New South Wales Supreme Court CITATION : Madden v NSW IMC [1999] NSWSC 196 revised - 31/08/99 CURRENT JURISDICTION : Common Law Division FILE NUMBER(S) : 11516/98 HEARING DATE(S) : 1 March 1999 JUDGMENT DATE : 15 March 1999 Jennifer Madden bhnf Joseph Madden (Plaintiff) PARTIES : v NSW Insurance Ministerial Corporation (Defendant) JUDGMENT OF : Master Malpass LOWER COURT JURISDICTION : Costs Assessor LOWER COURT FILE NUMBER(S) : 11516/98 LOWER COURT JUDICIAL OFFICER : Mr J Cockle COUNSEL : P - Mr C Branson QC, Mr J de Berg D - Mr J Hislop QC, Mr G W McGrath SOLICITORS : P - Marsdens D - J M Crestani CATCHWORDS : Assessment of indemnity costs; contingency fees; reasons District Court Rules Pt 39A r 13 ACTS CITED : Legal Profession Act 1987 ss 208L 208M Legal Profession Reform Bill CASES CITED : Attorney-General v Kennedy Miller (1997-8) 43 NSWLR 729 Soulemezis v Dudley (Holdings) P/L (1987) 10 NSWLR 247 DECISION : See paragraph 26 - 8 - THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER MALPASS 15 March 1999 11516/98 - Jennifer Madden bhnf Joseph Madden v New South Wales Insurance Ministerial Corporation JUDGMENT 1 The plaintiff suffered personal injury in a motor vehicle accident. Marsdens were instructed to act on her behalf. She brought proceedings in the District Court to recover damages. Mr Wheelahan QC and Mr Maxwell were briefed to appear on her behalf. The hearing took place before his Honour Judge Taylor. The plaintiff recovered judgment in the sum of $1,392,980.74. On 16 April 1996, Taylor DCJ made orders for costs. The defendant was ordered, inter alia, to pay the costs of the plaintiff on an indemnity basis for the period from 7 November 1994 to the date of judgment. 2 The order for indemnity costs was made pursuant to Part 19A rule 9 of the District Court Rules . The judgment sum awarded to the plaintiff exceeded an earlier offer of compromise 3 A bill of costs was prepared. It is dated 18 July 1996 and in the sum of $395,680.54 (including professional costs in the total sum of $187,585.64). Proceedings were commenced for an assessment of the costs. The application for assessment was referred to a Costs Assessor (Mr Cockle). After receiving submissions from the parties (including objection to part of the bill in the total sum of $169,832.74), he issued a Certificate As To Determination Of Costs on 24 April 1998. He assessed the costs in the sum of $260,925.18. His assessment either disallowed or reduced certain items. These are identified in a Schedule to the Certificate. 4 The plaintiff seeks to challenge the disallowance and reduction of the items. A Summons was filed on 19 June 1998. By that time, the prescribed period for the bringing of proceedings had elapsed (it is said that it expired on 22 May 1998). The plaintiff now applies for an extension of time. The application is opposed. An Amended Summons was filed on 6 October 1998. Relief is apparently sought pursuant to both sections 208L and 208M of the Legal Profession Act, 1987 (the Act ). By consent, the claim for relief under the Act and the application for an extension of time were heard together. 5 The plaintiff had entered into a Conditional Fee Agreement which is dated 7 November 1994 (there may have also been individual agreements made with counsel). It was placed before the Costs Assessor. The Agreement enabled the legal representatives to charge the client a success fee (which is described in the Act as a "premium") of up to 25% of the agreed fee in certain circumstances (it was said to be in view of, inter alia, "the speculative nature of the claim"). It also specified the fee rates to be charged by legal representatives. Such an agreement is permissible by reason of sections 186 and 187 of the Act . These are contained in Division 3 of Part 11 which is headed "Costs agreements". These provisions regulate costs arrangements between legal representatives and their clients. 6 During the second reading speech of the Legal Profession Reform Bill it was said that there may be a premium to take account of the risk involved "but the fee must not vary according to the benefit received by the client". 7 In this case, the legal representatives sought to charge a premium in the maximum of 25%. The charges appear as items in the bill of costs. The items were disallowed by the Costs Assessor. The total of the items was in the order of about $35,000. Further, he either disallowed or reduced charges for loadings, conferences and other disbursements. The total of these charges is relatively modest. 8 It is common ground that the Costs Assessor was bound to have regard to any relevant rules of the Court (section 208F). For present purposes, the relevant rule is Part 39A rule 13 of the District Court Rules . It is in the following form:- On an assessment on the indemnity basis, all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred, and any doubts which the assessor may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the receiving party. 9 The material before the Court may be found in Exhibit A. This is largely the material that was before the Costs Assessor. There are two affidavits sworn by Elyse White (these are relevant to the question of default). The plaintiff sought to read an affidavit sworn by Mr Coombs. The defendant objected to the reading of the affidavit. It comprised material that had not been placed before the Costs Assessor. I decided that this material should not be received in the hearing of these proceedings. I shall return to that matter in due course. 10 The question of the contingency fee was dealt with by the Costs Assessor as a preliminary matter. The decision was made during November 1997. The parties were notified of the decision by letter dated 12 November 1997 (a copy of the letter forms part of Exhibit A). The letter contains material which may be said to express the reasoning process behind the decision. The letter makes specific reference to a variety of matters and, inter alia, it both referred to and set out rule 13. It contains, inter alia, the following:- "I do not interpret this rule as imposing upon the Costs Assessor a duty to assess party/party costs in accordance with each and every agreement entered into on a solicitor/client basis.' 'Having considered the submissions of the parties and the matters to which I have referred, I reach the conclusion that it would be unreasonable for the Respondent to incur the additional 25% costs agreed to between the Plaintiff and solicitor pursuant to the costs agreement. I am not at liberty to apply the terms of the costs agreement unless I am of the opinion that it is a cost which the Respondent might reasonably incur. For the above reasons, I am not prepared to assess party/party costs by increasing the assessment by 25% mark up pursuant to the contingency fee agreement." 11 After having made that decision, the Assessor then proceeded to complete the assessment process. This was done when he issued the Certificate in 1998. 12 Counsel for the plaintiff have handed up written submissions. The principal contention is that there has been error of law. It is said that the Costs Assessor asked himself the wrong question and thereby assessed the costs on a fair and reasonable basis (rather than on an indemnity basis). Further, it is said that either he failed to give reasons or that the reasoning process disclosed was insufficient. These arguments have been advanced by way of general submission in respect of each item disallowed or reduced. 13 In my view, it is clear that the Costs Assessor directed his mind to the provisions of rule 13. This rule requires the Costs Assessor to allow all costs unless he is satisfied that they are of an unreasonable amount or have been unreasonably incurred. 14 I consider that the determination is consistent with him both having had regard to that rule and correctly applying its provisions. I am not satisfied that this challenge is made out by the plaintiff. 15 The exercise of determining whether costs are unreasonable in the sense contemplated by the rule is a factual one. Each case is going to turn on its own particular facts. In this case, it was clearly open to the Costs Assessor to decide that costs (including the contingency fees) were unreasonable in the relevant sense. 16 Since the decision of Attorney-General of NSW & Anor v Kennedy Miller Television Pty Ltd (1997-8) 43 NSWLR 729, there is binding authority that a costs assessor should provide reasons. The Court has been referred to authorities containing dicta concerning the matter of what will discharge an obligation to give reasons (including Kennedy Miller and Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247). It must be borne in mind that the Court is dealing with a decision made by a costs assessor and not a judicial officer. Many of the cases concern the discharge of the duty owed by a judicial officer. In the cases, observations have been made as to what is required of a decision maker. It has been said that lengthy or elaborate reasons are not required; in most cases, a word or two may suffice and it is necessary that the essential ground upon which the decision rests should be articulated. Whilst there is a plethora of dicta, it may be that ultimately the question has to be dealt with on a case by case basis. 17 A costs assessor is bound to issue a certificate. He is not required to deliver a determination in the nature of a judgment. There is no prescribed format for the disclosure of the reasoning process. It has been done in conjunction with the prescribed form of the Certificate. The Costs Assessor may deal with it in correspondence. In some instances, the reasoning process may be discernible from a combination of sources. 18 In this case, it may be said that the reasoning process could have been articulated with greater polish and eloquence. Be that as it may, in my view it emerges with sufficient clarity. The thrust of what is conveyed is that, in disallowing or reducing items, the Costs Assessor has been satisfied that what was either disallowed or reduced was unreasonable in the sense contemplated by the rule. It seems to me that this is so when regard is had to correspondence and other documentation (including submissions and objections) as well as the Certificate together with the attached Schedule. For completeness, I should mention, inter alia, one disallowed item appears from the material to be mere duplication. Whilst this may not strictly fall within the compass of the indemnity costs rule, it could not be said that the disallowance of a duplication was erroneous. 19 It may also be observed that there can be cases where, strictly speaking, the duty has not been discharged yet the appellate process is not effectively negated. The rationale behind the determination may sufficiently appear from material that is available to the parties and the Court (see Bacha v Patterson (3 December 1998)). 20 Accordingly, I am not satisfied that there is any error of law which would justify the disturbing of the determination. Whilst the plaintiff concentrated on this challenge to the determination, the process does claim relief of the nature provided by section 208M. The impression was given that resort was had to this provision largely for the purpose of using it as a vehicle for the admissibility of fresh evidence. Under this provision, the Court may grant leave to appeal. This power is exercised having regard to the circumstances of the particular case before the Court and so that justice is best served between the parties. As in the case of section 208L, the onus rests on the plaintiff to demonstrate an entitlement to relief. The defendant contends that this Court does not have jurisdiction to entertain the application for leave in this case. It is said that, by virtue of subsection (2), the District Court only has the jurisdiction. There may well be considerable force in that argument. However, the point was not fully argued and it is unnecessary to further pursue it. On the assumption that this Court does have jurisdiction, I am not satisfied that the plaintiff has demonstrated any entitlement to the granting of leave. 21 I should mention that the defendant has advanced a number of other arguments. For a variety of reasons (including questions going to the validity of such conditional costs agreements as were made), it says that it would be a futile exercise to send the matter back to the Costs Assessor for re-determination. The arguments relate to matters which were not agitated before the Costs Assessor. It is said that they could be raised before him if the matter was sent back to him for re-determination. In the light of the views already expressed, it is not necessary to dwell on these arguments. 22 There is material handed up by the defendant which it says supports the view that it was not contemplated that a contingency fee would fall within what may be regarded as indemnity costs. It may lend support for the determination that has been made by the Costs Assessor. It suggests that the Costs Assessor may have taken a view that was popular with other Costs Assessors. I mention it for completeness only, as it has not been taken into account in dealing with the questions raised on this appeal. 23 As things presently stand, there is no competent appeal before the Court. The plaintiff needs an extension of time. I have explored the merits of the grounds of appeal. In the light of the views expressed, it would be futile to grant an extension of time. I should add that, when exercising the jurisdiction to extend time, it is usually relevant to have regard to the explanation offered for the failure to bring the appeal within the prescribed time. In this case, the explanation offered falls short of what may be regarded as satisfactory. In the circumstances, I am not satisfied that I should grant an extension. 24 I should briefly return to the matter of the rejected affidavit. Section 208L does not contemplate the receiving of fresh evidence on the hearing of an appeal (subsection (3) contemplates the receiving of, inter alia, fresh evidence on a re-determination). The appeal is restricted to a matter of law arising in the proceedings to determine the application. Section 208M contemplates that fresh evidence may be received in the hearing of the appeal itself. In this case, even if the Court had jurisdiction, I am not satisfied that the plaintiff is entitled to a granting of leave. If the assumption be made that the Court has jurisdiction to entertain an application under section 208M, I am not satisfied that any grounds have been disclosed for receiving fresh evidence. In any event, I am not satisfied that the fresh evidence has relevance to the matters agitated in the proceedings. 25 Before concluding the judgment, it is necessary to refer to one further matter. After apparently completing the submissions in reply, Counsel for the plaintiff arose to raise a fresh ground of appeal. It has not been expressly raised in any documentation and the defendant had no notice of it. It relates to a question involving a sum in the order of about $60,000. The defendant was not in a position to deal with the matter and it would not have been in the interests of justice to proceed further with it at the time. I have reserved to the plaintiff liberty to apply for an amendment of the Summons, should she be so advised. On this matter, inter alia, the question of jurisdiction may be of relevance. I have advised the parties that I propose to proceed with the determination of the matters that have been argued before me. Counsel do not oppose the taking of this course. 26 Until the reserved question has been dealt with, I cannot make final orders on the Summons. The plaintiff is to pay the costs of the Summons to date. ********** Last Modified: 06/30/2000 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.