SD Commercial Lawyers Pty Limited v Lecos Corporate Pty Limited & Anor (No. 2) [2022] NSWDC 94

District Court New South Wales

Medium Neutral Citation: SD Commercial Lawyers Pty Limited v Lecos Corporate Pty Limited & Anor (No. 2) [2022] NSWDC 94 Hearing dates: 18 March 2022 Date of orders: 18 March 2022 Decision date: 18 March 2022 Jurisdiction: Civil Before: Neilson DCJ Decision: I order the defendants to pay the plaintiff's costs of these proceedings. Catchwords: CIVIL – COSTS – COSTS ASSESSMENT – APPEAL FROM DETERMINATION OF THE COSTS REVIEW PANEL – PAYMENT OF COSTS – SUBMITTING APPEARANCE BY THE DENDANT – WHETHER DEFENDANT SHOULD PAY THE PLAINTIFF'S COSTS OF THE PROCEEDINGS. Legislation Cited: Legal Profession Uniform Law (NSW) No 16a of 2014 Motor Accidents Compensation Act 1999 (NSW) Cases Cited: Lou v IAG Limited t/as NRMA Insurance [2019] NSWCA 319 Midson v Workers Compensation Commission & Ors [2016] NSWSC 1352 Midson v Workers Compensation Commission & Ors (No 2) [2017] NSWSC 147 SD Commercial Lawyers Pty Limited v Lecos Corporate Pty Limited & Anor [2022] NSWDC 85 Texts Cited: Nil Category: Costs Parties: Plaintiff – SD Commercial Lawyers Pty Limited First Defendant – Lecos Corporate Pty Limited Second Defendant – Leonardo Da Costa e Costa Representation: Plaintiff – McDonald, J instructed by SD Commercial Lawyers Pty Limited. Defendants – Hoskinson, I. instructed by Byrne & Co. File Number(s): 2021/00204018 Publication restriction: Nil

Judgment 1. On Thursday 24 February this year I commenced hearing the current proceedings which were commenced by summons. I gave judgment on the following day, 25 February 2022. Unfortunately, my reasons for judgment have not yet been transcribed. The matter proceeded ex parte because the defendants had filed a submitting appearance. At the conclusion of the judgment on 25 February 2022, the successful plaintiff made an application for costs against the submitting defendants. I stood that matter over for hearing before me today. That hearing has now been conducted. 2. The plaintiff is a legal practice, a solicitor's practice. The defendants were the practice's client for some time. The plaintiff represented the defendants in proceedings in the Federal Court of Australia. Those could be generally described as "commercial litigation." The last account rendered by the plaintiff to the defendants was on 10 October 2018. The defendants applied for an assessment of the costs charged by the plaintiff on the last day within the 12‑month period allowed, that is, on 9 October 2019. 3. The application for the assessment is Exhibit Q and, if my mathematics be correct, comprises some 52 pages. The application for assessment sought to include in the assessment of the plaintiff's costs, costs charged to the defendants by a previous law firm Fong D'Emilio Lawyers Pty Ltd. The costs assessor properly disallowed those costs being included in the assessment of costs rendered by the plaintiff to the defendants. 4. In their application for an assessment of the costs the defendants objected to almost every item in the invoices issued by the plaintiff and made numerous complaints regarding the fees and disbursements charged including asserting that they never received a costs agreement/disclosure document, dated 1 February 2017, which is known as the first costs agreement. The costs assessor found that they did receive that document, and noted that it had been expressly referred to in a tripartite deed entered into by the plaintiff, the defendants, and the defendant's new solicitors in December 2018 before the current application for costs was lodged. In other words, the assertion was factually incorrect or erroneous. 5. The application for assessment of costs also asserted that the plaintiff had contravened s 174(1)(b) of the Legal Profession Uniform Law (NSW) No 16a of 2014 which I have held to be incorrect. They also asserted that certain costs ought to have been shared with other clients of the law practice, again an assertion which I rejected, and maintained that the costs charged by the plaintiff for discovery of documents in the commercial litigation were unreasonable, a contention which has ultimately been rejected. 6. As a result of the application made by the defendants for assessment of the plaintiff's costs, the costs assessor reduced the costs payable to the plaintiff by $69,703.46 which included a deduction for the filing fee paid by the defendants to the Manager of Costs Assessment. The costs assessor also issued a certificate of determination of the Manager's Assessment Costs requiring the plaintiff to pay to the defendants the sum of $9,405. Those decisions were made on 27 July 2020 and the appropriate certificates were received by the plaintiff on 11 August 2020. 7. On 10 September 2020, the plaintiff sought a review by a costs Review Panel. That review was dismissed on 1 June 2021 and the plaintiff received the Review Panel's reasons and certificates on 18 June 2021. The plaintiff was ordered to pay costs related to the remuneration of the review panel in the sum of $5,303.38. 8. The plaintiff filed a summons in this Court on 16 July 2021 commencing an appeal from the whole of the decision of the costs Review Panel, which necessarily involved a reconsideration of the decision of the costs assessor as well. The summons was served on the corporate defendant on 24 July 2021. On 16 August 2021, Ms Christina Byrne of Byrne & Co filed an appearance on behalf of both the corporate defendant and the personal defendant. That notice of appearance was unconditional. 9. At a directions hearing on 19 August 2021, Ms Byrne indicated that the defendants would be filing a submitting appearance. On 6 September 2021, 18 days later, such a submitting appearance was filed. When the matter came on for hearing before me Ms Byrne appeared by audio visual link seeking to point out that although a submitting appearance had been filed, the defendants were not consenting to the orders sought by the plaintiff and therefore that the plaintiff still needed to prove its case as to why the decision of the Review Panel should be overturned and why then the Court should overturn the ruling of the costs assessor. 10. After the two-day ex parte hearing I granted the plaintiff relief. I made orders in accordance with short minutes of order which had been marked for identification "1". I directed the registrar to forward to the Manager of Costs Assessment at the Supreme Court a copy of my orders. In essence, the determinations made by both the Review Panel and the costs assessor were set aside and I restored the original costs charged by the plaintiff to the defendants. 11. The defendants submit that this is not an appropriate case in which to order costs against them. The plaintiff maintains that this is such a case. I have been referred to a large number of decisions, but I need refer to only a few of them. A convenient starting point is the decision of N Adams J in Midson v Workers Compensation Commission & Ors (No 2) [2017] NSWSC 147. In the first case, reported at [2016] NSWSC 1352, her Honour recited at the commencement of her judgment certain facts. They are these: "1. On 7 May 2015, the plaintiff made application to the Workers Compensation Commission ("the first defendant") for workers' compensation based on a psychological injury said to have been caused during his employment with Enerka Apex Belting Pty Limited ("the third defendant"). There was a medical dispute regarding the extent of the injury, which was referred by the Registrar of the Workers Compensation Commission to an approved medical specialist ("AMS") for assessment. 2. On 15 December 2015, the AMS issued a medical assessment certificate ("MAC") assessing the extent of the plaintiff's whole person impairment ("WPI") at 15%. This numerical value is of significance because, inter alia, in order for the plaintiff to recover damages for a work injury, he must be assessed as having at least 15% WPI under s 151H of the Workers Compensation Act 1987 (NSW) ("the 1987 Act"). 3. On 13 January 2016, the third defendant lodged a notice of appeal against the MAC. 4. On 31 March 2016, the second defendant, a Medical Appeal Panel of the Workers Compensation Commission ("the Panel") constituted pursuant to s 328(1) of the Workplace Injury Management and Workers Compensation Act 1998 ("the 1998 Act") delivered its reasons for reducing the WPI assessment from 15% to 13%." 1. The plaintiff, Mr Midson, filed a summons on 30 June 2016 in the Supreme Court seeking an order quashing the decision of the panel of 31 March 2016 reducing his WPI assessment. He also sought an order seeking to remit the matter to the Review Panel for a determination according to law. 2. In the second case, her Honour considered an application made by the worker, Mr Midson, for costs against his former employer, the third defendant. In the Supreme Court both the first, second and third defendants had filed submitting appearances. Commencing at [20] her Honour said this: "20. Notwithstanding the general rule that costs follow the event, r 41.2 contemplates that the particular circumstances of a matter may be such that it is appropriate to make some other order. For instance, misconduct on the part of the successful party, such as conduct that unnecessarily prolongs litigation, may disentitle that party to a costs order in its favour: per McHugh J in Oshlack at 95-96. In Mahenthirarasa v State Rail Authority of New South Wales (No 2) (2008) 72 NSWLR 273; [2008] NSWCA 201, Basten JA (Giles and Bell JJA agreeing) observed that the examples given by McHugh J all focus upon the circumstances of the successful party. 21. There are authorities suggesting that the fact that an unsuccessful party has filed a submitting appearance in accordance with r 6.11 of the UCPR may well provide good reason to decline to make the usual order as to costs, notwithstanding the absence of disentitling conduct on the part of the successful party: see, for example, Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47 at [42] per Bignold J and China Shipping (Australia) Agency Co Pty Ltd v D V Kelly Pty Ltd (No 2) [2010] NSWSC 1557 at [8] per Rein J. Despite this, it is not the case that a submitting party will never be ordered to pay costs. That such an order may be made is contemplated by the wording of r 6.11, which provides: "(1) A defendant who intends to take no active part in proceedings may include in the defendant's notice of appearance a statement to the effect that the defendant submits to the making of all orders sought and the giving or entry of judgment in respect of all claims made, to which may be added the words, "save as to costs". (2) Except by leave of the court, a defendant who has filed a notice of appearance containing a statement referred to in subrule (1) may not file a defence or affidavit or take any other step in the proceedings." 22. In Seller v Jones [2014] NSWCA 19 at [59] (cited by Darke J in Noon v The Owners – Strata Plan No. 22422 (No 2) [2014] NSWSC 1642 at [8]), McColl JA (Basten and Ward JJA agreeing) noted at [55] and [59] that r 6.11 of the UCPR does not provide for the costs consequences of a submitting appearance. Thus where an unsuccessful party has made a submitting appearance it is necessary to take into account relevant contextual considerations with respect to the circumstances of the litigation and conduct and role of the parties (citing Basten JA in Mahenthirarasa v State Rail Authority of New South Wales (No 2) at [7]). 23. A relevant contextual consideration in Mahenthirarasa v State Rail Authority of New South Wales (No 2) was the status of the submitting party as a statutory body representing the Crown. The successful appellant sought an order for costs against the State Rail Authority ("SRA"), which had filed a submitting appearance both at first instance and on appeal. The SRA had, by the making of submissions to the Registrar of the Workers Compensation Commission, secured a result that was favourable to it. Thereafter it did not take part in judicial review proceedings. Basten JA stated at [21]: "…the SRA, as the beneficiary of the ruling in the Commission, should, and no doubt did, give proper consideration to whether the proceedings had merit and whether it should defend the order which it had obtained in the Commission. If it had been of the view that the order could not fairly be defended, it should have advised the Court of that fact and its reasons for reaching that conclusion. It was inappropriate for the SRA as a statutory corporation to stand by and in effect require the appellant to persuade the Court of the correctness of his position." 24. Although it is plain that Mahenthirarasa v State Rail Authority of New South Wales (No 2) turns on its own facts, it serves as authority for the proposition that it may, in certain exceptional circumstances, be just and reasonable to make a costs order against a submitting party: see Rothman J in Buzrio Pty Limited v Consumer, Trade and Tenancy Tribunal (No 4) [2010] NSWSC 41 at [11]. 25. In Kisimul Holdings Pty Ltd v Clear Position Pty Ltd (No 2) [2014] NSWCA 317 the Court (Beazley P, Barrett and Gleeson JJA) observed at [14] that the question of whether a costs order should be made against a submitting party is to be approached according to "an appraisal of the circumstances of the case" and that, in particular, attention must be paid to the context in which the submitting appearance was filed. Their Honours went on to cite the observations of Beazley JA (as her Honour then was) in Nyman v Valmas [1997] NSWCCA 235 as follows: "In my opinion, the filing of a submitting appearance does not denote consent to the orders sought. A submitting appearance (both at first instance and in this Court) may be filed for a variety of reasons. The typical situation is where a party has no vested interest in the outcome of proceedings. This typically occurs in statutory appeals where a necessary respondent is the Court or Tribunal from which the appeal is brought. Another is where a party holds funds as a stakeholder or on trust. However, the occasions where a submitting appearance is filed are by no means limited to such obvious circumstances. A party might submit where the costs of appeal outweigh the amount in dispute so that it was too prohibitive or simply not worth the while of a party to contest the matter. The procedure provided by the submitting appearance is a means of facilitating notice to the Court that the party does not propose to put any argument to the court." 26. More recently in Douglas v James (No. 2) [2015] NSWSC 969, McDougall J awarded costs against a defendant who had filed a submitting appearance. His Honour found that the submitting party had delayed ten months before filing a submitting appearance and, in the interim, had "actively promoted and supported the defendant's case". His Honour found at [39] that "she was in a real sense a defendant who took an adversarial position in opposition to the plaintiff's case"." 1. More recently, the matter has been subject of litigation in the Court of Appeal: Lou v IAG Limited t/as NRMA Insurance [2019] NSWCA 319. That case concerned a lady who had been injured in a motor accident in 2014. She made a claim for compensation on the first respondent named in those proceedings. 2. The appellant had lodged an application with the Claims Assessment and Resolution Service (CARS) for a general assessment pursuant to s 94 of the Motor Accidents Compensation Act 1999. The matter was allocated to a claims assessor appointed by the State Insurance Regulatory Authority. The first respondent made an application seeking to have the matter exempted from that assessment pursuant to s 92(1)(b) of the Act. The claims assessor determined that the matter was suitable for assessment by CARS and declined the application for exemption. 3. On 23 October 2018, the first respondent filed a summons in the Supreme Court seeking judicial review of the claims assessor's decision. The matter was heard in the Supreme Court by a judge in the Common Law Division who did not hear from the appellant or her legal representative who were not present. On 22 May 2019, the judge in the Common Law Division awarded costs against the appellant in favour of the first respondent. The appellant sought leave to appeal from the primary judge's decision. The leading judgment was given by Payne JA with whom Gleeson JA agreed. Her Honour said this: "39. The UCPR provide, relevantly: 6.11 Defendant may submit to judgment by notice of appearance (1) A defendant who intends to take no active part in proceedings may include in the defendant's notice of appearance a statement to the effect that the defendant submits to the making of all orders sought and the giving or entry of judgment in respect of all claims made, to which may be added the words ", save as to costs". (2) Except by leave of the court, a defendant who has filed a notice of appearance containing a statement referred to in subrule (1) may not file a defence or affidavit or take any other step in the proceedings. Note. See rule 20.34 which allows the defendant in proceedings on a liquidated claim to file a statement acknowledging the whole of the amount of the claim. … 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 40. The power to award costs is found in s 98 of the Civil Procedure Act 2005 (NSW) which provides, relevantly: 98 Courts powers as to costs (1) Subject to 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. …. 41. There is no other rule of court or other provision dealing with the costs consequences of the filing of a submitting appearance, whether or not expressed to be "save as to costs". 42. What is called for, in all cases, is the principled exercise of the s 98 costs discretion. The discretion that s 98 confers is subject to the qualification that it must be exercised judicially "in accordance with established principle and factors directly connected with the litigation": Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65] per McHugh J (in dissent but not relevantly for present purposes). Among the fetters on the discretion to award costs are the rules of the Court contained in Part 42 of the UCPR. The usual rule is that costs follow the event, unless it appears to the Court that some other order should be made: UCPR, r 42.1. The rationale for the principle that costs follow the event is that the successful party to proceedings should be compensated: Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59. 43. There is no prima facie rule that a submitting party will never be ordered to pay costs. In Seller v Jones [2014] NSWCA 19 at [55] and [59] McColl JA (with whom Basten and Ward JJA agreed) noted that r 6.11 of the UCPR does not provide for the costs consequences of a submitting appearance. 44. I have concluded, nevertheless, that in the present case the primary judge fell into House v The King error. First, her Honour failed to take into account a relevant consideration, namely that, as Mr Robinson SC conceded, the appellant did not in this case cause the errors the subject of the proceedings before the primary judge. Her Honour did not take that matter into account and I reject the NRMA's submission that her Honour implicitly took that matter into account by the general statement in [23] of her judgment that she had considered the arguments of the parties. The fact that the appellant did not cause any error the subject of the proceedings was a material consideration in the exercise of the costs discretion. Secondly, there was no basis in the evidence to conclude that any step taken by the NRMA in these proceedings would have been in any way different if the appellant had consented to the relief sought. I do not accept that it was sufficiently likely, as the NRMA submitted on this appeal, that if consent had been forthcoming it would have chosen only to propound one of the grounds it identified. Thirdly, it was material to the exercise of the costs discretion in this case to recognise that these proceedings could not be resolved by consent: see Lewis per McCallum J; Kovalev v Minister for Immigration and Multicultural Affairs (1999) 100 FCR 323; [1999] FCA 557 per French J. The exercise of the supervisory jurisdiction under s 69 of the Supreme Court Act 1970 (NSW) is always within the discretion of the Court. Her Honour failed to take into account this matter as a consideration relevant to the costs discretion." 1. This case must be approached on the basis that my ruling made last month is correct, that is, that the costs charged by the plaintiff to the defendants were proper costs and that errors were made in the assessment by the costs assessor and by the Review Panel. Those reasons are found at SD Commercial Lawyers Pty Limited v Lecos Corporate Pty Limited & Anor [2022] NSWDC 85. It follows automatically that the defendants ought not to have sought an assessment of the plaintiff's costs. 2. The assessment process and the review process were marred, if I may use that word, by the submissions made to the costs assessor and the Review Panel by the current defendants. Only when the matter came to this Court did the defendants submit. Nevertheless, they did not agree that the relief sought by the plaintiff ought be granted. They were in a position to consent to the relief sought by the plaintiff from the Review Panel and to consent to the relief claimed by the plaintiff in these proceedings, but did not. 3. To vindicate its legal position, the plaintiff had to prosecute the costs matter in this Court in order to obtain justice. It was only necessary to do so because of the behaviour of the defendants. Even when the matter came before this Court it was open to the defendant to consent to the relief sought but they did not. In written submissions filed on this issue concerning costs, the defendants said that the matter was not one that could have been settled by consent: see MFI 4[20]. It is always one that could have been consented to. 4. The defendants make much of a concession made by Mr Stephen D'Emilio in an affidavit sworn on 21 October 2021 which was read before me and has been marked as Exhibit A. One aspect of the relief sought in this Court was leave to adduce further evidence, to put before the Court documents which had not been provided to the costs assessor. The documents in question are set out in [64] of Mr D'Emilio's affidavit. In [65] of his affidavit he sets out the reasons that the documents were not provided to the costs assessor. The relevant paragraph is this: "The reasons why these documents or complete copies of these documents were not provided to the costs assessor included the following: (i) the case was complex and included tens of thousands of documents, including emails and letters between us and the Defendants, other Applicants, and Respondents in the proceedings; (ii) we did our best to respond to all the issues raised by the Defendants in their Application which were extensive. In this respect we provided four lever arch folders of documents to the costs assessor and our Response to the Defendants' Application was 200 pages in length; (iii) I never perceived that there could be any confusion about what costs the 14 May 2018 costs agreement related to (i.e. being costs incurred from 14 May 2018) as the totality of all documents provided to the Defendants, including the actual 14 May 2018 costs agreement letter, and the reasons for doing so were abundantly clear. Further, the 30 April 2018 email and the 14 May 2018 costs agreement letter were directly responsive to the Second Defendant's request for 'future costs and actions' as was contained in the Second Defendant's email dated 23 April 2018; (iv) prior to their Application, the Defendants never identified to me that they were confused about what costs the 14 May 2018 costs agreement related to; (v) it did not previously occur to me that a costs assessor would make a finding that our costs agreement letters did not make it clear that they related to costs incurred from the date of the letter, as this was and always had been the sole and only purpose of the letters." 1. I granted the plaintiff leave to adduce that further documentary evidence, but it was abundantly clear that that was always available to the defendants from the very beginning of the assessment of costs matter and they could have disclosed those documents to the costs assessor if they had wished to do so but did not. The plaintiff had to take these proceedings to correct the actions taken by the defendants. 2. Furthermore, in my reasons for judgment I cited evidence in an affidavit of Siddharth Mahabal, a businessman from the Australian Capital Territory. He was the seventh applicant and a director of the sixth applicant in the Federal Court proceedings which gave rise to the retainer by the defendants of the plaintiff. Par [11] of an affidavit of 5 March 2021, which he annexed to his affidavit of 30 September 2021, said this: "In late May to early June 2018, I had a conversation with Mr Da Costa e Costa where Mr Da Costa e Costa advised me that he was meeting with his prospective new solicitors, LegalVision, about taking over his matter. Mr Da Costa e Costa said words to me to the following effect: 'I am looking at getting new solicitors involved in my matter, LegalVision. I am not going to respond to Stephen [Mr D'Emilio] on purpose. I am doing this so that Stephen can do the work for the security for costs application, and I won't have to pay him. I'll just go to different lawyers, and he can get stuck with my fees. I have no intention to pay his bills. 'In my country [he was referring to Brazil] I don't have to pay for phone calls or emails, so I don't understand why I get charged for these by Stephen. You should join me and retain LegalVision also.'" 1. That reflects a cynical attitude of the second defendant, the personal defendant in these proceedings, to the payment of the plaintiff's costs which appears to have followed on in the approach to the assessment of the plaintiff's costs and the application to the Review Panel. For those reasons I order the defendants to pay the plaintiff's costs of these proceedings. 2. Any other orders sought? MCDONALD: No, your Honour. HIS HONOUR: Thank you. The Court will adjourn. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 March 2022