New South Wales Supreme Court CITATION : Wilson v Richmond River Shire Council [2000] NSWSC 71 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 12422/99 HEARING DATE(S) : 15 February 2000 JUDGMENT DATE : 23 February 2000 Lawrence Wilson (Plaintiff) PARTIES : Richmond River Shire Council (Defendant) JUDGMENT OF : Master Harrison Mr D Robertson (Plainmtiff) COUNSEL : Mr A Pickles ( Defendant) Wroth Wall of Mullumbimby (Plaintiff) SOLICITORS : Hannigans of Casino (Defendant) CATCHWORDS : Appeal decision of costs assessor - liability to pay costs where party has been given indemnity LEGISLATION CITED : Environmental Planning and Assessment Act 1979 Legal Profession Act 1987 Larsen v Vile [1999] NSWCA 397 Carson v Pickersgill & Sons (1885) 14 QBD 859 CASES CITED : Adams v London Improved Motor Coach Builders Limited [1921] 1 KB 495 McCullum v Ilfield (1969) 2 NSWLR 329 Angor Pty Limited v Ilich Motor Co Pty Limited (1992) 37 FCR 65 Johnson v Santa Teresa Housing Association & Anor (1993) 107 FCR 441 DECISION : See para 18 8 THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON WEDNESDAY, 23 FEBRUARY 2000 12422/99 - LAWRENCE WILSON v RICHMOND RIVER SHIRE COUNCIL JUDGMENT (Appeal decision of costs assessor; liability to pay costs where party has been given an indemnity) 1 MASTER: The plaintiff by amended summons filed 9 November 1999 seeks firstly an order that the appeal from the decision of the costs assessor Ross G Pannifex dated 3 September 1999 be allowed; secondly, a declaration that in respect of proceedings brought pursuant to s 123 of the Environmental Planning and Assessment Act 1979 the indemnity principle is not applicable in the determination of what is a fair and reasonable sum payable to a costs applicant on a party/party basis; and thirdly a declaration that a costs assessor does not have a direction to enquire into the arrangement for funding the proceedings between the plaintiff and another. The plaintiff relied on the affidavit of Wrothwell Garth Wall sworn 4 November 1999. The second defendant does not oppose the orders sought save as to costs. The first defendant is in liquidation. 2 The grounds of appeal are as follows: (1) The costs assessor erred in law in his application of the indemnity principle to the assessment of party/party costs pursuant to an order made by the Land and Environment Court. (2) The costs assessor erred in law in that he exercised a purported discretion in exploring the purpose and effect of the costs order made by the Land and Environment Court. (3) The costs assessor erred in law in exercising a purported discretion in determining whether, contrary to the order of the Land and Environment Court, the plaintiff was entitled to recover any costs at all. (4) The costs assessor erred in law in that in determining the fair and reasonable sum payable to the plaintiff by the first and second defendants he took into account matters extraneous to those set out in ss 208F and 208G of the Legal Professions Act 1987 (the Act). 3 The approach that should be taken by the court in an appeal from a costs assessor was set out in Larsen v Vile [1999] NSWCA 397. An appeal under s 208L is confined to law. Whereas an appeal under s 208M (provided leave is granted) is a complete new hearing (at para 31). The alleged error referred to in the grounds of appeal is one of law. 4 Section 208L of the Act provides: "208L Appeal against decision of costs assessor as to matter of law (1) A party to an application who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the Supreme Court, appeal to the Court against the decision. (2) After deciding the question the subject of the appeal, the Supreme Court may, unless it affirms the costs assessor's decision: (a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or (b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application. (3) On a re-determination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given." 5 The short facts are as follows: (1) Mr Lawrence Wilson commenced proceedings in the Land and Environment Court against Iron Gates Pty Limited as first respondent and Richmond River Shire Council as second respondent. Mr Wilson sought an injunction and he retained Mr Wroth Wall to act as his solicitor. Section 123(3) of the Environmental Planning and Assessment Act 1979 allows an action to be brought by a person on his or her own behalf and on behalf of other persons (with their consent) having like or common interest in those proceedings. (2) On 29 July 1996 Mr Blackshield, the Manager , Native Title Unit of New South Wales Aboriginal Land Council wrote to Mr Wall and stated: "I am writing to confirm that if you accept instructions from Bandjalung custodian Mr Lawrence Wilson to represent him in relation to seeking an urgent injunction to retain proposed development at Evans Head, this Council will meet both you own costs and disbursements incurred in representing him (at rates representing 80% of the Federal Court scale) and those of counsel (at a rate of $150 per hour). Subject to Mr Wilson's approval, we would appreciate remaining in close contact with yourself over the conduct of the matter. Please note that we have not given Mr Wilson any advice as to his prospects of success [of] the contemplated proceedings, or as to his potential liability." (3) On 5 September 1999, in answer to a letter from the costs assessor, Mr Wall wrote: "1. All accounts referred to in your letter have been paid. 2. The costs applicant's liability to pay my costs was met by the NSW Land Council which effectively indemnified him in relation to Land and Environment Court proceedings No 40172 of 19996." (4) On 3 September 1999 the costs assessor gave reasons. The relevant portion is as follows: "1. Shortly prior to the costs applicant instructing Messrs Wroth Wall in these proceedings, those solicitors received a letter from the New South Wales Aboriginal Land Council dated 29.7.1996 the terms of which are set out in (d) above, of which the costs applicant was aware prior to instructing Messrs Wroth Wall to commence the proceedings. 2. Apart from the above letter, there are no other documents evidencing or bearing upon the liability of the costs applicant to pay the whole or any part of the costs the subject of this assessment. 3. Thereafter, the New South Wales Aboriginal Land Council received accounts from Messrs Wroth Wall as noted in (d), which accounts were subsequently paid by the Land Council. 4. The costs applicant's liability to pay Messrs Wroth Walls, costs (if it ever existed) was met by the Land Council which effectively indemnified him in relation to the proceedings the subject of this assessment (see (f) above). I hold that the purpose and effect of an order for payment of costs as between party and party is to indemnify the person in whose favour the order has been made in respect of any payment which that person has made, or for which he is liable in respect of solicitor/client costs in the proceedings. I further hold that in the present case the costs Applicant's solicitors cannot recover any solicitor/client costs from him because in the events which have happened he has been under no liability to pay the same. I further hold that if (contrary to the previous paragraph) he was ever under liability to pay the same, he has effectively been absolved from that liability, by reason of the same having been paid for him by the New South Wales Aboriginal Land Council. I reject the costs applicant's argument (advanced in (h)) to the effect that the indemnity principle is no longer in effect, for the following reasons: 1. The Legislature apparently took the view that it was still the law when enacting s 40 of the Legal Aid Commission Act, 1979 . If the indemnity principle no longer applied, it seems to me that the above section would have no work to do. 2. The present practice of costs assessors in calling for evidence of solicitor/client accounts and/or fee agreements in party/party assessments, and, as related to it, section 208H in the Legal Profession Act 1987 . I also reject the submission of the costs applicant in (m) that it is no function of costs assessor to enquire into or determine how the costs applicant funded his barrister's and/or solicitor's costs during the hearing or the financial impact of the costs order on him. This argument appears to concede that an indemnity principle might exist, but that if so, it is not the costs assessor's function to apply it. Apart from the inconsistency with s 208H of the Legal Profession Act 1987 referred to above, the question would arise as to at which stage of proceedings the principle would be applied. The logical possibilities would appear to be as follows: 1. At the time the question of whether a costs order should be made is argued before the court. I have never heard an argument, nor seen a judgment as to costs to that effect. 2. When the costs are assessed. Given that the conclusion of the assessment process results in the issue of a certificate which when filed and without more operates as a judgment for unpaid costs, if the indemnity principle is not applied at 1 or 2, when would it be applied? (see s 208J(3)). 3. After assessment, by application for a stay of proceedings. This might be possible, but it does not follow that application of the principle at 2 is thereby excluded. I hold that as the costs applicant is under no liability to pay his own solicitor/client costs in respect of the proceedings the subject of this assessment, he cannot recover the party/party costs claimed in this assessment." 6 Additionally in correspondence (referred to his reasons) the costs assessor referred to a passage from Carson v Pickersgill & Sons (1885) 14 QBD 859, namely: "If a solicitor cannot recover from his or her client, then there are no costs to be recovered from any party to a proceedings required to indemnify that client. A litigant, when absolved for any reason from paying those costs to his or her solicitor, has no costs to recover. Carson v Pickersgill & Sons (1885) 14 QBD 859." 7 This letter forms part of the costs assessor's reasons. 8 The costs assessor determined because the purpose and effect of an order for costs is to indemnify the person in whose favour the costs order has been made and because these costs have been paid there is no liability for the costs respondent to pay them or alternatively if Mr Wilson was liable to pay those costs he was absolved from doing so because they had been paid for him by the New South Wales Aboriginal Land Council. 9 Carson an 1885 decision, was concerned with a pauper. It was stated by Brett MR that the rule of taxation in actions which are not pauper actions is that the unsuccessful party is bound to pay to his opponent those costs which the opponent was reasonably entitled to incur and he either paid or rendered himself liable to pay. An exception to the rule was a pauper case. In a pauper case there is no retainer of the solicitor by the plaintiff. Thus the pauper could never maintain an action for remuneration. Carson held that pauper plaintiff was treated as an exception to the general rule. The general rule was, and still is, that an unsuccessful party is bound to pay the opponent's costs. 10 Counsel for the plaintiff referred me to Adams v London Improved Motor Coach Builders Limited [1921] 1 KB 495; McCullum v Ifield (1969) 2 NSWLR 329; Angor Pty Limited v Ilich Motor Co Pty Limited (1992) 37 FCR 65 and Johnson v Santa Teresa Housing Association & Anor (1993) 107 FCR 441. 11 In Adams the plaintiff was member of a trade union. The union instructed solicitor to act for the plaintiff in a claim for wrongful dismissal. The plaintiff had not given a written retainer to the solicitors. Bankes LJ stated "…once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs." 12 In his opinion evidence fell short of establishing a bargain between the plaintiff and the solicitor so the employer was not entitled to succeed. Likewise Atkin LJ stated; "It is perfectly possible for the agreement of employment to contain a term by which the agent agrees that he will not claim remuneration from his employer, but will either do the work for nothing or claim remuneration from some third party. But in the absence of such a term - the ordinary deduction from the employment of a professional man accepted in this is that the person accepting the agent's services is bound to remunerate the agent." 13 Adams was followed in McCullum, Angor and Johnson. 14 In McCullum, a decision of a judge of this Court, Taylor J stated: "For the plaintiff it was contended that the defendant has no right to recover costs against the plaintiff since party and party costs were an indemnity, the defendant had not incurred any liability for costs to Mr White; he could not recover costs against the plaintiff by way of indemnity. It is established that if a party to an action has an agreement with his solicitor that he will not have to pay any costs then he cannot recover party and party costs against the adversary. ( Gundry v Sainsbury [1910] 1 KB 645). Equally it is clear that the fact that a party to civil proceedings is indemnified by insurance or other agreement against his liability to pay the costs does not prevent him recovering his party and party costs. (See New Pinnacle Group Silver Lead Mining v Luhrig Coal & Ore Dressing Appliances Co (1902), 2 SR (NSW) 50; Adams v London Improved Motor Coach Builders [1921] 1 KB 495; [1920]l ER Rep 340)." 15 It is my view that there was no agreement between the plaintiff and his solicitor that in no circumstances was he (the plaintiff) liable to pay the costs. In the absence of evidence of a bargain to that effect, the plaintiff became liable to his solicitor for costs and this liability is not excluded because the New South Wales Aboriginal Land Counsel undertook to pay his fees. Mr Wilson was the person giving instructions to the solicitor. The solicitor was acting with the plaintiff's knowledge and assent. Thus the plaintiff was liable to pay his solicitor's costs and the fact that the New South Wales Aboriginal Land Council indemnified the plaintiff does not prevent him from recovering his costs. 16 It is my view that the costs assessor has erred in law. However it should be noted that the authorities referred to above were not drawn to the costs assessor's attention. The decision of the costs assessor dated 3 September 1999 is set aside. The matter is remitted to the costs assessor for redetermination. 17 On the issue of costs, the plaintiff seeks his costs. The second defendant opposes this order. As previously stated the plaintiff did not draw the authorities to the costs assessor's attention. However the second defendant adopted the position before to the costs assessor that it was entitled to be exempted from paying costs. Costs are discretionary. As there was fault on both sides, it is my view that each party should pay their own costs. 18 The orders I make are: (1) The determination of the costs assessor dated 3 September 1999 is set aside. (2) The matter is remitted to the costs assessor for redetermination according to law. (3) Each party is to pay his/its own 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. 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.