New South Wales Supreme Court CITATION : Howard & Ors v Mechtler & Ors [2000] NSWSC 455 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 13056 of 1999 HEARING DATE(S) : 5 May 2000 JUDGMENT DATE : 29 May 2000 Alfred Leslie Howard, William Bariamis, Leslie PARTIES : Bordacs, Ambrose Fazekas, John Hedison, Steven Koenig & John Buckley (Plaintiffs) v Leslie Mechtler, Josef Lorik, Andrew Urge, Dez Marton, William McColl, Imre Antal, Charles Luckel & Fritz Adelmann (Defendants) JUDGMENT OF : Master Malpass LOWER COURT Costs Assessment JURISDICTION : LOWER COURT 91502/99 FILE NUMBER(S) : LOWER COURT Mr M Strikis JUDICIAL OFFICER : N/A (Plaintiffs) COUNSEL : Mr G Sirtes (Defendant Mechtler only) No appearance of other defendants Lincoln Smith & Company (Plaintiffs) SOLICITORS : G J McKimm (Defendant Mechtler only) No appearance of other defendants CATCHWORDS : Determination of Costs Assessor - appeal - question of retainer and application of indemnity principle - powers of Costs Assessor. LEGISLATION CITED : Legal Profession Act 1987, s 208L. CASES CITED : Adams v London Improved Motor Coach Builders Ltd (1920) 1 KB 495. Angor Pty Ltd v Ilich Motor Co Pty Ltd & Anor (1992) 37 FCR 65. DECISION : See paragraph 15. THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER MALPASS MONDAY 29 MAY 2000 13056 of 1999 ALFRED LESLIE HOWARD & ORS v LESLIE MECHTLER & ORS JUDGMENT 1 These proceedings arise out of problems had by the St George Budapest Soccer Club Limited (the Club). A resolution was purportedly passed by the Club to have the effect of removing the plaintiffs as directors of the Club and replacing them by the defendants. The plaintiffs brought proceedings in the Equity Division of this Court challenging the validity of that resolution. The proceedings were heard by Austin J. He determined that the resolution was invalid and ordered the defendants to pay the plaintiffs' costs of those proceedings. The conduct of the plaintiffs' case in those proceedings was in the hands of Lincoln Smith & Company. 2 An assessment of the plaintiffs' costs was made. It was in the order of $15,000. The assessment was not accepted by the defendants. An application was made to this Court for an assessment of the costs. The application was referred to a Costs Assessor (Mr Strikis). 3 The defendants lodged objections (the challenge to the costs was in the order of $6,000). There was correspondence with the Costs Assessor. By letter dated 9 September 1999, the Costs Assessor advised that he had considered all of the material which had been provided to him and that subject to one significant issue he was ready to finalise his determination. In that letter, of his own volition, the Costs Assessor raised what he said was the "outstanding issue". He expressed it to be "the effect of the application of the indemnity principle to the circumstances of these parties". The parties then made submissions on this issue. Not surprisingly, the defendants then embraced the issue raised by the Costs Assessor. 4 A Certificate as to Determination of Party and Party Costs was issued on 22 November 1999. It stated inter alia "The application is determined by assessing as a fair and reasonable amount of costs to be paid by the Respondent to the Applicant the sum of $NIL". There is correspondence from the Costs Assessor which purports to set forth the reasoning process which led him to make this determination. 5 The ratio decidendi of the determination is not entirely clear. There is material which suggests that the Costs Assessor came to the decision that Lincoln Smith & Company had been retained by the Club (as opposed to the individual plaintiffs) and that in the absence of retainers from them, the individual plaintiffs were not liable to pay the firm any costs and thus there was nothing against which the respondents are to indemnify them. This is the approach that has been adopted by the parties. 6 These proceedings were brought by Summons filed on 17 December 1999. The plaintiffs relied on an affidavit sworn by Mr Annis-Brown. The defendant relied on an affidavit sworn by Mr McKimm. The Summons was heard on 5 May 2000. 7 The Summons seeks relief pursuant to s 208L of the Legal Profession Act 1987 (the Act). As has been often said, this section provides a narrow avenue of appeal which is restricted to a matter of law arising in the proceedings to determine the application for assessment. 8 The parties have prepared written submissions. It is not necessary to reproduce the detail contained therein. In substance, the plaintiffs say that there was error in the decision made as to the question of retainer and as to the application of the indemnity principle. Further, they say that the Costs Assessor lacked power to determine questions such as those of retainer. The defendants took issue with each of these arguments. 9 At the outset, it may be observed that during the course of the proceedings in the Equity Division, no challenge was made to the retainer had by Lincoln Smith & Company. The Costs Assessor had before him evidence of retainer of the firm by the directors of the Club (inter alia there were two facsimiles transmitted respectively on 23 October 1998 and 5 January 1999). There was material which revealed a relationship with the Club as to payment of the firm's costs. The material also established that the individual plaintiffs had a liability to the firm to pay its costs. It did not prove that the plaintiffs had no liability whatsoever to pay the firm its costs. 10 The court has been referred to a number of decided cases (including Angor Pty Ltd v Ilich Motor Co Pty Ltd & Anor (1992) 37 FCR 65 and Adams v London Improved Motor Coach Builders Ltd (1920) 1 KB 495). There was no issue as to what has been described as the indemnity principle. 11 It suffices to make general reference to some of the principles which emerge from the cases. Under an order for costs, the paying party is only obliged to pay such costs as the receiving party was primarily and potentially legally obliged to pay to his solicitor. There is an indemnity only in respect of the costs covered by the order. A receiving party cannot recover a sum in excess of the liability to his own solicitor. There can be co-existing obligations. The liability of the client is not excluded merely because there may be a third person to indemnify the client. It is necessary to prove that under no circumstances does the client have any liability to pay costs to his solicitors. 12 The plaintiffs bear the onus of satisfying the court as to a relevant matter of law which justifies the disturbing of the decisions made by the Costs Assessor. In the circumstances of this case, I am satisfied that this onus has been discharged. 13 This appeal can be disposed of without touching upon the vexed question of the jurisdiction or powers of a costs assessor. A finding that the individual plaintiffs had not retained the firm was simply not open on the material he had before him. It seems to me that the Costs Assessor has clearly misdirected himself. As it has not been argued, I leave aside the question of whether or not it was open to the defendants to raise the question of the retainer in the assessment. In my view, the decisions of the Costs Assessor which involved his dealing with questions of retainer and the application of the indemnity principle are erroneous. It seems to me, that he laboured under confusion. The errors justify the disturbing of the determination. 14 The questions of jurisdiction or power are of some complexity. A consideration of them involves the task of coming to terms with legislation which throws up a variety of problems. The questions have not been fully argued and are better left for another day. 15 The determination of the Costs Assessor is set aside. The application for assessment is remitted to the Costs Assessor for re-determination according to law. The defendants are to pay the costs of this appeal. ********** Last Modified: 09/26/2000 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.