District Court New South Wales Medium Neutral Citation: Mangano v Bullen [2024] NSWDC 294 Hearing dates: 11 July 2024 Date of orders: 11 July 2024 Decision date: 11 July 2024 Jurisdiction: Civil Before: Newlinds SC DCJ Decision: (1) Dismiss the summons commencing an appeal filed 5 April 2024. (2) Dismiss the notice of motion filed by Ms Mangano on 29 April 2024. (3) In relation to both the appeal and the notice of motion, I order that the Plaintiff pay the Defendant's costs, which I assess as a gross sum at $7,000 inclusive of GST. (4) I will reserve liberty to the Plaintiff to apply to me on short notice. Catchwords: CIVIL – Appeal from decisions of the Legal Costs Review Panel dismissing appeals from decisions of Costs Assessors – Indemnity principle – Proper construction of s 178 of Legal Profession Uniform Law (NSW) – Legal consequence of non-compliance with s 178 in relation to the operation and approach of the indemnity principle – Leave to appeal – Need for finality in litigation Legislation Cited: Legal Professional Uniform Law (NSW) s 178; s 178(1)(c) Uniform Civil Procedure Rules 2005 (NSW) r 50.3 Cases Cited: Bingham v Bevan [2023] NSWCA 86 Capello v Home Building Pty Ltd [2023] NSWCA 109 Enterprise Finance Solutions Pty Ltd v Ciszek [2014] NSWDC 314 Frontier Law Group Pty Ltd v Robert Glenn Barkman [2016] NSWSC 1542 Mangano v Bullen [2019] NSWSC 1704 Mangano v Bullen [2020] NSWCA 283 Wentworth v Rogers [2006] NSWCA 145 Category: Principal judgment Parties: Silvana Mangano (Plaintiff) Rosemary Bullen (Defendant) Representation: Counsel: T Hall; Solicitor (Plaintiff) B Balasubramanian; Solicitor (Defendant) Solicitors: Hall Partners (Plaintiff) Marsdens Law Group (Defendant) File Number(s): 2024/126516 Publication restriction: Nil JUDGMENT: Ex Tempore 1. The matter before me is a continuation of a long running dispute between the Plaintiff and the Defendant. The Defendant had a long relationship with the Plaintiff's late father, John Mangano. A number of protracted disputes have arisen following the death of the late John Mangano. 2. There have been various proceedings in the Supreme Court of New South Wales and the Court of Appeal brought by the Plaintiff against the Defendant in which the Defendant was ordered costs in each of those proceedings. There were proceedings at first instance before Slattery J: Mangano v Bullen [2019] NSWSC 1704, proceedings in the Court of Appeal from the decision of Slattery J: Mangano v Bullen [2020] NSWCA 283 and then proceedings in the Corporations List, being 2018/00308162, which were ultimately dismissed by Parker J. 3. In each of those cases, there was an order for costs, that is that the Plaintiff ("Ms Mangano") pay the Defendant's ("Ms Bullen") costs of each of the proceedings. That then resulted in three costs assessments in relation to the three separate proceedings, each of which was resolved in favour of Ms Bullen and cost certificates issued. Those cost certificates have since been filed in the Local Court of New South Wales and have been transformed into three separate judgments. 4. Between the decisions of the cost assessors and the entry of the judgments, there were three applications to the legal cost review panel by Ms Mangano, each of which was unsuccessful. 5. The upshot of all that, is that it has been determined by costs assessment and upon review that Ms Mangano is liable to pay Ms Bullen three amounts of money which have now merged into three separate judgments of the Local Court. 6. By summons filed 5 April 2024, Ms Mangano seeks to appeal the three decisions of the review panel and by a separate notice of motion filed 29 April 2024, seeks a stay of the various Local Court judgments pending determination of these proceedings. Although as the matter was argued, I think that a stay of the judgments was sought on a slightly wider basis. 7. Accordingly, what I am dealing with is three appeals from three decisions of the review panel. 8. I will deal with the matter as if there is one decision because relevantly, the same point arises in exactly the same way in each matter. 9. Mr Hall, solicitor, who has appeared on behalf of Ms Mangano, submission is that the costs review panel fell into legal error in such a way that would justify me making an order setting aside the cost determinations. He says that as between Ms Bullen and her solicitors, there was no valid costs agreement in place because the requirements of s 178 of the Legal Professional Uniform Law (NSW) were not complied with. This has the legal consequence, so the submission goes, that there is no liability as between Ms Bullen and her solicitors to pay any costs unless and until they have been assessed. Moreover, Mr Hall reminds me that s 178(1)(c) prevents Ms Bullen's solicitors from commencing any proceedings in relation to recovery of any unpaid fees. 10. Mr Hall then relies on what is known as the "indemnity principle" explained in cases like Wentworth v Rogers [2006] NSWCA 145 where it was said by Basten JA at para [102]; "If that party is under no legal obligation to pay lawyers' fees, no amount can be recovered from the unsuccessful party…" And at [126]: "Accordingly, it is beyond dispute that the purpose of an adverse costs order is to compensate or partly indemnify one party to litigation (usually the successful party) for the legal costs incurred in the course of the proceedings. The principle does not require that the costs have been paid, but it does require that there be a legal liability to pay costs." 1. So, the argument goes, based on the premise that s 178 had not been complied with by Ms Bullen's solicitors, that because of the operation of s 178 itself, Ms Bullen has had at no relevant time, any liability to pay her solicitors any amount of money and therefore the proper application of the indemnity principle is that Ms Mangano as the unsuccessful party cannot be required to pay any amount of costs because Ms Bullen has no liability to pay such costs herself. It is submitted that the consequence of any payment of the adverse costs order in those circumstances would be something other than compensation but would result, so the argument goes, in a windfall in favour of Ms Bullen. 2. I do not think the argument propounded for Ms Mangano can be accepted for at least the following reasons. 3. Firstly, I am not satisfied on the evidence that the requirements of s 178 were not complied with. I am told, and there does not seem to be any dispute about this, that the way the matter is now being run before me was not how it was run or at least it was not how it was run clearly before either the costs assessor or the review panel. 4. Before the costs assessor and the review panel there was evidence of an initial retainer agreement between the solicitors and Ms Bullen and an initial estimate of costs with a statement to the effect that the estimate would be updated from time to time. 5. Thereafter, there was no evidence one way or the other as to whether the costs estimate was updated from time to time. 6. Accordingly, it seems to me that the submission made on behalf of Ms Mangano to the effect that, on the evidence before the assessor, the assessor should have made a positive finding of fact and law that s 178 was engaged is not supported by any evidence. All the assessor needed to know to be satisfied as to the operation of the indemnity principle was that there was a retainer agreement in place with an initial estimate of costs and that memorandums of fees had been issued, all of which was before the costs assessor. 7. Without that essential plank to Mr Hall's arguments, the rest of his legal contentions fall away. However, if I am wrong on that point, I will deal with those other arguments. 8. A review of the rather alarming amount of cases that have detained the Court of Appeal on this topic leads to the conclusion that fundamental to an understanding of the resolution of the issue of law propounded by Mr Hall is an understanding that there is a significant difference between the operation of s 178 which deals with the relationship and rights as between solicitor and client and the relationship between a party to litigation and an unsuccessful party when having a costs order cost assessed. 9. They are different concepts and take place in different contexts. However, it is fair to say that there is an overlap, and it comes into play because of the indemnity principle. Obviously for a person seeking to enforce a third-party costs order, there needs to be demonstrated that what are being recovered are costs that either have been paid to a lawyer for relevant legal costs or will be paid to such a lawyer. 10. So much it seems to me is not inconsistent with what was said by the Court of Appeal in Bingham v Bevan [2023] NSWCA 86 ("Bingham") at para [41], or Frontier Law Group Pty Ltd v Robert Glenn Barkman [2016] NSWSC 1542, or in Capello v Home Building Pty Ltd a decision of Judge Gibson of this Court, which received considerable analysis by the Court of Appeal in [2023] NSWCA 109 where Mitchelmore JA at para [19] and para [34] explains the relevant relationships in the context of a discussion about the indemnity principle, in particular at [34] - 4.6, her Honour said: "Matters to do with the circumstances of entering into a costs agreement and making disclosure are matters to be considered in a law practice/client assessment. They have no relevance in an ordered costs assessment. Compliance with the indemnity principle is central to an assessment of ordered costs." And at [34] - 4.6.1: "In Enterprise Finance Solutions Pty Ltd v Ciszek [2014] NSWDC 314, Her Honour Gibson DCJ confirmed that an assessment of ordered costs is not an occasion for enquiring into what (if any) failures there have been in relation to disclosure requirements for the purpose of reducing the unsuccessful parties' liability to pay costs." 1. All of those statements, when read together and in particular what Basten AJA said in Bingham to the effect that the jurisdiction of a costs assessor and or the review panel is in any event limited to the question of whether the amount of costs claimed is fair and reasonable and does not necessarily require or indeed even entitle the costs assessor to make contractual type findings, mean that Mr Hall's fundamental legal proposition cannot be accepted. 2. In my view, the way s 178 works is that in the absence of compliance with the provisions of the legislation, a liability for unpaid legal fees does arise as between solicitor and client when the solicitor issues an invoice. However, by operation of s 178, that liability is not payable by the client, nor can the solicitor commence proceedings to recover any such amount, unless and until an assessment has taken place. 3. However, and this becomes relevant to the facts of this case, that does not prevent a client who chooses not to seek an assessment in such circumstances from paying the legal fees. If the client does that, then that payment is of an actual legal liability which will have the effect of extinguishing that liability. 4. If any other analysis was correct, it would mean that a payment in those circumstances was some sort of gift by the client to the solicitor and the liability would remain extant which of course is an absurd proposition. 5. Analysed in that way, it can be seen that, notwithstanding s 178, there remains a liability to pay which triggers the indemnity principle. 6. The final reason I cannot accept Mr Hall's submissions is that, in this case, I have evidence before me which has been tendered on the application for leave and at the moment I have limited its tender to the question of leave, but I think it is probably admissible in any event on the appeal because the point really was not run before the costs assessor or the costs review panel, so I think this evidence should be received by me not just on the question of leave, but also on the question of liability. The affidavit of Ms Bullen satisfies me that firstly, she has partly paid some of the outstanding invoices the subject of the assessments. Secondly, she intends to pay the balance over time but also in circumstances whereas she hopes, Ms Mangano pays her something for the outstanding costs order. 7. Ms Bullen has provided an irrevocable undertaking to this Court that any monies paid to her by Ms Mangano towards the judgments entered in the Local Court which are the subject to the costs assessment the subject of these proceedings will be paid to her solicitors Marsdens to discharge any outstanding fees owed by her to them in relation to those matters. 8. Ms Bullen has given an irrevocable direction to Marsdens to receive those monies and only deal with them in that way and thereafter account to her for any balance that is left over once the assessed costs have been paid in full. 9. In those circumstances it seems to me that the justice of this case can be looked at in this way. The indemnity principle is critical because it is consistent with and ensures that orders for costs against unsuccessful litigants are only ever compensatory and do not operate at some sort of damages against the person having to pay the money or some sort of windfall in favour of the person who receives them. That is because it is no more or less than an order that the actual costs incurred be paid. The indemnity principle has always required, at the time of assessment of costs, that the costs have been paid by the client to their solicitor, or that they will be paid by the client to the solicitor. 10. On Ms Bullen's sworn evidence and the undertakings, I am comfortable satisfied that, to the extent the invoices remain partly unpaid, they will be paid and to the extent they have been paid, they obviously have been paid. 11. For those reasons, I have determined, having considered the substance of the appeal, that it must be dismissed. 12. I should say that the appeal was lodged out of time by Ms Mangano and therefore she requires leave to proceed which she did not formally seek or make any written submissions in relation to. 13. The appeal was filed 32 days out of time because it was required to be filed 28 days from the date of decision being released to the parties see r 50.3 Uniform Civil Procedure Rules 2005 (NSW). 14. Ms Mangano has contended that I should be satisfied that she did not receive the decision of the review panel until well within the 28-day period apparently because she contends that I should be satisfied that somehow, she wrote the wrong email address on the relevant form. 15. However, before me, there are two versions of that form. One relied upon by Ms Mangano does not have a filed stamp from the cost review panel. The other, relied upon by Ms Bullen does. The one relied upon by Ms Bullen has been amended in hand, I infer, by Ms Mangano so as to provide the email address that the review panel did send the decision to. Accordingly, if it be right that Ms Mangano did not find out about the review panel's decision until she was out of time, that is her own fault for giving the wrong address on the relevant form. 16. If I am wrong as to the substance of the matter and if I assume that the merits of this application were arguable, I would not have given leave to Ms Mangano to bring the proceedings out of time. There are a number of reasons for that. Firstly, as I have observed, if it be right that she did not receive notification within time, that is through her own fault. Secondly and of more substance, it seems to me that even if Mr Hall's factual and legal submissions were accepted by me, that ultimately in circumstances where it is accepted that the amount of fees that have been assessed are fair and reasonable (there is no challenge to that) then ultimately what Mr Hall was seeking, is to set aside the decision of the costs panel and the Local Court judgments to await such time as Ms Bullen paid some or all of the costs which would have then sent the parties in those circumstances back to have another round of costs assessments in circumstances where there would be no issue between them. If I had got to that stage as a matter of substance, I would have done no more than perhaps stay the Local Court judgments until such time as I was satisfied that the outstanding fees had either been paid or payment was imminent. The third and very important reason I would not grant leave is because there does come a point in time in every piece of litigation where it can reasonably be said that enough is enough and in this case, the parties have well and truly reached and passed that milestone. 17. There is a significant public interest in Courts bringing disputes between parties to an end. That is part of the beauty of the justice system in our society, the Courts determine disputes between people finally. That is the end of the dispute, the parties then each get to move on with their lives. Such considerations of finality become even more paramount and acute when one is in the field we are now in which is substantial and expensive litigation which concerns nothing more than the amount of costs flowing from an earlier piece of substantial and expensive litigation. 18. For those reasons, even if I am wrong as to my resolution of the substance of the appeal, and if I proceed upon the basis that the matter was arguable and it certainly is not anything more than arguable, I would not grant leave to Ms Mangano to bring the appeal out of time. 19. Finally, I turn to the question of costs of this application by which I mean the appeal and the notice of motion. Thankfully, some common sense has broken out, at least between the practitioners before me, to the effect that whatever else happens after this application, there should be no more costs assessments and so there is effectively a joint application that I make an order for costs on a lump sum basis which in the circumstances I am prepared to do so. I have an affidavit from Joshua Costlow as solicitor for Ms Bullen which assesses her legal costs in relation to these proceedings at approximately $14,000 and suggests that after assessment and with appropriate discounts for the necessary rough and ready approach that has to be taken on gross sum costs orders, an amount of $7,000 would be appropriate for a lump sum costs order. Mr Hall accepts that result would be a reasonable one. 20. For all those reasons I make the following orders: 1. Dismiss the summons commencing an appeal filed 5 April 2024. 2. Dismiss the notice of motion filed by Ms Mangano on 29 April 2024. 3. In relation to both the appeal and the notice of motion, I order that the Plaintiff pay the Defendant's costs, which I assess as a gross sum at $7,000 inclusive of GST. 4. I will reserve liberty to the Plaintiff to apply to me on short notice. ********** 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: 17 July 2024