New South Wales Supreme Court CITATION : Farkas v Northcity Financial Services Pty Ltd [2006] NSWSC 1036 HEARING DATE(S) : 29 September 2006 JUDGMENT DATE : 6 October 2006 JUDGMENT OF : Bergin J DECISION : Interest awarded on costs excluding costs awarded to plaintiff for work he did in the proceedings. CATCHWORDS : [INTEREST ON COSTS] - Whether interest should be paid on costs awarded to the plaintiff - whether delay in bringing an application precludes an award - whether interest should be paid on costs awarded to the plaintiff (a barrister) in respect of work he did in the proceedings described by the costs assessor as work of "junior counsel" - whether the lengthy delay by the costs assessor in providing the certificate should reduce the award to the plaintiff. LEGISLATION CITED : Civil Procedure Act 2005 Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790 CASES CITED : Farkas v Northcity Financial Services Pty Ltd & 3 Ors [2004] NSWSC 206 Lahoud v Lahoud [2006] NSWSC 126 PARTIES : George Farkas - Plaintiff/Applicant Tower Australia Ltd - Fourth Defendant/Respondent FILE NUMBER(S) : SC 50154/03 COUNSEL : WG Muddle - Plaintiff/Applicant DF Villa - Fourth Defendant/Respondent SOLICITORS : Bruce Stewart Dimarco - Plaintiff/Applicant Turks Legal - Fourth Defendant/Respondent - 10 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST BERGIN J 6 OCTOBER 2006 50154/03 GEORGE FARKAS v NORTHCITY FINANCIAL SERVICES PTY LIMITED & ORS JUDGMENT 1 This is an application by the plaintiff, George Farkas, for an order pursuant to s 101(4) of the Civil Procedure Act 2005 (the Act) that the fourth defendant, Tower Australia Limited, pay interest on the amount of costs awarded to the plaintiff in these proceedings. 2 Section 101 of the Act provides relevantly: 101 Interest after judgment … (4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs. (5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from: (a) the date or dates on which the costs concerned were paid; or (b) such later date as the court may order. 3 The application was heard by me on 29 September 2006 when Mr WG Muddle, of counsel, appeared for the plaintiff and Mr DF Villa, of counsel, appeared for the fourth defendant. 4 I delivered judgment in the main proceedings on 22 June 2004 in favour of the plaintiff against the fourth defendant: Farkas v Northcity Financial Services Pty Ltd & 3 Ors [2004] NSWSC 206. On 28 June 2004 I made orders including an order that the fourth defendant pay 75% of the plaintiff's costs of the proceedings. That order was entered on 28 July 2004. On 25 August 2004 the plaintiff filed an application for assessment of party/party costs. Notwithstanding that the costs assessment process was commenced in August 2004, the Costs Assessor wrote to the plaintiff's solicitors on 31 October 2005 in the following terms: Unfortunately you were right. I did complete work on the assessment and then other matters intervened and I did not go back to it when I could. My apologies. I am back on it again and expect to complete my determination by Friday 11 November 2005. 5 On 14 November 2005 the Costs Assessor issued the relevant Certificate determining the plaintiff's costs in the amount of $203,354.63. On 18 November 2005 the plaintiff's solicitors wrote to the Costs Assessor in terms that included the following: Having reviewed the Certificate of Determination ("the Determination"), it has become apparent that no amount was expressly sought by the Costs Applicant on account of goods and services tax, notwithstanding that GST had been incurred and paid by the Costs Applicant for both professional fees and disbursements. An express claim for GST should have been included in the original Costs Assessment Application and I am instructed by the Costs Applicant to now make a claim for GST on his behalf. 6 On 29 November 2005 the plaintiff's solicitors wrote to the fourth defendant's solicitors advising that they had requested that the Costs Assessor "correct" the costs determination to account for GST. The plaintiff's solicitors also advised that they would be seeking interest on the costs. 7 On 19 December 2005 the fourth defendant paid the plaintiff the sum of $203,354.63. On 15 December 2005 the plaintiff had filed an application for review of the Costs Assessor's determination. On 7 March 2006 the Costs Review Panel issued a determination increasing the costs to $217,638.60. The additional amount (for GST) awarded to the plaintiff was paid by the fourth defendant on 24 March 2006. 8 The plaintiff is by occupation a barrister and some of the costs claimed and awarded related to work done by him in the proceedings. The Costs Assessor dealt with this aspect of the matter in his Statement of Reasons as follows: A particular feature of the Costs Applicant's bill of costs are the claims in items 1316 to 1398 inclusive being a total amount claimed of $103,559.95. These items relate to work done by the plaintiff (Costs Applicant) acting as junior counsel in the proceedings. The Costs Respondent objects to these items and submits that I should disallow the claims in total. The Costs Applicant submits that the items should be allowed. Generally a litigant is only entitled to an indemnity for out-of-pocket expenses but not for work undertaken by the litigant. The exception to the general rule is referred to in London Scottish Benefit Society v Chorley, Crawford & Chester [1884] 13 QBD 872. This case is the authority for the exception in that a solicitor/litigant in person does not incur costs in the capacity of a solicitor but because, as a result of being a solicitor, his costs are capable of being qualified by the Court. In Guss v Veenhuizen (No. 2) (1976) 136 CLR 47 the exception was referred to and a solicitor was entitled to his costs where he appeared in person. In Cashia v Hanes (1994) 179 CLR 403 the Court again approved both the general principal and the exception although with some reservation. It did not overrule Guss v Veenhuizen (No. 2) . In Atlas Corporation Pty Ltd v Kaylk [2001] NSW CA 10 … the Court held that it was obliged to follow Guss v Veenhuizen (No. 2) and dismissed an appeal where the appellant challenged an assessor's ruling which upheld a claim for professional costs where a solicitor acted for himself and his partners. The litigant in this matter is a barrister and it is submitted that much of the work undertaken by the litigant was work undertaken by a solicitor and therefore offends some of the New South Wales Barrister's Rules. It is fair to say that the distinction between barristers and solicitors in this day is considerably less than before, and indeed it is acceptable, although unusual, for barristers to accept a brief direct from the public without the intervention of a solicitor. Both barristers and solicitors are legal practitioners under the Act. It is the style under which they seek to practice under different practice rules which sets them apart. I have carefully considered the submissions from the Costs Applicant and the Costs Respondent on this aspect of the assessment. I have determined that the Costs Applicant is entitled to costs for the work undertaken by him as a junior counsel. I am not prepared, however, to accept the rate as charged by the Costs Applicant. I do not consider that the rate of $400.00 per hour is fair and reasonable. I have had regard to the rate of other junior counsel particularly in these proceedings being Mr Lancaster who seeks $300.00 per hour. I allow as a fair and reasonable rate for the Costs Applicant the sum of $300.00 per hour. I have also had regard to the nature of some of the work undertaken by the Costs Applicant as junior counsel in the proceedings. I have disallowed items where I am of the view that such work is more properly work done by either junior solicitors or paralegals such as collation, cross-referencing and tagging of documents. I have also had regard to the very considerable contact set out in the bill of costs between the solicitor and the Costs Applicant. The Costs Applicant's costs are described as disbursements in the bill of costs and I have referred in my reasons as to why I have varied those costs. 9 The plaintiff relied on my decision in Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790 in which I ordered the unsuccessful plaintiff to pay interest on the amount of the defendant's costs. In that case I was assisted by Campbell J's analysis in Lahoud v Lahoud [2006] NSWSC 126. The relevant paragraphs of Cat Media relied upon are as follows: 27 The orders sought in these proceedings are substantially in the same terms as the orders made by Campbell J in Lahoud v Lahoud [2006] NSWSC 126. In that case Campbell J dealt with costs applications in respect of proceedings that were heard over seven days by Palmer J, who upheld the claim made by the plaintiff and dismissed the cross-claim brought by the defendants. The defendants in that case accepted that it was appropriate to make an order against them as they had lost the proceedings but they opposed an indemnity costs order and an order for the payment of interest on costs. Campbell J said relevantly: 82 In my view it is appropriate to make an order for the payment of interest on costs. There is no requirement, before an order for payment of interest on costs is made, for the Court to be satisfied that the circumstances of the case are out of the ordinary: Grogan v Thiess Contractors Pty Ltd & Anor [2000] NSWSC 1101 at [10] per Barr J; Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (in liquidation) & Ors [2002] NSWSC 280 at [23]-[25] per Einstein J; Puntoriero & Anor v Water Administration Ministerial Corporation [2002] NSWSC 217 at [10] per Grove J; Davies v Ku-ring-Gai Municipal Council [2003] NSWSC 1010 at [7] per Austin J. 83 To the extent to which the plaintiffs have been out of pocket as a result of having to pay their lawyers' costs and disbursements, it is appropriate that the compensation which is recognised in the Court's order for costs take into account the fact that the plaintiffs have been out of pocket in that way: Hughes Bros v The Trustees of the Roman Catholic Church [1999] NSWSC 1051 at [60]; Grogan v Thiess Contractors Pty Ltd & Anor [2000] NSWSC 1101 at [12]; Woods v Woods [2001] NSWSC 1108 at [29]; Australian Development Corporation Pty Limited v White Constructions (ACT) Pty Ltd (in liquidation) & Ors [2002] NSWSC 280 at [17]; Puntoriero & Anor v Water Administration Ministerial Corporation [2002] NSWSC 217 at [10]; Optus Networks Pty Ltd & Ors v Leighton Contractors Pty Limited & Ors [2005] NSWSC 156 at [9]; Roads and Traffic Authority v Cremona (No 3) [2005] NSWCA 13 at [34]. Given the length of time the proceedings have been on foot and the extensive preparation, the amount by which the plaintiffs have been out of pocket could be large. It is relevant that the plaintiffs, and the defendants, each conduct businesses and so the amounts which the plaintiffs have had to pay to finance the litigation is likely to be money which otherwise could have been put to a productive use. Conversely, the defendants, by not being required to pay costs until some time in the future when the costs are agreed or assessed, are likely to have been able to retain, for their own productive use, the amount of those costs. 84 The form of the order for interest on costs has occasioned me some concern. As the plaintiffs have succeeded in obtaining an order for indemnity costs in relation to only one issue in the proceedings, it is possible that there will be some costs and disbursements which the plaintiff has paid from time to time as the litigation progressed, but which are not allowed on assessment. It might sometimes be possible to cast an order in the form of allowing interest only on such costs as the plaintiff has paid as are allowed on assessment – but such an order would require the assessor to conduct what would amount to a separate assessment in relation to each payment that the plaintiffs had made. While the making of such a series of costs assessments would be within the scope of section 353 Legal Profession Act 2004 , adopting such a procedure has the potential for making the costs assessment itself more complex and expensive. Further, it sometimes happens in the course of litigation – and the evidence does not tell me whether it has happened in the course of this litigation – that a litigant makes payments to his lawyers from time to time of lump sums on account of costs, without purporting to allocate those payments to particular memoranda of fees or items of work performed. If that had happened in the present case, one could not tell whether the whole or any part of such a payment had been allowed on assessment. 28 There is no doubt that in this case that the defendant has been paying costs to its legal advisors during the period since the proceedings commenced. The proceedings were commenced two years ago and the defendant has been out of that money from the time it paid those costs. The plaintiff submitted that the circumstances of this case are not such as to warrant the exercise of my discretion in favour of the defendant as the defendant could hardly be described as being in "indigent circumstances". It is not necessary to establish that an applicant for an award of interest on costs is in such circumstances. This is particularly so in commercial causes. Parties to commercial litigation must understand that where large amounts of money are paid for litigating in this List interest on costs may be awarded to a successful party. 29 The exercise of this discretion is focused upon the fact that the successful party has been out of its money for some time and the consideration of whether the successful party will be appropriately compensated by an award of costs in its favour without an award of interest. It is not apt to suggest that the defendant is a large insurance company, as was suggested by the submission that it was not in indigent circumstances. It will depend upon the circumstances of each case but where the parties to the litigation are commercial parties suing and being sued for millions of dollars, the fact that the successful party has been out of money that could have been used otherwise in the commercial enterprise is a relevant factor to be taken into account in the exercise of the discretion. The matters to which Campbell J referred in Lahoud at [84] are relevant to this case. 10 The fourth defendant opposes the award of any interest. It was firstly submitted by Mr Villa that this application was made too late and it was not pleaded in the original claim. Notwithstanding those two matters Mr Villa candidly conceded that there was little prejudice to which he could point. However he submitted that there would have been extra costs incurred by his client in having to attend to the matter on two occasions rather than one. It was submitted that had the claim been made at the beginning of the assessment process some of the later costs could have been saved. I am not persuaded that these matters warrant denying the plaintiff an award for interest. It seems to me that at their highest they could only have a slight impact on the award of interest but, in any event, there was no evidence called by the fourth defendant to suggest there had been duplication of work. 11 The next submission made by Mr Villa was that interest should not be awarded where the applicant is an individual rather than a commercial organisation. Emphasis was placed upon what I said in Cat Media in respect of commercial parties suing in the Commercial List and the fact that the successful party in that case had been out of its money and could have used it otherwise in its "commercial enterprise"[29]. I certainly did not intend to convey that an award of interest should be limited to cases where money could otherwise have been used in a commercial enterprise. In any event, the plaintiff in these proceedings is a barrister in a professional enterprise. The plaintiff has been out of his money whether it could have been used in his professional enterprise or otherwise. That is a relevant factor to be taken into account in the exercise of the discretion to award interest under s 101(4) of the Act. The fact that the applicant is an individual is not a distinction that warrants a denial of an award of interest. 12 The next submission made by Mr Villa related to the inordinate delay by the Costs Assessor in producing his determination. It was submitted that it would be reasonable to allow a period of some months to produce the determination in this case but that the delay of a further nine or ten months, as occurred, should not be borne by the fourth defendant having to pay the plaintiff interest during that period. It was submitted that it would be appropriate for the parties to share equally that burden, or "risk" as Mr Villa put it. I disagree. The plaintiff has been out of his money and it does not seem to me be appropriate that the burden of the Cost Assessor's delay should be shouldered by a successful plaintiff/applicant who has apparently not contributed to such delay. I am not satisfied that I should reduce or adjust any award to the plaintiff by reason of the Costs Assessor's delay. 13 The next submission made by Mr Villa which appears to me to have some force is that interest should not be awarded on the costs awarded to the plaintiff for the work that he did, described by the Costs Assessor as work of "junior counsel in the proceedings". Mr Villa relied upon s 101(5)(a) which refers to the date or dates on which the costs "were paid" to submit that s 101 provides for the award of interest on money that has been paid over to another party. Mr Muddle submitted that notwithstanding the provisions of s 101(5)(a) the plaintiff did not have the use of the funds that were ordered to be paid as costs and although they were not "paid" they were "payable". Although the expression "payable" is used in s 101(4) of the Act, it seems to me that the purpose of the subsection read in the context of s 101(5), is to award interest on amounts that have actually been paid. Work that was done by the plaintiff saved him having to pay costs over to a third party. He had the benefit of having the skills to reduce the costs that were to be paid by doing the work himself. I am not satisfied that I should exercise my discretion to award interest on these costs. 14 The final matter relates to the claim for interest on the award of GST. It is clear that the plaintiff did not include an application for GST in the original costs assessment application and had to make a further application to obtain the benefit of an award. It was submitted that any interest on that additional amount should only run from the date the Review Panel made the award. I am of the view that the fairest outcome is to award interest on the GST amount from the date the claim was notified. Conclusion 15 I am satisfied that the plaintiff is entitled to an award of interest: (1) on his costs from the date on which the costs were paid by the plaintiff until the date those costs were paid by the fourth defendant; and (2) on the GST amount from the date the claim was notified to the date the amount was paid by the fourth defendant. I refuse the plaintiff's application for an award of interest on the costs awarded to him for the work he provided as "junior counsel in the proceedings". 16 The parties are to file with my Associate no later than 23 October 2006 Short Minutes of Order reflecting these findings and an agreed costs order of the Notice of Motion. Should the parties be unable to agree on a costs order they should make contact with my Associate prior to 23 October 2006 to have the matter relisted for argument. ********** 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.