Tidswell, Rebecca --- "Gender dysphoria cases" [2014] PrecedentAULA 52; (2014) 124 Precedent 51

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NSW COURT OF APPEAL CONSIDERS COSTS ISSUES

By Phillipa Alexander

The NSW Court of Appeal has recently considered a number of questions relating to costs assessment in Wende v Horwath (NSW) Pty Limited.^[1] A claim that began as a contract dispute involving $18,526 evolved into a dispute about legal fees amounting to $175,052.78.

In 1998, Herbert Wende, Margaret Wende and Mark Lloyd (Wende) suffered loss when a neighbour's tree fell onto their property. Proceedings were instituted in the District Court of NSW against the neighbour to recover damages and Horwarth (NSW) Pty Limited (Horwarth) was retained to provide expert evidence as to losses sustained by Wende. In 2004, Horwarth brought proceedings in the Local Court of NSW for recovery of its fees for the preparation of expert reports which had been obtained for use in the District Court proceedings.

COSTS OF ARBITRATION

The parties were in dispute as to whether a costs order made by the Local Court of NSW covered the costs of a court-appointed arbitration at which the arbitrator had made an award in favour of Horwarth. Wende had sought a full rehearing which, when ordered, resulted in the arbitrator's award ceasing to have effect.^[2] Following the rehearing, the court ordered that ‘defendants to pay plaintiff's costs of hearing (sic) on party/party basis up to 20 October 2004 thereafter defendant to pay plaintiff's costs on indemnity basis’.^[3] The arbitration had been ordered prior to 20 October 2004 but took place over four days from 25 October 2004 to 2 February 2005. Wende argued that the costs of the arbitration were not covered by the court's order. The Court of Appeal confirmed that extrinsic material, such as the reasons for judgment, submissions or surrounding circumstances, may be relied on to assist an understanding of a court order.^[4]

Barrett JA (Beazley P agreeing) considered that arbitration was a ‘step’ in the Local Court proceedings and therefore the costs of the arbitration were included in the court's order holding that:

‘In the ordinary course and in the absence of some indication to the contrary, an order simply that a party have its “costs” of an action encompasses all costs incurred by the party in the action, including those of interlocutory applications and other intermediate steps.’^[5]

However, Baston JA considered the costs order did not extend to the costs of the arbitration and held:

‘If Horwath had wished to have an order which dealt with both the rehearing and the arbitration, it should have made that clear, both to the present applicants and to the Court. On its proper construction, the order for costs in the Local Court did not extend to the costs of the arbitration.’

To avoid argument, practitioners are advised to specify in an application for costs that the costs sought include the costs of any arbitration, mediation or other intermediate step in the proceedings.

ASSESSMENT OF MULTIPLE COSTS ORDERS

The Court of Appeal considered whether a single application for assessment may be made in respect of costs payable as a result of more than one costs order. Beazley P^[6] and Barrett JA^[7] confirmed that multiple costs orders may form the subject of an 'omnibus' application being permissible under the Legal Profession Act 2004 (NSW).

However, the Court considered that a costs assessor is required ‘to make a determination as to the amount that is a fair and reasonable amount for the costs that are subject of each costs order’.^[8] Beazley P^[9] and Basten JA^[10] also held that separate certificates of assessment must be issued in respect of each costs order for which an application for assessment is made. This is consistent with s368(2) of the Legal Profession Act 2004 (NSW) which provides that several certificates may be issued in relation to an application for assessment of costs.

As far as I am aware, where a single application for assessment has been made in respect of multiple costs orders, the majority of costs assessors issue a single certificate of determination for the total of the costs. But the Court of Appeal has held that the present structure of the legislation does not permit this to happen and has noted that the relevant professional associations may wish to bring this to the attention of the legislature.^[11]

In light of the decision, practitioners who wish to enforce a certificate of determination involving multiple costs orders may wish to consider requesting the costs assessor to re-issue a separate certificate of determination for each costs order.

The issue of separate certificates of determination might also have advantages regarding review, in that a review could be made in respect of one particular costs order only. Recovering the costs of a review might also be more achievable, as a review applicant would have to improve his or her position only by 15 per cent of the determination under review rather than 15 per cent of the total of the assessed costs.

LEGAL AID PROTECTION

On appeal to the Supreme Court of NSW from the judgment of the Local Court, Herbert Wende had obtained a grant of legal aid. Wende was unsuccessful in the Supreme Court proceedings and a costs order was again made in favour of Horwarth. An amount of $15,000 was paid by the Legal Aid Commission on behalf of Wende on account of Horwarth's costs of the Supreme Court proceedings.

Wende argued that Horwarth's right was to recover costs against a partnership and that as he (Herbert Wende) had received a grant of legal aid in respect of the proceedings, s47 of the Legal Aid Commission Act 1979 (NSW) limited to $15,000 the total amount recoverable under the costs order made by the Supreme Court.

The Court held that protection from an adverse costs order conferred by s47 of the Legal Aid Commission Act 1979 (NSW) to a legally assisted person does not extend to persons with whom the person is in partnership. Basten JA held:

‘The Supreme Court costs order was made against the three individuals. They thereby became subject to what would, in the ordinary course, have been joint and several liability of all of them for costs as agreed or assessed. The Legal Aid Commission Act operated to free Mr Wende from that liability. Joint and several liability of Mrs Wende and Mr Lloyd to the respondent remained.’^[12]

This gives rise to an issue that if one party, but not all, have legal aid, in the event of an adverse costs order, the remaining parties might ultimately be liable for a greater proportion of costs than would otherwise be the case.

COSTS OF COSTS ASSESSMENT

The Court of Appeal has also confirmed that s369(3)(c) of the Legal Profession Act 2004 (NSW) – which provides that the costs of a costs assessment which is reduced by 15 per cent or more are payable by the law practice that provided the legal services concerned – applies only to practitioner-client costs.^[13]

However, Basten JA also noted that the 15 per cent standard is a standard that may readily be applied to party/party costs to identify success or failure by an objector. If the costs are reduced by 15 per cent or more, there may be good reason to consider whether the objecting party should be liable for the whole of the costs of assessment.^[14]

Phillipa Alexander is a specialist in legal costs with Costs Partners. PHONE [phone] EMAIL [e-mail].

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^[1] [2014] NSWCA 170 (2 June 2014).

^[2] Section 44(1) Civil Procedure Act 2005 (NSW).

^[3] Wende v Horwarth (NSW) Pty Limited [2014] NSWCA 170 at [60].

^[4] Ibid at [250].

^[5] Ibid at [76].

^[6] Ibid at [6]–[9].

^[7] Ibid at [195].

^[8] Ibid per Beazley P at [9].

^[9] Ibid at [11]–[13].

^[10] Ibid at [38]–[48].

^[11] Ibid per Beazley P at [13].

^[12] Ibid at [236].

^[13] Ibid per Basten JA at [90].

^[14] Ibid per Basten JA at [90].