New South Wales Supreme Court CITATION : Doyles v Quin [2008] NSWSC 128 HEARING DATE(S) : 11 February 2007 JUDGMENT DATE : 28 February 2008 JURISDICTION : Common Law JUDGMENT OF : Harrison AsJ (1) An extension of time to file this appeal is granted DECISION : (2) The summons filed 14 November 2006 is dismissed (3) The plaintiff is to pay the defendants' costs. CATCHWORDS : APPEAL - Costs Assessor LEGISLATION CITED : Legal Profession Act 1987 Uniform Civil Procedure Rules 2005 CATEGORY : Principal judgment Frumar v Owners of Strata Plan 36957 (2006) 67 NSWLR 321 CASES CITED : Larsen v Vile [1999] NSWCA 397 Marano v Quagliero [2006] NSWSC 1364 Doyles Construction Lawyers (Plaintiff) PARTIES : Ken Quin (First defendant) Ian Francis Dwyer (Second defendant) FILE NUMBER(S) : SC 11542/2006 COUNSEL : J Doyle (Plaintiff) R M McCulloch (First defendant) SOLICITORS : Doyles Construction Lawers (Plaintiff) Pike Pike & Fenwick (First defendant) LOWER COURT JURISDICTION : Costs Assessor LOWER COURT FILE NUMBER(S) : 92044/2005 LOWER COURT JUDICIAL OFFICER : Ian Francis Dwyer LOWER COURT DATE OF DECISION : 6 October 2006 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON THURSDAY, 28 FEBRUARY 2008 15542/2006 - DOYLES CONSTRUCTION LAWYERS v KEN QUIN JUDGMENT (Appeal decision of costs assessor) 1 HER HONOUR: By summons filed 14 November 2006, the plaintiff seeks firstly, an order granting an extension of time to file for leave to appeal pursuant to Rule 50.12(1) of the Uniform Civil Procedure Rules 2005; secondly, an order that the certificate as to determination of costs as assessed by Mr Ian Francis Dwyer, costs assessor, issued 6 October 2006 be set aside; and thirdly, that the matter be redetermined by a review panel. 2 The plaintiff is Doyles Construction Lawyers (Doyles). The first defendant is Ken Quin (Mr Qin). The second defendant is Ian Francis Dwyer. Doyles relied on the affidavits of Daniel Vicano sworn 26 April 2007 and the affidavit of George Hayek sworn 6 December 2007. Doyles were engaged by Mr Quin to perform legal services which related to Mr Quin's neighbours conducting construction work on their property which had an adverse effect on his property. Extension of time to lodge the appeal 3 The plaintiff submitted that leave should be granted for an extension of time to file the appeal on the basis that the appeal was filed within 28 days of the material date but had been incorrectly filed in the Court of Appeal. The defendant does not objection to an extension of time for the filing of the appeal in these proceedings. The explanation for delay is adequate so I grant an extension of time to file this appeal. Grounds of appeal 4 The plaintiff appeals the whole of the decision of costs assessor Mr Dwyer in accordance with ss 208L and 208M of the Legal Profession Act 1987 on the grounds that firstly, the costs assessor erred in law in breach of s 208C of the Legal Profession Act 1987 by not applying the rates agreed in the original costs agreement in his determination dated 6 October 2006; secondly, the costs assessor erred in law in assessing costs, the subject of an agreement dated 10 August 2005, as to the amount of costs in breach of s 208C; and thirdly, the costs assessor failed to provide adequate reasons for the reduction of a substantial amounts of costs to Doyles Construction's bill of costs. Certificate as to determination of costs 5 The solicitor claimed the sum of $213,830.77. The costs assessor determined the application by substituting for the disputed costs as fair and reasonable the amount of costs after 23 December 2004 to Doyles the sum of $55,753.50. The end result is that as Mr Quin had paid $128,672.78 to Doyles has to repay Mr Quin the sum of $72,919.28. The relevant statutory provisions 6 It is common ground that the Legal Profession Act 1987 is applicable (the Act). It has since been replaced by the Legal Profession Act 2004. 7 Section 208M of the Act reads: "Appeal against decision of costs assessor by leave (1) A party to an application relating to a bill of costs may, in accordance with the rules of the Supreme Court, seek leave of the court to appeal to the court against the determination of the application made by a costs assessor. (2) A party to an application relating to costs payable as a result of an order made by a court or a tribunal may, in accordance with the rules of the court or tribunal, seek leave of the court or tribunal to appeal to the court or tribunal against the determination of the application made by a costs assessor. (3) The Supreme Court or court or tribunal may, in accordance with its rules, grant leave to appeal and may hear and determine the appeal. (4) An appeal is to be by way of a new hearing and fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given. (5) After deciding the questions the subject of the appeal, the Supreme Court or court or tribunal may, unless it affirms the costs assessor's decision, make such determination in relation to the application as, in its opinion, should have been made by the costs assessor." 8 Section 208L of the Act provides: "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." 9 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. An appeal under s 208M (provided leave is granted) is a complete new hearing. The solicitor relies on the same grounds for both ss 208L and 208M but submitted that a substantial injustice has been visited upon him and this is a relevant consideration under s 208M. The submissions made to the costs assessor by Mr Quin 10 Mr Quin sought to have the costs assessor determine the costs agreement as being unjust on the basis that he had and still has a poor standard of English. He cannot read and write English. Mr Quin emigrated from China in 1992 at the age of 18 years. He was educated in China to the equivalent of Year 6. He attended the English language centre in Beverley Hills to learn English and then subsequently, at the age of 20 years, enrolled in Year 10 at Kingsgrove high school. After two years at Kingsgrove high school, he was requested by the principal to discontinue school. He has worked as a driver, assisted in selling clothes at Paddy's Market and now conducts a wholesale business in menswear where he employs a representative to help him. 11 As a result of Mr Quin's low standard of literacy in English and his lack of general education, he says that did not fully understand the costs agreement or any of the other correspondence sent by Doyles. Mr Quin says that he signed the costs agreement, as well as other documentation during the course of the matter, at the request of Doyles without a proper understanding of what he was signing but with the understanding that if he did not sign then the matter could not proceed. 12 Nevertheless, the costs assessor at paragraph (b)(v) of his reasons considered that none of the terms of the costs agreement dated 19 May 2004 were unjust apart from Clause 7 which provided for interest on unpaid amounts at 12% per annum. Doyles do not challenge the costs assessor's decision in relation to interest. Nor is there challenge to the amount of disbursements that were allowed by the costs assessor. 13 Mr Quin submitted to the costs assessor that if Doyles proposed to base its charges on a time basis as prescribed by the costs agreement, then proper information should be provided to him as to the specific time spent on each activity as opposed to global times spent on range of activities; and secondly, this method particularisation of Doyles' invoices did not enable a proper analysis of the fairness and reasonableness of the costs on a time basis. Mr Quin's dispute so far as the costs agreement was concerned was not merely confined to the rates specified in the agreement for the calculation of costs. He disputed numerous aspects of the agreement including the reasonableness of any costs incurred in the Land and Environment Court on the basis that the proceedings were unreasonably commenced; the duplication work due to a large number of solicitors working on the matter both at any point in time and over time; using the six minute unit in the absence of a specific provision in the costs agreement; and charging the costs which are not recoverable such as rendering invoices. Whether the costs assessor erred in the application of s 208C of the Act 14 Section 208C of the Act provides: "Costs agreements not subject to assessment (1) A costs assessor is to decline to assess a bill of costs if: (a) the disputed costs are subject to a costs agreement that complies with Division 3, and (b) the costs agreement specifies the amount of the costs or the dispute relates only to the rate specified in the agreement for calculating the costs. (2) If the dispute relates to any other matter, costs are to be assessed on the basis of that specified rate despite section 208A. The costs assessor is bound by a provision for the payment of a premium that is not determined to be unjust under section 208D. (3) This section does not apply to any provision of a costs agreement that the costs assessor determines to be unjust under section 208D. (4) This section does not apply to a costs agreement applicable to the costs of legal services if a barrister or solicitor failed to make a disclosure in accordance with Division 2 of the matters required to be disclosed by section 175 or 176 in relation to those costs." 15 Doyles submitted that the costs assessor was required to decline to assess the bill of costs pursuant to s 208C, other than to apply the rate agreed and to determine any dispute as to actual time, as the disputed costs were subject to a costs agreement that complied with Division 3. 16 Doyles further submitted that while s 208A provided what a costs assessor must consider in assessing an application relating to a bill of costs and s 208B provided other factors a costs assessor might consider in assessing an application relating to a bill of costs, the costs assessor only had authority to determine whether the amount of actual time spent in relation to each item claimed was in fact spent by the practitioner if that is the agreement of the parties. The costs assessor carried out his duties outlined in ss 208A and 208B of the Act. 17 The costs agreement signed by the client at clause 1 stated: "The range of work for which professional fees will be charged is all time spent on your file on a time basis…" 18 Doyles submitted that based on this clause of the agreement, it was entitled to payment for all actual time spent on the matter [my emphasis added]. Doyles further submitted that as a valid costs agreement existed which set out the rate to be charged on an hourly basis for that time, and that the costs assessor had no authority to determine his estimation of the amount of reasonable time required to perform a billable task. Hence, the costs assessor should have declined to assess the bills of costs other than to deal with disputed items in relation to actual time spent by the plaintiff. Doyles submitted that it is entitled to all time spent on the file and because Doyles provides premium service it falls within its discretion to decide whether three solicitors from the firm should attend a conference and the like. 19 Mr Quin says that Doyles' interpretation misconstrues s 208C and, as I largely adopted these submissions, I shall refer to them shortly. Costs Assessor's reasons 20 The costs assessor in his written reasons dated 6 October 2006 relevantly states: "(x) I considered that an excessive amount of time was spent in relation to the proceedings and reduced the time claimed accordingly. (xi) I allowed Jim Doyle some supervision having regard to the delegation of work to lower charging operatives. (xii) I considered that there were an excessive number of joint attendances and internal conferences, even on a solicitor and own client basis and reduced or disallowed such conferences. (xiii) Attendances by the Costs Respondent in relation to the Costs Applicant's costs are part of Solicitor's overheads and are not recoverable from the client. Accordingly I disallowed those attendances. … (xvi) I considered that 15 days of preparation for a 2 day hearing as estimated in the Costs Respondent's letter of 28 July 2005 was grossly excessive. … (xxii) I determined the reasonable costs using the charge out rates set out in the Costs Agreement/or Bill of Costs based on my determination of the work reasonably required to carry out the Costs Applicant's instructions. Overall I considered that an excessive amount of time was spent by the Partner and staff of the Costs Respondent that this was unreasonable both as to the work that was done and the manner in which it was done. (xxiii) I considered that the reasonable costs excluding disbursements for the period 1 December 2004 to 30 November 2005 were $55,753.50." 21 Section 208C(1) requiring a costs assessor to decline to assess a bill of costs has two preconditions, the second of which is in the alternative. The first precondition is that the disputed costs are subject to a costs agreement that complies with Division 3. Mr Quin conceded that the costs assessor determined that the disputed costs were the subject of a costs agreement dated 19 May 2004 and that such agreement complied with Division 3. The second precondition to s 208C(1) is that either the costs agreement specifies that amount of the costs, or the dispute relates only to the rate specified in the agreement for calculating the costs. 22 The costs agreement of 19 May 2004 did not specify an amount of costs so the first alternative for the second precondition does not exist. As the dispute between Mr Quin and Doyles did not relate "only to the rate specified in the agreement for calculating the costs". 23 It is my view that neither precondition of s 208C(1)(b) was applicable as the dispute did relate to "any other matter" and that in that event the costs assessor was required to assess the costs on the basis of the rates specified in the costs agreement dated 19 May 2004 despite the provisions of s 208A. The costs assessor did apply at rates specified in the costs agreement. At paragraph 3(b)(xxii) of his determination the costs assessor stated "I determined the reasonable costs using the charge out rate set out in the costs agreement…". The costs assessor made no error of law in applying s 208C(2) of the Act in relation to the costs agreement dated 19 May 2004. The costs assessor's approach to subsequent agreement for a lump sum amount 24 Doyles submitted that a variation to the costs agreement was made by the parties in their letters of 6 and 8 August 2005 and that the costs assessor was not entitled to assess that lump sum agreement. 25 On 5 August 2005, Doyles wrote to Mr Quin and relevantly stated: "We confirm that the amount of $38,777.41 has been overdue for sometime. In addition to the above, we have been advised that out accounts department has issued an invoice for the month of July 2005 in the amount of $12,520.69 and forwarded it to your home address today. A copy of this invoice is enclosed for your information. A total amount of $51,298.10 is now outstanding and due to Doyles Construction Lawyers. Accordingly, please forward payment of $51,298.10 by Direct Debit to Doyles Construction Lawyers… In addition to the payment of the outstanding fees due to Doyles Constructions Lawyers, you have the option of paying a lump sum figure of $30,000.00 for our fees from the date of payment to the end of the two (2) day hearing commencing on 25 August 2005 on the basis of the calculations set out in our letter dated 28 July 2005." 26 On 6 August 2005, Mr Quin replied: "1. We would like to pay the cost $66,000.00 ($28,000+$38,000.00) which is including the Lump Sum Payment, and this $66,000.00 would be the costs till to this case finished. Moreover, the $66,000.00 cost is including: a. The outstanding fee in the past period; b. Significant increase of evidence, directions or preparing and attendance of interlocutory applications brought by either party; c. Prolonged hearing for more than two days; and d. Delays in filing or responding to evidence." 2. In addition, we agree to pay the fee for the barrister ($18,000.00) and the experts separately." 27 On 8 August 2005, the solicitor replied: "Doyles has agreed to accept your proposal as set out in your letter dated 6 August 2005 on the basis that:- (a) Outstanding fees of $38,771.41 be reduced to $38,000.00; (b) Outstanding fees of $12,520.69 shall be paid on Tuesday, 23 August 2005; (c) Lump Sum fee of $30,000.00 be reduced to $28,000.00 but on the terms set out in our letter dated 5 August 2005." 28 Doyles submitted that as this agreement specifies the amount of costs and under s 208C the costs assessor should have declined to assess those costs. 29 The costs assessor's determination in relation to the purported variation of the costs agreement was as follows: "(xvii) As a client is entitled under Part 11 Division 6 of the Legal Profession Act 1987 to have Bills of Costs assessed on the terms set out in the Act I did not consider that the alleged agreement between the parties dated 10 August 2005 was binding on the Costs Applicant." 30 It is my view that there was no agreement because while Doyles agreed to accept $38,000 as offered, paragraph (b) of his last letter required an additional $12,520.69 be paid on 23 August 2005. The decision of the costs assessor is correct. Whether the costs assessor provided adequate reasons The law 31 Section 208JAA of the Act reads: "208JAA Reasons for determination (1) A costs assessor must ensure that a certificate issued under section 208J that sets out his or her determination is accompanied by: (a) a statement of the reasons for the costs assessor's determination, and (b) such supplementary information as may be required by the regulations. (2) The statement of reasons must be given in accordance with the regulations." 32 Regulations 61(2) and (3) read: "(2) A statement of reasons for a costs assessor's determination that is required by section 208JAA of the Act to accompany a certificate issued under section 208J of the Act must be accompanied by the following information: (a) the total amount of costs for providing legal services determined to be fair and reasonable, … (d) in respect of any disputed costs, an explanation of: (i) the basis on which the costs were assessed, and (ii) how the submissions made by the parties were dealt with, (e) if the costs assessor declines to assess a bill of costs under section 208C of the Act—the basis for doing so, … (3) A statement of reasons to which this clause applies may be accompanied by such further information as the costs assessor concerned considers is necessary to clarify the determination of the application for a costs assessment." 33 In Frumer v Owners of Strata Plan 36957 (2006) 67 NSWLR 321 the Court of Appeal considered the adequacy of reasons of a costs appeal panel and explained at 335: "61 The relatively precise amount suggests a calculation or an addition of items, but this is not explained. The assessment may or may not have been by adjustment of the bill of costs, but if it was the adjustments were not identified and if it was not there was no more than an end figure. The panel stated a figure as the result of its assessment and asserted that it was "in all the circumstances" a fair and reasonable amount of costs, but the content cannot be seen. 62 In my opinion, this fell short of providing a statement of reasons for the panel's determination as required by s 208KG of the Act, and fell short of providing the explanation required by reg 68(1)(d). If either the claimant or the opponent wished to appeal to the Supreme Court, he or it could not do so when he or it did not know - (a) whether the panel's assessment had been by taking the itemised bill of costs and allowing, disallowing or adjusting items, or by coming to its own view of work reasonable to be carried out; (b) if the former, what items had been allowed, disallowed or adjusted and whether as to hourly rate or reasonable times or for some other reason; or (c) if the latter, what work the panel thought reasonable and how it costed the carrying out of the work. 63 The claimant would need to know for appeal as to a matter of law pursuant to s 208L of the Act, but plainly also for appeal pursuant to s 208M. If the claimant had contemplated disputing the extent of unreasonable charging accepted by the costs assessor to have occurred in relation to coordination work and reporting work, how could he have done when he did not know what coordination work or reporting work had been excluded from the claim in the bill of costs, or what coordination work or reporting work the costs assessor had included in his own assessment as reasonable work to be carried out; or what the panel had done in these respects? How could he do so if he did not even know whether the panel had also accepted that there had been unreasonable charging in relation to coordination work and reporting work? The opponent also had an interest in the reasons, since it might have wanted to appeal against the cutting down of its costs, and it was equally in the dark." 34 However, as I have previously stated in Marano v Quagliero [2006] NSWSC 1364 at [22]: "… when these bills of costs that form the basis of the costs assessment are examined, they give details of the date and description of the work carried out, the initials and the designation of the person who carried out the work. No units of time are specified, except where there is an actual attendance by the client. The client, after making an examination of each of those bills of costs, would be largely unable to ascertain whether or not the costs were charged in accordance with the costs agreement." 35 Marano v Quagliero was a case where a solicitor asserted that a costs assessor has wrongly assessed costs in circumstances where a costs agreement was said to exist. The point of all this is that the costs assessor is reliant on the quality of the information provided by the solicitor as to how the costs were calculated. If the information does not reveal how long the solicitor spent on a specific item of work, the costs assessor's tasks in assessing what is reasonable is more difficult. It is common ground that the costs assessor had access to Doyles' files and some of the information may have been revealed there. 36 There was no bill of costs as such furnished to the costs assessor but rather a series of monthly invoices. The first invoice is typical of the others. It's format is as follows: "Professional Time Report Period From 1/06/2004 to 30/06/2004 Patricia Lenehan 1/06/2004 Drafting letter of advice to client 4/06/2004 Telephone call to client, briefing with PH, finalising letter of advice, draft letters to certifier, Council and developer 7/06/2004 Settling draft letter to PCA & Artec 16/06/2004 Perusal of file, conference with L & D Quin re: notification of adjoining proposed DA 17/06/2004 Settling draft letter to Council and letter to client 25/06/2004 Perusal of facsimile from client re: submissions to Council Total 4.0 Phillip Hanna 4/06/2004 Letter to private certifier, Yellamo Building Certifiers 7/06/2004 Draft Letter to PCA and Artec Developments 16/06/2004 Conference with Ms Lisa uin and Ms Darcy Quin 16/06/2004 Drafting Letter on behalf of client for objection to DA 16/06/2004 Telephone conference with Bankstown City Council 17/07/2004 Drafting and Re-Drafting submission to Council and letter to Mr Ken Quin 18/06/2004 Conference with Jim and Patricia on review of file 22/06/2004 Drafting letter to client on progress of matter 30/06/2004 Telephone conference with Mr Ken Quin Total 2.1 37 From the way the invoices are set out it is impossible to ascertain how long was spent on each item of work. However, identification can be made as to the overlap of work by legal practitioners. By way of example on 18 June 2004, three members of Doyles had a conference to review the file. 38 The costs assessor provided an explanation on how the costs were assessed. He applied the rates set out in the costs agreement but made deductions for excessive time, reduced or disallowed some of the principal's supervision, reduced joint and internal conferences that he considered excessive and reduced 15 days claimed for preparation for a two day hearing saying it was grossly excessive, and finally disallowed costs involved in seeking payment from the client. 39 The costs assessor also provided reasons as to why he did not find the rest of the costs agreement unjust except as to interest. The costs assessor in his reasons explained how the parties' submissions were dealt with. A reading of the reasons put Doyles in a position to know what had been excluded from his invoices. It is my view that the reasons complied with Reg 61 and that they were adequate. 40 So far as s 208M is concerned, when one looks at the total amount of the invoices, namely the sum of $213,830.87 and the amount assessed is only $55,735.20 and disbursements totalled $22,021.25 (including GST) it is obvious that there has been a substantial reduction in the costs claim. But the reasons of the costs assessor explain why this is so, eg, the solicitor charges 17 days preparation for a 2 day hearing. The costs assessor determined that there had been gross overcharging for preparation and I agree with his view. There has been no substantial injustice occasioned upon Doyles. In these circumstances, leave under s 208M should not be granted. The appeal under s 208L fails. The summons filed 14 November 2006 is dismissed. 41 Costs normally follow the event. The plaintiff is to pay the defendants' costs. The court orders: (1) An extension of time to file this appeal is granted. (2) The summons filed 14 November 2006 is dismissed. (3) The plaintiff is to pay the defendants' 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.