New South Wales Court of Appeal CITATION: Coshott v Woollahra Municipal Council [2008] NSWCA 176 HEARING DATE(S): 27 May 2008 JUDGMENT DATE: 4 August 2008 JUDGMENT OF: Tobias JA at 1; McColl JA at 2; Handley AJA at 3 DECISION: (1) Leave to appeal refused with costs. (2) Appeal dismissed with costs. CATCHWORDS: COSTS - indemnity principle - subrogation - RES JUDICATA - final orders for costs not open to challenge in other proceedings LEGISLATION CITED: Legal Profession Act 1987 Supreme Court Act 1970 CATEGORY: Principal judgment Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 Australasian Conference Association Ltd v Mainline Constructions Pty Limited (1978) 141 CLR 348 CASES CITED: Blair v Curran (1939) 62 CLR 464 Dyktynski v BHP Titanium Minerals Pty Limited [2004] NSWCA 154; (2004) 60 NSWLR 203 Forbes-Smith v Forbes-Smith [1901] P 258 CA Lord Napier v Hunter [1993] AC 713 PARTIES: Robert Gilbert Coshott (Appellant) Woollahra Municipal Council (Respondent) FILE NUMBER(S): CA 40591/07 COUNSEL: Robert Gilbert Coshott (Appellant) M L Brabazon (Respondent) SOLICITORS: Robert Gilbert Coshott (Appellant) Deacons (Respondent) LOWER COURT JURISDICTION: Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S): SC 10821/05 LOWER COURT JUDICIAL OFFICER: Whealy J LOWER COURT DATE OF DECISION: 9 August 2007 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40591/07 SC 10821/05 TOBIAS JA MCCOLL JA HANDLEY AJA MONDAY 4 AUGUST 2008 ROBERT GILBERT COSHOTT v WOOLLAHRA MUNICIPAL COUNCIL COSTS – indemnity principle – subrogation RES JUDICATA – final orders for costs – not open to challenge in other proceedings. HEADNOTE The claimant applied for leave to appeal from a judgment in the Common Law Division which dismissed his appeal from the determination by a review panel which had assessed the costs payable by him under an order of the District Court. The Council had received a partial indemnity against those costs from a third party. The claimant submitted that Council was not entitled to an assessment to recover costs paid by a third party. The claimant also appealed as of right from the dismissal of his claim for a declaration of his right to recover taxed costs of Federal Court proceedings which he had paid. HELD: (1) The cost assessment could not be challenged for breach of the indemnity principle because the third party would be subrogated to any recovery by the Council once it had been reimbursed for its own expenditure; (2) The orders for costs in the Federal Court proceedings were final orders: Forbes-Smith v Forbes-Smith [1901] P 258 CA applied; (3) The Council's entitlement to the costs of the Federal Court proceedings was res judicata and those orders were not open to challenge. ORDERS (1) Leave to appeal refused with costs. (2) Appeal dismissed with costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40591/07 SC 10821/05 TOBIAS JA MCCOLL JA HANDLEY AJA MONDAY 4 AUGUST 2008 ROBERT GILBERT COSHOTT v WOOLLAHRA MUNICIPAL COUNCIL Judgment 1 TOBIAS JA: I agree with Handley AJA. 2 MCCOLL JA: I agree with Handley AJA 3 HANDLEY AJA: The proceedings before this Court involve an appeal by Mr Coshott lodged as of right from the Judgment of Whealy J of 9 August 2007. His Honour heard an appeal under the Legal Profession Act 1987 (the 1987 Act) from a costs assessment and a claim for a declaration of right. The appeal was from the determination by a review panel of the application by Mr Coshott for a review of the determination by a cost assessor. 4 The cost assessor assessed the costs payable to the respondent Council under an order made by Puckeridge DCJ in the District Court on 5 December 2002. He determined that Mr Coshott's liability for costs under that order was $75,000.00 plus $6,322.18 for the costs of the assessment. On 16 February 2005 the review panel dismissed the application for review, subject to issuing a new certificate pursuant to s 208KF of the 1987 Act which corrected clerical and mathematical errors in the assessor's certificate. The new certificate was for $81,322.18 as the costs Mr Coshott was bound to pay the Council. 5 Mr Coshott appealed to the Supreme Court from that determination under s 208L, made applicable by s 208KI(1). The appeal provided by s 208L(1) is limited to questions of law. Section 208M(1) allows a wider appeal, but only by leave. Under sub-s (4) the appeal is to be by way of rehearing and the Court can receive fresh evidence and additional evidence. Mr Coshott did not seek leave to appeal under s 208M. Whealy J held that Mr Coshott had failed to establish that the review panel had erred in law and dismissed the appeal. 6 Mr Coshott purported to appeal from this decision as of right, but this part of the case fell within s 101(2)(q) of the Supreme Court Act and the appeal was incompetent without leave, which Mr Coshott sought. 7 The other claim before Whealy J was for a declaration that Mr Coshott was entitled to restitution of moneys he had paid to the Council for legal costs. This claim related to $131,232.55 that the Council had recovered from Mr Coshott, or perhaps from him and his wife, under garnishment orders of the Federal Court. The Council sought in this way to enforce orders that Mr Coshott pay its taxed costs of a trial and appeal in the Federal Court which had been allowed at $120,000.00 and $11,232.25. These sums were paid into the Federal Court pursuant to the garnishment orders. After a contested hearing Wilcox J ordered that the money in Court be paid out to the Council. The appellant's purpose in seeking the declaration was to establish his right to recover those moneys. The Costs Appeal 8 The only ground of appeal in respect of the decision of Whealy J on the costs question was based on the indemnity principle. This prevents a party with the benefit of an order for costs recovering more than it had paid or was liable to pay to its own solicitor for the costs of the proceedings. 9 The Council's bill of costs claimed $116,418.10, but the review panel only allowed $75,000.00 plus the Council's costs of the assessment of $6,322.18 to make the total of $81,322.18 (WB 49, 54). The assessor and the review panel found (red 15) that the Council had paid $63,491.53 to its solicitors and that at least a further $33,729.18 had been paid to them under a mutual indemnity scheme, known as Premsure, maintained by a group of Councils including the respondent. 10 Mr Coshott made several points. He said that Premsure was not a separate legal entity, it was not an insurer, and it had no subrogation rights in respect of the money it had paid to the Council's solicitors. Accordingly, he submitted, the indemnity principle applied, that is the principle that the function of an order for costs is to indemnify the successful litigant in whole or in part against the expense he has incurred in the litigation. Accordingly, he submitted, the Council could not recover more than it had actually paid or was liable to pay its solicitors, and the assessor and the review panel could not properly assess his liability at a higher figure. Since the Council had only paid $63,491.53 and Premsure had paid the balance this was the limit of his liability. He also submitted that the costs disallowed by the assessor and the review panel, which totalled $41,418.10, should be deducted from the $63,491.53 and only the balance was recoverable. There is no substance in this last point. The indemnity principle is not infringed where the successful litigant recovers no more than it has relevantly paid to its own solicitors. 11 The remaining point concerns the payments by Premsure. The contractual arrangements between the members, by way of indemnity, may have been in the nature of insurance. But whether or not this was so is not critical. Its payments reduced the prima facie liability of the Council to pay that amount to its solicitors: Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 CA, 501. A litigant, liable to its own solicitor for the costs of proceedings, who is indemnified in whole or in part for those costs, is entitled to recover his taxed or assessed costs for the benefit, in whole or in part, of the party providing that indemnity: Dyktynski v BHP Titanium Minerals Pty Limited [2004] NSWCA 154; (2004) 60 NSWLR 203 CA. The principle extends to all indemnity arrangements whether or not they are in the nature of insurance. 12 The Premsure deed does not give the group any contractual right to reimbursement from recoveries by a member in respect of amounts for which it has been indemnified by the group. However subrogation is an equitable right which does not depend on a contractual entitlement: Australasian Conference Association Ltd v Mainline Constructions Pty Limited (1978) 141 CLR 335, 348; Lord Napier v Hunter [1993] AC 713. Premsure had a clear entitlement in equity to be subrogated to the Council's rights to recover costs from Mr Coshott once the Council had been reimbursed for its own expenditures. 13 The Council was therefore entitled to assess the costs properly allowable under the costs order in the District Court at least up to the total amount of $97,220.71 paid to its solicitors and recover those costs as certified. Once it had recovered the $63,491.53 it had paid its solicitors it was accountable to Premsure for any further recovery under the costs certificate. 14 Mr Coshott attempted to challenge some of the findings of fact of the assessor and the review panel, but this was not open before Whealy J on an appeal under s 208L and it is not open in this Court either. Other legal issues which were raised and rejected below were not pursued in this Court. The ground of appeal from the decision of Whealy J on the costs assessment that was argued was rightly rejected below, and leave to appeal should be refused. Restitution Claim 15 Mr Coshott has an appeal as of right on this question, but the appeal is entirely without substance. The Council's right to the costs in question is res judicata. The declaration sought by Mr Coshott, if made, would establish his right to recover the taxed costs he was ordered by the Federal Court to pay to the Council as part of its final orders (Forbes- Smith v Forbes-Smith [1901] P 258 CA) at the trial and on appeal. On 16 February 2001 the Federal Court (Wilcox J) made final orders in the garnishment proceedings for payment out to the Council of the moneys paid into Court by the garnishee. These moneys were received in payment or satisfaction of the earlier orders as to costs. The declaration sought would directly contradict these final orders by recognising a right in Mr Coshott to recover those costs he was ordered to pay and has been compelled to pay in the garnishment proceedings. 16 The res judicata principle was summarised by Dixon J in Blair v Curran (1939) 62 CLR 464, 531: "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies." 17 The entitlement of the Council to those costs under the orders and certificates of the Federal Court is res judicata, and it is not competent for this, or any other Court, to entertain a challenge to those orders in collateral proceedings. The principle prevents any inquiry into the legal or factual correctness of those final orders. The appeal from the decision of Whealy J refusing to make the declaration sought should therefore be dismissed. In my judgment the following orders should be made: (1) Leave to appeal refused with costs. (2) Appeal dismissed with costs. ********** 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.