Wendes be granted leave to bring a cross-claim against someone not already a party to the proceedings (apparently a solicitor who had acted for the Wendes in the District Court proceedings or part of those proceedings). On 3 November 2005 a Local Court Magistrate dismissed the applications which had been brought by the Wendes.

6 The Wendes brought proceedings by way of summons in the Supreme Court (proceedings no 15877/05), challenging the Local Court’s decision of 3 November 2005. These proceedings were heard by Associate Justice Malpass of this Court. On 21 April 2006 his Honour delivered a judgment in which he held that leave was required to appeal against the decision of the Local Court, that the proceedings brought by the Wendes in the Supreme Court were without merit and that leave to appeal should be refused. His Honour dismissed the Wendes’ summons and made an order that the Wendes pay Horwath’s costs of the summons.

7 The Wendes filed a notice of motion in proceedings no 15877/05, seeking various orders with respect to Associate Justice Malpass’ decision of 21 April 2006. On 2 June 2006 the notice of motion came before Grove J, who ordered that the notice of motion be dismissed, apparently on the ground that no appeal lay from a decision of an Associate Justice to a single judge of the court, and ordered that the Wendes pay Horwath’s costs of the motion.

8 An application for leave to appeal to the Court of Appeal against Associate Justice Malpass’ decision was brought by the Wendes (Court of Appeal proceedings no 40432/06). On 12 December 2006 a two-judge bench of the Court of Appeal (Handley JA and Tobias JA) refused leave to appeal and made an order that the summons for leave to appeal be dismissed, with costs.

9 Accordingly, three court orders were made against the Wendes that they pay Horwath’s costs, namely:-

1. the order of Associate Justice Malpass of 21 April 2006 that the Wendes pay Horwath’s costs of the summons in proceedings no 15877/05.

2. the order of Grove J of 2 June 2006 that the Wendes pay Horwath’s costs of the motion in proceedings no 15877/05.

3. the order of the Court of Appeal of 12 December 2006 that the Wendes pay Horwath’s costs of the summons in proceedings no 40432/06 in the Court of Appeal.

Assessment of costs by the costs assessor

10 On 25 January 2007 Horwath’s solicitors Messrs Heidtman & Co served on the Wendes an application for an assessment of the party/party costs payable under the three costs order and an itemised bill of costs, in which the items of work claimed to have been done were progressively numbered and the charge made for each item was shown. The bill of costs was divided into two parts, the first part dealing with the costs of the Supreme Court proceedings no 15877/05 and the second part dealing with the costs of the Court of Appeal proceedings no 40432/06.

11 In the bill of costs the persons in Heidtman & Co who had done each item of work were identified as being Mr Alan McMurran (“AM”), a partner in the firm; Mr Gavin Stuart (“GSS”), another partner in the firm; Ms Cynthia Chan (“CKC”), a solicitor/associate; or Ms Vanessa Marquez (“VJM”), a legal clerk/graduate-at-law. These persons charged for work done by them at different hourly rates, according to their level of seniority. The total amount of costs claimed in the bill of costs was $26,912.05.

12 On 26 February 2007 the Wendes served a document in which they stated their objections to the bill of costs. A number of general objections were taken and specific objections were taken to the great majority of the individual items in the bill of costs. On 2 April 2007 Horwath’s solicitors served a response to Wendes’ objections to the bill of costs. On the same day the application for an assessment of the costs was filed by Horwath’s solicitors.

13 Mr Stephen Lancken was appointed as the assessor to determine the application for an assessment of the costs. Mr Lancken requested further information and documents for the purpose of conducting the determination and further information and documents was supplied to him. Letters and written submissions were also sent by the Wendes to Mr Lancken.

14 Mr Lancken made a determination of the application for an assessment of costs and issued a certificate dated 3 July 2007, in which he stated that the amount of costs payable by the Wendes to Horwath was $22,902.35. As required by s 370 of the Act, Mr Lancken also issued a statement of his reasons for his determination. In his statement of his reasons Mr Lancken briefly summarised the background to the making of the cost orders and the cost orders themselves. The statement of his reasons continued:-

“I have read the application and the Objections of the Respondent dated 26 February 2007.

I have considered all of the matters raised in those documents and the work that was reasonably performed in this matter. I have considered each of the items in the bill and the objections to them.

Most of the Objections are not helpful, being very general. In many instances the Objections simply says that the amount is “solicitor client” and should not be allowed without any further information or explanation. This is not the test in an assessment where it is my role to determine what is “fair and reasonable”.

I have dealt with the general objections as follows.

The hourly rates are fair and reasonable.

6 minute units are an appropriate way of assessing the work done in this matter.

The fact that documents may not have been looked at by a Judge or Associate Justice does not mean that the Costs Applicant did not have to read them and deal with them.

There are some attendances particularly in attending court and instructing counsel where it is not reasonable for there to be two solicitors in attendance and I have reduced the bill accordingly (for instance items 79 and 80 and 60 and 61). Otherwise the method of conducting the work was reasonable.

There are a number of adjustments that I have made to the bill. I have taken the view that the best method of assessment is for me, having considered all of the items in the bill to assess what is a fair amount of time to be spent on the matter.

Generally the times noted in the bill are in my view fair and reasonable for the work performed.

I have allowed $11,000.00 (not including GST) for Professional costs which I assess as a fair and reasonable amount for work reasonably performed in this matter. That is something less than 25 hours work at various rates.

The Costs Applicant is no doubt registered for GST and therefore entitled to a tax input for GST on its solicitor’s bills and the bill has therefore been reduced for the GST claimed.

As to disbursements I have made the following reductions or adjustments.

· GST on counsels fees $1,062.50 otherwise counsel’s fees are fair and reasonable.

· Other expenses $30.00 there is no indication what these other expenses are.

Counsel’s fees are fair and reasonable for this matter and having seen invoices I am satisfied counsel was used appropriately.

The amount allowed in the certificate is therefore

Total $22,902.35

I am not able to allow a stay on a cost order properly made.

The Applicant has been largely successful in the assessment and I therefore allow it costs of the assessment.

I have also taken into account the following matters in coming to my assessment of the costs and disbursements allowed (Section 364 Legal Profession Act 2004)

The amount that I have allowed for costs and disbursements is fair and reasonable for the work reasonably carried out in this matter.”

Assessment of costs by the panel

15 On 7 August 2007 the Wendes applied to have the determination of the costs assessor reviewed by a review panel of costs assessors. The determination of the costs assessor was referred to a panel for review. On 26 November 2007 the review panel issued a certificate of its determination of costs, certifying that the amount of costs determined by the panel was $22,414.50.

16 As required by s 380 of the Act, the panel issued a statement of its reasons for its determination. This statement of reasons is 13 pages long.

17 In par 1 of its reasons the panel listed the numerous documents it had received for the purpose of making its determination. In par 2 of its reasons the panel provided definitions of the various terms it would use in its reasons. One term which was defined was “the Berghofen parties” meaning Herbert Wende, Margaret Wende and Mark Lloyd. There is no paragraph numbered 3 in the reasons.

18 In par 4 of its reasons the panel considered the nature of the review it had to conduct. This paragraph is in the following terms:-

“4. NATURE OF REVIEW

4.1 A review panel has “all the functions of a costs assessor…” and is to “determine the application … in the manner that a costs assessor would be required to determine an application for costs assessment” (s375(2) LPA 2004). A review panel must therefore act in the same manner as a costs assessor.

4.2 The panel is “not to receive submissions from the parties” or “to receive any fresh evidence or evidence in addition to or in substitution for the evidence received by the costs assessor” unless “the panel determines otherwise” (s375(3)LPA 2004).

4.3 In Kells v Mulligan & Or [2002] NSWSC 76, particularly paragraphs 24 to 27, Master Malpass, as he then was, indicated that the function of the panel was to conduct a review as opposed to entertaining an appeal. The Master assessed that a panel finding an assessor had “fairly and competently conducted his assessment” was a misconception of the function of a panel.

4.4 The Berghofen parties provided grounds for review. The purpose of those grounds is to indicate to the panel those items in respect of which the Berghofen parties seek reassessment.

4.5 The panel’s function is to conduct a reassessment of those items identified in the review application as being affected by the grounds.

4.6 It is not the function of the panel to make comments on the conduct of an assessor of the original assessment, except to the extent that it is appropriate to do so in the course of determining the review application.

4.7 The grounds contain a number of matters directed to all the fee items claimed in the bill. Most of the grounds affect all the fee items. The barrister’s fees are also the subject of the grounds.

4.8 It follows that the Berghofen parties have put all the costs claimed in issue by indicating grounds affecting all the fee items, and all but $100.00 of the expense items (the courier, photocopying and filing fees).

4.9 The panel has therefore reassessed the whole of the bill, on the basis of all the material that was before the assessor.

4.10 The panel has not received submissions from the parties, or received any fresh evidence or evidence in addition to or in substitution for the evidence received by the original assessor. The panel has conducted its reassessment on the basis only of the material before the assessor with the exception only of some material on the grounds (see for example 8.3).”

19 Paragraph 5 of the panel’s reasons was in the following terms:

“5. GROUNDS OF REVIEW: GENERAL MATTERS

5.1 The panel will set out some observations about the proceedings. The Supreme Court proceedings were commenced by a summons. The summons filed by the Berghofen parties ran to eight pages, five and a half of them very full pages typed in very modest sized print. Five orders were sought and the “appeal grounds’ comprised five of the five and a half pages referred to above.

5.2 The judgment of Associate Justice Malpass dismissing that summons ran to 35 numbered paragraphs over eight pages, determining the Supreme Court proceedings and resulting in the Supreme Court proceedings costs order.

5.3 The Supreme Court notice of motion proceedings were ultimately commenced with a notice of motion seeking five orders, including an order that the summons be amended, and that the grounds relied on exceed two relatively close typed pages. The affidavit of Mark Lloyd in support of that summons comprised three pages.

5.4 In relation to the appeal proceedings, the initial summons was dismissed, and then on 14 December 2005 leave was granted to the Berghofen parties to file an appeal summons, and an extension of time for doing so was granted. The summary of argument submitted in respect of the appeal runs to nine pages. The amended summons sought 12 orders, and on pages 2 to 12 inclusive (of a 15 page document) set out grounds of appeal relating to difficulties in running the case without joining the solicitor Mr Lyons, referring to matters in a previous assessment and review, a District Court case, whether Horwath should have been allowed to amend a defence, whether Horwath had and should provide further particulars of its defence and cross-claim, matters related to expert evidence and the Uniform Civil Procedure Rules and denial of natural justice, an alleged contempt of Court and false statements, the cause of delays, and procedures adopted by Magistrate Lulham said to have been unfair to the Berghofen parties.

5.5 The draft notice of appeal was of two pages.

5.6 The various proceedings related to interlocutory orders arising from the Local Court proceedings, or refusal to make interlocutory orders, or matters of procedure and fairness in the course of the interlocutory proceedings.

5.7 The panel has set out a very brief overview of the proceedings and the documents indicating the nature of the very proceedings, because it is apparent from an examination of those documents that the Berghofen parties raised a great number of issues, of some complexity. Having done so, the Berghofen parties created circumstances in which it was reasonable to engage a senior solicitor and a barrister to deal with the complexity of the proceedings.

5.8 Having looked through all the material, the panel cannot accept a number of submissions made by the Berghofen parties, for example:

5.8.1 That the involvement of Mr Hughes “was not necessary” (which, as the panel have indicated, is not the test in any event). It was reasonable to engage Mr Hughes to do the work that he did;

5.8.2 The costs for the work done ‘should amount to $1,480.00 for the Supreme Court action and $1,035.00 for the Court of Appeal action”. The fair and reasonable amount of costs assessed on a global basis should be $10,000.00 to $12,000.00 in the panel’s opinion; and

5.8.3 Ms Cynthia Chan “would have been quite capable of dealing with all matters”. It was reasonable to engage senior solicitors in the way that Horwath did.

5.9 It is with this background to the proceedings that the panel now turns to specific matters raised in the review application.”

20 Paragraph 6 of the panel’s reasons was in the following terms:

“6 SOLICITOR/CLIENT ATTENDANCES

6.1 The panel has looked at whether it was reasonable to carry out the work, whether the work was carried out in a reasonable manner, and the fairness and reasonableness of the amount of legal costs in relation to the work done (section 363(1) LPA 2004).

6.2 As the panel is conducting a reassessment, it is not necessary for the panel to comment on the approach of the assessor, but it seems to the panel that the assessor adopted the correct approach. In the reasons the assessor wrote that whether a matter was “solicitor client” was “not the test in an assessment where it is my role to determine what is ‘fair and reasonable”. The panel affirms that approach of the assessor.

6.3 The panel has taken the objection “solicitor/client” to mean that it was not reasonable to carry out the work in the context of the proceedings. Use of the words “solicitor client” and (elsewhere in the objections) reference to certain work as not being “essential” or “necessary” is unhelpful.

6.4 The test of whether it was reasonable to do work is a “real-world” test. Looking at the nature of the proceedings commenced by the Berghofen parties, the issue is what work was it reasonable for Horwaths to instruct its solicitors to do, and for the solicitors and barristers to do in respect of those proceedings. Assessors and review panellists are experienced solicitors. They can and should call on their experience to determine what work it was reasonable to do, and in what manner work ought to be done, in order to determine the fair and reasonable amount of costs.”

21 In paragraph 7 of its reasons the panel held that it would not take into account a determination of costs made by a costs assessor in another matter between the same parties.

22 Paragraph 8 of the panel’s reasons was in the following terms:-

8. HOURLY RATES AND SIX MINUTE UNITS

8.1 In the review application, the Berghofen parties submit that “a charge of a partner is around $250.00 per hour and for an employed solicitor less. A good estimate would be a charge for a costs assessor of $192.50 per hour”.

8.2 There were submissions in the objections as to the total amount that was fair and reasonable for costs. The only specific submission regarding rates made in the objections was that when “AM” or “GSS” performed work, the rate of “CKC” (Cynthia Chan) should be substituted. Accordingly in the original objections the submission was actually that the rates of Ms Chan, which were $250.00 per hour from 1 July 2005 to 30 June 2006, and $300.00 per hour from 1 July 2006 to the last item of work in the bill (9 December 2006) were fair and reasonable.

8.3 That is very different to the submission made in the review application, but to the extent that the submission in the review application that costs should be at the rate of $192.50 or $250.00 per hour comprises new evidence or submissions, the panel will take those submissions into account, even though they were not specifically put before the assessor.

8.4 The panel rejects those submissions. The panel accepts in all the circumstances the rates referred to at J on the page numbered 6 in the bill for the work of the various solicitors.

8.5 The panel accepts those charges in minimum units of six minutes.

8.6 Where a number of items were done one after the other, the use of six minute units can artificially increase the amount charged through the adoption of particular parts of the work as an “item”. Had that occurred, the panel would have reduced the costs claimed.”

23 In par 9 of its reasons the panel considered the “onus of proof”. Paragraph 9.1 was in the following terms:

“9.1 The panel accepts that where the Berghofen parties have raised objections, the onus is on Horwath to satisfy the assessor, and now to satisfy the panel on the basis of the material before the assessor, that it was reasonable to carry out the work, the work was carried out in a reasonable manner, and therefore as to the fair and reasonable amount of costs for the work concerned (section 364(1) LPA 2004).”

24 In the remainder of paragraph 9 the panel rejected a submission which had been made by the Wendes that, if Horwath had not responded “to every detail of the item by item objections submitted by the Berghofen parties”, Horwath should be taken to have conceded the items.

25 Paragraphs 10 and 11 of the panel’s reasons were in the following terms:-

“10. GLOBAL APPROACH

10.1 In the review application the Berghofen parties submit that the assessor’s approach of deciding “what is a fair amount of time to be spent on the matter” is not a permissible approach.

10.2 The panel is of the view that it is permissible for an assessor in an appropriate matter to assess costs globally, as the assessor did in this matter.

10.3 In the objections the Berghofen parties seem to have invited the assessor to assess costs globally. The Berghofen parties indicated in the objections "I estimate that total allowable fees for this work should not exceed $1,480.00" in relation to the first part of the bill, and the figure of $1,035.00 in relation to the second part of the bill. That is repeated in the part of the objections headed "Submissions of Costs Respondent to Costs Assessment No. 587 of 2007", at paragraph 8 where an estimate is made by the Berghofen parties of the "fair and reasonable costs for the work done" at $1.480.00 (for the Supreme Court proceedings and the Supreme Court notice of motion proceedings), and $1,035.00 (for the Court of Appeal proceedings). The Berghofen parties stated in that document "the costs respondents stand by these figures".

10.4 The Berghofen parties continue with a global approach in the review application at the paragraph numbered 7 on page 4 where they submit "the costs should have been assessed to be $2,515.00 as specified in that notice of objections".

10.5 The assessor, adopting a global approach, came to a figure of $11,000.00 for fees. The panel, looking at fees on an "item-by-item" basis has come to a figure of $10,627.00 exclusive of GST for fees. The panel finds no fault with the assessor's approach, but more importantly the panel has arrived at the figure substituted for the assessor's determination by a process of assessment of individual items. The two figures are very close.

10.6 A further submission is made as to what 25 hours of work would be at various rates. It is not necessary for the panel to enter into that matter, given that the panel has accepted the rates referred to in the bill as fair and reasonable in all the circumstances, and assessed costs on an "item-by-item" basis (although not required to do so).

11. ATTENDANCE OF TWO SOLICITORS

11.1 In the review application the Berghofen parties submit that the assessor "specified the instances where he reduced the bill because two solicitors were in attendance when only one was required, but there were other instances where this occurred, namely items 17 and 18, and 40 and 41, and the bill should have been reduced accordingly".

11.2 The assessor's reasons clearly indicate that examples given (79 and 80, 60 and 61) were not the only reductions made by the assessor. The assessor's reasons relevantly read "There are some attendances particularly in attending Court and instructing counsel where it is not reasonable for there to be two solicitors in attendance and I have reduced the bill accordingly (for instance items 79 and 80, and 60 and 61)".

11.3 The panel does not understand why the Berghofen parties believe this means there were no other instances where the assessor thought costs ought to be reduced, but as the panel has conducted its own item-by-item assessment, what appears to have been a misreading of the assessor's reasons by the Berghofen parties is of no relevance.

11.4 The panel has disallowed the charges at items 18, 40, 61 and 79 in the first part of the bill relating to the Supreme Court proceedings and the Supreme Court notice of motion proceedings, and item 12 in the later part of the bill dealing with the Court of Appeal proceedings.

26 In paragraph 12 of its reasons the panel found that the barrister’s fees charged had been reasonably incurred and were fair and reasonable in amount.

27 Paragraphs 13 and 14 of the panel’s reasons were:

“DETAILS OF PANEL’S ASSESSMENT

The panel has disallowed or reduced the following items, adopting the last part of the numbering below from the bill numbering:

13.1 Supreme Court proceedings and Supreme Court notice of motion proceedings:

13.1.13 Not reasonably incurred as also conferences with counsel at items 15 and 16, disallow this item

13.1.18 Allow only senior solicitor, disallow this item.

13.1.22 Allow $25.00 for this item as fair and reasonable. No great measure of skill was called for.

13.1.31 There was no sufficient indication of what was done. Disallow this item.

13.1.37 Disallow this item. The connection to the Supreme Court proceedings has not been shown by Horwath.

13.1.40 Allow only senior solicitor, disallow this item.

13.1.53 Allow $25.00 for this item as fair and reasonable. No great measure of skill was called for.

13161 Allow only senior solicitor, disallow this item.

13.2 Court of Appeal proceedings:

13.2.12 Allow only senior solicitor, disallow this item.

1 3.2.31 Allow at $30.00 per hour only given the nature of the work, allow $30.00 for this item.

13.2.35 No indication of any complexity with this item. Allow $30.00 only for email enclosing copy of affidavit.

13.3 General: GST not allowed for reasons indicated by assessor.

13.4 Expense items Supreme Court proceedings and Supreme Court notice of motion proceedings.

13.5 Expense items Court of Appeal proceedings.

13.5.3 Disallow this item as no indication what "other expenses" is for.

14. SUMMARY

14.1 The amounts the panel has allowed are as follows:

14.1.1 Fees Supreme Court proceedings and Supreme Court notice of motion proceedings (items 1 to 84 in first part of bill) $7,170.00

14.1.2 Fees Court of Appeal proceedings (items 1 to 45 second part of bill) $3,457.00

14.1.3 Total fees $10.627.00

14.1.4 GST Nil

14.1.5 Fees inc. GST $10,627.00

14.1.6 Expenses Supreme Court and Supreme Court notice of motion proceedings $6,468.50

14.1.7 Expenses Court of Appeal proceedings $5,319.00

14.1.8 Total expenses allowed 11,787.50

$11,787.50

14.1.11 Total costs allowed $22,414.50”

28 In paragraphs 15 and 16 of its reasons the panel held that the Wendes should pay the costs of the determination before the costs assessor and also the costs of the determination by the review panel.

Provisions of the Legal Profession Act

29 As I stated at the commencement of this judgment, the present proceedings are an appeal pursuant to s 384 of the Act and an application for leave to appeal pursuant to s 385 of the Act. Sections 384 and 385 are both in Subdivision 6 of Div 11 of Part 3.2 of the Act. Part 3.2 of the Act is headed “costs disclosure and assessment”.

30 Division 11 of Part 3.2 is headed “Costs assessment”. Section 353 in Subdivision 1 of Division 11 provides that an application may be made for the assessment of party and party costs. Section 357 in Subdivision 2 of Division 11 provides for the referral of an application for a costs assessment to a costs assessor.

31 Subdivision 3 of Division 11 is headed “Party/party costs”. Section 364(1) in Subdivision 3 provides:-

32 Subdivision 4 of Division 11 is headed “Determinations” and deals with determinations of costs assessments by costs assessors. Section 367A in Subdivision 4 provides:-

“A costs assessor is to determine an application for an assessment of costs payable as a result of an order made by a court or tribunal by making a determination of the fair and reasonable amount of those costs.”

33 Section 368 in Subdivision 4 requires a costs assessor to issue a certificate setting out his or her determination and s 370 in Subdivision 4 requires a certificate setting out a determination to be accompanied by a statement of the reasons for the costs assessor’s determination.

34 Subdivision 5 of Division 11 is headed “Review of determination by panel”. Section 373 in Subdivision 5 provides that a party to a costs assessment who is dissatisfied with a determination of a costs assessor may apply for a review of the determination. Section 374 in Subdivision 5 provides that the application is to be referred to a panel constituted by two costs assessors.

35 Section 375 in Subdivision 5 provides in part as follows:-

(2) For the purposes of subsection (1), the panel has, in relation to the application for assessment, all the functions of a costs assessor under this Part and is to determine the application, subject to this Subdivision and the regulations, in the manner that a costs assessor would be required to determine an application for costs assessment.

36 Section 378 in Subdivision 5 requires a panel to issue a certificate setting out its determination and s 380 in Subdivision 5 requires the certificate to be accompanied by a statement of the reasons for the panel’s determination.

37 Subdivision 6 in Division 11 is headed “Appeals”. Sections 384 and 385 in Subdivision 6 were at the relevant times in the following terms:-

“384 Appeal against decision of costs assessor as to matter of law

(1) A party to an application for a costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the Supreme Court, appeal to the Court against the decision.

385 Appeal against decision of costs assessor by leave

(2) A party to an application for a costs assessment relating to costs payable as a result of an order made by a court or a tribunal may, in accordance with the rules of the court or tribunal, seek leave of the court or tribunal to appeal to the court or tribunal against the determination of the application made by a costs assessor.

(3) The Supreme Court or court or tribunal may, in accordance with its rules, grant leave to appeal and may hear and determine the appeal.

(4) An appeal is to be by way of a new hearing and fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.

(5) After deciding the questions the subject of the appeal, the Supreme Court or court or tribunal may, unless it affirms the costs assessor’s decision, make such determination in relation to the application as, in its opinion, should have been made by the costs assessor.”

38 It will be noted that ss 384 and 385 in their terms refer to appeals against decisions of costs assessors. However, s 382 in Subdivision 5 provides in subsection (1):-

“(1) Subdivision 6 (Appeals) applies in relation to a decision or determination of a panel under this Subdivision as if references in Subdivision 6 to a costs assessor were references to the panel.”

39 The present proceedings are really an appeal pursuant to s 384 and an application for leave to appeal pursuant to s 385, as those sections are applied to a decision or determination of an appeal panel by virtue of s 382.

40 Regulation 134 of the Legal Profession Regulation 2005 provides in part as follows:-

“134 Statement of reasons—section 380 of the Act

Frumar v Owners of Strata Plan 36957

41 In both written and oral submissions frequent references were made to the decision of the Court of Appeal in Frumar v Owners of Strata Plan 36957 [2006] 67 NSWLR 321. The relevant legislation in Frumar was not the Legal Profession Act 2004 but its predecessor, the Legal Profession Act 1987. However, it was common ground in the present proceedings that no distinction could be drawn between the provisions of the two Acts and that regulation 68 of the Legal Profession Regulation 2002, which was a relevant regulation in Frumar was in the same terms as regulation 134 of the Legal Profession Regulation 2005.

42 In Frumar an order had been made for the payment by the claimant to the opponent of party and party costs. The opponent’s costs were assessed by a costs assessor and on a review by a panel of two costs assessors. The claimant appealed to the Supreme Court against the decision of the panel. An associate judge dismissed the appeal. The claimant then applied for leave to appeal to the Court of Appeal. The Court of Appeal granted leave to appeal and allowed the appeal.

43 The Court of Appeal held that the associate judge had erred in holding that the panel had given adequate reasons for its determination. On the extent of the obligation to give reasons Giles JA who delivered the principal judgment in the Court of Appeal said at pp 330-331 (43-45):-

“ [43] The extent of the obligation, whether by explication of reg 68(1) or by giving content to s 208KG, is informed by the general law concerning the duty of judicial officers to give reasons for their decisions discussed in cases such as Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, Mifsud v Campbell (1991) 21 NSWLR 725 and Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430. The extent of a judicial officer's duty depends on the circumstances. Whether or not a costs assessor and a panel are acting administratively or judicially, which was left open in Attorney-General (NSW) v Kennedy Miller Television Pty Ltd (1998) 43 NSWLR729, the extent of their duties must take into account the different nature of their task and their roles as legal practitioners bringing to bear their experience and judgment in evaluation of what work was reasonable and what is a fair and reasonable amount of costs; but it is also moulded by the basis for the obligation to give reasons in Attorney-General (NSW) v Kennedy Miller Television Pty Ltd , thereafter taken up by the legislature.

[44] The reasons must be such that a party dissatisfied with the costs assessor's or panel's determination “should have a real and not largely illusory right of appeal”. These words in Attorney-General (NSW) v Kennedy Miller Television Pty Ltd (at 735) were qualified by “in regard to questions of law at least”, but in my respectful opinion they apply equally to questions of fact: questions of whether the time engaged or an hourly rate are reasonable can be very important, and although subject to leave s 208M permitted an appeal on those questions. The filter for an appeal as to fact is the Court's decision as to leave, not the cost assessor's or panel's expression of reasons, and whether leave should be granted can only be decided if it is known why the determination was made.

Beale v Government Insurance Office (NSW)

44 Giles JA held that the both the costs assessor and the panel had failed to give adequate reasons. At pp 334-335 (59-62) his Honour said:-

“ [59] It can not be seen from the costs assessor's reasons what work in items in the bill of costs, being co-ordination work or reporting work or perhaps other work, was thought by the costs assessor to have been unreasonably carried out. Indeed, it does not seem that the costs assessor identified that work and, applying the hourly rates, deducted an amount from the profit costs, whilst inferentially accepting that the rest of the itemised legal services had been reasonably provided. Rather, he seems to have begun again with his own assessment of an overall fee based on what he considered was reasonable work to be carried out. Since his assessment was less than the $79,492.20 in the bill of costs, and in the light of what he said about coordination work and reporting work, he did not accept that the whole of the work in the bill of costs was reasonably carried out. But it can not be seen what work the costs assessor thought was or was not reasonable work to be carried out, including by way of coordination work and reporting work, or its relationship to the work in the items in the bill of costs.

[60] The panel's reasons do not make good these difficulties in the costs assessor's reasons. They add to them. The panel endorsed the costs assessor's reasons as setting out the basis for his determination, and his approach of assessing the bill of costs “as a whole” (under Ground 5), but in conducting its own assessment arrived at a relatively precise amount of $63,833 in lieu of the round figure. It can not be seen what work in the items in the bill of costs the panel thought was unreasonably carried out, or what work it thought was reasonable work to be carried out independently of the itemisation in the bill of costs and its relationship to the work in the items in the bill of costs. Maybe it accepted that the hourly rates were reasonable and applied them, but it did not say so: at least on the surface, in making its own assessment the panel could have applied different hourly rates.

[61] The relatively precise amount suggests a calculation or an addition of items, but this is not explained. The assessment may or may not have been by adjustment of the bill of costs, but if it was the adjustments were not identified and if it was not there was no more than an end figure. The panel stated a figure as the result of its assessment and asserted that it was “in all the circumstances” a fair and reasonable amount of costs, but the content can not be seen.

Decision

45 The application for leave to appeal under s 385 of the Act was not strongly pressed by counsel for the Wendes and counsel for Horwath submitted that leave should not be granted.

46 In my opinion, I should refuse leave to appeal under s 385. The costs assessors were persons experienced in the assessment of costs and able to bring to bear their experience in determining what was a fair and reasonable amount of costs. In comparison, I, in common with other judges, lack experience in the assessment of costs. In these circumstances I consider that I should be cautious about entering upon a determination of disputed questions of fact arising in the assessment of the costs, particularly where there have been two independent assessments of the costs by a costs assessor and an appeal panel and the two assessments have produced fairly similar figures. In any event, I have not really been provided with sufficient information to determine questions of fact arising in the assessment of the costs. It would appear that under ss (5) of s 385 (in contra-distinction to ss (2) of s 384) the only courses open to a court, if leave is granted, are to affirm the costs assessor’s decision or to make its own determination of the costs. In general, leave should be granted under s 385, only if the costs assessor or the appeal panel has made some error of principle. In the present case I will proceed on the basis that any error in principle alleged by the Wendes involves a matter of law and gives rise to an appeal as of right under s 384.

47 As to the appeal under s 384 of the Act, it was submitted by counsel for the Wendes that the appeal panel had erred in matters of law in:-

1. mistaking its function and in not adopting a correct approach to the assessment of the costs

2. in failing to give adequate reasons for its determination

48 I will deal in turn with these submissions.

49 1. It was submitted by counsel for the Wendes that the panel had proceeded on the basis that its function was to determine whether the costs assessor had made any error in his assessment, whereas the proper function of the panel was to make its own independent assessment, and that the panel had adopted the approach of making a global assessment of the amount of the costs, whereas it should have made an item by item assessment of the costs, taking into account the objections of the Wendes to individual items in the bill of costs.

50 In support of this submission counsel for the Wendes pointed inter alia to the assessor’s reasons for his determination and to pars 5.8.2, 6 and 10 of the panel’s reasons for its determination.

51 I do not consider that these submissions should be upheld.

52 I accept that the assessor in his reasons would appear to have adopted a global approach (for example, in saying that the best method of assessment was for him, having considered all of the items in the bill of costs, to assess what would be a fair amount of time to be spent on the matter) and that the appeal panel in its reasons characterised the approach taken by the assessor as a “global” approach. If an assessor or an appeal panel adopts a global approach to an assessment of costs, it is unlikely that the assessor or the panel will be able to give reasons such as will satisfy the conditions for adequate reasons laid down in Frumar and in regulation 134.

53 It is unfortunate that the panel in its reasons approved the global approach taken by the assessor. However, it is quite clear from the panel’s reasons that this was not the approach adopted by the panel itself. The panel stated expressly that it had arrived at its determination by a process of assessment of individual items (see for example par 10.5 of the panel’s reasons) and this assertion is supported by the contents of the reasons generally, including the details of the assessment set out in par 13.

54 It is also clear that the panel, notwithstanding that it sometimes used language in its reasons to the effect that it found no error in what the assessor had done and that it affirmed what the assessor had done, understood that, in accordance with s 375 of the Act, its function was to conduct its own review of the items of costs in issue and that its function was not limited to determining whether the costs assessor had made any error (see, particularly, par 4 of the panel’s reasons).

55 2. It was submitted by counsel for the Wendes that the panel had not given any reasons or had not given adequate reasons such as would satisfy the conditions laid down in Frumar, for allowing what were contended by counsel for the Wendes to have been “solicitor-client” items; for allowing items of work which had been done by a solicitor more senior than Ms Chan, charging at a higher rate than her rate; for sometimes allowing items of work by two solicitors in circumstances where, it was submitted, the solicitors were “duplicating” work; for allowing, in cases where items of work by two solicitors had not been allowed, the item of work by the more experienced solicitor charging at the higher rate. Some other submissions of a similar sort were made by counsel for the Wendes. It was also submitted that the panel had not explained how it had arrived at the total amount of costs allowed.

56 I do not consider that these submissions should be upheld.

57 Much of the panel’s reasoning is to found in par 5 of its reasons. In par 5.1 to 5.6 the panel conducted what it described in par 5.7 as “a very brief overview of the proceedings and the documents”. In par 5.7 of its reasons the panel said that the Berghofen parties (the Wendes) had raised a great number of issues of some complexity and, by doing so, had created circumstances in which it was reasonable for Horwath to engage a senior solicitor and a barrister.

58 In par 5.8.1 of its reasons the panel said that it had been reasonable to engage counsel to do the work that counsel had done and in par 5.8.3 the panel said that it had been reasonable to engage senior solicitors in the way that Horwath had. In par 5.9 of its reasons the panel said that it was with this background that it would turn to the specific matters raised in the application.

59 It was submitted by counsel for the Wendes that a number of items which had been allowed by the panel were “solicitor/client” items and were not items the costs of which could be recovered under a party and party order for costs.

Attorney General for New South Wales v Kennedy Miller Television Pty Ltd

Legal Profession Act

60 The appeal panel expressly found in its reasons that some disputed items satisfied the criteria of reasonableness, for example items of work done by a more senior solicitor than Ms Chan and items of work done by counsel. Futhermore, contrary to a submission made by counsel for the Wendes, the panel did explain, in par 13 and 14 of its reasons, how it arrived at its total figure for costs. The panel expressly identified the items of costs which it was disallowing and the items of costs which it was reducing and it subtracted these adjustments from the total amount of costs in the bill of costs so as to arrive at the total amount of costs which the panel was allowing. In my opinion, it can properly be inferred that the panel found that all the other items in the bill of costs, that is the items which it was not disallowing or reducing, met the statutory criteria of reasonableness. In my opinion, the statement by the panel of its reasons satisfied the requirements laid down in Frumar and by regulation 134.

Conclusion

61 I dismiss the summons and order that the plaintiffs pay the defendant’s costs of the summons.

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Citations

Wende v Horwath (NSW) Pty Limited [2008] NSWSC 1241

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CITATION:	Wende v Horwath (NSW) Pty Limited [2008] NSWSC 1241
HEARING DATE(S):	12 November 2008
JUDGMENT DATE :	28 November 2008
JUDGMENT OF:	James J
DECISION:	1. Summons dismissed. 2. Plaintiffs to pay defendant's costs of the summons.
CATCHWORDS:	Legal practitioners — assessment of costs — Legal Profession Act 2004 s.384 and s.385 — appeal from assessment panel whether global approach to assessment by panel — whether sufficient reasons given by panel
LEGISLATION CITED:	Legal Profession Act 2004
PARTIES:	Herbert Wende (First Plaintiff) Margaret Wende (Second Plaintiff) Mark Lloyd (Third Plaintiff) Horwath (NSW) Pty Limited (Defendant)
FILE NUMBER(S):	SC 10517/08
COUNSEL:	JL Sharpe (Plaintiffs) SF Hughes (Defendant)
SOLICITORS:	Leitch Hasson Dent Solicitors (Plaintiffs) Heidtman & Co (Defendant)