Pasupati v Okill [2011] NSWSC 1383

Supreme Court New South Wales

Medium Neutral Citation: Pasupati v Okill [2011] NSWSC 1383 Hearing dates: 02/11/11 Decision date: 24 November 2011 Jurisdiction: Common Law Before: James J Decision: Application for leave to appeal against the review panel's determination dismissed. Mr Pasupati to pay the costs of the application of Messrs Okill and Raymont. Catchwords: Costs - the indemnity principle Legislation Cited: Legal Profession Act 2004 Cases Cited: Adams v London Motor Coach Builders Limited (1921) 1 KB 495 Wentworth v Rogers [2006] NSWCA 145 Category: Principal judgment Parties: Kumareshwara Pasupati - Plaintiff Phillip Okill - First defendant Brett Raymont - Second defendant Representation: D Allen - Plaintiff Hancocks Solicitors - Plaintiff M Ryckmans (Somerset Ryckmans) - Defendants File Number(s): 2011/271640

Judgment 1This is a summons by Kumareshwara Pasupati ("Mr Pasupati") against Phillip Okill and Brett Raymont seeking leave pursuant to s 385(2) of the Legal Profession Act 2004 ("the Act") to appeal against a determination of a review panel under sub-division 5 of Division 11 of Part 3.2 of the Act, affirming a determination of costs by a costs assessor. 2It is convenient to outline the background to the proceedings in which the relevant costs orders were made and the course of those proceedings. Background to the court proceedings and the court proceedings 3In July 2002 Mr Pasupati commenced employment with a company named Print Management Australia Pty Limited ("PMA"). In September 2002 Mr Pasupati became the chief financial officer of PMA. He also became a director of PMA. Mr Okill and Mr Raymont also became directors of PMA. 4On 10 December 2007 PMA terminated Mr Pasupati's employment. On 24 March 2008 PMA brought proceedings in the Equity division of the Supreme Court against Mr Pasupati, alleging breaches by Mr Pasupati of director's duties owed by him and making other claims against him. On 30 April 2008 a defence by Mr Pasupati was filed. 5On 30 July 2008 a cross-claim by Mr Pasupati against PMA, Mr Okill and Mr Raymont was filed. In the cross-claim Mr Pasupati alleged, among other things, oppressive conduct, misleading and deceptive conduct, breaches by Mr Okill and Mr Raymont of their directors' duties and wrongful dismissal. 6Advice was given by senior counsel (Mr Garnsey QC) that Mr Okill and Mr Raymont should be represented by separate solicitors from PMA's solicitors but that the same counsel could appear for both PMA and for Mr Okill and Mr Raymont. In accordance with this advice Mr Okill and Mr Raymont retained Messrs Somerset Ryckmans (Mr Marc Ryckmans and Mr Louis Ryckmans). Another firm of solicitors Messrs Fox Staniland acted for PMA. 7On 3 November 2008 a defence to the cross-claim bought by Mr Pasupati was filed on behalf of Mr Okill and Mr Raymont. 8On 26 June 2009 Mr Okill and Mr Raymont made an application that Mr Pasupati provide security for the costs of the cross-claim in the sum of $294,000. An affidavit which had been made by Mr Marc Ryckmans on 24 June 2009 was filed in support of the application for security for costs. In this affidavit Mr Ryckmans said that up to the date of the affidavit Messrs Okill and Raymont had incurred costs of defending the cross-claim in an amount of approximately $40,000. Mr Ryckmans estimated that the total party and party costs of Messrs Okill and Raymont of the cross-claim would be $292,400. 9The application for security for the costs of the cross-claim was heard by McDougall J on 31 August 2009. On 31 August 2009 McDougall J gave an extempore judgment. His Honour ordered that Mr Pasupati provide security for Messrs Okill and Raymont's costs of the cross-claim in the sum of $150,000. His Honour also made an order that Mr Pasupati pay forthwith the costs of the application for security. 10Mr Pasupati did not provide the security which McDougall J had ordered. On 5 November 2009 Messrs Okill and Raymont brought an application that Mr Pasupati's cross-claim be dismissed. On 28 April 2010 Gzell J made an order that the cross-claim by Mr Pasupati against Messrs Okill and Raymont be dismissed and made an order that Mr Pasupati pay Messrs Okill and Raymont's costs of the cross-claim. The costs proceedings 11On 17 August 2010 Messrs Okill and Raymont made an application for assessment of the party/party costs awarded to them by the order made by McDougall J on 31 August 2009 that Mr Pasupati pay the costs of Messrs Okill and Raymont of the application for security for costs and the order made by Gzell J on 28 April 2010 that Mr Pasupati pay the costs of Messrs Okill and Raymont of the cross-claim. The total amount of the costs claimed (solicitors fees plus disbursements) was $334,851.85. 12A costs assessor (Ms Alexandra Hutley) was appointed to determine the application for the assessment of costs. 13At the request of Mr Pasupati the assessor granted an extension of time for the lodging of objections up to 18 December 2010. In fact, no objections were ever lodged on behalf of Mr Pasupati. 14On 3 December 2010 the solicitors for Messrs Okill and Raymont sent to the assessor and to the solicitors who had been acting for Mr Pasupati copies of invoices and receipts for disbursements incurred by them, including counsel's fees. 15On 25 March 2011 the assessor sent an email to Messrs Okill and Raymont's solicitors requesting further information. On 30 March 2011 Mr Louis Ryckmans replied by email, supplying certain information. 16On 4 April 2011 the assessor issued a certificate of determination, determining that the amount of the costs payable by Mr Pasupati under the two orders for costs was $222,163.95 (solicitors costs $125,591.95 and disbursements $96,572). The assessor provided a statement of her reasons for the assessment. 17On 29 April 2011 Messrs Okill and Raymont's solicitors sent a facsimile transmission to Mr Pasupati's solicitors relating to Mr Marc Ryckmans' affidavit of 24 June 2009. 18On 12 May 2011 Mr Pasupati applied for a review of the costs determination by the assessor. The assessor's determination was referred to a review panel consisting of two costs assessors (Mr John Lawrence Sharpe and Mr Christopher Phillip Wall). 19The review panel conducted a review of the assessor's assessment. In a certificate of determination dated 5 August 2011 the panel affirmed the assessor's certificate of determination of costs. 20On 23 August 2011 Mr Pasupati filed the summons in this Court seeking leave to appeal from the determination of the review panel. The assessor's statement of reasons 21Parts of the assessor's statement of reasons which were referred to in argument on this application included the following paragraphs of the statement. "10. In his judgment McDougall J commented that: "To the extent that Messrs Okill and Raymont are entitled to costs, it is an entitlement to the separate costs that they will incur by reason of the need to defend the separate claims brought against them in circumstances where they have some separate representation. I should point out that separate representation is confined to their solicitors, it appears to be accepted that the same counsel will appear for them as will appear for PMA." 11. His Honour also noted that the claimed security for costs of $294,000 failed to take info account the extent of the overlay and his Honour, as noted above, allowed security for costs of $150,000. GENERAL COMMENTS ....... 3. The applicants have claimed fees for three counsel of which only one has a contractual relationship with the applicants' solicitors. Mr Garnsey QC and Mr Connell of Counsel were both instructed by PMA's solicitors and all fees were rendered to that firm pursuant to the agreement with those solicitors. No fees were rendered to the applicants for any work relating to the cross claim. In response to my enquiry as to whether there had been a breach of the indemnity rule, I was informed by the applicants' solicitor PMA provided a loan to the applicants for their defence costs and the loan is repayable from costs recovered from the respondent. If the applicants are unsuccessful in recovering costs from the respondent, the loans will be added to their loan accounts as directors of PMA. Mr Garnsey QC and Mr Connell acted for the applicants on the cross claim and the application for security for costs. On the basis of this advice I accepted that there had not been a breach of the indemnity rule. 4. In regard particularly to the memorandums of fees of Mr Garnsey and Mr Connell but also to the bill generally, I was not assisted in the assessment by the applicants' approach of ambit claims. Claims for costs were made without regard to whether they were covered by the two costs orders and little detail was provided to enable me to determine if the items claimed related to the cross claim, the principal proceedings or the defence of PMS. Where costs were claimed for work that related to the principal proceedings or PMA as the first cross defendant those costs were not allowed as they were not covered by the costs order." 22General comment 3 referred to information which had been supplied to the assessor by Mr Louis Ryckmans in the email of 30 March 2011 to the assessor. Paragraphs (4) and (5) of this email of 30 March 2011 were in the following terms:- "(4) We are instructed by our clients that PMA agreed to advance (and did advance) loan amounts to enable payment of defence costs and representation expenses on behalf of the directors since July 2008 pending determination of the Cross Claim. The costs advanced by PMA on behalf of the directors was agreed to be the costs payable to Somerset Ryckmans and so much of the costs of Senior and Junior counsel as related exclusively or primarily to the defence of the directors (whether or not PMA also obtained a benefit). (5) We are instructed that as between PMA and its directors, any costs recovered by the directors from Mr Pasupati are required to be paid to PMA in reduction of the loan advances, and that if no amount is recovered the loan advances will be allocated pro rata to the directors' loan accounts." The review panel's statement of reasons 23The review panel's statement of reasons included the following passages: "Nature of Supreme Court proceedings ........... 4.6 Both the claim brought by PMA and the cross-claim brought by Mr Pasupati involve matters which were complex both as to facts and law. The proceedings were in the Supreme Court Equity Division. It is fair to say that the stakes were high for Mr Okill, Mr Raymont, Mr Pasupati and indeed PMA itself. 4.7 It is obvious that proceedings were hard-fought. These were proceedings between parties who had been working together as directors and in respect of the company of which Mr Pasupati had been Chief Financial Officer. 4.8 The proceedings involved the reputations of Okill and Raymont and the commercial and personal reputation of Mr Pasupati. As a Chief Financial Officer who had an income of $180,000.00 plus superannuation plus expenses and dividend payments, said to have been $212,500.00 per year until June 2006, the proceedings were of great importance to each of Mr Pasupati, PMA, Okill and Raymont. 4.9 Given the nature of the proceedings, it was almost inevitable that there would be twists, turns and developments that none of the parties, nor their legal advisers, could accurately predict. 4.10 It is important for the panel to look at the nature of the Supreme Court proceedings when reviewing the assessor's determination." 24In paragraph 5 of the statement of reasons under the heading "General approach to review" the review panel discussed what should be the proper approach by a review panel to a review of an assessor's assessment. As it was not submitted on this application that the review panel adopted an incorrect approach to its task, it is unnecessary to make further reference to paragraph 5 of the statement of reasons. 25In paragraph 6 of its statement of reasons under the heading "The assessor's reasons" the panel said at 6.8:- "6.8 T he panel is of the view that the assessor's reasons clearly identified the way in which the assessor dealt with fees, expenses and GST claimed, exposed the assessor's reasoning and calculations, and allowed each of the parties to have a real and not illusory right of appeal." 26In paragraph 7 under the heading "Fresh evidence" the review panel decided that it would take into account Mr Marc Ryckmans' affidavit of 24 June 2009, which had not been before the assessor, but decided that most of the other fresh evidence sought to be relied on by Mr Pasupati should not be taken into account on the review. 27In paragraph 8.3 of its statement of reasons the review panel said:- "8.3 The assessor requested that Okill and Raymont send documents to indicate whether they had paid the barristers or were liable to pay them. Okill and Raymont sent to the assessor and to Mr Pasupati on 30 March 2011 a document indicating the barristers were engaged separately from the company PMA, and that the company made a loan to Okill and Raymont which was to be repaid (or if not repaid, allocated to directors' loan accounts) and any costs recovered to part pay the loan. The letter specifically indicated "no indemnity has been given by PMA to the directors in respect of the legal costs." 28In paragraph 12 of its statement of reasons the review panel said with reference to the affidavit of Mr Marc Ryckmans:- "12.1 The Ryckmans affidavit was not before the assessor. Lander & Rogers must have had it. The likelihood is that Mr Pasupati had it, although once again whether he himself had the Ryckmans affidavit between at least August 2010 and April 2011 has not been indicated in any of the material put before the panel by Mr Pasupati. 12.2 Nevertheless, the panel has determined to consider it. 12.3 The purpose of that affidavit was to provide an estimate of the costs of defending the cross-claim. 12.4 Paragraph 18 of the Ryckmans affidavit refers to Okill and Raymont having incurred costs "of approximately $40,000.00" up to 24 June 2009. How that estimate was made is not set out. 12.5 Unfortunately the use of the word "costs" can be ambiguous. It could mean what the panel has referred to as fees. It could mean what the panel has referred to as costs. Whether it is inclusive or exclusive of GST is not indicated. 12.6 The panel accepts that the solicitors for Okill and Raymont, Somerset Ryckmans, kept time records. It is reasonably obvious that the estimate was not made by looking at the time records. Had reference been made to those time records, that alone would not have indicated the actual time and actual fees up to June 2009 incurred in defending Mr Pasupati's cross-claim, because an apportionment between the cross-claim and PMA's claim would have to be made. It seems likely the approximation of costs up to June 2009 was perhaps an approximation of fees, but in any event was probably an educated guess. Whilst it is not clear whether paragraph 19 refers to the $40,000.00 in paragraph 18 or the figures at (a) to (e), or all of those, paragraph 19 of the Ryckmans affidavit does indicate that "the time and cost estimates in my opinion are on the low side. 12.7 At the time of compiling the Ryckmans affidavit, in June 2009, it seems likely on the basis of the dates of the barristers' fee notes, that Marc Ryckmans did not have any bills from the barristers. 12.8 The bill submitted for assessment was indicated to contain actual times from time records. 12.9 The award of $ 150,000.00 as security for costs by His Honour McDougall J was not relevant to the assessor's enquiries. It is not relevant to the panel's enquiry. His Honour did not have a detailed bill. To some extent the material before His Honour was not well compiled and unsatisfactory. His Honour reduced the amount of security from the sum "... of security sought at $294,000.00 or so" to $150,000.00 because there was likely to have been an overlap between PMA's claim and the cross-claim and the likelihood that on a party and party basis less costs would be allowed than incurred by a party on a solicitor/client basis. In addition His Honour thought the hearing of the cross-claim would probably involve around three days. His Honour applied a rough sort of justice to arrive at a figure of $150,000.00, looking prospectively and doing the best that could be done on the information presented to him. That figure has no weight when looking at the actual costs claimed and set out in the bill. 12.10 The prospective estimates in the Ryckmans affidavit did not contain any element for the application for security for costs itself. Had those costs also been referred to or included, then the figure would have been higher. Significant costs were incurred by Okill and Raymont in relation to the application for security for costs. 12.11 Even so, the total estimated was $292,400.00. The amount allowed by the assessor was $222,163.95, after detailed examination of the claims and after the assessor had regard to the overlap between the PMA claim and the cross-claim brought by Mr Pasupati. 12.12 The panel notes, in passing, that in ground 12, Mr Pasupati indicates he received the Ryckmans affidavit "in or about January 2011". No explanation is given for why these matters were not raised before the assessor but, nevertheless, the panel has considered the Ryckmans affidavit." 29In paragraph 13 of its statement of reasons the review panel said with reference to the indemnity principle:- "13.1 A party cannot recover more than that party either has paid or is liable to pay. There seems to be a suggestion in the material provided by Mr Pasupati that an assessor can only assess and determine party and party costs if the costs owing by the receiving party have been paid. That is not the case. The purpose of what is generally known as "the indemnity principle" is to prevent any unjust enrichment of the receiving party in respect of the costs order. 13.2 For the general reasons set out above, the panel declines to consider the PMA financial documents that were not before the assessor. How and when those documents came into the possession of Mr Pasupati has not been indicated either in material before the assessor or in material now put before the panel. 13.3 It is not appropriate that the panel orders Okill and Raymont to provide copies of all invoices and receipts in relation to legal costs to Mr Pasupati. Those documents will likely contain some confidential details. In addition, the Supreme Court proceedings are continuing between the parties. 13.4 It is not appropriate that the panel orders a non-party, PMA, to provide copies of all invoices and receipts in relation to legal costs in the Supreme Court proceedings. That submission could have been made, but was not made to the assessor. In any event, it was not the role of the assessor, and it is not the role of the panel, to engage in a discovery exercise that may well be part of the proceedings between PMA, Okill and Raymont on the one hand and Mr Pasupati on the other, which proceedings are continuing. 13.5 It is important to note that the issue was raised by the assessor, not by Mr Pasupati. The assessor would have been entitled to proceed without requesting the matters sought through the assessor's letter of 25 March 2011. 13.6 There was material before the assessor in response to that letter, sufficient to satisfy the assessor that there was no breach of the principle that a party cannot be liable to pay pursuant to an order for costs made by a Court, an amount greater than the amount that party has paid or is liable to pay for the party's own legal costs. The material indicated there was no indemnity provided by PMA to the directors for their costs. The material indicated PMA advanced a loan to the directors, which was repayable, and that any costs recovered would be used to part pay that loan. 13.7 The panel has not examined the PMA financial documents, largely because they were not put before the assessor and no explanation is given for when they came into the possession of Mr Pasupati and could have been put before the assessor. 13.8 Nevertheless, the panel observe that it is not uncommon for such arrangements to be made, but not to be properly documented. The panel cannot assume that if the documents compiled by PMA's accountant do not contain details of the loan, that no such loan was made. The assessor had, and the panel has, direct material indicating that Okill and Raymond were and are liable to pay the costs claimed." The Act 30As I stated at the beginning of this judgment, the present proceedings are an application for leave to appeal pursuant to s 385(2) of the Act against a determination of a review panel made under sub-div 5 of Div 11 of Part 3.2 of the Act, which deals with reviews of costs assessors determinations by review panels. 31Section 385 is in sub-div 6 of Div 11 of Pt 3.2 of the Act, which deals with appeals. Section 385 provides as follows:- "Appeal against decision of costs assessor by leave (1) A party to an application for a costs assessment relating to a bill may, in accordance with the rules of the District 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 for a costs assessment 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 District 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 District 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." 32Section 385 refers to an application for leave to appeal against a determination of a costs application made by a costs assessor. However, section 382(1) in sub-div 5 provides:- (1) Subdivision 6 (Appeals) applies in relation to a decision or determination of a panel under this Subdivision as if references in Subdivision 6 to a costs assessor were references to the panel." The submissions of the parties The applicant 33Counsel confirmed that Mr Pasupati's application was purely an application under s 385 of the Act and did not include any appeal under s 384 of the Act (in sub-div 6), which confers a right to appeal against a decision of a costs assessor (and, therefore, a review panel) as to a matter of law. 34Counsel said that the hearing before me was limited to an application for leave. If leave was granted, the proceedings should then be adjourned. 35It was submitted that leave should be granted on two grounds, namely:- 1.On the evidence in the application it was arguable that by virtue of the indemnity principle relating to an order that a party pay another party's costs, no costs were payable by Mr Pasupati, because Mr Okill and Mr Raymont had never been liable to pay costs to their solicitors. 2.On the evidence in the application it was arguable that the quantum of costs claimed by Mr Okill and Mr Raymont was excessive. 36If leave were granted, the Court would be required, in accordance with sub-s (3) of s 385, to hear and determine the appeal. Fresh evidence could be adduced by Mr Pasupati at the hearing of the appeal and Mr Pasupati would use procedures which are available to a court for the purpose of gathering fresh evidence, which had not been available to the costs assessor or the review panel. 37I will now summarise counsel for Mr Pasupati's main submissions on the two grounds on which leave was sought. The indemnity principle 38Counsel for Mr Pasupati referred to para 3 of the general comments in the assessor's statement of reasons, to the inquiry made by the assessor on 25 March 2011 and to the email from Mr Louis Ryckmans to the assessor of 30 March 2011. 39Counsel pointed out that in para 3 of the general comments the assessor had noted all counsel's fees had been rendered to PMA's solicitors. 40It was submitted that the email of 30 March 2011 was not an adequate response to the assessor's inquiry. It was contended that the email merely showed that some arrangement had been entered into between PMA and Messrs Okill and Raymont whereby Messrs Okill and Raymont might incur a liability to PMA but did not show that Messrs Okill and Raymont were under any liability to Somerset Ryckmans to pay costs. 41Counsel submitted that a comparison of the balances of the loan accounts of Messrs Okill and Raymont in the financial accounts of PMA for the years ended 30 June 2008 and 30 June 2009 showed that the indebtedness of Messrs Okill and Raymont on the loan accounts had decreased, not increased. 42Counsel referred to part of the transcript of the cross-examination of Mr Marc Ryckmans on the hearing of the application for security for costs and, in particular, the following question and answer:- "Q: The cost of your client is being paid by PMA, is that right? A: I think that is correct. I don't know off the top of my head. I certainly know the invoices are made out to the second and third cross-defendants, as to where the source of the funds is coming from, I'm not quite certain." 43Counsel referred to a number of parts of the judgments of members of the Court of Appeal in Wentworth v Rogers [2006] NSWCA 145, in which the Court of Appeal allowed an appeal against a refusal by a judge to grant leave to appeal under s 208M of the Legal Profession Act 1987, which corresponded to s 385 of the Legal Profession Act 2004. Counsel referred particularly to parts of the judgment of Basten JA, including para 190 where his Honour said in part:- "If there is disputed evidence, which in substance the costs assessor does not have power to deal with in the manner usually considered procedurally fair with respect to contractual disputes, and absent countervailing considerations, it would seem generally desirable that leave would be given to allow those matters to be agitated in a relevant court or tribunal." Quantum of the costs 44Counsel for the applicant stressed that the order for costs made by Gzell J was an order limited to the costs of Messrs Okill and Raymont (and not PMA) and limited to their costs of the cross-claim and did not include their costs of the principal proceedings. 45It was submitted that there were indications in the evidence on the application that the costs claimed in the application for an assessment of costs had not been so limited. 46Counsel referred to para 4 of the general comments in the assessor's statement of reasons in which the assessor complained about the making of ambit claims by the solicitors for Messrs Okill and Raymont and of claims being made without regard to whether they were covered by the two costs orders. Counsel also referred to para 3 of the assessor's general comments. 47Counsel referred to Mr Marc Ryckmans' affidavit of 24 June 2009. In para 18 of his affidavit Mr Ryckman said:- "To date the applicants have incurred costs of defending the cross-claim in an amount of approximately $40,000." 48However, an examination of the costs claimed in the application for a costs assessment showed that the solicitors' fees claimed up until just before 24 June 2009 were about $85,000 and the fees of Mr Garnsey of senior counsel which were claimed for work done up to 24 June 2009 were about $20,900. 49In para 18 of his affidavit of 24 June 2009 Mr Ryckmans continued as follows:- "Going forward I estimate that the total properly recoverable party and party costs of the Applicants in respect of the Cross Claim (excluding GST) will be: (a) Solicitors' costs up to the date of the hearing $104, 400; (b) Solicitors' costs of the hearing (5 hearing days) $18,000; (c) Senior and junior counsel's costs of preparing for the hearing $60,000; (d) Senior and junior counsel's costs of the hearing $60,000; (e) Expert fees $50,000 Total $292,400" 50Counsel for the applicant compared the figure of $292,400 with the total amount claimed in the application for an assessment of costs of $344,851.85, which did not include any solicitors' costs or any counsel's fees for a hearing. 51Counsel for the applicant also referred to the amount of $150,000 which McDougall J had set as the amount for which Mr Pasupati should provide security. Messrs Okill and Raymont 52Counsel for Messrs Okill and Raymont submitted that there was no arguable case that there had been any contravention of the indemnity principle, such as would prevent Messrs Okill and Raymont recovering costs against Mr Pasupati and that leave should not be granted to enable a further investigation as to the quantum of costs payable. 53It was submitted that, in order for a litigant to be disentitled under the indemnity principle from recovering costs under a party and party costs order made in his favour, it is necessary for the other party to show that under no circumstances would the first party be liable to pay to his own solicitors the costs being claimed. 54If there are circumstances in which the first party could be liable for payment of costs, it is not material that the first party may have entered into an arrangement with a third party to be lent the amount of the costs by that third party or to be indemnified against those costs by a third party. 55Counsel referred to a written costs agreement between Messrs Okill and Raymont and Somerset Ryckmans dated 1 August 2008 as showing that Messrs Okill and Raymont had committed themselves to paying Somerset Ryckmans's costs of the cross-claim by Mr Pasupati. 56As to the quantum of the costs, it was submitted that the claims for costs in the application for an assessment had been subjected to a costs determination by the costs assessor and then a review by the review panel. The costs assessor had disallowed many items and had very significantly reduced the total amount of the costs. 57The costs assessor and the two costs assessors who constituted the review panel were experienced costs assessors and much better qualified than a judge would be, if leave was granted under s 385, to make a determination of the amount of costs which should be payable. 58It was submitted that the assessor had demonstrated in para 4 of her general comments in her statement of reasons that she was fully aware that only Messrs Okill and Raymont's costs of the cross-claim should be allowed. 59The appeal panel in its statement of its reasons had carefully considered Mr Ryckmans' affidavit and McDougall J's order. The assessor had referred to part of McDougall J's judgment in para 10 of her statement of reasons. 60It was submitted that, generally, the matters on which counsel for the applicant had sought to rely were matters of which the assessor and the review panel were fully aware. 61Counsel referred to the email sent by Mr Louis Ryckmans to Mr Pasupati's solicitors on 29 April 2011. In the email it was pointed that Mr Marc Ryckmans' estimate of the amount of costs incurred up to 24 June 2009 was qualified by the word "approximately", that the last invoice which had been rendered to the clients before 24 June 2009 was for the period ended 1 March 2009 and that the costs incurred from 1 March 2009 to 1 June 2009 had subsequently been billed and totalled approximately $38,000. Decision 62The indemnity principle was discussed in the judgments of Santow JA and Basten JA in Wentworth v Rogers . As previously noted, Wentworth v Rogers was a case under the Legal Profession Act 1987 but it was not suggested at the hearing of this application that the judgments in Wentworth v Rogers were not equally applicable to the Legal Profession Act 2004. 63At paras [45] and [46] of his judgment in Wentworth v Rogers Santow JA said:- "[45] The indemnity principle is long-established at general law. It is however not to be applied rigidly, or uninfluenced by statute or by practice recognised by statute, such as in relation to conditional fee agreements. I do not agree with the amicus' submissions that the principle has ceased to exist. Certainly there have been inroads to it brought about by the Act and by analogical reasoning from recognised exceptions. Where a party to an action has an agreement with their legal adviser that they do not have to pay any costs, then the general law principle states that that party cannot recover party and party costs against their adversary: McCullum v Ifield [1969] 2 NSWR 329 at 330 per Taylor J citing Gundry v Sainsbury [1910] 1 KB 645. [46] This principle has been applied to applications for assessment of party and party costs under the Act. Thus in Howard & Ors v Mechtler & Ors [2000] NSWSC 45 5 at [11] Master Malpass observed: "Under an order for costs, the paying party is only obliged to pay such costs as the receiving party was primarily and potentially legally obliged to pay to his solicitor. There is an indemnity only in respect of the costs covered by the order. A receiving party cannot recover a sum in excess of the liability to his own solicitor. ... It is necessary to prove that under no circumstances does the client have any liability to pay costs to his solicitors."" 64At para [102] of his judgment Basten JA said:- " The substantive issue at the heart of the Appellants' case was the principle that the fundamental purpose of an order that one party to litigation pay the legal expenses or 'costs' of another party is to provide an indemnity in relation to the whole, or usually part, of the legal obligation incurred by the other party to his or her lawyers. If that party is under no legal obligation to pay lawyers' fees, no amount can be recovered from the unsuccessful party. This principle, sometimes known as the indemnity principle, was explained in Gundry v Sainsbury [1910] 1 KB 645." 65Basten JA began para [104] of his judgment by saying:- "The indemnity principle has been held to operate in two circumstances which might not obviously fall within its terms." 66It is apparent from the rest of para [104] and from the cases cited by his Honour in that paragraph that his Honour was conveying in the first sentence that litigants had been held to be entitled to recover party and party costs in the circumstances he was about to mention. 67In para [104] Basten JA continued by saying:- "The first is where the lawyers will be paid for their services, but not, as a matter of practice, by the client. Examples of that situation include cases where the litigant is indemnified by an insurer, by an association, such as a trade union, of which the litigant is a member, or where legal aid is obtained..." 68In the leading case of Adams v London Motor Coach Builders Limited (1921) 1 KB 495 Bankes LJ said at 500 that it was essential for a party resisting the making of a costs order to establish that the terms upon which the other party's solicitors had been engaged included a term that under no circumstances should they look to the client for costs. At 502 Atkin LJ said that it would be necessary to show that the other party had made a binding agreement with the solicitors that he was not to pay any costs. 69In the present case, so far from there being any evidence of an agreement between Messrs Okill and Raymont on the one hand and Somerset Ryckmans on the other hand, that under no circumstances would Messrs Okill and Raymont be liable for costs, there was a written offer by Somerset Ryckmans to Messrs Okill and Raymont dated 1 August 2008 to enter into a costs agreement. 70Paragraph 2 of the offer was in the following terms:- "Nature of work The work we have been instructed to do is as follows: Defend l itigation brought against you by Kumareshwara Pasupati in the Supreme Court ("the Work"). If the scope of the Work changes we will inform you and revise any estimate of costs we have given you." 71Annexed to the offer was a costs disclosure document. 72Paragraph 4 of the offer was in the following terms:- "Acceptance of Offer If you accept this offer you will be regarded as having entered into a costs agreement. This means you will be bound by the terms and conditions set out in this document, including being billed in accordance with it. Acceptance may be by any one of the following ways: signing and returning a copy of this document; giving us instructions after receiving this document; oral acceptance. Failure to accept our offer within 7 days of dispatch of this document can result in the immediate withdrawal of our offer to act on your behalf." 73If not otherwise accepted, the offer was accepted by Messrs Okill and Raymont giving instructions after they had received the document. 74It was immaterial to the operation of the indemnity principle that an agreement might have been made between PMA and Messrs Okill and Raymont that PMA would lend to Messrs Okill and Raymont the amount of their costs, that amount to be charged to their directors' loan accounts with PMA, or that PMA did in fact pay the costs of Messrs Okill and Raymont. 75In my opinion, applying what Basten JA said in Wentworth v Rogers at para [102], there is not in the present case disputed evidence, which the costs assessor did not have power to deal with in a manner which would be considered procedurally fair with respect to contractual disputes. 76I refuse the application for leave, insofar as the application is based on the indemnity principle. 77As to the quantum of costs, I accept that in the application for a costs assessment Somerset Ryckmans made some claims for costs which were not within either of the costs orders. 78However, the assessor was clearly fully aware of the correct principle to be applied, that the only costs which could be taken into account were Messrs Okill and Raymont's costs of the cross-claim. It is apparent from the assessor's statement of her reasons that she closely examined individual items in the bill of costs and that she disallowed many of the items claimed. 79The costs assessor's determination was then reviewed by a panel of two costs assessors who, clearly conscious of the principle on which costs were to be assessed, affirmed the assessor's determination. 80As to Mr Marc Ryckmans' affidavit, I consider that I should take into account the contents of the email of 29 April 2011 and I consider that the comments about Mr Ryckmans' affidavit made by the appeal panel in paragraph 12 of its statement of reasons should be accepted as being correct. I also consider that the comments made in paragraph 12.9 of the review panel's statement of reasons concerning McDougall J's order of 31 August 2009 should also be accepted as being correct. 81I make the general observation that the costs assessor and the members of the review panel were all experienced costs assessors, who would be much better qualified than a judge would be to make findings about whether individual items of claimed costs should be allowed or disallowed. 82I refuse the application for leave, insofar as the application is based on the quantum of costs. Conclusion 83I dismiss the application for leave to appeal against the review panel's determination and I make an order that Mr Pasupati pay the costs of the application of Messrs Okill and Raymont.