District Court New South Wales Medium Neutral Citation: Nikolaidis v Chippindall (No 2) [2012] NSWDC 172 Hearing dates: 30 May 2012 Decision date: 30 May 2012 Before: Neilson DCJ Decision: I grant leave to the plaintiff to file in Court an amended summons. I grant the relief sought by the current plaintiff. In what I have identified as the first, third, fourth and fifth matters I allow the appeal. I set aside the determination of the review panel in each of those matters and I also set aside each determination of the costs assessor. In the matter I have identified as the second matter, Liberty Holding Pty Ltd ats Goodacre Developments Pty Ltd I grant leave to the plaintiff to appeal against the decision of the costs assessor. I set aside the determination of the costs assessor. I direct that the issue as to the nature of the agreement between the plaintiff and the defendant be tried by a judge of this Court. For the purpose of that hearing I direct that matter be heard before the List Judge on Friday 15 June 2012. I reserve the question of costs to the trial judge. Prima facie the plaintiff is entitled to costs and prima facie the defendant ought have a certificate under the Suitor's Fund Act 1951 if he be qualified to receive such a certificate. The exhibits are to be returned to the plaintiff with the exception of exhibit 1 which is to remain on file. I direct the plaintiff to properly care for the exhibits and to produce them at the next hearing in case there be any cross-examination based on any of the documents which are the exhibits in the plaintiff's case before me. Catchwords: COSTS ASSESSMENT APPEAL - Issue of whether there existed an independent agreement between plaintiff and defendant that the formal costs agreement would only apply if the plaintiff was successful in the matter and recovered a costs order against the other party - Failure of costs assessor to decline to assess costs in accordance with dictum of Hodgson JA in Doyle v Hall Chadwick and send matter back to judicial arm of the Supreme Court for determination by a judge of the factual issue joined between the costs applicant and the costs respondent - Review Panel erred in law in failing to identify this issue and proceeded upon basis that there was no real issue as to whether there were the agreements pounded by the costs applicant Cases Cited: Doyle v Hall Chadwick [2007] NSWCA 159 Najem v Maatouk [2010] NSWSC 20 Category: Procedural and other rulings Parties: Leon Nikolaidis (Plaintiff) John Chippindall (Defendant) Representation: Mr J Svehla (Plaintiff) N/A (Defendant) File Number(s): 2012/13604 Judgment 1HIS HONOUR: Yesterday afternoon I made a finding as to the jurisdiction of this Court to determine the five appeals brought in the amended summons against five determinations of costs assessors, four of which had been adopted by a Review Panel. In that ruling, I outlined the nature of the five matters in which the costs assessor had assessed costs and outlined the four decisions of the Review Panel and pointed out that the Manager of Costs Assessment had withdrawn from the Review Panel the application for review brought by Mr Nikolaidis against the matter I identified as "the second matter", namely, the review application concerning costs in the matter of Liberty Holdings Pty Limited ats Goodacre Developments Pty Limited. 2The substance of the appeal in each case can be gleaned from a submission put by Mr Nikolaidis to the costs assessor, Mr Robert Fox of Messrs Fox O'Brien, solicitors at Sutherland, in a letter of 19 May 2010, sometimes incorrectly referred to by Mr Fox as a letter of 19 March 2010. In the first two paragraphs of his letter, Mr Nikolaidis said this: "[1] Mr Chippindall had been retained by me for a considerable number of years (predominantly in insolvency matters) prior to the claims relating to the Subject Assessments coming into existence. We had a good working relationship. [2] That working relationship, in which Armstrong Wily & Co [accountants] matters were not involved, was premised upon me briefing him on the understanding, following discussions between Mr Chippindall and me, that if full recovery of costs was made in proceedings, he would be paid in full but if only partial or no recovery of costs was realised, we would share any costs recovered on a pro rata basis, or else claim no fees at all if no fees were recovered. This arrangement was an incentive and an inducement for me to brief Mr Chippindall." 3In relation to the first matter, that is, Nikolaidis ats Preston, Mr Nikolaidis said this: "[7] In relation to the Preston matter, I had the following conversation with Mr Chippindall in early 1993 before retaining him in words to the following effect: 'LN: "As you are aware, we are having a fight with John Preston. He has commenced proceedings against us seeking the delivery of his files on which we claim a lien pending payment of our outstanding fees." JKC: "I always knew you would end up having a fight with John Preston. You should have taken my advice and your father's advice and not acted for a person like this." LN: "Knowing John Preston like I do, I think we are going to have a bitter fight with this fellow." JKC: "I will be delighted to act for you." LN: "On a mate rate basis." JKC: "I will have to be paid something because I rather suspect that this person is not going to go away easily." LN: "What do you suggest?" JKC: "I am happy to run the matter at a discounted rate of say 50 percent of my normal charge out fee. I will issue a memo of fees from time to time for my normal fees which you can use for the purpose of recovery against Mr Preston if we get a costs order, but between us you pay me half." LN: "That's fine, we will proceed on that basis, as you know Michael is running the matter"." 4There are similar conversations recorded about proceedings that I referred to as proceedings number 3, Nikolaidis ats Legal Services Commissioner, and number 5, Nikolaidis v Legal Services Commissioner in the Court of Appeal. As far as the third matter, which I identified as Masri and ors v Perpetual Nominees, Mr Nikolaidis said that the defendant, Mr Chippindall, accepted a brief from him on the terms set out in the second paragraph of his letter of 19 May 2010, which I have quoted above. 5Essentially, in regard to each of the five matters, although there may have been a formal costs agreement, there was an independent agreement between the plaintiff and the defendant that the formal costs agreement would only apply if the solicitor, the plaintiff, was successful in the matter and recovered a costs order against the other party, in which case the formal costs agreement would be used against the party ordered to pay costs, whether on a party/party basis or a solicitor/client basis. If there were only a partial recovery of costs, there would be a separate arrangement as between the plaintiff and the defendant, and if there was no order for costs recovered the defendant would do the work "pro bono". The letter was clearly before the costs assessor. 6Mr Nikolaidis, the plaintiff, sent to Mr Fox, the costs assessor, a letter dated 9 August 2010 enclosing his affidavit sworn on 10 August 2010 (erroneously described by him as being sworn on 9 August 2010) and an affidavit of Andrew Wily sworn 9 August 2010. Those affidavits are exhibits D and E, and it is clear that, although exhibits D and E are only copy documents, the original documents were duly attested, the affidavit of Mr Wily being sworn before Mark Galler, a Justice of the Peace, and the affidavit of Mr Nikolaidis being taken by Michael Zwar, a solicitor. I accept that those documents were sent to the costs assessor on or about 9 August 2010. 7I am assured by learned counsel for the plaintiff that the approach of the costs assessor and indeed the approach of the Review Panels in each matter was the same. 8I turn to the reasons for determination of costs made by Mr Fox in the matter of Masri and ors v Perpetual Nominees, the reasons being dated 6 December 2010. In his reasons, Mr Fox said this: "On 16 February 2010, I asked for Objections by 5 March 2010. On that day the costs respondent wrote to me questioning my jurisdiction, and indicating [that] he intended to commence Supreme Court proceedings to interfere." Mr Fox then refers to correspondence with the costs applicant and then to a communication from Mr Nikolaidis of 20 April 2010 which caused him to send a reply on 22 April 2010, which requested his objections "within twenty-eight days". His reasons then continue thus: "On 30 April 2010 the costs respondent indicated that the sworn affidavits would be received next week - but I still await them. On 19 March [sic, scil May] 2010 I received objections and the costs applicant replied to these on 6 July 2010. On 24 July 2010 I wrote to the costs respondent seeking further comment but nothing has been received. Generally the costs respondent states that all work was done on a contingency basis for party [sic] other than the receiver Armstrong Wily. They were done on the basis that if there was full recovery of costs the costs applicant would be paid, but if only partial recovery was effected the bills would be paid pro rata. If there was no recovery, the costs applicant would not be paid at all." 9Clearly the costs assessor was aware of the contention made by the present plaintiff that the formal costs agreement, if there were one, was conditional, the condition being that there be an order that a third party pay the plaintiff's clients' or the plaintiff's own costs, and if there were no recovery of costs that the defendant would act pro bono. 10In his reasons, the costs assessor goes on to point out that the costs applicant, the present defendant, denied any such agreement. The costs assessor's submissions were put by Messrs Church & Grace on 6 July 2010. In that letter, it is clear that the current defendant denied the existence of any "general fee recovery agreement" and pointed out that there was no evidence before the costs assessor that the costs agreements were conditional. Further on in the same letter, the following is stated: "Apart from the fact that Mr Nikolaidis' submissions make assertions as to conversations, they provide no other evidence that these conversations ever occurred." There are further statements essentially to the same effect in the costs applicant's response to the present plaintiff's submissions and then submissions put on behalf of the costs applicant that the assertions of the present plaintiff were "recent invention". The costs applicant then, through his solicitors, said that the costs assessor ought not accept Mr Nikolaidis' assertion that there was a dispute about the nature of the costs agreement. 11Therefore, it was abundantly clear to the costs assessor that there was a dispute as to the nature of the costs agreement and that that dispute could only be ascertained by the weighing of oral evidence, that is, the evidence of both the costs applicant, Mr Chippindall, and the costs respondent, Mr Nikolaidis. 12The costs assessor then said, in his reasons, this: "It is not my function to seek to adjudicate on those matters, but it seems to me to be appropriate that I 'clear the air' in that regard." The first clause of that sentence is entirely correct. It is difficult to know how Mr Fox, the costs assessor, could "clear the air" about that dispute. He went on, however, to assess the costs on the basis that the costs agreement propounded by the costs applicant in fact existed. On p 3 of his reasons in the Masri matter, Mr Fox said this: "Although s 359(3)(b) entitles me to make findings about the existence of a costs agreement, I am of the view that is that [there] is a discretion which I cannot exercise if its resolution involves the prospect of testing of evidence. That appears to be what I would have to do to adjudicate the dispute whether there is a general fee recovery agreement as alleged by the costs respondent or whether the truth is found in the costs applicant's denial, and I will not do that. I simply assess the basis of the retainer claimed by the costs applicant (whether that be by way of written costs agreement or by way of a relevant disclosure followed by continuation of instructions)." The costs assessor went on to point out that, because of the date of instructions in each of the five matters, where the 2004 Act differed from the 1987 Act he had regard to the 1987 Act. Notwithstanding that, his decision issued under the 2004 Act. 13In the four matters which went to the Review Panel, the Review Panel adopted the decision and determination of the costs assessor. The Review Panel decision in the Masri matter really does not address the issue that is currently before me. It merely skirts that issue. 14In Doyle v Hall Chadwick [2007] NSWCA 159, the primary decision was given by Hodgson JA with whom Campbell JA concurred and with whom Mason P concurred in all relevant respects. Commencing at [56], his Honour discussed the jurisdiction of a costs assessor. His Honour said: "[56] In my opinion, s 208(3) of the 1987 Act makes it clear that this is so, at least where the assessment is between the lawyer and the client. However, I do not entirely agree with either of the opposing views expressed in the Muriniti litigation, that is, the view of Davies AJ in Muriniti v Lyons [2000] NSWSC 680 and that of Dunford J in Muriniti v Lyons [2004] NSWSC 135. [57] In that litigation, there was a dispute as to the terms of an agreement between a solicitor and a barrister, where the agreement was apparently not in writing and the barrister was deceased. The barrister's widow applied to the Supreme Court for a costs assessment under the 1987 Act; and when, over objection of the solicitor, the costs assessor indicated an intention to proceed, the solicitor commenced proceedings in the Supreme Court, seeking among other things a declaration to the effect that any agreement with the barrister was subject to a condition that had not been fulfilled. [58] Davies AJ dismissed those proceedings, holding that any questions as to the terms of the agreement were to be determined by the costs assessor, not the Court. [59] The costs assessor proceeded with the assessment, and issued a certificate, although he stated explicitly that he was only determining a fair and reasonable amount of costs, not whether they were payable. The barrister's widow filed the certificate of assessment, obtained a judgment under s 208J and pursued execution of that judgment. [60] The solicitor commenced further proceedings in the Supreme Court, seeking a declaration that he was not liable to pay the costs; and those proceedings were subsequently amended to seek an extension of time to appeal from the determination of the costs assessor. Dunford J granted that leave." His Honour then went on to quote what fell from Dunford J. His Honour then recommenced his reasons thus: "[61] In my opinion, Davies AJ was correct to say that a costs assessor, assessing costs between a lawyer and client, can determine disputes as to the terms of the costs agreement, and Dunford J was wrong to say otherwise. However, where the existence of the terms of the agreement are in dispute in a way that would require the hearing of evidence to resolve, it may be appropriate for the costs assessor to decline to resolve the dispute; and in the Muriniti litigation, it would in my opinion have been open and reasonable for Davies AJ to have permitted the question to have been determined in the proceedings before him. As it turned out, the costs assessor did decline to resolve this question; and in my opinion, in those circumstances, the costs assessor should not have issued a certificate which could be converted into a judgment. That is, in a case where there is a real dispute on substantial grounds as to whether any costs are payable, a costs assessor should not complete an assessment by issuing a certificate unless satisfied that the costs are payable, because the certificate can be filed so as to take effect as a judgment. [62] In my opinion, this approach is consistent with the views of the Court of Appeal in Graham v Aluma-Lite Pty Limited (NSWCA, unreported, 25/3/97) and Wentworth v Rogers [1999] NSWCA 403. In so far as there is a divergence of opinion in Wentworth v Rogers [2006] NSWCA 145 as to the power of a costs assessor, in assessing party and party costs, to determine the terms and effect of the costs agreement of the party against whom the costs are sought, it is not necessary to address that divergence of opinion in this case." 15A similar position arose in Najem v Maatouk [2010] NSWSC 20, a judgment of McCallum J. In that case there was a dispute as to whether there were costs disclosures as required by the 1987 Act. The issue as to the existence of the costs disclosures was a matter of grave importance in that case. At [33] her Honour cited s 208M(4) of the 1987 Act, which permits an appeal to be by way of a new hearing at which fresh evidence or additional evidence or evidence in substitution of the original evidence may be given. Her Honour went on to say this: "[34] The material relied upon by Mr Najem in the present appeal consisted of the material that was before the costs assessor together with additional evidence from Mr Sandroussi and Mr Najem, including oral evidence. [35] Mr Rollinson, who appeared for Mr Maatouk, initially submitted that the evidence that was before the assessor should not be admitted as to the truth of its contents in these proceedings, but only to prove what was before the assessor (cf UCPR 50.14(1)). He subsequently resiled from that position, however, and accepted that all of the material before the assessor should be before me for the purpose of determining those grounds of appeal as to which leave was granted... [36] As to the oral evidence led at the hearing before me, I have since found a decision in which Handley JA expressed the view that the evidence which is admissible on an appeal under s 208M is limited to written evidence which could have been tendered before the assessor: see Sweeney v Australian Securities and Investments Commission [2006] NSWCA 230 at [11] - [15]. The two other members of that Court, Tobias J and McColl JJA, expressly declined to express a concluded view on that issue: at [26] and [27]. [37] The decision in Sweeney was not referred to by either counsel in the present case and no objection was taken to the admission of oral evidence on that specific basis. In Doyle v Hall Chadwick [2007] NSWCA 159, decided after Sweeney, the Court of Appeal appears to have assumed that this Court does have power in an appeal under s 208M to receive sworn evidence which can be tested by cross-examination, although it must be acknowledged that the point does not appear to have been expressly decided: see [60]-[61] per Hodgson JA; Mason P agreeing at [2] (except as to an unrelated issue); Campbell JA agreeing at [79]. In that case, Hodgson JA expressed the view that a costs assessor can determine disputes as to the terms of a costs agreement, but said at [61]: [I omit the quotation which I have already cited.] [38] It is implicit in those remarks (read in light of the contents of [60] of his Honour's judgment) that the further evidence which is admissible on an appeal under s 208M is not limited to written evidence which could have been tendered before the assessor. Acknowledging the force of the reasons expressed by Handley JA in Sweeney for concluding otherwise, I am satisfied that the approach taken in the present case of admitting oral evidence and permitting cross-examination was in accordance with the course contemplated with unanimous approval in Doyle v Hall Chadwick. [39] Mr Maatouk's consent to the grant of leave to appeal was expressly confined to the grounds concerning the existence and terms of any costs agreement between Mr Najem and Mr Maatouk. Those grounds were identified by the parties as being grounds 1, 2, 3, 4 and 7 in the further amended summons seeking leave to appeal filed in court on 16 September 2009. [40] Ground 1 complains that "the costs assessor erred in failing to decline to undertake the costs assessment in circumstances where there was apparent before him a real dispute on substantial grounds as to the agreement as to costs between the parties if any". That ground was based principally on the remarks of Hodgson JA in Doyle v Hall Chadwick set out above. [41] Since it is acknowledged by the parties that the remaining grounds raise the issue of the existence and terms of any costs agreement between Mr Najem and Mr Maatouk, the issue raised by ground 1 has, in my view, effectively been subsumed by the grant of leave to appeal. The appeal is a new hearing on those issues, which means they are to be retried. The party that succeeded below "enjoys no advantage, and must, if he can, win the case a second time": Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281 at 297G-298A. Accordingly, the question whether the costs assessor ought to have declined to determine those issues has become academic. [42] It may be noted, however, that this does appear to have been the kind of dispute Hodgson JA had in mind in the remarks his Honour made in Doyle v Hall Chadwick at [61]. The material before the assessor disclosed that there was a substantial dispute as to the existence of the agreements relied upon by Mr Maatouk in support of the assessment and that each party was effectively accusing the other of lying on that issue. The costs assessment process was a poor forum for the resolution of such issues, and the case for leave to appeal was a strong one in the circumstances: cf Wentworth v Rogers [2006] NSWCA 145 per Basten JA at [193]; Santow JA agreeing at [67]; Hislop J concurring at [215]." 16The costs assessment in these matters proceeded on the basis that the costs agreement propounded by the costs applicant, the present defendant, governed the relationship between the present plaintiff and the present defendant. That issue is hotly disputed. That was apparent to the costs assessor. The costs assessor ought to have declined to assess costs in accordance with the dictum of Hodgson JA in Doyle v Hall Chadwick and sent the matter back to the judicial arm of the Supreme Court, sent the matter back for a determination by a judge of the factual issue joined between the costs applicant and the costs respondent. However, the costs assessor did not do that. 17The Review Panel erred in law in failing to identify that issue and proceeded upon the basis that there was no real issue as to whether there were the agreements propounded by the costs applicant. In the circumstances and based on what fell from Hodgson JA in Doyle v Hall Chadwick, supported as it is by the decision of McCallum J in Najem v Maatouk, I have no option but to grant the relief sought by the current plaintiff. 18In what I have identified as the first, third, fourth and fifth matters, I allow the appeal. I set aside the determination of the Review Panel in each of those matters and I also set aside the determination of the costs assessor. 19In the matter I have identified as the second matter, the matter of Liberty Holding Pty Limited ats Goodacre Developments Pty Limited, I grant leave to the plaintiff to appeal against the decision of the costs assessor. I set aside the determination of the costs assessor. 20I direct that the issue as to the nature of the agreement between the plaintiff and the defendant be tried by a Judge of this Court. I disqualify myself from hearing that application because I have previously had the current plaintiff in the witness box in another set of proceedings in which there was a challenge to his credibility and where I rejected such challenge. In those circumstances, Mr Chippindall would be entitled to object to my hearing the current matter which would involve a determination of the relative credibility of Mr Nikolaidis and Mr Chippindall. For the purpose of that hearing, I direct that the matter be mentioned before the list judge. DISCUSSION AS TO SUITABLE DATES 21For that purpose, I list the matter for directions before the list judge on Friday 15 June 2012. SVEHLA: Would your Honour entertain an application for the costs of this part of the application out of the Suitors Fund? Mason P gave that order in the minority in Hall Chadwick because he allowed the appeal. That's at para 11 of his reasons. Mr Chippindall has filed a submitting appearance to the summons so far, so he is not a contradictor, but we have been successful in undermining the statutory exercise of the power by the assessor and the Review Panel. HIS HONOUR: How do I know if Mr Chippindall is qualified? All right. 22I reserve the question of costs. Prima facie the plaintiff is entitled to costs and prima facie the defendant ought have a certificate under the Suitors Fund Act 1951 if he be qualified to receive such a certificate. Whether he be qualified or not, I do not know, and that is a matter on which he is entitled to be heard. He has, after all, filed a submitting appearance. However, it appears to me that the matter should be left to the ultimate tribunal of fact because, if the ultimate tribunal of fact finds for Mr Chippindall and ultimately there is no determination inconsistent with the original determination of the costs assessor, then it could be said that the whole of the appeal process was otiose and in such circumstances that the plaintiff ought not be entitled to any costs order. However, as I have said, that is a matter for the trial judge. 23Any other orders? SVEHLA: No, your Honour. HIS HONOUR: The exhibits are to be returned to the plaintiff with the exception of exhibit 1, which is to remain on file. I direct the plaintiff to properly care for the exhibits and to produce them at the next hearing in case there be any cross-examination based on any of the documents which are the exhibits in the plaintiff's case before me. It's merely a housekeeping order, Mr Svehla. SVEHLA: Yes, I understand. HIS HONOUR: The District Court just doesn't have the room to store all the exhibits and once you get lever arch binders and things, it becomes impossible. SVEHLA: Yes. The Supreme Court is suffering from the same issues. 24I cannot leave this case without observing the reason why the jurisdiction in costs appeals was transferred from the Supreme Court to this Court. I have cited the judgment of McCallum J in Najem v Maatouk. Her Honour's reasons cover fourteen of sixteen pages of the judgment and in dispute in that hearing was the princely sum of $8,215.13. One might cite the Latin poet Horace, who said, "parturient montes nascetur ridiculus mus". The quantum of the cases was so small that the Supreme Court did not wish to hear them. In the matter of Masri in the current case the amount in issue was $17,235.50. One might paraphrase the poet with these words, "parturient colles nascetur ridiculus mus": "The mountains go into labour. The outcome is a silly little mouse." I replace "montes" with "colles": "the hills go into labour. The outcome is a silly little mouse." We are talking about matters that are in the jurisdiction of the Local Court. ********** 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. Decision last updated: 09 October 2012