District Court New South Wales Medium Neutral Citation: Behnia v Sarraf (No 2) [2019] NSWDC 281 Hearing dates: 24 May 2019; 20 June 2019 Date of orders: 25 June 2019 Decision date: 25 June 2019 Jurisdiction: Civil Before: Dicker SC DCJ Decision: (1) The amount of costs determined by the court as owed by the defendant to the plaintiff pursuant to the 20 March 2017 costs order of the Supreme Court is $26,256.50. (2) The amount of costs of costs assessment determined by the court as owed by the defendant to the plaintiff is $5,668.27. (3) The defendant must pay to the plaintiff the remuneration costs of the Costs Assessor and the costs of the Review Panel in the sum of $2,454.38. (4) The defendant is to pay the plaintiff's costs of and incidental to the hearings on 24 May 2019 and 20 June 2019 as agreed or assessed. (5) The parties have liberty to apply within 14 days to seek a different costs order to that set out in (4) above or to correct any errors in calculation. Catchwords: Appeal – costs - whether court can remit matter to Assessor or Review Panel upon allowing the appeal – whether the court can remit matter to a costs Assessor as Referee under Part 20.14 - proper approach to the assessment of costs where indemnity costs ordered Legislation Cited: Legal Profession Uniform Law Application Act 2014 (NSW), ss 75, 76, 77, 82, 83, 85, 89 Legal Profession Act 2004 (NSW), s 384 Uniform Civil Procedure Rules 2005, Part 20.14; Part 42.5 Cases Cited: Attard v James Legal Pty Ltd [2010] NSWCA 311 Behnia v Sarraf [2019] NSWDC 138 Newell v De Costi [2018] NSWCA 49 Texts Cited: M Brabazon, "Appeals from Costs Assessments in NSW" [2016] Precedent AULA 76 Category: Costs Parties: Masud Behnia (Plaintiff) Ardalan Sarraf (Defendant) Representation: Counsel: A Cornish (Plaintiff) R Christie (Defendant) (24 May 2019) R Christie and R Golovina (Defendant) (20 June 2019) Solicitors: Carmody Lawyers (Plaintiff) Jesus' Advocacy International (Defendant) File Number(s): 2018/369408 Judgment 1. Before the court is a further hearing in this matter arising from the court allowing the appeal in its judgment and orders dated 18 April 2019: see Behnia v Sarraf [2019] NSWDC 138. 2. It is assumed that a reader of this judgment will be familiar with the decision in Behnia v Sarraf [2019] NSWDC 138. In paragraph 5 of that judgment I stated the following: "5. In my opinion, if I form the view that the Review Panel has relevantly erred, there is an issue as to who should determine the assessment. One possible option is for this court to determine it. A second option is to refer the assessment out to a referee appointed by the court. A third option is to remit the matter to either the Review Panel from whom the appeal is brought or to the Manager, Costs Assessment, to appoint another assessor. It would not seem to be consistent with the purpose of the legislation to have this court determine the assessment having regard to the time and detail which would be involved. I agreed to hear further submissions on this point if I allowed the appeal." 1. It is not in issue that the relevant legislation applicable is the Legal Profession Uniform Law Application Act 2014 (NSW) ("the Act"). The costs in issue of the plaintiff all arose from 16 December 2017. They related to a retainer entered into between the plaintiff and his solicitors signed in May 2016: Exhibit "MJC – 1" to the affidavit of Mark John Carmody sworn 21 January 2019 pages 70 and 360 (paragraphs 3.1 and 3.2). The former costs legislation, the Legal Profession Act 2004 (NSW), is therefore inapplicable. 2. The background to the matter is that there had been an assessment of the plaintiff's claim for costs on an indemnity basis in relation to a Notice of Motion and an appeal from that assessment to a Review Panel. The plaintiff was unsuccessful at both levels and then appealed by way of Summons to this court. 3. Section 89 of the Act provides as follows: "89 Appeal on matters of law and fact (1) A party to a costs assessment that has been the subject of a review under this Part may appeal against a decision of the review panel concerned to: (a) the District Court, in accordance with the rules of the District Court, but only with the leave of the Court if the amount of costs in dispute is less than $25,000, or (b) the Supreme Court, in accordance with the rules of the Supreme Court, but only with the leave of the Court if the amount of costs in dispute is less than $100,000. (2) The District Court or the Supreme Court (as the case requires) has all the functions of the review panel. (3) The Supreme Court may, on the hearing of an appeal or application for leave to appeal under this section, remit the matter to the District Court for determination by that Court in accordance with any decision of the Supreme Court and may make such other order in relation to the appeal as the Supreme Court thinks fit. (3A) The Supreme Court may, before the conclusion of any appeal or application for leave to appeal under this section in the District Court, order that the proceedings be removed into the Supreme Court. (4) An appeal is to be by way of a rehearing, and fresh evidence or evidence in addition to or in substitution for the evidence before the review panel or costs assessor may, with the leave of the Court, be given on the appeal." 1. Section 82 of the Act provides as follows: "82 Review panels Review panels are established under the costs assessment rules and are each constituted by 2 costs assessors appointed under those rules. A review panel may be established for one or more costs reviews." 1. Section 83 of the Act provides as follows: "83 Application by party for review (1) A party to a costs assessment may, within 30 days after the certificate of determination by the costs assessor has been forwarded to the parties in accordance with the regulations or the costs assessment rules, apply for a review of the determination. (1A) The Manager, Costs Assessment may extend the period for lodging an application. (2) Subject to this section, an application for a review is to be made in accordance with the costs assessment rules. (3) An application for a review must: (a) be filed with the Manager, Costs Assessment, and (b) be accompanied by the fee (if any) prescribed by the local regulations, and (c) be served on the other parties to the costs assessment concerned in accordance with the costs assessment rules. (4) The Manager, Costs Assessment may waive or postpone payment of the application fee either wholly or in part if satisfied that the applicant is in such circumstances that payment of the fee would result in serious hardship to the applicant or his or her dependants. (5) The Manager, Costs Assessment may refund the application fee either wholly or in part if satisfied that it is appropriate because the application is not proceeded with." 1. Section 85 of the Act provides as follows: "85 Conduct of reviews (1) A review panel may, on an application made under section 83 or 84, review the determination of a costs assessor and may: (a) affirm the costs assessor's determination, or (b) set aside the costs assessor's determination and substitute the determination that, in its opinion, should have been made by the costs assessor. (2) The review panel has, in relation to the application for review, all the functions of a costs assessor in relation to the assessment concerned and is to determine the application, subject to this Part and the costs assessment rules, in the manner that a costs assessor would be required to determine an application for costs assessment. (3) Without limiting subsection (2), the review panel is not bound by the rules of evidence and may inform itself on any matter in the manner it thinks fit. (4) If the costs assessors who constitute the review panel are unable to agree on a determination in relation to an application, the panel is to affirm the determination of the costs assessor." 1. Accordingly, under s 89(2) of the Act, the District Court has all the functions of the Review Panel. Under s 85 of the Act, a Review Panel may review the determination of the costs assessor and may affirm the cost assessor's determination, or set aside the cost assessor's determination and substitute the determination that, in its opinion, should have been made by the costs assessor. 2. In my judgment handed down on 18 April 2019, I set aside the determinations of the Assessor and the Review Panel. Accordingly, it is my task to review the Cost Assessor's determinations dated 23 April 2018 and substitute the determination that, in my opinion, should have been made by the Assessor. 3. In my view, this is the appropriate approach to take in the light of the provisions I have referred to in the Act. While it is arguable that I could refer the assessment back to the Review Panel or even the Assessor, the power to do so would have to be implied into s 89 of the Act. I have considered the Explanatory Memorandum for the Act and the Victorian legislation on which it is based but no clarification is provided. Further, in an article "Appeals from Costs Assessments in NSW" [2016] Precedent AULA 76, Mr Brabazon SC, a recognised authority on costs issues, expressed the opinion that the legislature had given the functions of the Review Panel to an appellate court "without power of remittal". I agree with that view in the case of the District Court, particularly in the light of the express power of remittal given to the Supreme Court in s 89(3) of the Act. No such express power of remittal is given to the District Court. This should be contrasted with the position of the District Court under s 384(2)(b) of the Legal Profession Act 2004 (NSW). 4. It seems the court has the power to refer the matter to a person with appropriate costs expertise in accordance with its power to refer issues to a Referee for inquiry and report under Part 20.14 of the Uniform Civil Procedure Rules: Attard v James Legal Pty Ltd [2010] NSWCA 311 at [180]-[183]; Newell v De Costi [2018] NSWCA 49 at [63] and [236]. That would involve the preparation of a formal report by the Referee and the holding of a formal adoption hearing in relation to the report. In the present case, the costs involved are not very large and that procedure would appear to involve further delay and excessive costs and thus be inappropriate and not in the interests of justice. It would also appear contrary to the overriding purpose in s 56(1) of the Civil Procedure Act 2005. In all the circumstances, in my view it appears in cases like the present that the legislature intended this court to perform the assessment. That is in my view regrettable as it is time-consuming and this court is not experienced in matters of assessment. In my opinion, consideration should be given to altering the legislation to give this court a power of remittal to the Review Panel or the Assessor. 5. In my first judgment, I set out the background facts. I also considered as part of the evidence, the affidavit of Mark Carmody sworn 21 January 2019 which had as an exhibit Exhibit "MJC-1", a bundle of relevant documents. Those documents appear to include all relevant documents submitted to the Assessor Mr Stern and the Review Panel by the parties. 6. Submissions made by the defendant show that in substance he only took the point before the Assessor that the final orders made by Hallen J in the Supreme Court on 16 August 2017 had vacated the earlier costs order made in favour of the defendant on 20 March 2017: Exhibit "MJC – 1" pages 20-24. I held that submission should be rejected and the 20 March 2017 costs order had not been vacated and the plaintiff's costs were to be assessed in accordance with that order: see at paragraphs 17-26. The defendant chose not to make detailed objections in relation to the bill of costs lodged with the costs assessment application made by the plaintiff dated 13 November 2017 which was filed on 14 November 2017: see Exhibit "MJC-1" at pages 1-12. In paragraph 17 of the narrative to the objections to the bill of costs filed it was submitted on behalf of the defendant as follows: "The costs claimed by the Plaintiff for the Notice of Motion that was withdrawn and did not run are excessive, unreasonable, and they are outside the gambit of what the parties have agreed to." In the costs application and the bill of costs, the total amount claimed by the plaintiff was $34,151.75 inclusive of GST: see Exhibit "MJC-1" at pages 3 and 19. 7. It should be noted in assessing the plaintiff's claimed costs that: 1. The relevant order made on 20 March 2017 was that the defendant was to pay the plaintiff's costs of the Notice of Motion "on an indemnity basis"; 2. Under s 75(2) of the Act, "if a court or tribunal has ordered that costs are to be assessed on an indemnity basis, the costs assessor must assess the costs on that basis, having regard to any relevant rules of the court or tribunal and any relevant regulations"; 3. Under Part 42.5(b) of the Uniform Civil Procedure Rules, except in certain specified cases, if the court determines that costs are to be paid on an indemnity basis "all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed". 1. I now review the costs claimed by the plaintiff in his application for assessment of ordered costs. I determine, having the functions of the Review Panel, the assessment in circumstances where the defendant chose not to make any detailed objections to the bill of costs other than the one I rejected in my judgment. I do have to determine whether the costs claimed appear to have been unreasonably incurred or appear to be of an unreasonable amount. As stated above, the defendant in his narrative of objections asserted that the costs claimed were excessive and unreasonable. 2. In his letter to Assessor Stern dated 8 January 2018, Mr Carmody, the solicitor for the plaintiff, stated that the plaintiff no longer pressed items 23 and 38 of the bill of costs. Item 23 is an amount of $1,210 inclusive of GST and Item 38 is an amount of $302.50 inclusive of GST: see Exhibit "MJC-1" at pages 16-17 and 45. 3. At page 14 of Exhibit "MJC-1", in the narrative to the bill of costs, it is stated that the relevant legal work was performed by Mr Mark Carmody, principal of the law firm Carmody Lawyers, Ms Jessica Doorey, a solicitor with that firm and Mr Cornish of counsel. 4. The hourly rates of the legal practitioners involved are stated to be $550 excluding GST for Mr Carmody, $275 excluding GST for Ms Doorey and $275 excluding GST for Mr Cornish of counsel. In my view, the rates charged do not appear excessive for the principal of the firm, the solicitor and counsel as at 2017 having regard to the fact that the proceedings were Supreme Court proceedings involving a claim of breach of confidence. I note the defendant's narrative to the objections described the proceedings as "highly acrimonious": Exhibit "MJC-1" page 22 (paragraph 3). Accordingly, I would allow the rates charged as being not unreasonable and excessive. 5. The next issue is the heavy involvement of Mr Carmody and Mr Cornish of counsel. As revealed in my earlier judgment, the matter was a sensitive matter and complex. It also appeared to be fairly hotly contested: see paragraph 10 of my earlier judgment. In those circumstances, in my view it was reasonable for Mr Carmody to be heavily involved in the conduct of the proceedings and the Notice of Motion and for the plaintiff to brief counsel in relation to the Notice of Motion which is the subject of the costs in the bill of costs. 6. I have carefully considered the itemisation in the bill of costs in the context of the material in Exhibit "MJC-1" of Mr Carmody's 21 January 2019 affidavit. In my view, having regard to the background to the dispute, the particulars and details of the work performed and the time taken, the amounts claimed up to and including item 41 but excluding the no longer pressed items 23 and 38 appear not unreasonable and I allow them. It must be recalled that the order made by the Supreme Court was that the defendant was to pay the plaintiff's costs of the Notice of Motion on an indemnity basis: Exhibit "MJC-1" page 8. The fact the Notice of Motion was never formally heard is not decisive. The plaintiff was justified in instructing his legal representatives to undertake all necessary reasonable preparations for the Notice of Motion. 7. I accordingly start with the total claimed of $34,151.75: Exhibit "MJC-1" page 19. From that I subtract the sum for Item 23 of $1,210 and the sum for Item 38 of $302.50 which are no longer claimed by the plaintiff to arrive at the sum of $32,639.25. 8. There appear to be a number of clear errors in the bill of costs of the plaintiff. The amount for Item 25 for GST should be $55 and not $110. The GST in items 10, 34 and 37 when reviewed in light of the memoranda of fees appears to be incorrectly stated. The GST amounts need to be increased from $22 to $60.50 for Item 10, $16.50 to $165 in item 34 and from $55 to $165 in item 37. There are other errors in the GST amounts. However, the correct GST amount appears to have been claimed in the total following Item 51 in the Itemised Bill of Costs. Therefore, no further alteration needs to be made. Both parties accepted this in submissions. 9. In relation to Items 42-44, the costs referred to were incurred and appear in the client invoices in evidence: see invoice dated 3 September 2017. Having regard to the content and nature of the Application and the need carefully to review the invoices issued to prepare the itemised bill, the question is whether the costs appear to be fair and reasonable. Mr Carmody was involved in instructing on the Notice of Motion. It is arguable that it may have been more efficient for him to have prepared the itemised bill of costs, despite his higher hourly rate, rather than it being prepared by his employed solicitor, Ms Doorey, with him having to then review a draft. However, I note that Ms Doorey assisted in the preparations of related documents: see Items 43 (two Items have this number). In my view, Ms Doorey should have been more heavily involved in the preparation of the itemised bill of costs rather than Mr Carmody. I therefore reduce as fair and reasonable the amount allowed for Item 44 by $825 representing one and a half hours of Mr Carmody's time. Otherwise I allow the amounts claimed in Items 42-44. 10. In relation to Items 45-51, the Items in the Application for Costs Assessment lodged (Exhibit "MJC-1") have the annotation "estimated." 11. At the further hearing, the plaintiff read without objection an affidavit of Mr Carmody sworn 19 June 2019 which updated some of the estimates, many to the advantage of the defendant. Items 45-51 as originally claimed amounted to $2,970 plus $297 GST (if one looks at the total not the individually claimed GST which has some errors). Items 45-51 as updated add up to $2,585 plus $258.50 GST. This lower figure assists the defendant. I have reviewed the Items and the amounts claimed for them in the updated figures. I find that the time charged for the tasks outlined to be fair and reasonable in the light of the materials in evidence and thus claimable. 12. The items in 52 to 63 should be allowed. The work completed by Mr Cornish of counsel as itemised appears fair and reasonable. The disbursements charged appear to be consistent with the cost disclosure and costs agreement of Carmody Lawyers commencing at Exhibit "MJC-1" at page 67 and are fair and reasonable. 13. Further disbursements are claimed in Mr Carmody's second affidavit. I allow the 13 November 2017 court filing fee and the 14 June 2018 court filing fee in the sums of $341.52 and $275.00, respectively. Such fees would have been known at the time to a Costs Assessor appointed under the Act familiar with the relevant court filing fees. They were necessarily incurred for the two applications filed. 14. Accordingly, in relation to the assessed costs of the Notice of Motion under the indemnity costs order dated 20 March 2017, I allow the sum of $26,256.50. I find this sum to be fair and reasonable within s 76(1) of the Act taking into account the order was an indemnity costs order. See s 75(2) as referred to above. The total I allow is $31,924.77. This includes fees determined, GST on fees, disbursements, GST on disbursements and the costs of the costs assessment. The costs of the costs assessment are the amounts claimed at Items 42-44 (with correct GST amounts) and the updated figures at Items 45-51 together with the two court filing fees minus the reduction of $825 plus $82.50 GST for Item 44. These costs amount to $5,668.27. 15. The plaintiff has paid the costs incurred by the costs Assessor and the Review Panel of $1,058.75 and $1,395.63 (Exhibit "MJC-1" at pages 356 and 388). I infer this as the costs must be paid in order to obtain the reasons for the Determinations which reasons were included in the evidence before me. Those costs should be reimbursed by the defendant to the plaintiff. 16. Accordingly, the amount of costs I have determined as being assessed under the costs order is $26,256.50. The amount of costs of the costs assessment which I have determined is $5,668.27. 17. The plaintiff has been generally successful in relation to the amount claimed. Accordingly, I see no reason why the usual order for costs under Part 42.1 should not be made in relation to the additional hearing days. A party can apply within 14 days if a different costs order is sought. 18. I therefore make the following orders: 1. The amount of costs determined by the court as owed by the defendant to the plaintiff pursuant to the 20 March 2017 costs order of the Supreme Court is $26,256.50. 2. The amount of costs of costs assessment determined by the court as owed by the defendant to the plaintiff is $5,668.27. 3. The defendant must pay to the plaintiff the remuneration costs of the Costs Assessor and the costs of the Review Panel in the sum of $2,454.38. 4. The defendant is to pay the plaintiff's costs of and incidental to the hearings on 24 May 2019 and 20 June 2019 as agreed or assessed. 5. The parties have liberty to apply within 14 days to seek a different costs order to that set out in (4) above or to correct any errors in calculation. ********** 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: 25 June 2019