County Court scales up on costs

Are you a County Court litigator charging scale? If so, congratulations; you got a pay rise this week.

Commiserations on the other hand if you a County Court litigant already rueful about rejecting a shrewd offer of compromise. Your burden just got heavier.

The County Court of Victoria has amended its cost rule, Order 63A.

For beneficiaries of scale costs (lawyers and successful litigants especially) this is good news.

There are two key changes.

The first is the axing of the County Court’s own stand-alone scale. Instead, the County Court Civil Procedure Rules now apply the Supreme Court’s scale but discounts it a uniform 20 per cent.

Take, for example, the scale allowances for a solicitor’s time. Under the former County Court scale, a solicitor’s time was allowable at $277 per hour for attending a conference and $546 per half day instructing in Court.

That same solicitor’s time under the new County Court costs regime is now worth $296 per hour (ie 80 per cent of the Supreme Court rate of $370 per hour). As is in the Supreme, costs are now claimable on an hourly basis and also in 6 minute units but the half-day rate for solicitors’ time is gone.

The second key change is the end of ‘party and party costs’. The new default measure of costs is ‘standard basis’ (which is really ‘solicitor and client’ costs by another name). (Indemnity costs remain as the juicer alternative). This change echoes the Supreme Court’s costs reforms of last year (as to which see my blog of the time here).

Some other features of the new County Court costs regime:

  • Costs of pleading amendments (whether with or without leave) are now costs in the proceeding unless the Court otherwise orders (CCR 63A.17);
  • Similarly, costs of interlocutory applications will be costs in the proceeding absent an order to the contrary (CCR 63A 20.1) (Incidentally, this rule has no direct Supreme Court equivalent);
  • Interlocutory costs orders are payable “forthwith” (CCR 63A.03(2)) but unless the Court otherwise orders those costs may not be taxed until the entire proceeding is completed (CCR 63A 20.1). (This is likely to have a glacial effect on the concept of “forthwith”).
  • The entire Order 63A continues to be ostensibly premised on the “County Court scale of costs” as if such a document exists. But it simply doesn’t. Instead CCR 1.13 gives legal force to the mirage by providing, “County Court scale of costs” means a fee, charge or amount that is 80 per cent of the applicable rate set out in Appendix A to Chapter 1 of the Rules of the Supreme Court.”
  • The new rules and costs apply from 7 October 2014 irrespective of when the proceeding involved commenced (CCR 63A.83).

(Thanks to barrister Mark Lapirow for alerting me to the new Order 63A before the ink had even dried on it.)

More overblown than overarching: Court of Appeal smacks solis with costs orders and disallows fees

The Victorian Court of Appeal last week thumped three large law firms for work which was not “reasonable and proportionate” within the meaning of the Civil Procedure Act 2010.

What’s more, it effectively invited other Victorian courts to do likewise more often.

The case is Yara Australia Pty Ltd v Oswal [2013] VSCA 337.

Expect to hear a lot more about it. It is the first detailed appellate consideration of the Civil Procedure Act obligations on parties and their lawyers.

Many civil litigators will find it confronting reading.

The case

In Yara, three applicants sought leave to appeal against their failure to obtain security for costs. Although they were later able to point to a wider strategic purpose, the amount of security sought between the three of them ostensibly totalled about $141,000, (relatively small beer for the Court of Appeal.)

The applicants had separate but similar interests. Between them, they were represented by solicitors Clayton Utz, Herbert Smith Freehills and K & L Gates, 3 silks and 3 junior counsel.

Their application went down after a single day’s hearing. And worse was to come for the lawyers.

After refusing the application, the Court of Appeal of its own motion invited submissions on the question of whether anyone had breached their overarching obligations under the Civil Procedure Act 2010 in the conduct of the leave to appeal application.

The resulting judgment starts with two factual questions. “First, whether there was any over- representation of a party by counsel, and second, whether the material produced on the hearing of the application for leave to appeal was unnecessary or excessive.”

The Court was ultimately persuaded that the abundance of barristers did not constitute “over-representation” but it was less forgiving about the documentation filed in support of the application.

Why? Because even excluding the notices of appeal and written cases, the application book exceeded 2700 pages and 6 lever arch folders.

In their joint judgment Redlich and Priest JJA and Macaulay AJA were scathing. They variously described parts of it as “entirely otiose”, “not directly relevant”, “excessive”, “superfluous”, “entirely unnecessary” , “repetitious” and containing “a substantial amount of duplicated material”.

The Court concluded by ordering each applicant to pay the respondents’ costs of the application.

Each applicant’s solicitor was then hit with a double whammy. First, each solicitor was ordered to indemnify its client for half of the respondent’s costs “incurred as a consequence of the excessive or unnecessary content of the application books.” Secondly, each applicant’s solicitor was “disallowed recovery from the applicant of 50% of the costs relating to the application books, and costs incidental thereto.”

Some cherries from the judgment

The Court of Appeal is clearly hoping this approach will catch on.

And judges are being invited to act on their own initiative where the parties themselves are bashful.

Here are some extracts from the judgment (citations omitted) to give you its flavour.

5       The statutory regime and the obligations that are imposed by the [Civil Procedure Act] have not previously been considered in any detail at an appellate level. As the enforcement of the overarching obligations under the Act has been so little traversed, there is presently little to guide judicial officers as to the extent of the Court’s powers and the means by which parties or their legal representatives can be penalised for any contravention. We have thus addressed some of these issues at greater length than would ordinarily be necessary when a contravention of the Act is under consideration.

….

14     Each party and their solicitor and counsel have an obligation to comply with the overarching obligation. Whether any of them have breached that overarching obligation is to be determined by an objective evaluation of their conduct having regard to the issues and the amount in dispute in the proceeding. The legal practitioners’ duty is non-delegable. The obligation will override their duty to their client where the discharge of that duty would be inconsistent with the overarching obligation. The legal practitioner will not be relieved of this overarching responsibility because of the instructions of their client.

15     Legal practitioners, whether solicitor or counsel, involved in the preparation of pleadings, affidavits or other materials that are to be used in the proceeding or who provide advice as to such matters, have individual responsibilities to comply with the overarching obligation. Both solicitor and counsel also have an overarching responsibility with respect to the extent and level of their client’s representation. Each must ensure that, having regard to the issues, the extent and level of representation proposed is reasonable and proportionate. Advice or instructions given or received by legal practitioners, and instructions given by the client, may inform but will not be determinative of the question whether, viewed objectively, there has been a breach of the obligation.

         ….

18     Section 29 of the Act provides the Court with broader and more flexible powers than under the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’) or under its inherent jurisdiction. Rule 63.23(1) enables the Court to make orders for costs against a legal practitioner who has caused costs to be incurred improperly by a failure to act with reasonable competence and expedition. However, the primary object of r ? 63.23(1) is not punitive or disciplinary but compensatory, enabling reimbursement of a party’s costs incurred because of the default of the solicitor. The primary object of the Rule is not to punish the solicitor, but to protect the client who has suffered and to indemnify the party who has been injured. Rule 63.23(1) also protects solicitors from the negligence or incompetence of counsel.

20     The Court’s powers under s 29 of the Act include the power to sanction legal practitioners and parties for a contravention of their obligations …. Moreover, the power to sanction is not confined to cases of incompetence or improper conduct by a legal practitioner. Where there is a failure by the practitioner, whether solicitor or counsel, to use reasonable endeavours to comply with the overarching obligations, it will be no answer that the practitioner acted upon the explicit and informed instructions of the client. A sanction may be imposed where, contrary to s 13(3)(b), the legal practitioner acts on the instruction of his or her client in breach of the overarching obligations.

21     …. In our view, the enactment of s 29 together with s 28(2) imbues the Court with broad disciplinary powers that may be reflected in the costs orders that are made. The Court is given a powerful mechanism to exert greater control over the conduct of parties and their legal representatives, and thus over the process of civil litigation and the use of its own limited resources.

22     The Act does not merely reaffirm the existing inherent powers of the court but provides a powerful indication of the will of the Parliament about the values sought to be achieved by the way in which cases are managed in the courts and the balances that have to be struck….

23     It is therefore somewhat surprising that despite the length of time the Act has been in force, the scope of the sanction provisions in the Act for a failure to comply with the overarching obligations has been under-utilised.

….

25     The explanation for the under-utilisation of the provisions of the Act lies in part in a false perception that these provisions and the overarching obligations do not effect any material change to the Rules and the inherent jurisdiction of the Court…. The Act creates obligations which extend beyond those in the Rules and confers upon the courts a panoply of powers not found in the Rules.

26     The Act prescribes that parties to a civil proceeding are under a strict, positive duty to ensure that they comply with each of the overarching obligations and the court is obliged to enforce these duties. The statutory sanctions provide a valuable tool for improving case management, reducing waste and delay and enhancing the accessibility and proportionality of civil litigation. Judicial officers must actively hold the parties to account.

27     Yet as we have observed, sanctions imposed for a breach of any overarching provisions have been a rarity at first instance. When no party invites the court to determine whether there has been a breach of the Act, there may be a judicial disinclination to embark upon such an own-motion inquiry for fear that inquiry as to a potential breach may be time consuming and may require the introduction of material that was not before the court as part of the proceeding. Such fears cannot relieve judges of their responsibilities….

You can probably still hear this judgment causing a hush in mega-firms the length of Collins Street (starting with their photocopying departments).

WA court bins stat demands, orders indemnity costs and calls the cops

Some obscure judgments deserve a wider audience.

Master Sanderson of the Western Australia Supreme Court delivered one such gem in April in Rohanna Pty Ltd v Nu-Steel Homes Adelaide Pty Ltd [2013] WASC 109.

Some scene-setting first.

In Christmas week 2012 the plaintiff received two statutory demands from the defendant. The parties had never had any prior contact with each other and yet the demands totalled almost $220,000. Both stat demands were ultimately set aside by Master Sanderson. In the interim the defendant was represented in correspondence by a South Australian solicitor who did not file a formal appearance (Mr Nicholls) and in Court by a non-lawyer (Mr Pearse). Mr Nicholls had offered to settle the matter on the basis that the plaintiff pay the defendant’s costs of $25,000. He also remarked upon the need to advertise any winding up application which might follow if the plaintiff didn’t stump up that loot.

Master Sanderson was scathing. Here are some highlights from a stinging judgment.

11.   In further support of its application the plaintiff filed a second affidavit …. The purpose of this affidavit was to demonstrate the solvency of the plaintiff. A mere glance at this affidavit would be enough to convince even the economically illiterate the plaintiff was solvent. Indeed it shows the plaintiff as a massively successful commercial enterprise. But that was not enough for Mr McNamara.

 

       ….

 

17.   All of these matters can then be aggregated. First, the defendant served the statutory demands without any prior consultation with the plaintiff. If it had a genuine belief there was a debt owed it would have been reasonable to write to the plaintiff, make a claim and explain the basis of that claim. That was not done. Instead the demands were sent by post and arrived on the Thursday before Christmas. If ever there was a time when it was difficult to deal expeditiously with a demand which required action within 21 days, that was it.

 

 ….

 

20.   Fourthly, faced with clear evidence of the solvency of the plaintiff the defendant determined to press on. No reasonable party properly advised would have done so.

 

21.   Fifthly, the correspondence suggests an attempt to embarrass the plaintiff by advertising the fact of a winding up application. There was no need to refer to the advertising of a winding up application in the way Mr McNamara did. The letter strongly suggests the defendant was looking to force the plaintiff into a compromise to serve its own purposes.

 

22.  Sixthly, the defendant actually issued a winding up application. This was done prior to the application to set aside the demands being heard. It must have been clear there was a live issue as to whether the application to restrain the defendant would succeed. … Once again it looks as though the defendant was attempting to pressure the plaintiff.

 

23.   Seventhly, no appearance to the application to set aside the demands was ever lodged. Mr McNamara in his correspondence said he had been retained by the defendant. As late as 28 February 2013 he wrote to the plaintiff’s solicitors on behalf of the defendant. At no time did Mr McNamara indicate his instructions had been terminated and at no time did he give any indication he would not appear at the hearing of the matter on 7 March 2013. Perhaps the defendant was concerned if it did enter an appearance a costs order might be made against it. Or perhaps there was some other reason no appearance was entered. But it does suggest the defendant never took seriously the prospect it could successfully resist the plaintiff’s application.

 

24.   Finally, there is the offer to settle on payment of $25,000 for costs. It may be that Mr McNamara is one of South Australia’s leading corporate lawyers. If that is so, this case does not represent his finest hour. But even assuming high competence on the part of Mr McNamara there is no possible way the defendant’s costs could have amounted to $25,000. No appearance was filed, no affidavits in opposition to the application were lodged, it would appear submissions to be made on behalf of the defendant were drawn by Mr Pearse and the totality of Mr McNamara’s involvement was three or four letters. Really this demand for ‘costs’ is no such thing. It was tantamount to extortion.

 

25.   … This is a case where indemnity costs should be awarded and the only question is who should pay those costs. Mr Pearse will have 14 days from the publication of these reasons to make submissions as to why he should not pay the costs personally.

 

26.   I intend to refer these reasons to the Western Australian Police Service for such action as they deem necessary in relation to Mr Pearse. I will also refer a copy of these reasons to the authorities in South Australia who regulate the legal profession to take such action as they deem appropriate in relation to Mr McNamara.

 

Lessons from this case? Many.

But the very first that occurs to me is that the Wild West’s legal system might have been unfairly maligned by the late Robert Hughes (as recorded in my post here on his passing).

Victorian Supreme Court costs – the party/party is over

No April Fool’s Day jokes please.

Effective 1 April 2013 the Victorian Supreme Court has a new costs regime.

The highlights:

  • The ‘party and party basis’ (by which most Supreme Court cost bills have historically been taxed) is axed.
  • Henceforth, costs orders will generally be taxed on the more generous ‘solicitor and client basis’ (that is “all costs reasonably incurred and of reasonable amount”) although that yardstick is to be renamed the ‘standard basis.’
  • Costs on an indemnity basis remain available.
  • Solicitors’ time on the standard basis will be claimable in 6 minute units at the rate of $36 + GST per unit (ie $360 + GST per hour).
  • Unless otherwise ordered, the maximum daily allowance for counsel is $5000 + GST per day for juniors and $7500 + GST per day for silks.
  • Photocopying (currently allowable at a whopping $2.30 per page) becomes discretionary but is likely to be allowed in the Costs Court at 22 cents per printed side of page.

For a more detailed explanation of the new costs regime see:

What do the changes mean?

It is probably good news for successful litigants. Any standard costs order in their favour should now translate into more coin in their pocket than was formerly likely under the more austere party and party basis.

It is correspondingly bad news for unsuccessful litigants (by which I include others such as winners who fail to beat their opponents’ Calderbank offers or Offers of Compromise).

And it’s likely business as usual for those practitioners of the dark arts of costs consulting.

How Edelsten’s costs application against solis backfired

Last October I posted about Dr Edelsten’s adventures in the Supreme Court of Victoria against a lady friend in (Mainly) keeping a sugar daddy’s confidences.

A quick reminder. In an entertaining but unflattering judgment Dr Edelsten won an order for $US5000 plus certain limited suppression orders against a Ms da Silva.

Among other things, Beach J found that “most of the evidence given by the defendant was demonstrably false and could not be believed. However, Dr Edelsten was no more an impressive witness than Ms da Silva.”

Now the aftermath (which escaped me among the distractions of the summer holidays).

The week before Christmas Dr Edelsten went back to court and sought his costs of the litigation against the defendant’s solicitors – on an indemnity basis.

Among other things, he relied upon the Civil Procedure Act.

He argued that swathes of the defendant’s case had no proper basis, her solicitors must have known this and therefore they should not have persisted with key aspects of the defendants’ case.

Beach J was not swayed.

“I am satisfied that at all times … the defendant’s solicitors were acting on the instructions of the defendant. Indeed, when the defence was eventually abandoned, it was abandoned in the face of the defendant’s evidence to the contrary.

… Having regard to the instructions the defendant’s solicitors then possessed, I see nothing improper, or in breach of any rule of conduct, or in breach of any overarching obligation or other provision of the Civil Procedure Act, in the drawing, settling and filing of the defendant’s defence. …

It is always possible to say that an issue, upon which it becomes clear that a party will ultimately be unsuccessful, could have been abandoned earlier if greater diligence had been exercised. However, the mere failure to abandon a point at the earliest possible time does not mandate a conclusion that an overarching obligation of the Civil Procedure Act has been breached.

…. In the end, I have come to the conclusion that while a counsel of perfection would have suggested that the concession made on the afternoon of the third day of the trial could (and possibly should) have been made 24 hours earlier, the failure to take this step at that time did not involve the contravention of any of the overarching obligations in the Civil Procedure Act.

And the ordeal was not yet over.  Beach J concluded with an order that Dr Edelsten pay the solicitors’ costs of his failed application on a solicitor /client basis (apparently because the judge considered the application had been sufficiently hopeless to warrant costs on more than the usual party/party basis).

The costs decision is here.

 

When a Calderbank offer is likely to be a hundred-to-one outsider

At the track, bets are customarily not paid until the winning jockeys and their saddles have weighed in and the stewards have declared ‘correct weight’.

Similarly, in commercial litigation (never entirely dissimilar to gambling) the financial outcome of the courtroom contest is often unclear until the final costs orders are made.

But in retail tenancies cases at VCAT successful punters rarely even glimpse the stewards’ scales. This is because of the near-prohibition on costs orders contained in s 92 of the Retail Leases Act 2003 .

The latest illustration of this problem for successful litigants, and boon for unsuccessful litigants, is Complete Pets Pty Ltd v Coles Group Property Developments Pty Ltd [2012] VCAT 361.

A tenant, its guarantor and two investors together sued a landlord. The landlord cross-claimed. The landlord offered in a Calderbank letter and, later, in an open offer, that all claims be settled on the basis that each party walk away from the litigation and bear its own costs.

The tenant’s camp did not bite. They fought on with disastrous consequences. They were awarded zilch. The landlord won $342,901.

The landlord then sought its costs.

The landlord argued firstly that the guarantor and investors had brought their claims under the Fair Trading Act and accordingly were not caught by the savage restriction on costs orders contained in the Retail Leases Act.

Senior Member Riegler was unmoved, stating (at para 16): –

I am of the view that it is of no consequence that the relief is being sought under the Fair Trading Act 1999 …… The critical question is not what relief is being sought but rather whether the parties are parties to a proceeding before the Tribunal under Part 10 of the Retail Leases Act.

He concluded that the parties were involved in such a proceeding and, as a consequence, the landlord could not obtain a costs order against any of the tenant, guarantor or the investors unless it could show that one of the exceptions to s 92 of the Retail Leases Act applied. This required the landlord to satisfy VCAT that its opponents had conducted the proceeding either in a vexatious way that unnecessarily disadvantaged the landlord, or after failing to participate in alternative dispute resolution.

The landlord relied on its spurned settlement offers to make precisely those alternative submissions. It argued that as the ‘walk away’ offers it had made were clearly more favourable to the litigation’s losers than the end result vexatious conduct and/or the failure to participate in alternative dispute resolution should be inferred.

Again Senior Member Riegler was not persuaded. He said –

  • a litigant merely putting its opponent to its proof is not of itself vexatious;
  • neither is a litigant’s failure to accept an advantageous offer of settlement; and
  • the reference in the Retail Leases Act to alternative dispute resolution does not extend to settlement offers.

Conclusion

Is a party with a strong case wasting its time and money making a Calderbank offer (or similar) in VCAT’s Retail Tenancies List?

Probably.

Of course, not every punter who backs himself to pick the four winners necessary for a quadrella comes away disappointed – just the overwhelming majority.

In a retailing leasing dispute your client’s odds of getting a costs order are probably similar. Your punter might do much better taking a form guide to Flemington than a Calderbank offer to a costs application in the Retail Tenancies List.