New South Wales Supreme Court CITATION : Steve Watt Constructions v Formscan [2000] NSWSC 833 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 12099 of 1999 HEARING DATE(S) : 14 August 2000 JUDGMENT DATE : 24 August 2000 Steve Watt Constructions Pty Ltd (Plaintiff) PARTIES : v Formscan Pty Ltd (Defendant) JUDGMENT OF : Master Malpass LOWER COURT Costs Assessment JURISDICTION : LOWER COURT 90660 of 1999 FILE NUMBER(S) : LOWER COURT Mr J M Goodman JUDICIAL OFFICER : COUNSEL : Mr M Condon (Plaintiff) Mr J Bartos (Defendant) SOLICITORS : Gordon A Salier (Plaintiff) Colin Biggers & Paisley (Defendant) CATCHWORDS : Appeal from decision of Costs Assessor - fresh evidence - is an arbitrator a court or a tribunal - statutory assessment process (as opposed to old taxation regime) - considerations of what are fair and reasonable hourly rates of staff costs - costs - sufficiency of disclosure of reasoning process - exercise of the discretionary power had in respect of costs of the assessment. Commercial Arbitration Act 1984, s 34, s 34 (2). Legal Profession Act 1987, Pt 11, s 173, Pt 11 Div 6; Div 6 subdiv 1; s 202, Div 6 subdiv 3; LEGISLATION CITED : s 208F, s 208F (4), s 208G, s 208L, s 208M, s 208M (1) and (2), Sch 8. Legal Profession Regulation 1994, cl 26D. Australian Blue Metal Ltd v Hughes and Others (1970) 2 NSWR 119. Cachia v Hanes (1994) 179 CLR 403. CASES CITED : Kerridge & Anor v Foley & Anor (Street J, unreported, 19 August 1970). Madden v NSW Insurance Ministerial Corporation [1999] NSWSC 196. Turner v Pride (1999) NSWSC 850. Walton v McBride (1995) 36 NSWLR 440. DECISION : See paragraph 38. THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER MALPASS THURSDAY 24 AUGUST 2000 12099 of 1999 STEVE WATT CONSTRUCTIONS PTY LTD v FORMSCAN PTY LTD JUDGMENT 1 Disputes between the parties were referred to an Arbitrator for determination pursuant to the Commercial Arbitration Act 1984 (the 1984 Act). The arbitration involved about 8 days hearing time. The plaintiff's claim was successful in part only. The defendant's Cross-claim was unsuccessful. The Arbitrator (Mr Bryant) made an award in favour of the plaintiff in the sum of $216,507.21 plus interest. Further, he made an award that the defendant pay the costs of the plaintiff on a party/party basis. The award also provided that, if it was not otherwise agreed, the costs were to be taxed by the appropriate officer of the Supreme Court of New South Wales. 2 There was no agreement on costs. Proceedings were commenced in this Court by way of application for assessment of those costs and the application was referred to a Costs Assessor (Mr Goodman). He undertook the assessment task and received submissions. Mr Goodman made a determination. He has purported to give reasons for that determination (inter alia letters dated 28 July 1999 and 6 October 1999). 3 The costs claimed by the plaintiff were in the sum of $294,166.77. The Costs Assessor allowed costs in the sum of $119,013. 4 The plaintiff has sought to challenge that determination. It has sought relief pursuant to s 208L of the Legal Profession Act 1987 (the Act), which is restricted to a question of law. Also, relief has been sought pursuant to s 208M of the Act (which enables an application to be made for leave to appeal). 5 These proceedings were heard on 14 August 2000. The plaintiff sought to read two affidavits which deposed to material which had not been made available to the Costs Assessor. The defendant objected to the reading of the two affidavits. In the circumstances of this case, the tender of the affidavits was rejected. 6 For completeness, perhaps it should be mentioned that, in dealing with proceedings for relief under sections 208L and 208M (1) or (2), the court is performing an appellate function. It is not embarking on a fresh hearing. Also, it should be mentioned that the provisions of s 208L and s 208M do not contemplate the adducing of inter alia fresh evidence on either the hearing of an appeal under s 208L or the application for leave under s 208M. The provisions allow the receiving of inter alia fresh evidence where the hearing of the appeal leads to a re-determination (and it may be received in that re-determination) or where leave has been granted (and it may be received in that appeal which is by way of a new hearing). 7 At an early stage of the hearing, the court expressed concern as to whether or not the decision made by the Arbitrator fell within Division 6 (Assessment of costs) of Part 11 of the Act. The application for assessment had been made pursuant to s 202 (which may be found in Subdivision 1 of Division 6). This enables an application to be made only where the costs are payable as a result of an order made by a court or a tribunal. 8 The continuation of the hearing was stood down to enable counsel to carry out further research and obtain instructions on this matter. 9 When the hearing was resumed, both parties adopted the stance that the application was properly brought pursuant to s 202. However, little was said in support of this stance and the question was not fully argued. Largely, the supporting argument was propounded by the plaintiff. 10 There was reference to the provisions of s 34 (2) of the 1984 Act, and to provisions contained in Schedule 8 of the Act (Savings, transitional and other provisions) which state that a reference to the taxation of costs is to be taken to be a reference to the assessment of costs under Division 6 of Part 11. Further, it was said that an Arbitrator was a tribunal within the meaning of the Act. Apart from reference to the provisions of certain Victorian legislation, no authority was produced to support this proposition. 11 The Act does not define "a tribunal". "Tribunal" has a dictionary meaning which includes a court of justice and an adjudicative body. "Arbitrator" has a dictionary meaning of a person appointed to settle a dispute. On one approach an arbitrator may be seen as an individual to whom disputes may be referred for settlement, whereas a tribunal may be seen as a body established by statute to decide matters falling within its jurisdiction. 12 Section 34 enables the Arbitrator to tax or settle the amount of the costs to be paid. The statutory scheme (which was one that was in being prior to the enactment of the assessment process) envisages that if this is not done the costs are to be taxed (save for those cases which are to be dealt with in the District Court) in this Court. 13 Whilst I was left with the impression that the submissions were less than convincing, in the light of the approach taken by the parties, I continued with the hearing of the proceedings. In accordance with well established authority, I then proceeded to deal with the issues selected and argued by the parties. 14 Whatever view may be taken on the s 202 question, it is clear that the application for leave to appeal is misconceived. Section 208M enables an application for leave (and any consequential appeal) to be brought only to the court or tribunal that made the costs order ( Turner v Pride (1999) NSWSC 850). The relevant provision is subsection (2) and it is in the following terms:- "A party to an application 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." In the present case, relief under s 208M is not available in this Court. On any view, it is not the relevant court or tribunal. 15 I now turn to the questions argued in the appeal. These questions were treated as falling into four general categories. Counsel have prepared written submissions. These were supplemented by oral argument. 16 Before dealing separately with each of these categories, it may be helpful if some preliminary general observations are made. 17 The assessment process has replaced the old taxation regime. An application for assessment is not a proceeding in this Court. It is a creature of statute which was enacted to inter alia regulate the admission and practice of barristers and solicitors. It is regulated by the Act and the Legal Profession Regulation 1994 (the regulation). It should not be seen as akin to the old taxation regime. The relevant provisions that govern it contemplate a process that is different. Generally speaking, at best, cases decided in respect of the taxation regime are of guidance only. 18 The court is presently concerned only with applications which fall within Subdivision 3 of Division 6. In such cases, the assessment must be made bearing in mind the provisions of sections 208F and 208G. 19 Largely, section 208F contains provisions that are mandatory (including the "fair" and "reasonable" considerations). The Costs Assessor must consider whether or not it was reasonable to carry out the work to which the costs relate and what is a fair and reasonable amount of costs for the work concerned. He must determine the costs payable by assessing the amount of the costs that, in his opinion, is a fair and reasonable amount. Also the section confers a discretionary power in respect of the costs of assessment. 20 Section 208G identifies matters to which the Costs Assessor may have reference in assessing what is a fair and reasonable amount of costs. 21 The Costs Assessor had before him a prodigious body of material (including submissions). Apart from the detailed bill, he had detailed objections and a detailed reply to those objections. He was confronted with a task that was both unenviable and formidable. In his reasons, he has said that he took into account all of the material provided to him. 22 The Costs Assessor was engaged in assessing a large claim. His reasons reflect a view which could be described as seeing the bill as massively excessive and being rendered in respect of much work that was regarded as unnecessary. On the material he had, it was an approach he was entitled to take. The costs significantly exceeded the amount recovered in the arbitration. The application encompassed claims for work performed by the firm of solicitors which is usually regarded as falling within the province of counsel (some of which is not usually separately charged by counsel). There was a team of solicitors and counsel. Counsel had rendered fees for preparation as well as other work. The Costs Assessor was aware that counsel had come into the matter at relatively short notice. 23 Costs were claimed for work done in connection with the making of written submissions and in connection with the preparation of questions for cross-examination. In the case of the first of these two matters, a sum in the order of $20,000 was not allowed. In the case of the second of the two matters, a sum in the order of $7,200 was not allowed. In respect of each of these two matters, the claim was made for work done by both the firm of solicitors for the plaintiff and by counsel. It may be added that in the case of the second of the two matters, the bill claimed in part for work (described as preparing questions for cross-examination) done by a member of the team having the status of a clerk. The costs of the firm were calculated on an hourly rate. 24 Largely, the broad thrust of the objections by the defendant was that what was claimed was for work that was unnecessary and that charges were excessive. The decisions of the Costs Assessor made an allowance in part in respect of each of the two matters. In my view, in relation to these matters, the Costs Assessor made decisions which were open to him (whether or not there be any error in the expression of reasoning process). They were consistent with a proper application of the statutory provisions. I am not satisfied that there was any misconception or denial of natural justice or other error of law which justified the disturbing of his decisions. 25 The claimed costs contained a significant component for work performed by officers of the plaintiff itself (see items 481 and 482). Principally it was a claim made in respect of work performed by non-legal staff inter alia in preparation and assisting the lawyers (for staff hours). There was also a claim for costs and charges. It was for a total sum in the order of $60,000. There was objection to the whole of the claim. The stand was taken that they were not properly claimable and/or excessive. The claim was allowed in part in a modest sum. 26 Again, an attack has been made on the expressed reasoning process of the Costs Assessor. It seems to me that any complaint that can be made about that expression of reasoning process or any assertion of error of law is of no moment in the circumstances of this case. Even assuming that there was substance in the complaint, it would not justify disturbing the result that was reached. There were evidentiary deficiencies. The Costs Assessor made decisions as to what was fair and reasonable. In my view, the result that was reached was open to the Costs Assessor. Indeed, there is force in the submission made by the defendant that it was generous to the plaintiff. There has to be a real question as to whether a claim such as that made by the plaintiff in this case for staff hours is maintainable (either in whole or in part) under the assessment process. I take this no further as it has not been fully argued. In this case, the problem was presented to the Costs Assessor largely in the context of authority, which was in some respects conflicting, that preceded the enactment of the assessment process. It is an area where much may turn on the particular facts of each case. 27 I am not satisfied that what was done was other than consistent with having due regard to the statutory provisions. 28 The concept of "costs" has been largely unexplored. The Act provides a definition of "costs". It is an inclusive definition. The term is expressed to include fees, charges, disbursements, expenses and remuneration. The Act discloses an intention to deal with costs of providing legal services. Part 11 is headed "Legal fees and other costs". "Legal services" are defined to mean work done, or business transacted, in the capacity of a barrister or solicitor (s 173). 29 I should add that the court has been referred to a number of decided cases (including Cachia v Hanes (1994) 179 CLR 403; Australian Blue Metal Ltd v Hughes and Others (1970) 2 NSWR 119; Kerridge & Anor v Foley & Anor (Street J, unreported, 19 August 1970) and Walton v McBride (1995) 36 NSWLR 440). For present purposes, it is unnecessary to embark on any analysis of what was said and decided in those cases and what is now their present standing in the assessment context. 30 The Costs Assessor reduced the hourly rates charged by solicitors involved in the conduct of the plaintiff's case. It is said that he failed to give reasons for these decisions. 31 The hourly rates for Dr Doyle, Messrs Aiken and Huggins and Ms Fleck were reduced. In the case of Dr Doyle, it was from $360 per hour to $275 per hour. In the case of the employed solicitors it was from $230 per hour to $200 per hour. 32 In the application for assessment, there was issue between the parties on the question of hourly rates. The submissions made by the parties to the Costs Assessor clearly defined the nature and the ambit of the dispute. In my view any lack of expression of the reasoning process is of no significance in this case. His reasoning process emerges with sufficient clarity from the material. There can be no doubt that that the amounts allowed by him in respect of hourly rates were what he regarded as fair and reasonable (see inter alia Madden v NSW Insurance Ministerial Corporation [1999] NSWSC 196). He made decisions on questions of fact that were open to him. I am not satisfied that any case has been advanced for disturbing the decisions that he has made on these matters. 33 A challenge is made to the decisions made by the Costs Assessor in relation to the costs of the assessment process. A sum in the order of $5,000 is involved in this part of the dispute. The assessment saw a determination which differed markedly from the amount claimed in the application (it was reduced by much more than half). 34 This part of the case did not excite much argument. It was submitted there was a miscarriage of discretion (this was the discretion conferred by s 208F (4) ). It was said that it miscarried in circumstances when the plaintiff was obliged to file the application and where the defendant took many objections and made many submissions. 35 Section 208F (4) does not specify the criteria to be taken into account in exercising the discretionary power thereby conferred. In such a case, the discretion is to be exercised having regard to the relevant circumstances of the particular case then being assessed. 36 I do not accept the plaintiff's submission. I am not satisfied that the discretion was exercised otherwise than in accordance with the provisions of both the Act and the regulation (clause 26D). The clause does no more than identify matters to which the Costs Assessor may have regard. For completeness, I may add that he had regard to matter identified in that clause. In my view, the plaintiff has failed to demonstrate any basis justifying the disturbing of these decisions. 37 The plaintiff bears the onus of satisfying the court that there was error of law which justified the disturbing of the Costs Assessor's determination. In my view, that onus has not been discharged. Accordingly, the appeal must fail. 38 I dismiss the Summons. The plaintiff is to pay the costs of the Summons. Exhibits may be returned. ********** Last Modified: 09/27/2000 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.