O’Connor v Fitti [2000] NSWSC 540

New South Wales Supreme Court

CITATION : O'Connor v Fitti [2000] NSWSC 540 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 11911 of 1999 HEARING DATE(S) : 7-8 June 2000 JUDGMENT DATE : 16 June 2000

Clive Patrick O'Connor T/as Thomson Rich PARTIES : O'Connor (Plaintiff) v Bernardino Fitti (Defendant) JUDGMENT OF : Master Malpass

LOWER COURT Costs Assessment JURISDICTION : LOWER COURT 91631/96 FILE NUMBER(S) : LOWER COURT Mr P J McNally JUDICIAL OFFICER :

COUNSEL : Mr M K Condon (Plaintiff) Mr M L Brabazon (Defendant) SOLICITORS : Thomson Rich O'Connor (Plaintiff) Hickey Lawyers (Defendant) CATCHWORDS : Appeal from decision of costs assessor - assessment of costs in relation to a bill of costs - construction of costs agreement - disputed costs and function of costs assessor - interest, powers of the court where the application is remitted for re-determination and indemnity certificate. Legal Profession Act 1987, s 173, s 207, ss208A-208E, 208L, 208M, Sch 8 cl 45. LEGISLATION CITED : Suitors Fund Act 1951, s 6, s 6 (1B). Supreme Court Act 1970, s 121. Legal Profession Regulation 1994, cl 22A, cl 22A (1). CASES CITED : Turner v Pride (1999) NSWSC 850. DECISION : See paragraphs 34 and 42.

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

MASTER MALPASS

FRIDAY 16 JUNE 2000

11911 of 1999 CLIVE PATRICK O'CONNOR T/AS THOMSON RICH O'CONNOR v BERNARDINO FITTI JUDGMENT 1 The plaintiff is a solicitor. In 1992, he was retained to act by the defendant. The parties entered into a costs agreement which is constituted by a letter dated 25 May 1992. Thereafter, the plaintiff provided legal services which related to proceedings which were commenced in the Federal Court. 2 A number of Bills of Costs have been given to the defendant. Certain of them were paid without dispute. The present proceedings concern seven Bills of Costs which were rendered during the period between 25 February 1993 and 20 May 1994. 3 On 17 December 1996, the plaintiff made application to this Court for an assessment of the costs and disbursements claimed in the seven bills. The application was referred to a Costs Assessor (Mr McNally). A final determination of the assessment did not take place until 23 July 1999. 4 A preliminary determination had been made in relation to the Costs Agreement itself. A voluminous notice of objection was made. It provoked a voluminous reply. The Costs Assessor exercised powers pursuant to s 207 of the Legal Profession Act 1987 (the Act). The plaintiff responded to this action. There were submissions made by the parties. The Costs Assessor received Statutory Declarations. 5 The assessment presented the Costs Assessor with an onerous and burdensome task. He was left to grapple with a formidable body of material. It was an unenviable assignment. 6 There were objections to the profit costs claimed by the plaintiff in a sum totalling $152,631.69. The determination saw the profit costs being reduced by $148,418.12 (only $90,335.38 was allowed). The claim for disbursements was also reduced. There was a claim for interest on unpaid costs. The Costs Assessor did not allow any interest. 7 These proceedings were commenced by Summons. The plaintiff seeks relief pursuant to both sections 208L and 208M. 8 The hearing took place on 7 and 8 June 2000. It was an unusually lengthy affair. It was also an unenviable assignment. 9 A number of affidavits have been read. This process involved the court in dealing with numerous objections. A mountain of documentary material has been tendered. There has been very lengthy argument. 10 It is part of the plaintiff's case that the Costs Assessor has made a number of errors of law. After certain of these matters had been ventilated in argument, it became apparent that the plaintiff was entitled to relief and that it was inevitable that there would be a remitting of the matter for re-determination. In an endeavour to avoid the parties incurring the further expensive costs involved in a re-determination they were exhorted to explore the prospects of resolution by compromise. Although some attempt was made, no compromise was reached. 11 These proceedings can be disposed of without becoming too deeply enmeshed in the details of the dispute and without dealing with all of the many matters canvassed during the hearing. It suffices to briefly deal with just the few matters which are decisive in the determination of these proceedings. 12 There is a primary question which goes to the construction of the Costs Agreement. 13 Clause 1 of the Costs Agreement provides inter alia that "All work carried out will be charged at $225 per hour". The parties were at issue on the question of the proper construction of the agreement. In addition, the defendant challenged its validity. 14 On 4 August 1997, the Costs Assessor made a decision as to the proper construction of the agreement. The decision made and the reasons for the decision are as follows:- "A 'The agreement dated the 25th May, 1992 made between Clive Patrick O' Connor and Berardino Fitti shall apply to this proceeding in respect of the actual work done or legal services provided by the said Clive Patrick O' Connor and which required his skill and expertise. B All other work done or legal services provided shall be assessed on the basis of a fair and reasonable amount.' My reasons were: 1. As at the 25th May, 1992 you were a sole practitioner practising under the name of 'Thomson Rich O' Connor'. 2. I consider the hourly rate of $225.00 was applicable for work actually done by you which required your skill and expertise. 3. If it was intended the hourly rate of $225.00 was to apply to work done by your employees without regard to the qualifications or experience of those persons or the degree of difficulty of the work, the client should have been informed in writing and also advised the hourly rate would be computed by six minute units." 15 Neither party had contended for this construction. However, it did see the agreement as not being struck down as invalid. The defendant has not sought to disturb this preliminary determination. 16 In my view, this construction was erroneous. Legal services were in fact provided by both the plaintiff and employed solicitors. The plaintiff contends that it was intended to impose a charge for professional services at the rate of $225 per hour. It seems to me that this was what was had in mind. Accordingly, I conclude that it was intended that this charge be applicable to all legal services provided by legally qualified staff (not merely legal services provided by the plaintiff). Business efficacy supports this construction. One possible construction is that it was intended to apply to the work performed by all staff (including staff members who are not legally qualified). However, it seems to me, that this was not intended by the parties. 17 This decision has a significant impact on the assessment at large. It of itself would justify the remitting of the matter for re-determination. 18 There have been numerous instances in which the Costs Assessor has disallowed items which were not the subject of any dispute raised by the objections. There are numerous instances of items being reduced by an amount which exceeds what was put in dispute by the objections. Schedules have been prepared which demonstrate the detail of these complaints. 19 The Act draws a distinction between applications for assessment of costs in relation to "a bill of costs" (which is defined in s 173) and applications for assessment of costs that result from an order (made by a court or a tribunal). In Turner v Pride (1999) NSWSC 850, I drew attention to this distinction. In the present case, the court is dealing with an application in relation to "a bill of costs" (I wish to stress that the observations made in this judgment are restricted to such applications). Accordingly, the assessment process applicable in this case is to be found in Subdivision 2 (sections 208A-208E). 20 In Turner , I also adverted to the question of s 208A (2) imposing a limitation on what may be disallowed in cases where there is an application relating to "a bill of costs" (as opposed to applications that result from an order). 21 For present purposes, the relevant provisions of s 208A are as follows:- "Assessment of bills generally (1) When considering an application relating to a bill of costs, the costs assessor must consider: (a) whether or not it was reasonable to carry out the work to which the costs relate, and (b) whether or not the work was carried out in a reasonable manner, and (c) the fairness and reasonableness of the amount of the costs in relation to that work.