Reported Decision : 49 NSWLR 184 New South Wales Supreme Court CITATION : Ryan v Hansen [2000] NSWSC 354 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 12931/99 HEARING DATE(S) : 03/04/2000 JUDGMENT DATE : 4 May 2000 PARTIES : Peter John Ryan (Pl) Bruce William Hansen t/as Hansens Solicitors (Def) JUDGMENT OF : Kirby J LOWER COURT Local Court JURISDICTION : LOWER COURT 223/97 FILE NUMBER(S) : LOWER COURT S V Jackson LCM JUDICIAL OFFICER : COUNSEL : M J Walsh (Pl) P Cummings (Def) SOLICITORS : Wood Roberts Solicitors (Pl) Hansens Solicitors (Def) CATCHWORDS : Stated Case - appeal against Magistrate's decision - Legal Profession Act 1987 - power of costs assessors - whether negligence of solicitors can be raised before costs assessor - Anshun principle in context of a cross claim Legal Profession Act 1987 - ss 175, 182, 199, 203, 204, 206, 207, 208 Supreme Court Rules - Pt52 Hansard, 26 September 1993 at p3276 LEGISLATION CITED : Butterworths Costs Service - para 266 Oaths Act 1900 - Pt 5 Evidence Act 1995 - ss 4(1), 21 Contracts Review Act 1980 "Anshun Today" - 71 ALJ 934 Port of Melbourne Authority v Anshun Pty Ltd (1980-81) 147 CLR 589 Anthony Developments Pty Ltd v Marsden [1999] NSWSC 472 Attorney General for NSW v Kennedy Miller Television (1998) 43 NSWLR 729 Faustin Epeabaka v Minister for Immigration & Multicultural Affairs (1997) 150 ALR 397 Bryant v Commonwealth Bank of Australia (1995) 130 ALR 129 Tanning Research Laboratories v O'Brien (1989-90) 169 CLR 332 R v Brynes & Hopwood (1995) 183 CLR 501 CASES CITED : Willers v The Queen (1995) 125 FLR 221 Kennedy v Council of the Incorporated Law Institute of NSW (1939)13 ALJ 563 Ziems v The Prothonotary of the Supreme Court of NSW (1957) 97 CLR 297 Re Massey & Carey (1884) 24 Ch D 459 Re Windeyer, Fawl & Co: Ex parte Foley (1930) 31 SR 145 Silver v Consumer Claims Tribunal (1978) 2 NSWLR 313 Mason-Jones v Jones (1987) 11 NSWLR 583 Cachia v Isaacs (1985) 3 NSWLR 366 DECISION : Ref Para 85 THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION KIRBY J Thursday 4 May 2000 12931/99 - Peter John RYAN -v- Bruce William HANSEN t/as HANSENS SOLICITORS JUDGMENT 1 HIS HONOUR: This is an appeal by Mr Peter Ryan against a decision of Mr Stephen Jackson, Local Court Magistrate at Newcastle. Mr Jackson determined that a cross claim, which Mr Ryan wished to pursue against his former solicitors, Hansens Solicitors ("Hansens"), should be struck out. The Land and Environment Court Proceedings 2 Mr Ryan is a director of RFT Investments Pty Limited ("RFT Investments"). In late 1995 he approached Hansens in respect of a conveyancing transaction. An option had been acquired over land known as Lot 3, Tingara Drive, Whitebridge. A development application to the Lake Macquarie City Council was then lodged, seeking the Council's approval to subdivide the land. 3 The Council, however, did not deal with the application. Its failure to give approval within a specified period was, under the relevant legislation, deemed to be a refusal of the application, providing the aggrieved party with the right of appeal. On 29 February 1996, an appeal was lodged to the Land and Environment Court. The notice of appeal was prepared by Hansens. The appellant named was Mr Peter Ryan. The Court fixed a hearing in late August 1996. It was expected to occupy three days. However, on 23 August 1996 the appeal was withdrawn. 4 The Lake Macquarie City Council then filed a notice of motion, seeking costs against Mr Ryan. The motion was returnable on 5 September 1996. On that day Hansens, on behalf of the appellant, sought an adjournment. The adjournment was granted, subject to an order that Mr Ryan pay the Council $200 costs. 5 The motion next came before the Court on 13 September 1996. On that day the Court made an order that Mr Ryan pay the costs of the Lake Macquarie City Council, assessed at $12,000. 6 Hansens rendered an account to Mr Ryan for the work they had performed. The accounts totalled $11,469.50. Mr Ryan refused to pay. The Cost Recovery Action by Hansens 7 On 13 February 1997, Hansens issued a statement of liquidated claim in the Local Court at Newcastle. It sought $11,469.50, plus costs. Mr Ryan retained Messrs Wood Roberts, solicitors of Mayfield, in respect of those proceedings. On 3 April 1997, his solicitors lodged, on his behalf, verified grounds of defence, and a cross claim. The defence drew attention to the provisions of the Legal Profession Act, 1987 ("the Act"). No costs agreement had been furnished by Hansens to Mr Ryan, contrary to s175 of the Act. Accordingly, proceedings could not be maintained until there had been an assessment of costs in accordance with Division 6 of the Act (s182(2)). 8 The cross claim asserted that Hansens had been negligent "in and about the manner of conducting the proceedings in the Land and Environment Court". The particulars of negligence were as follows: "(a) Commencing proceedings in the name of the defendant personally although the plaintiff knew that it was the company who had an interest in the land and development application. (b) Maintaining the proceedings in the Land and Environment Court in the name of the defendant personally notwithstanding the plaintiff's knowledge as to the involvement of the company. (c) Failing to generally conduct the proceedings in the Land and Environment Court with all due care, skill and consideration. (d) Failing to instruct the Barrister nominated by the company. (e) Failing to order and/or utilise expert reports necessary for the proper conduct of the proceedings in the Land and Environment Court." 9 Hansens plainly recognised the force of Mr Ryan's objection based upon the Legal Profession Act. They responded by preparing a bill of costs in the form required by the Act. Thereafter, they applied to the Proper Officer of the Supreme Court for an assessment of those costs (s199). The Proper Officer referred that assessment to an assessor appointed under the Act (cf s208S). The assessor was Mr Patrick Wills, solicitor of Maitland. The Act required that Mr Peter Ryan should be served with a copy of the bill of costs and the application, and no doubt that was done (cf s204). 10 Mr Wills wrote to Mr Ryan (care of his solicitors, Messrs Wood Roberts) on 22 August 1997. He sought submissions on the bill of costs, and the production of relevant documents. Mr Ryan did not respond. Mr Wills wrote again on 25 November 1997. He fixed a deadline of 2 December 1997, after which date he proposed to make his assessment. Mr Wills, in his letter, said this: "However, I shall postpone such action until Tuesday 2 December 1997 to provide you with an opportunity to respond to this letter and to my previous Notices. As you know, you are also entitled to prepare and forward to me Objections to the Applicant's Bills of Costs, however, any such Objections should reach me by no later than 2 December next." 11 At the same time, Mr Wills drew Mr Ryan's attention to the provisions of s207(5) of the Act. That section gave him the power to deal with the assessment upon the basis of information which had been provided. 12 Surprisingly, Mr Ryan again failed to respond. Mr Mills, in these circumstances, made a determination on 9 December 1997. He issued a certificate under s208J, which included the following: "The application is determined by substituting for the disputed costs as a fair and reasonable amount of costs to be paid to the practitioner the sum of $11,084.56 …" 13 The Legal Profession Act, 1987, makes the following provision in respect of such certificates: "s208J(3) In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs." 14 Hansens, therefore, abandoned their previous action. Instead, the solicitors filed the certificate in the Local Court. Mr Ryan, again represented by Messrs Wood Roberts, filed an amended notice of cross claim. The cross claim was an elaboration upon the previous cross claim. It included the following: "6. The plaintiff thereby and otherwise conducted the appeal proceedings in the Land and Environment Court negligently and on 23rd August, 1996 incorrectly and carelessly advised the defendant that if he then withdrew the appeal no costs orders would be made against him, as a consequence of which an order was made on 13th September, 1996 against the defendant himself in the Land and Environment Court that the defendant pay the legal costs of Lake Macquarie City Council in the sum of $200.00 and on 27th September, 1996 a further order was made that the defendant pay the costs of Lake Macquarie City Council in the additional sum of $12,000.00." 15 The particulars of negligence were as follows: "PARTICULARS OF NEGLIGENCE a. Commencing the appeal proceedings in the name of the defendant personally although instructed otherwise and despite the fact that the plaintiff knew that it was only the company and/or Palmer Bruyn and Parker who had an interest in the land and/or the owner's consent to make the development application and thus to bring the appeal. b. Maintaining the proceedings in the Land and Environment Court in the name of the defendant personally notwithstanding the plaintiff's knowledge as to the involvement of the company and the defendant's instructions being given, to the plaintiff's knowledge as agent for the company. c. Failing to generally conduct the proceedings in the Land and Environment Court with all due care, skill and consideration, including failure to comply with the Land and Environment Court Rules requiring the filing and service of reports and by not requiring the attendance at Court for cross examination of Lake Macquarie City Council's witnesses who had prepared, filed and served reports intended to be used as evidence in chief in the appeal. d. Consenting to a hearing date upon which the Plaintiff knew that the Defendant's Barrister, Peter Tomasetti was not available. e. Failing to instruct the Barrister nominated by the company of any other Barrister to appear at the hearing of the appeal. f. Failing to order file and/or serve expert reports necessary for the proper conduct of the proceedings in the Land and Environment Court in accordance with the Rules and Practice Directions then in force in that Court. g. Failing to act on the advice given by Barrister Peter Tomasetti. h. Advising the defendant on 23rd August, 1996 that if he then discontinued the appeal he would not suffer an order for costs against him whereas Part 11 Rule 5 of the Land and Environment Court Rules given the Court a discretion to order costs in favour of the other party which discretion was then inevitably to be exercised as notice of the withdrawal was communicated on the last business day before the appeal was fixed for a three day hearing. i. Failing to notify the defendant of the filing of a Notice of Motion by Lake Macquarie City Council seeking costs in the appeal, failing to obtain instructions on such motion and agreeing without instructions to the adjournment of such motion on 13th September 1996 with an order for costs in the sum of $200.00 against the Defendant. j. Failing to inform the Defendant of the listing of the said costs motion on 27th September, 1996 until shortly before the hearing of such motion thereby depriving the Defendant of a reasonable opportunity to consider same, take advice and to issue appropriate instructions thereon." 16 Mr Ryan claimed "damages" of $23,284.56, together with interest and costs. That very specific sum was made up of the amounts which Mr Ryan had been ordered to pay to Lake Macquarie City Council by the Land and Environment Court ($200 and $12,000 respectively), as well as the costs assessed by Mr Wills ($11,084.56). 17 Hansens filed a defence to the cross claim. The defence included an assertion that Mr Ryan was estopped from pursuing the cross claim (Port of Melbourne Authority v Anshun Pty Limited (1980-81) 147 CLR 589). The defence to the cross claim included the following paragraph: "13. By reason of the filing of the certificate in Newcastle local Court the defendant/cross claimant is estopped from further prosecuting his cross claim on the grounds that the facts, matters and circumstances pleaded and the relief sought in the cross claim are matters that are res judicata having properly belonged to the subject of the litigation in the Cost Assessment proceedings and which the defendant/cross claimant, exercising reasonable diligence, might have brought forward in the Cost Assessment proceedings." 18 When the matter came before the Local Court, the parties agreed to deal with estoppel argument as a preliminary issue. In a careful judgment, the learned Magistrate determined that issue in favour of the solicitors. He said this: (p12) "I am satisfied that the issues to be resolved in the present cross claim could have been and should have been resolved in the proceedings brought before the Costs Assessor by Hansen. At the risk of being repetitious, Hansen has obtained a certificate from the costs assessor and has registered it and it has become a judgment of this court. To allow Ryan to now proceed with his cross claim would be to put him in a position where, if he succeeds, he will have a judgment which conflicts with an earlier judgment. While that earlier judgment was obtained as a result of two administrative processes - firstly the costs assessment process and secondly the registration of the certificate process - there was a capacity for the person conducting the first administrative process to consider and deal effectively with all of the issues that Ryan now seeks to ventilate. Ryan's conduct has worked against him in so far as he has ignored the earlier proceedings and done nothing. He cannot be allowed to throw doubt on valid legal processes by his inaction in these circumstances. In my opinion the estoppel principle operates to prevent him proceeding further with his cross claim." 19 The cross claim by Mr Ryan against Hansens was therefore struck out. The Contentions of the Parties 20 Mr Ryan, through his counsel, attacks the conclusion of the learned Magistrate that "the issues to be resolved in the present cross claim could and should have been resolved in the proceedings before the costs assessor by Hansen". The cross claim is a claim in negligence. Its determination requires a hearing, sworn evidence, cross examination, experts, all matters utterly foreign to a costs assessment, and matters beyond a costs assessor's power. 21 Hansens, through their counsel, asserts that there was power. The assessor could deal with each issue raised by the cross claim. In helpful written submissions, counsel added: (p8) "It is conceded that Costs Assessors in practice may be reluctant to embark upon such a procedure and, indeed, it may even be suggested that it would be rare to see a Costs Assessor do so. However, in principle, there is no impediment to a Costs Assessor embarking upon this process if that is how he chose to determine issues raised for his consideration pursuant to Section 208P. Unless the Costs Assessor had these powers to receive evidence then Sections 208L and 208M of the Act are substantially meaningless and, indeed, the whole of the system whereby the entitlement to Solicitor/Client costs and an indemnity in respect of third party costs is determined by a specialised streamline procedure established by parliament, is emasculated." 22 Hansens assert that the matters raised by the cross claim were "so relevant to the subject matter of the" costs assessment "that it would have been unreasonable not to rely on (them)…" (Anshun at p602/3). Counsel, in the same submissions, beguilingly referred to my own words in Anthony Developments Pty Limited v Marsden [1999] NSWSC 472 at pp3-4, referring to the Anshun principle: "The principle rests upon the foundation of two ideas. First, there is the aspect of fairness and efficiency. A party should bring before the Court its whole case. Secondly, there is the aspect of consistency. If a party's case comes before the Court piecemeal, there is the danger that any judgment given in the first proceedings will conflict with that in the second." The Second Reading Speech 23 What, then, are the powers of a costs assessor? The system of taxing a bill of costs before a taxing master (Pt 52 Supreme Court Rules) was replaced on 1 July 1994 by a system of costs assessors, drawn from the profession. The assessors are appointed by the Chief Justice (s208S(1)). An assessor must be a person who is a barrister or a solicitor of at least five years standing (Schedule 7). The changes were introduced through amendments to the Legal Profession Act, 1987. When introducing the changes, the Attorney General, the Hon J P Hannaford, identified the aim as the delivery of a "cheap and efficient system of reviewing accounts" (Hansard, 16 September 1993 at p3276). The Attorney General said this: "Division 6 introduces a new system of assessment to replace taxation of costs. There are a number of problems with the system of taxation. The taxation process in New South Wales is overly formal, legalistic and complex." 24 The Attorney added: (at p3277) "The system is also adversarial, requiring an application to the court and often representation by a solicitor to seek taxation of costs. The system is unnecessarily complex and artificial with court officials spending lengthy periods going through piles of documents to determine a 'winner' and 'loser' on the issue of what is a fair bill for service." 25 Mr Hannaford then said this: (at p3277) "Clearly, what is needed is a faster, easier and cheaper system of review of bills of costs. It may not be possible to achieve this by reform of the taxation process which is heavily based on an adversarial approach." 26 The Attorney General described how he saw the costs assessors performing their function: (p3277) "The key element of the proposed assessment scheme is assessment of the fair and reasonable costs having regard to all the circumstances of the legal service. The matters for assessors to consider in determining the fair and reasonable costs are set out at new sections 208A and 208B. Assessment is available to a client as against a practitioner and, by operation of new section 200, as between practitioners. The assessor will deal mainly with documents, determining whether they show that the amounts charged are commensurate with the services received. The assessor may require the parties to lodge additional information or to appear in person to explain any matters which are not readily available, or are not clear, from the documents." 27 The Costs Assessors' Rules Committee was established as required by s208R(1). It produced a bulletin containing guidelines for assessors. The bulletin included the following: (Butterworths Costs Service para 266) "A. The new costs assessment process is designed to be 'paper driven' and telephone contact should only be made in exceptional circumstances. I. An early identification of these items of costs and disbursements not in dispute should occur and be notified to the assessor, who should be requested by consent to issue an interim certificate. Any such failure or delay may become important in relation to payment of costs of the assessment. J. A costs assessor is to determine the costs payable by assessing the amount of the costs that is fair and reasonable. It is in the interest of parties and assessors that material is submitted to each other which is helpful and straight forward and that submissions are only directed to issues in dispute." The Powers of Costs Assessors Under the Act 28 Turning to the Act, the powers given to costs assessors are defined somewhat more broadly. An application is made, in accordance with a prescribed form, to have costs assessed (s203(1)). The application must authorise access to all documents by whomsoever held (whether solicitor, barrister or client). The application is then referred to a costs assessor, who may require a party (whether solicitor, barrister or client) to produce all relevant documents (s207(1)). Further, the assessor may require further particulars to be furnished by those in dispute (s207(2)). He or she may even require such particulars to be verified by statutory declaration (s207(3)). 29 Before determining an application, the assessor is obliged to give each of the parties the opportunity to make written submissions (s208(1)(a)). The assessor is then obliged to consider those submissions (s208(1)(b)). The Act also makes the following provision: "s208(2) In considering an application, a costs assessor is not bound by rules of evidence and may inform himself or herself on any matter in such manner as he or she thinks fit." 30 There is no requirement for a hearing. The rules of natural justice are met, first, by the obligation to provide the parties with the opportunity to make written submissions in relation to the application (s208(1)(a)), which the assessor must consider, and, secondly, by the requirement that the assessor should have no interest in the application (s206(2)). 31 Counsel for Hansens suggested that there was the power to take sworn evidence. No such power appears in the Act (cf Oaths Act 1900, Pt 5). The power arose, according to his argument, because an assessor performs a function of the Supreme Court of New South Wales. The assessment process can aptly be described as "proceedings" before the Supreme Court. It is, therefore, subject to the provisions of the Evidence Act, 1995, where evidence may be taken on oath (s21). 32 However, the power given to the Chief Justice to appoint assessors does not make an assessor, once appointed, part of the Supreme Court. Indeed, the Act (s208S(4)) expressly provides that assessors are not officers of the court when acting as costs assessors. The submission also overlooks s208(2). The costs assessor may well be performing a judicial function (cf Handley JA in Attorney General for New South Wales v Kennedy Miller Television (1998) 43 NSWLR 729 at 739). However, in performing that function, they are not part of the Supreme Court. The Evidence Act 1995 has no application (s4(1); Dictionary definition "NSW Court"; cf Faustin Epeabaka v Minister for Immigration and Multicultural Affairs (1997) 150 ALR 397). 33 The task of a costs assessor is defined by s208A which is in these terms: "s208A 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. (2) A costs assessor is to determine the application by confirming the bill of costs or, if the assessor is satisfied that the disputed costs are unfair or unreasonable, by substituting for the amount of the costs an amount that, in his or her opinion, is a fair and reasonable amount." 34 In determining "what is a fair and reasonable amount of costs", the assessor may have regard to a number of matters, including the following: "s208B(e) the skill, labour and responsibility displayed on the part of the barrister or solicitor responsible for the matter, (f) the instructions and whether the work done was within the scope of the instructions, (g) the complexity, novelty or difficulty of the matter." 35 Costs assessors are, nonetheless, called upon to deal with issues which one might ordinarily expect to be resolved by evidence. Although not relevant in this case, a costs assessor may determine that a costs agreement is unjust in the circumstances. He or she may do so by having regard to the sorts of issues that arise under the Contracts Review Act, 1980, namely: "s208D(2)(b) the relative bargaining power of the parties, and (c) whether or not, at the time the agreement was made its provisions were the subject of negotiation, and (f) whether or not any party to the agreement was reasonably able to protect his or her interests because of his or her age or physical or mental condition, and (g) the relative economic circumstances, educational background and literacy of the parties to the agreement and of any person who represented any of the parties to the agreement." 36 The costs assessor, therefore, is given power to disallow costs claimed by a solicitor or a barrister in the bill of costs. An assessor is also given power to require a lawyer to reimburse his client in respect of an order that may have been made against his client by a court or tribunal that he or she should pay costs. The following provisions were the focus of much of the argument before this Court: "s208P Liability of barrister or solicitor for costs (1) A costs assessor may act as set out in subsection (2) if it appears to the costs assessor that costs have been incurred improperly or without reasonable cause, or have been wasted by undue delay or by any other misconduct or default. (2) The costs assessor may in the determination: (a) disallow the costs as between the barrister or solicitor and the barrister's or solicitor's client, and (b) direct the barrister or solicitor to repay to the client costs which the client has been ordered by a court or a tribunal to pay to any other party, and (c) direct the barrister or solicitor to indemnify any party other than the client against costs payable by the party indemnified." 37 However, again the Act makes it clear that the issue is to be resolved by submissions, rather than sworn evidence. The assessor is obliged, in such circumstances, to observe the following requirements: "s208P(3) Before taking action under this section, the costs assessor must given notice of the proposed action to the barrister or solicitor and the client and give them a reasonable opportunity to make written submissions in relation to the proposed action. (4) The costs assessor must give due consideration to any submissions so made." 38 Accordingly, there is, in my opinion, no power to take sworn evidence, and thereby resolve conflicts in the evidence, as would a court. On important issues the costs assessor can, no doubt, seek particulars, and require verification (s207(2) and (3)). However, ultimately he or she must determine any factual issue on the documents "in much the same way as Magistrates do in the Small Claims division of the Local Court and Judicial Registrars do in interim applications in the Family Court …" (written submissions Hansens, 5 April 2000, p8). 39 Such an interpretation is entirely consistent with the procedure which the Attorney General described in 1993 in the Second Reading Speech. The Anshun Principle 40 The learned Magistrate, in the passage extracted, stated his opinion that the issues in the cross claim "could and should" have been brought before the costs assessor. He added: (p12/13) "… so in this matter I do not think it necessary that I find that Ryan is estopped under the Anshun principle or merely because of what is referred to as issue estoppel. But if in reality it is the Anshun principle that applies, it seems that I have to consider special circumstances. I am not satisfied that there are any special circumstances of which Ryan can take advantage." 41 The use of the word "could" is, of course, a reference to power. The Magistrate is asserting that the costs assessor had the power to deal with each of the grievances Mr Ryan sought to raise in the cross claim. The reference to "should" is a reference to convenience and policy, where there may be alternatives. It is convenient that such issues should have been raised. 42 The distinction is of some importance in the context of a cross claim. If the costs assessor has the power to deal with an issue, and that issue is relevant as a defence to the costs which are claimed, the issue should be raised before the costs assessor. However, different considerations may arise in the context of a cross claim. In Anshun Gibbs CJ, Mason and Aickin JJ said this: (at p600) "To require that the defendant always raise his cross-claim or set-off at the first available time could cause great inconvenience." 43 Their Honours' formulation of the principle recognised that, in some circumstances, a party may justifiably refrain from raising an issue in the first proceedings. Gibbs CJ, Mason and Aickin JJ said this: (at p602/603) "In this situation we would prefer o say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few." 44 Their Honours added: (at p603) "It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment." 45 In Bryant v Commonwealth Bank of Australia (1995) 130 ALR 129, the Court (Beaumont, Wilcox and Moore JJ) referred to certain comments made by Brennan and Dawson JJ in Tanning Research Laboratories v O'Brien (1989-90) 169 CLR 332, relevant to the application of the Anshun principle to a cross claim. They said this: (at p 139) "It is true that, in Tanning Research Laboratories at 346, Brennan and Dawson JJ stated that the Anshun principle will ordinarily not apply to cross-claims. They made an exception of cases where the relief claimed in the second proceedings is inconsistent with the judgment in the first. In making this distinction, their Honours may have had in mind a situation, such as the one before them in that case, where the cross-claim depended on facts remote from those of the principal claim. Questions of substantive degree may be involved; and in contrast to defences, many cross-claims may have little or no connection with the principal claim in the action; there may be no more than an identicality of parties. Where that is so, there may be no policy justification for forcing defendants to litigate their claims as cross-claims rather than as principal claims in separate actions in the forum of their choice." 46 The Court then applied that test to the facts before them. They said this: (at p 139) "But, where, as here, a defendant's claim is intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time; thereby minimising costs and avoiding the possibility of inconsistent judgments." 47 Justice K R Handley, in Anshun Today (71 ALJ 934) saw Bryant as a moderation of the Anshun test. He said this: (at p938) "In Anshun , the High Court rejected the Kilbrandon test in Yat Tung that additional claims that 'could and therefore should' have been litigated in the first suit will be barred, but held that claims that would result in inconsistent judgments will be barred. Between these two extremes we have the test of reasonableness based on the relevancy of the omitted claims to the subject matter of the first suit. The test is whether 'it would be expected' having regard to the nature and subject matter of the first suit that the additional claim would have been raised in that suit." 48 His HHHHHHonour added: (at p938) "The principle that has been applied by the Federal Court in Bryant v Commonwealth Bank and Ling v Commonwealth (Ibid at 274-275) is whether the additional claim arises out of substantially the same facts. If so, the later claim will be barred as in Bryant , if not, it will not, as in Ling. This is a useful test because it is easy to apply, and because it is directly related to the principles of private right and public convenience which undergird the res judicata doctrine. In so far as the claims have a common substratum of fact, there will be duplication in the use of court time and in the costs incurred by the parties. In so far as the new claims raise additional facts, there will be no such duplication. To that extent the defendant will not be vexed twice for the same cause, and litigation on the same cause will not be prolonged." The Issues Before the Costs Assessor 49 A costs assessor obviously had no jurisdiction to hear a cross claim based upon negligence, or to award damages. However, the High Court (in Anshun) emphasised the need to look at the substance of the issues raised in the later proceedings rather than the form (cf Bryant v Commonwealth Bank, supra, p 139). 50 Mr Ryan certainly asserted that the appellant should have been the company rather than himself. It is unclear from the pleadings whether he also asserted that Hansens' client was RPT Investments, not himself. If he was making that claim, it could have been raised before the assessor. It is implicit in the assessor's task that he, or she, must determine that there existed, relevantly, a solicitor/client relationship between the parties to the bill. The certificate of Mr Wills, which was then registered as a judgment, presupposes such a relationship. Were the cross claim pursued, and that issue ventilated, there is the risk of a finding which contradicts that in the costs assessor's certificate. 51 Now, Mr Ryan's complaint in the cross claim does not depend upon an assertion that RPT Investments was the client. He may have been the client, responsible to the solicitor for their costs, and yet given instructions to appeal in the name of the company. 52 Did the costs assessor have jurisdiction to determine the issues of negligence raised by Mr Ryan in the cross claim? The answer turns on the proper construction of s208P (supra p 15). The costs assessor may disallow costs claimed by the solicitor against the client, either upon the basis of fairness and reasonableness (s208A(1)), or upon being satisfied (s208P(1)): "… that costs have been incurred improperly or without reasonable cause, or have been wasted by undue delay or by any other misconduct or default." 53 In such circumstances, the assessor may also direct the solicitor to repay to the client costs which the client has been ordered to pay another party by a court (s208P(2)(b). 54 Section 208P contemplates two situations. Either may cause an assessor to disallow costs, or direct the solicitors to shoulder the client's liability to pay another party's costs. The two situations are these: · First, where costs have been incurred improperly and without reasonable cause. · Secondly, where costs have been wasted, and such waste has come about in one of three ways. Either by undue delay or by any other misconduct, or by default on the part of the solicitor. 55 The terms of s208P suggest something more than mere negligence. To characterise something as improper suggests conduct inconsistent with the proper discharge of a person's duties, obligations and responsibilities (R v Brynes & Hopwood (1995) 183 CLR 501; Willers v The Queen (1995) 125 FLR 221 at 225). The first category (costs incurred improperly and without reasonable cause) would typically arise where there is over-servicing, which is not Mr Ryan's case. Misconduct, likewise, suggests behaviour that reflects gravely upon a lawyer's character or capacity (cf Kennedy v Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563; Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279). 56 However, the concept of impropriety, in the context of costs, has been given a somewhat broader definition. In Re Massey & Carey (1884) 24 Ch. D. 459, Messrs Massey & Carey acted as the solicitors for Mr Wood, himself a solicitor. Mr Wood had been named defendant in an action. The plaintiffs filed a reply to the statement of defence. A copy was furnished to Mr Wood. He did not thereafter communicate with his solicitors. In the meantime the time for rejoinder had passed. Counsel advised that a rejoinder should be filed. An application was made to file such a document out of time. The affidavit in support by the solicitors stated that the failure was due to "inadvertence". Later the solicitors prepared a bill of costs. It included the costs of the application. The Registrar disallowed such costs. The solicitors appealed to the Court of Appeal. The headnote is instructive. It is in these terms: "The Taxing Master in taxing a bill of costs between a solicitor and his client has power to disallow the costs of proceedings in an action conducted by the solicitor which were occasioned by the negligence or ignorance of the solicitor. But if the negligence goes to the loss of the whole action, he ought not to disallow them, but to leave the client to bring an action for negligence against the solicitor." 57 The source of that statement is the judgment of Cotton LJ where he said this: (at p642) "Probably at Common Law if the objection was that the whole action had failed by reason of the negligence of the solicitor that would be considered a question proper to be decided not by the Master but in an action by the client for negligence." 58 Cotton LJ added: (at p642) "…for both at Common Law and in Chancery the Taxing Master will entertain the objection that a certain step in the action would not have been necessary if the solicitor had done his duty in the ordinary way, and would hold that the costs of such a step were not properly chargeable to the client. No doubt in the case of Matchett v Parkes (9 M & W 767, 768) Baron Parke said, 'The Master had certainly no authority to entertain the question of negligence; that is a matter for the consideration of a jury.' But any expression of a Judge must be taken with reference to the facts of the case before him, and in that case it was not a question of particular steps in the action, but the whole action had been rendered useless to the client by the negligence of his solicitor. Therefore it was a question which ought properly to be left to a jury in an action. In the present case I am of opinion that the Registrar had power to disallow, and was right in disallowing, the items in question." 59 The reasons provided by Bowen LJ were similar. He said this: (at p463/464) "He seems to me to have been right in disallowing these items. It is true that at Common Law the Taxing Master has not the power to decide the question of negligence in all cases. If the negligence goes to the loss of the whole action he cannot entertain the question; but if it relates only to certain proceedings in the action he can. Otherwise the unfortunate result would be that if there was a question as to the propriety of a particular step in the action, as to which no man is better able to decide than the Taxing Master, you place the client in the position that he would have to pay the charge and then bring an action to get it back from the solicitor. It seems to me that the Taxing Master has the power to decide, and that he ought to decide such questions without prejudice to the right of the client to bring an action." 60 Fry LJ made the following statement, which has been taken up in later cases, and which gives definition to the word "improper": (at p.464) "To my mind it is very clear that the Taxing Master has power to decide whether any particular items charged are proper, and to disallow them if they are improper. It is equally clear that no item can be proper which is due to the negligence or ignorance of the solicitor. Therefore, the only question is, are these items proper charges, or do they arise from the negligence of the solicitor?" 61 In Re Windeyer, Fawl & Co: Ex parte Foley (1930) 31 SR 145, the Court (Street CJ, Innes and Halse Rogers JJ) considered a claim by a solicitor, Mr Windeyer, against his client. Expenditure had been incurred as a consequence of "bad advice" given by the solicitor. Mr Windeyer acted for Mrs Foley in a divorce. Mr Foley, in his defence, made serious accusations against his wife. The accusations concerned persons resident in Batavia. To rebut the allegations, Mr Windeyer obtained an order to take evidence on commission in Batavia. The husband responded by stating that he could not afford to travel to Batavia. He instead withdrew the allegations. Mr Windeyer, in these circumstances, warned his client that the cost of travelling to Batavia to take the evidence may not be recoverable. He nonetheless advised Mrs Foley that it was necessary that he should go. 62 The Prothonotary disallowed the costs of Mr Windeyer's visit to Batavia. He said they were unnecessary and improperly incurred. Street CJ (with whom other members of the Court agreed), upheld that ruling, saying this: (at p149) "It is a well recognized principle in taxations between party and party that only such costs can be allowed as are necessary or proper for the attainment of justice or the protection of the rights of the party by whom they were incurred; and it is an equally well recognized principle in the taxation of costs between solicitor and client that, in the absence of special circumstances, a solicitor cannot charge for work which is useless towards accomplishing the object his client has in view." 63 Street CJ added: (at p151) "That brings me to what in my opinion is the vital question in the matter, and that is whether the warning given to Mrs Foley and Mrs Larkin by Mr Windeyer was vitiated by what must be taken to be the bad advice that he gave them. I think that it was. It was his duty to give his client advice and protection against unnecessary expense. If he had contented himself with warning her of the risk and had left it to her to decide, the position might have been different; but it is apparent that she looked to him for advice and guidance in the matter, and I think that by advising her that his personal attendance on the commission was necessary he neutralized the effect of the warning that he gave her, and that he cannot now rely upon it as a justification for the expenditure." 64 See also Rath J in Silver v Consumer Claims Tribunal (1978) 2 NSWLR 313 at 322. 65 In Mason-Jones v Jones (1987) 11 NSWLR 583, a situation arose which has some parallels with the present case. The facts are complicated. The plaintiff, Mr Mason-Jones, was a solicitor. He acted for Mrs Shirley Jones on the conveyance of a home unit. He made a number of enquiries and thereafter arranged for the exchange of contracts. A problem then emerged in respect of the drainage system. The conveyance ultimately did not proceed. The solicitor ceased to act. He rendered an account. Mrs Jones sought taxation of the bill of costs under Pt 52 of the Supreme Court Rules. 66 In the meantime, Mrs Jones made a complaint to the Consumer Claims Tribunal. The solicitor was named as the respondent. She asserted that he had been negligent, in that he had failed to advise her as to the presence of certain valves in the drainage diagram. The solicitor unsuccessfully sought to have the proceedings in the Consumer Claims Tribunal dismissed. 67 Before those proceedings had been concluded, however, the taxing officer in the Supreme Court notified the parties that he would, in accordance with the rules, tax the bill in the absence of the parties unless there was a request for an appointment by a nominated date. One gathers that no such request was made. The taxing officer then certified the bill. Later Mrs Jones unsuccessfully sought to have the certificate of taxation set aside. The Master directed judgment for the solicitor. 68 Mrs Jones then proceeded with her action before the Consumer Claims Tribunal. Yeldham J summarised what occurred in these words: (at p588/589) "Judgment was entered in this Court on 17 November, 1986 for the amount set out in the certificate of taxation, after the plaintiff's bill of costs had been taxed in accordance with the Supreme Court Rules . Subsequently a decision of a Consumer Claims Tribunal purported to order that the bulk of the amount for which judgment was entered 'is not owing to' the person who obtained the judgment in this Court. This conclusion was based upon a finding that the solicitor was negligent." 69 His Honour then said this: (at p589) "…there is no doubt that the question of any negligence on the part of the plaintiff could and should have been raised before the taxing officer: Re Massey and Carey (1884) 26 Ch D 459; Silver v Consumer Claims Tribunal [1978] 2 NSWLR 313 at 321-322; Cachia v Isaacs (1985) 3 NSWLR 366 at 371, 376 ff." 70 The judgment obtained by Hansens in this case is not necessarily inconsistent with the maintenance of an action for negligence against such solicitors. A solicitor, although negligent, will be entitled to costs in certain circumstances. The relevant principle was stated by the President (Kirby P) in Cachia v Isaacs (1985) 3 NSWLR 366 at 371: "The result of the authorities (which are reviewed by Hope JA) and of the principles of contract law of which this is but a special species is that a solicitor, who has been found to be negligent, may nonetheless recover from his client those costs which are severable, untainted by negligence and which relate to matters distinct from those upon which the solicitor has been found negligent. He may not recover fees in respect of the very proceedings in which he has been found negligent, unless he can show (the onus being on him) that, despite the negligence, some real advantage has accrued to the client from those services, or some of them, which would render it unjust for the client to escape liability for those fees or part of those fees." 71 What emerges from this analysis? · First, I should state the obvious lest it be overlooked. A costs assessor's task is to determine a bill of costs. Items on the bill may be allowed or disallowed. There is no power to determine the validity or otherwise of a cross claim, or to award damages. · Second, a costs assessor may disallow items claimed by a solicitor because they are unfair or unreasonable (s208A), or outside the specific instructions given by the client (s208B(f)). · Third, costs may be disallowed if they have been incurred improperly, or without reasonable cause (s208P(1)). · Fourth, if through the solicitor's negligence or ignorance, expenditure has been incurred, the assessor may disallow such expenditure on the basis that it has not been properly incurred (Re Massey & Carey). · Fifth, if, through negligent advice, work has been done or expenditure has been incurred, the assessor may disallow such expenditure, or the cost of that work (Re Windeyer). · Sixth, work performed by the solicitor which is useless in accomplishing the objective which the client had in view may also be disallowed by the assessor (Re Windeyer). · Seventh, if costs have been wasted by undue delay, or any other misconduct or default on the part of the solicitor, the costs assessor may disallow such costs (s208P(1)). · Eighth, if a court or tribunal makes an order for costs against the client, and the circumstances which brought about that order were, in truth, the responsibility of the lawyer, not of the client, then (subject to the default being characterised as one falling within s208P(1)), the costs assessor may direct the lawyer to repay such costs. · Ninth, where a solicitor is negligent, there may be a number of consequences for the client. The client may be disadvantaged in having work done for which he is later charged, where there has been no benefit from that work. The consequences for the client, however, may go beyond that. The negligence may bring about the failure of the action. The client then loses what he sought to gain by the litigation. Or the client may be disadvantaged in some other way. He may, for instance, alter his position to his detriment as a result of poor advice. Where the solicitor's negligence has consequences beyond the cost of the work performed, the matter is properly one for a cross action. · Tenth, that is not to say that the client, in such circumstances, can afford to ignore an application by the solicitor to have a bill of costs assessed. The client, in such circumstances, not only has a right to claim damages in a cross claim, but the right to resist (upon the grounds set out above) a claim for the cost of the work performed. A negligent solicitor, in such circumstances, can only recover for services which, notwithstanding his negligence, were of some real advantage to the client (Cachia v Isaacs). The Issues Raised by the Cross Claim 72 It becomes important to identify the issues raised by the cross claim, insofar as they can be determined from the pleadings. One must then ask whether such issues "could or should" have been raised before the costs assessor? 73 The cross claim asserted that Hansens had been negligent. Damages were claimed. The particulars broadly identify three areas of complaint: · First, the handling of the appeal to the Land and Environment Court. · Secondly, the advice provided at the time the appeal was abandoned. · Thirdly, the handling of the notice of motion claiming costs filed by the Lake Macquarie City Coucil. 74 Dealing with the first issue, the handling of the appeal, the particulars provide less than the full picture. The following is alleged: · that the appeal was commenced in the wrong name. It should have been commenced in the name of RPT Investments. Instead it was commenced in the name of Peter Ryan. · that the solicitors failed to prepare the appeal. Whatever they may have done, they did not take rudimentary steps which may be thought necessary to secure victory. They did not qualify experts. They did not require the Council's experts to attend for cross examination. They set the matter down on a day when counsel nominated by Mr Ryan was not available. · that, in respects which are not specified, it is alleged that Hansens failed to follow counsel's advice. 75 The second and third areas of complaint concern the withdrawal of the appeal, and the costs orders which followed. It is convenient to deal with both matters together. The complaints emerging from the particulars appear to be as follows: · It is implicit that the solicitors failed to apprise the client of the dismal prospects on appeal until a short time before the hearing. That failure meant that, when the appeal was withdrawn, the Lake Macquarie City Council inevitably suffered inconvenience, thereby increasing the likelihood of its claiming costs. · At the time instructions were given to withdraw the appeal, Mr Ryan is alleged to have been given bad advice. He was told that were he to withdraw the appeal no order for costs would be made. · That once the Lake Macquarie City Council sought costs, the application was again said to have been mishandled. Mr Ryan was not told until shortly before the hearing. · Finally, Mr Ryan asserted that the action should have been in the name of the company, since it was the company who had the interest in the land. Instead, the appeal was lodged in his name. The costs order was therefore made against him personally. One gathers that Mr Ryan claimed thereby to have been disadvantaged, presumably because he had assets whereas the company did not. Conclusion 76 Here, I do not believe that enough was known about the cross claim, upon the basis of the pleading, to say, as the Magistrate did, that the Anshun estoppel operated to defeat that claim. 77 First, the bill of costs was not tendered. One does not know the extent to which the amount claimed by the solicitors related to work which was the subject of the various complaints in the cross claim. One is obliged to speculate. 78 Secondly, one really does not know why the appeal was withdrawn. Was it because it had been commenced in the wrong name? Was it because it had not been properly prepared? Was it because the solicitors had failed to follow the advice provided by the barrister? Was if for some other reason? If the action was abandoned because of the solicitors' negligence, rather than because of an absence of merit, then there is room for a cross claim. 79 Thirdly, in respect of what I have characterised as the second complaint (the advice provided by the solicitors on costs at the time instructions were given to withdraw the appeal), again, not enough is known. What advice was given? Was it negligent advice? What were the consequences for Mr Ryan? Did he alter his position to his detriment? If so, how? Had he been told of the risk (indeed, given the lateness of withdrawal, the likelihood) of costs being awarded against him, what would he have done? Would have sought an adjournment to prepare the case? Would he have taken his chances by going ahead? What, if anything, was his loss? Is it the loss of the chance that the subdivision may have been approved? No such claim is made in the particulars. The specific amount claimed may suggest that, at this point, there is no such claim. 80 Fourthly, in respect of what I have characterised as Mr Ryan's third complaint (the alleged mishandling of the Council's notice of motion seeking costs), again, in my view, the pleadings do not reveal enough. One cannot say, upon the spare information provided in the cross claim, that the estoppel operates, and that Mr Ryan had no cross claim based upon the negligence of his former solicitors. There were no documents before the Local Court relevant to this aspect. The Court did not have the notice of motion lodged by the Council, or the affidavit in support. It did not have the transcript, or the judgment on costs. There was no basis, in my view, for determining that the complaints of Mr Ryan were properly matters to be taken up with the costs assessor, rather than the subject of a costs claim. 81 I believe, in short, that it was a mistake to deal with the cross claim as a preliminary issue. Mr Ryan should have been allowed to call evidence in support of the cross claim. By this means two things which to me are unclear on the pleadings, would have become clear. 82 First, the extent to which issues identified in the cross claim were, in truth, matters which could have been raised before the costs assessor. 83 Secondly, the extent to which the judgment sought on the cross claim contradicted the judgment already secured by Hansens after the costs assessment. 84 Only then could a decision have been made as to the defence raised by Hansens, based upon the Anshun principle. Orders 85 I therefore make the following orders: 1. The appeal is allowed. 2. I remit the matter to the Local Court to be determined according to law. 3. The respondents, Hansens, should pay the appellant's costs. Last Modified: 09/25/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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