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Chapman v Harris (No 2)[2019] QDC 78

Chapman v Harris (No 2)[2019] QDC 78

DISTRICT COURT OF QUEENSLAND

CITATION:

Chapman v Harris (No 2) [2019] QDC 78 

PARTIES:

SHAYE CHAPMAN

(plaintiff)

v

KATRINA JUNE HARRIS

(defendant)

FILE NO/S:

D2111/2018; S9553/2014

DIVISION:

 

PROCEEDING:

Civil action

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

24 May 2019

DELIVERED AT:

Brisbane

HEARING DATE:

15 May 2019

JUDGE:

Judge McGill SC

ORDER:

Plaintiffs claim is dismissed.  On the counterclaim, judgment that the plaintiff pay the defendant $61,919.05 including $582.28 interest by statute.  Order that the plaintiff pay the defendants costs of the review, including the costs reserved on 9 May 2018 and 17 September 2018, and, if they were not included in the costs of the costs assessment, the costs dealt with on 22 May 2015 by McMurdo J.  Otherwise there be no order as to the costs of the claim or of the counterclaim.  Order that the balance of the money held on trust by Mr James Sotiri Michos pursuant to the undertaking by him to the plaintiff dated 8 April 2015 (together with accretions if any) be paid to the solicitors for the defendant. 

CATCHWORDS:

COSTS – Solicitor and client – costs agreements – interest payable under the agreements – costs assessed under the Act – effect of assessment – set off of costs of assessment.

COSTS – Solicitor and client – proceeding to recover unpaid costs – order for assessment – costs of assessment – costs of review of assessment – costs of proceeding. 

Legal Profession Act 2007 s 342.

UCPR r 737.

Burdick v Garrick (1870) LR 5 Ch App 233 – cited.

Chiropractic Board of Australia v Jamieson (No 2) [2013] QSC 111 – considered.

Civil Mining and Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd (No 3) [2018] QSC 60 – distinguished.

Cook’s Constructions Pty Ltd v Stork Food Systems Australia Pty Ltd [2008] QSC 220 – cited.

Re Crouch & Lyndon’s Bill of Costs [1998] 2 Qd R 228 – considered.

Curtin v Meadlow Holdings Pty Ltd [2001] QCA 145 – cited.

Re Gould [1992] 2 Qd R 377 – considered.

Hunt v R M Douglas (Roofing) Ltd [1990] 1 AC 398 – cited.

J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23 – applied.

Johns Perry Industries Pty Ltd v International Rigging (Aust) Pty Ltd [1988] 2 Qd R 556 – cited.

Leonardi v Payne [2017] QSC 319 – cited.

McQueen v Mount Isa Mines Ltd [2018] 3 Qd R 1 – cited.

Ryan v Worthington [2016] QCA 128 – cited.

Watson & Anor v Ward [2013] QCA 393 – cited.

Wright v Southwood (1827) 1 Y&J 526; 148 ER 779 – considered.

COUNSEL:

MP Amerena for the plaintiff

SM Gerber for the defendant

SOLICITORS:

The plaintiff was self-represented

Sambrook Grant for the defendant

  1. [1]
    This matter came before me earlier this year as a review of a costs assessment under the Legal Profession Act 2007.  On that occasion I dealt with various challenges to the decisions of the costs assessor, and made some small adjustment to the amount that he had determined was properly payable by way of costs.  The matters remaining outstanding between the parties were the plaintiff’s entitlement to interest under the costs agreements on which she sued, the costs of the review proceeding, what further orders are appropriate to finalise the proceeding, and the costs of the proceeding. 

Interest on unpaid costs

  1. [2]
    By a counterclaim filed with the defence in the Supreme Court in 2014 the defendant sought to have the costs agreements between the parties set aside. That remedy was not pursued, and the matter has proceeded on the basis that there are a set of costs agreements between the parties which are valid. The first of those, dated 5 May 2011, provided in clause 9:

“If our invoices are not paid within 30 days of receipt by you, we will charge you interest on the unpaid amount at the rate of the cash rate target specified by the Reserve Bank of Australia, increased by 2%. Interest can be charged 30 days after giving a lump sum bill even if we provide you with an itemised bill at your request.  However, where a lump sum bill is given to you and an itemised bill is requested by you, proceedings for recovery of costs cannot be instituted until 30 days have elapsed after we have complied with your request.”

  1. [3]
    The later costs agreements each contained a provision essentially in the same terms, except that the words “(compounding monthly)” were inserted.[1]  In these circumstances there was a contractual right to interest on amounts charged but not paid within 30 days.  There were a number of invoices which were paid in full, and the amount paid totalled $77,674.83, but the most recent five invoices were not paid, and it was in respect of these that the plaintiff sued.  The order for assessment which was made under the Act dealt with the costs covered by all of the invoices, and that was what was assessed by the costs assessor.  As a result, some of the amounts claimed and paid under the earlier invoices were reduced.  On the review some additional amounts were allowed, and an error of calculation was corrected.  Overall the effect of the review was to raise the amount payable by $4,175.53.
  1. [4]
    Counsel for the plaintiff sought interest under the contract on the basis that interest was payable on those amounts which, in the light of the assessment and review, were properly payable but were not paid. The effect of the assessment was that the amount claimed by the plaintiff was substantially reduced, but a substantial amount remained unpaid. The costs assessor also assessed the costs of the assessment, and ordered that they be paid by the plaintiff; his certificate which was filed in the court deducted those costs from the amount payable to the plaintiff. Because of the filing of the application for review no order on the certificate has yet been made by a court.
  1. [5]
    The assessor’s certificate was filed on 10 October 2017, and the initial application for review was not filed until 9 April 2018. On 9 May Martin J gave leave to file an amended application, which was done on 28 June 2018, but also transferred the matter to this court. He also gave directions with a view to progressing the review, and further directions were given by a judge of this court on 17 September 2018. Then on 5 February 2019 another judge made an order that an amount from funds held in a trust account pursuant to the plaintiff’s claim of a lien over some of the proceeds of the defendant’s claim against third parties be paid out to the plaintiff, and that occurred on 13 February 2019 when an amount $305,184.58 was paid to the plaintiff.
  1. [6]
    The entitlement to be paid interest on unpaid legal costs is regulated under the Act by s 321, which requires that the costs agreement provide for charging interest, or the costs are unpaid for 30 days or more after a bill of costs has been given; in addition by subsection (2) the bill for the costs must contain the statement that interest is payable and the rate of interest. It seems to me that in the present case that occurred; although the invoices referred to the rate by reference to the formula in the costs agreement, it gave a reference to where the current and former Reserve Bank cash rates could be located. In circumstances where the costs agreement provides for a rate which varies depending on something like the rate from time to time adopted by the Reserve Bank, it seems to me that the form used in the present case is sufficient compliance with s 321(2).[2]  The contrary was not argued by the defendant. 
  1. [7]
    Finally, interest may not be charged at a rate more than the rate prescribed by regulation. The relevant regulation is the Legal Profession Regulation 2017 s 72 which refers to the rate prescribed by the Civil Proceedings Act 2011 s 59(3) for a money order debt.  That section in turn refers to the rate prescribed under a practice direction by the Chief Justice.  The relevant practice direction is Supreme Court Practice Direction 7 of 2013, which also fixes a rate by reference to the Reserve Bank rate, though as it is 6% above that rate the contractual rate is comfortably below that rate.  It follows that there is no impediment under the Act to the enforcement of the contractual entitlement to interest in the present case.
  1. [8]
    A calculation has been undertaken of the amount of interest payable in accordance with the clause in the costs agreements. There was no challenge to that as a calculation, but it was submitted on behalf of the defendant that there was no entitlement to interest under the agreements, because of the extent of the plaintiff’s breach of contract, in overcharging the defendant. It was submitted in effect that by charging excessive amounts the plaintiff had prevented the defendant from paying the correct amounts in a timely way, and in those circumstances had disentitled herself to any interest on amounts outstanding which were properly payable.
  1. [9]
    The contract does not provide expressly that the legal work be done in a reasonable way, or that only work which it was reasonable to carry out would be done, which are the matters taken into account on an assessment under s 341(1) other than the actual terms of the contract between the parties. Even if such an obligation could be implied into the costs agreements, so that there was a breach of that obligation, it is difficult to see how the defendant has suffered substantial damage as a result of that breach. It is not as though the defendant has been deprived of the use of money by paying it to the plaintiff; the relevant money was not paid, at least prior 13 February this year.
  1. [10]
    The entitlement to interest arises only because money which, with the benefit of hindsight, ought to have been paid was not paid. A client in the position of the defendant can protect herself from interest under the contract by paying the amount claimed, which is not a bar to assessment under the Legal Profession Act.  If as a result of the assessment the solicitor has been overpaid, an order can be made on restitutionary grounds for the recovery of the amount of the overpayment. Accordingly it does not seem to me that any entitlement to damages for breach of contract equivalent to the amount payable under the costs agreement by way of interest would arise.  In any case, no claim for damages for breach of contract was pleaded in the counterclaim.
  1. [11]
    The appropriate course in my view (subject to a matter considered below) is to allow interest on those amounts which were properly payable (with the benefit of hindsight) but unpaid up to the date on which the payment was made out of the trust account. There were at that stage amounts outstanding under four invoices, and interest calculations have been made by reference to the capitalisation dates. The interest calculations for the first three invoices, 1440002, 1440006 and 1440005, were brought up to a date on or about 13 February; the total interest payable in respect of them was $59,143.25. The calculation of interest on the fourth invoice was carried up to 4 May 2019; as at 4 February 2019 the table setting out the calculation shows that interest in the sum of $90.94 had accrued on the amount payable of $528.75. So as at the date of the payment the adjusted amount of costs payable, plus interest, came to $366,254.07. After deducting the payment from the trust account, this left a balance of $61,069.49. The contractual interest rate is 3.5% per annum, the equivalent of 0.2317% per month. That amount plus interest at 3.5% per annum compounding monthly for the period from 13 March to 24 May this year comes to $61,501.46. This is the amount for which prima facie the defendant is liable by way of unpaid costs plus interest.

Costs of costs assessment

  1. [12]
    The question then arises as to what is to happen with the costs of the costs assessment. This comprises two components, the costs assessor’s fee of $57,750 and the defendant’s legal costs of the costs assessment, assessed at $59,293.95, a total of $117,043.95. The conventional way in which such costs are dealt with on a costs assessment is that they are either added to or deducted from the amount allowed by way of disbursements on the assessment of the bill or costs statement, depending on who is liable to pay the costs.[3]  In the situation here, where the costs are payable by the plaintiff, the costs assessor has set them off against the amount payable to the plaintiff by the defendant, to produce a figure which reflects the balance payable.  That is in accordance with the form for a certificate of a costs assessor after assessment, but it was submitted for the plaintiff that these costs do not under the Act or the rules become actually payable unless and until an order is made on the certificate for payment of those costs. 
  1. [13]
    Section 342 of the Act provides that the costs assessor must decide the costs for the costs assessment, and contains provisions setting out to some extent how that decision is to be made. That decision involves both who pays the costs, and the amount payable. The form for the certificate is in accordance with UCPR r 737(1) which requires the costs assessor to “certify the amount or amounts payable by whom and to whom in relation to the application (i.e. the application for costs assessment) having regard to (a) the amount at which costs were assessed; and (b) the costs of the assessment”. That rule applies to an assessment under the Legal Profession Act: r 743I(1).  The wording of the rule is in my opinion significant.  It does not require the costs assessor to certify the amount at which the costs were assessed, but rather to certify the amount payable having regard to that amount and the costs of the assessment.
  1. [14]
    There are rules as to who pays the costs of the assessment in rr 734 and 735, but these do not apply to an assessment under the Legal Profession Act; that is governed by s 342 of that Act.  Nevertheless, that Act also requires the assessor to determine the costs of the assessment, and to whom they are payable.  In either case therefore it seems to me that r 737 not only permits but requires the costs of the assessment to be either added to the amount of costs assessed, if they are payable by the party liable to pay the costs, or deducted from the amount of costs assessed, if they are to be paid by the party entitled to receive the costs.  Where, as in this case, the costs of the assessment were determined to be payable by the plaintiff, the result is that r 737(1) required the assessor to certify the net amount payable to the plaintiff, as he did.
  1. [15]
    The question is what effect this has on the entitlement to interest. The submission of the plaintiff was that no entitlement to interest on the costs of the assessment can accrue until a judgment for them to be paid is given by the court under r 743H; under that rule the court may give “the judgment it considers appropriate having regard to the certificate”. No such judgment has yet been given, so the decision by the costs assessor as to who pays the costs of the assessment, and the quantum of those costs, does not give rise to an entitlement to interest under contract or the Civil Proceedings Act 2011, or affect the plaintiff’s contractual entitlement to interest. 
  1. [16]
    There are I think two other ways in which the costs assessor’s determination could affect the payment of interest. The first is if the certification of the amount payable has the effect of reducing the contractual debt of the defendant to the plaintiff under the costs agreements by the amount of the costs of the assessment, in the same way as his assessment reduces the contractual debt in respect of legal costs. A costs agreement is enforceable as a contract, subject to the provisions of the Legal Profession Act for the assessment of costs under that Act and the UCPR.[4]  Hence the provisions for an assessment modify contractual entitlements.  Given that the UCPR provides for a reduction in the amount payable, if the solicitor is liable to pay the costs of the costs assessment in accordance with the Act and Rules, it is not obvious why that would not produce the same result as an adjustment of the amount payable as a result of the assessment of the bill.
  1. [17]
    Alternatively, it could be said that an entitlement to interest arises for the purposes of s 58 of the Civil Proceedings Act 2011, on the basis that once a costs assessor has assessed the amount payable as the costs of the assessment, and determined by whom they are payable, then subject to any variation of those decisions on a review under r 742 that result will stand.  In effect, this decision creates a liability which is enforceable by a judgment of the court.  Assuming that the certificate of the costs assessor is not itself a money order, since it is not an order of the court, it seems to me that prima facie it gives rise to an entitlement to an order of the court unless there is some interference with the costs assessor’s determination on a review.  If a person has a right to obtain an order of the court for relief, that is in substance a cause of action, and accordingly the matter could be seen to come within s 58.
  1. [18]
    In circumstances like the present there would be a serious gap in the costs regime if an application for review of a costs assessment would have the effect, as it did in this case, of delaying the judgment under r 743H while interest runs on the client’s liability for costs, but interest does not run on the amount payable by the solicitor in respect of the assessment, because no order has been made for payment of that amount, notwithstanding that the client will no doubt have paid any legal costs incurred in relation to the assessment, and the assessor’s fees (as occurred here).
  1. [19]
    The common law courts generally did not award interest, possibly because of the ancient taint of usury.[5]  There have however for a long time been statutory provisions dealing with interest both before and after judgments.  One issue which has arisen in this context is how interest after judgments was to be dealt with in circumstances where an order for costs is made, and the costs are subsequently fixed by taxation or assessment.  The practice here has varied from time to time.
  1. [20]
    The issue came before the House of Lords in Hunt v R M Douglas (Roofing) Ltd,[6] where it was held that interest ran from the day on which the order for costs was made, rather than the day on which the amount of the costs was quantified by taxation.  This was justified partly on historical grounds and partly on the basis that, if interest did not run until assessment, it encouraged delay in the assessment process.  Lord Ackner who delivered the principal judgment noted that there was no provision for pre-judgment interest on costs, whenever they were incurred.  This of course was concerned with an order for costs inter partes. 
  1. [21]
    The same approach is adopted in the case of an order made for the payment of money where the amount was ascertainable even if at the time of the order it had not been ascertained: Watson & Anor v Ward.[7]  That was a case where an order sanctioning a settlement provided for the payment in a particular way of the balance of the settlement sum after statutory charges had been paid, and it was held that interest ran from the date of the order, not from the date when the balance was ascertained.  These decisions were applied recently in Leonardi v Payne,[8] in a matter governed by the Supreme Court Act 1995 s 48, where it was held that interest on the amount of costs payable under an order ran from the date of the order rather than the date on which the costs were assessed.
  1. [22]
    Under the older statutes, the issue about what would happen if a client had already paid more than the amount ascertained on taxation to be properly payable was unlikely to arise, because ordinarily if the bill had been paid there was no right to taxation; in order to obtain an order for taxation after payment, it was necessary for the client to show special circumstances.[9]  One example of such a case is Wright v Southwood.[10]  After extensive litigation, a solicitor delivered bills of costs totalling over £3,600, which, making allowance for various sums received including payment out to the solicitor of money held in court, produced a balance in favour of the solicitor of over £600.  Two years later an order was made for taxation, as a result of which a master taxed the bills at an amount of a little over £2,700, and after taking into account payments between the parties, stated a balance due to the client of over £500, to which he added just over £100 for the costs of taxing the bill. 
  1. [23]
    The issue that went to the court was whether the master had erred in failing also to allow for interest on the money which, in the light of the taxation, was held by the solicitor in excess of the amount that he was entitled to retain. This was said to be a novel application, and it was noted that in an action at law interest would not be allowed.[11]  The court acknowledged that, in cases of “confidential transactions” between parties, where one of them is bound to take care that money is made productive of interest for the benefit of the other, interest may be obtained if the party neglects to do so, but it concluded that that principle did not apply.  The court however refused interest essentially on the basis that there had been delay in applying for taxation, which may have prejudiced the solicitor, because the particular solicitor who had been dealing with the client had died. 
  1. [24]
    The position does seem to be that interest was refused largely on discretionary grounds. Alexander LCB said:

“If there had been any gross fraud or laches on the part of the solicitor, or any unnecessary obstacles or delay had been thrown by him in the way of the taxation, I think there might have been some ground for charging him with interest; none such, however, is suggested.”

Hullock B said that:

“The court, in the exercise of its jurisdiction over its own officer, may visit him with interest, either as interest, or in the shape of damages, for misconduct, if a case of misconduct be properly made out; that, however, is not done in the present instance.”

  1. [25]
    That decision was referred to in Re Gould,[12] a Queensland case where an order had been made for taxation of a bill of costs, and the order went on to provide that the solicitors refund what if anything they may on such taxation appear to have been overpaid.  The result of the taxation was that, because of payments already made, the solicitors had been overpaid by over $88,000.  In addition the solicitors were liable for a sum of over $30,000 in respect of the costs of the application for the order for taxation and the subsequent cost of the taxation.  The whole of that amount was ultimately paid, but not for some time, and the clients sought interest from the time when the payment had been made on account of the costs in April 1985 until the time when it was repaid in December 1990.
  1. [26]
    McPherson ACJ said that the English Judgments Act 1838 had been invoked to enable interest to be recovered on taxed costs, but only once an order had been made for payment of the amount found or certified to be paid by the person who owed them: p 380.  In that case an order had been made for payment of the balance to be ascertained.  His Honour went on to say at p 381 that “the client’s cause of action can be seen to be their right to recover or be repaid the money which the taxation has shown they overpaid”.  This was by parity of reasoning with the situation where a solicitor’s cause of action for costs was said to arise when the work was completed.
  1. [27]
    It was held that the master’s order for taxation and refund of the amount if any of overpayment amounted to “an order for the payment of money” within the then equivalent of s 59, which took effect as an order against the solicitors for payment of the balance when ascertained, once the result of the taxation was certified: p 382. A submission that it had never been the practice to award interest against a solicitor in respect of amounts received and retained on account of costs was questioned with reference to Wright v Southwood (supra), quoting the passages that I have quoted, and a decision of Burdick v Garrick,[13] where the court allowed interest, but not compound interest, in circumstances where there had been a breach of trust by a solicitor in mixing the client’s money with his own funds. 
  1. [28]
    His Honour said that those decisions could not be regarded as controlling the discretion conferred by the equivalent of s 59, though they did suggest factors to be taken into consideration. After referring to various relevant circumstances he said[14]:

“Taking all these matters into consideration, I think the interests of justice will be sufficiently served if interest is not awarded in respect of the overpayment for the period from the date of payment to the solicitors in April 1985 until 25 August 1987, when the allocatur issued.  There are grounds for suspecting that the ordinary delays associated with taxation may have been increased by dilatoriness on the part of the solicitors in the present instance.  Both because of that, and especially because of the unexplained delay in refunding the overpayment, the case is, in my opinion, one in which a proper exercise of the discretion under s. 73 calls for an award of interest on the sum of $88,243.32 at compound rates for the period between 25 August 1987 and the date of its repayment on 6 December 1990.”

  1. [29]
    His Honour did not cite, and may have been ignorant of, the decision of House of Lords in Hunt (supra) which would have supported an award of interest under s 73 from the date of the order for taxation until payment of the balance on 2 December 1982, although His Honour might have held that in circumstances where no overpayment had occurred as at that date it was appropriate to depart from that decision.  In any event, the decision stands as an example of interest being ordered under s 73 in a way which departed from the ordinary operation of that section.
  1. [30]
    Wright v Southwood (supra) was also referred to in Re Crouch & Lyndon’s Bill of Costs.[15]  This was a review of taxation which occurred after the solicitor had been paid. On taxation more than one-sixth of the bill was taxed off, and accordingly the taxing officer awarded costs to the client which were assessed at a particular figure, together with the fee for taxation.[16]  Bearing in mind the amount allowed for costs, the amount the client had already paid, and the costs of taxation, the taxing officer certified that the client was entitled to a refund from the solicitors in a particular amount, and also certified the client be allowed interest on that amount, from the date of the original order that the solicitors deliver a bill in taxable form: p 231.  In that case there was no equivalent to the order for payment of the balance made in Re Gould (supra) and no argument was advanced that there was an entitlement to interest under the equivalent of s 59.  White J referred to Wright v Southwood (supra) and held that the question was whether there had been impropriety or misconduct on the part of the solicitors which would justify an award of interest, which was not found, and that part of the certification was vacated.

Analysis

  1. [31]
    I must say that I find the argument for the plaintiff quite unattractive. It is now 19 months since the costs assessor filed his certificate which determined (subject to review, the equivalent of an appeal) the amount payable by the defendant to the plaintiff. Yet the effect of the plaintiff’s argument is that the plaintiff remained entitled to interest by contract on the amount owing in respect of legal costs, disregarding the costs of the assessment, after that date until payment or judgment, though in the case of the costs of the assessment, which in the event that happened were properly set off by the costs assessor, there is no entitlement to interest over that period, since interest only begins to run once I make an order for their payment. That argument, if right, means that the solicitor was able to profit from the delay associated with the review process, even though it has been almost entirely unsuccessful from the solicitor’s point of view.
  1. [32]
    In my opinion r 737(1), which requires the costs assessor to certify the amount payable having regard to the costs of the assessment, is a provision in a statutory instrument requiring the costs assessor to set off (in an appropriate case) the amount of the costs determined by the assessor when determining the “amount payable” under that rule. In the context of a party-and-party assessment, it has been said that a certificate of assessment once filed takes effect as a judgment of the court, because of the terms of r 740(1), which provides that, after the certificate of assessment is filed, the registrar of the court must make the appropriate order having regard to the certificate.[17]  Rule 740 does not apply to an assessment under the Legal Profession Act, but the fact that in the case of an assessment inter partes the registrar must make an appropriate order having regard to the certificate demonstrates that r 737 operates as a statutory set off.  Hence it provides for a set off at law.
  1. [33]
    It is not necessary to come within the Civil Proceedings Act 2011 s 20 in order to achieve a set off at law, because s 20(5)(b) provides that that section applies subject to any express provision in another Act.  The term “Act” includes a statutory instrument made or in force under an Act,[18] and accordingly s 20 is subject to the express provision of r 737.  That is to say, r 737 operates to provide a set off at law notwithstanding that the requirements of s 20 have not been satisfied.[19]
  1. [34]
    Accordingly once the certificate had been filed in my opinion it had the effect of reducing in law the amount payable by the defendant to the plaintiff from the amount of costs certified as payable to the amount after deducting the costs of the assessment. That means that the contractual entitlement to interest was affected by the assessment, in the same way as the contractual entitlement to be paid was affected by the assessment. On this basis, the amount of interest payable by contract needs to be adjusted by reducing the amount of the principal by the amount of the costs of the assessment as from the date of the filing of the certificate. That I consider produces a just result in the circumstances of this case.
  1. [35]
    It occurs to me that in any event the same result may follow under the provisions for interest in the Civil Proceedings Act.  Section 58 has generally been regarded as being inapplicable because there is no “cause of action” for costs until the time when an order for costs is actually made by a court.  I do not suggest that that is incorrect as a general proposition, but one must look at the particular position of the certification by a costs assessor of the amount of the costs of the costs assessment, and the decision as to who pays the costs.  Assuming that that does not amount to a “money order” in the case of an assessment under the Legal Profession Act, it nevertheless creates a situation where, subject to the existence of any other issues impacting on liability which the court has not yet determined, there is an entitlement to a judgment having regard to the certificate under r 743H(4).
  1. [36]
    A cause of action is simply the collection of facts and circumstances which give rise to an entitlement to relief from a court.[20]  Once a certificate has issued therefore the fact of the issuing of the certificate combined with its contents and the fact of the absence of other issues to be determined in the proceeding means that there is an entitlement on the part of the defendant to judgment under that rule insofar as the certificate provides for relief in favour of the defendant.  If the arguments of the plaintiff were otherwise correct and the plaintiff were prima facie entitled to the full amount of the assessed costs without diminution for the costs of the costs assessment, the consequence would be that the defendant has an entitlement to a judgment for the costs of the costs assessment.  Accordingly, there has arisen in this matter a collection of facts and circumstances which, on this hypothesis, gives rise to an entitlement to such a judgment in favour of the defendant.
  1. [37]
    Jackson J said in Chiropractic Board of Australia v Jamieson (No 2) (supra) at [11]: “It is questionable whether there is power to make a pre-certificate of assessment award of interest.”  Authority was cited by his Honour, including a reference to s 58 of the Civil Proceedings Act, which tends to confirm my view that there is an entitlement to interest under s 58 once a certificate of assessment has been filed.
  1. [38]
    If therefore I am in error in concluding that the effect of r 737 was to produce a legal set off and reduced the amount owing to the plaintiff in respect of legal costs by the amount of the costs of the costs assessment, I consider that s 58 applies in respect of the defendant’s cause of action to recover those costs. In order to avoid any complications, I would say that if I had to exercise my discretion to award interest under s 58 I would order interest on the amount of those costs in accordance with the practice direction but limited in quantum to the amount by which the interest payable to the plaintiff under the contract would have been reduced if I had been correct in a conclusion that r 737 provides for a legal set off.
  1. [39]
    There are two other possibilities open, at least potentially. It may be that the effect of the decision of Jackson J in Jamieson (supra) was that a certificate of assessment once filed would carry post-judgment interest under the Civil Proceedings Act s 59: [10].  If that is so, I would make a special order under s 59 varying the interest payable in respect of the period between the date on which the certificate was filed and the date of this judgment so that the amount of interest to that date is not in excess of the amount of interest not payable to the plaintiff because of the set off referred to earlier.
  1. [40]
    Finally, there is the power to award interest on the basis of impropriety or misconduct on the part of a solicitor referred to in Re Crouch & Lyndon’s Bill of Costs (supra).  A solicitor is a fiduciary, and there is a power to order interest under the equitable jurisdiction of the court on the basis referred to in that decision.[21]  As I have said, I consider that it would be unjust for the solicitor to continue to receive interest on the amount of costs assessed undiminished by the costs of the assessment once the certificate has been filed, and I consider that asserting a right to interest under the contract on the amount of the costs without taking into account the obligation to pay the costs of the assessment does amount to impropriety or misconduct for the purposes of that rule.  This is so particularly in a context where that situation has arisen because of significant overcharging on the part of the solicitor.  If her argument is otherwise right, I would award interest in equity equivalent to the amount of extra interest she would recover under the contract, and set off that amount.[22] 
  1. [41]
    It then becomes a matter of recalculation of the interest accruing under the contract after 10 October 2017. As at the date of the filing of the costs assessor’s certificate, the amount outstanding on invoice 1440002 plus accumulated interest came to $5,481.38.[23]  Invoice 1440006 together with accumulated interest came that day to $19,072.53.[24]  The effect of the set off was to extinguish these two debts together with accumulated interest, leaving a surplus of $92,490.04 to be set off against the debt and interest accumulated on the next invoice, 1440005, which at that date had amounted to $324,563.06.[25]  Hence after the set off there was a balance on this invoice of $233,073.02.  That figure continued to accrue interest at 3.5% per annum, captialised monthly, and by the time of the payment on 13 February 2019 the figure had grown to $243,228.10.  There was also invoice 143996, which by 13 February 2019 had grown to $619.71.[26]  Deducting the amounts owing on these two invoices with accumulated interest up to that date from the amount of the payment, $305,184.58, produces a balance in favour of the defendant of $61,336.77.  Hence a restitutionary right to be paid that amount arose at that time.
  1. [42]
    Accordingly, under r 743H it is appropriate to give judgment for the defendant for this sum, together with interest under the Civil Proceedings Act 2011 s 58 from 14 February 2019.  This is because, as a result of the costs assessment and the review of the costs assessment, the plaintiff can be seen, with the benefit of hindsight, to have been overpaid by that amount on that date.  I cannot give compound interest under s 58, but the period is short and I will allow interest at 3.5%, which comes to $582.28, making a total of $61,919.05.   The appropriate course therefore in terms of the proceeding as a whole is to dismiss the claim and to give judgment on the counterclaim for that relief. 
  1. [43]
    Counsel for the plaintiff particularly resisted a set off in this matter, presumably for the tactical desire to obtain some money judgment notwithstanding the payment from the trust account. It follows from what I have said that I do not endorse that approach, but if I had reached a position where it was appropriate to give judgment on the plaintiff’s claim without regard to the costs of the assessment, and give judgment for those costs (and interest) on the counterclaim, I would then have set off those amounts and given a single judgment for the balance payable to the defendant, under UCPR r 184. The decisions I have found on that rule suggest that, when there are money judgments each way, that should occur unless there is objectively some good reason not to do so.[27]  I do not consider that any good reason is shown in this case.[28]  That would produce one judgment, in favour of the defendant. 

Costs of the review

  1. [44]
    On the face of it the plaintiff’s application for review pursued a very broad challenge to the detail of the assessment, with the costs assessor’s decisions on a large number of individual items being disputed. Ultimately it was unnecessary for me to look at most of the items listed in the amended application, because as the review progressed counsel for the plaintiff became more and more selective in the matters argued. No doubt as a consequence of this, the rate of success of those matters which were argued went up as the review progressed.[29]  Ultimately counsel for the plaintiff abandoned the pursuit of further individual items, and the final argument was about the question of the costs of the costs assessment.  On that point the plaintiff was unsuccessful. 
  1. [45]
    The largest single adjustment to the amount of the costs assessor’s certificate came as a result of an arithmetic miscalculation by the costs assessor, which he had conceded after the certificate was filed in correspondence with the plaintiff. At the hearing before me, no dispute was raised about the fact that the costs assessor had in this respect made a miscalculation. I was told that there had not actually been a concession on the part of the defendant that this error existed prior to the time when the matter was raised before me, and some costs would have been incurred in placing before me the relevant material. Apart from this, the largest single item that I adjusted was one where I made the adjustment, but, on further consideration in preparing my reasons, realised the adjustment I had made had been an error. In terms of actually showing that the costs assessor had made errors in assessing particular items in the course of the costs assessment, therefore, the plaintiff’s success was very limited.
  1. [46]
    Counsel for the plaintiff frankly conceded that the plaintiff should bear most of the costs of the application for review, but sought to have the amount payable limited to 95% of the defendant’s costs, on the basis that the plaintiff had had some success in the review. The defendant sought the whole costs of the review, and sought them on the indemnity basis, essentially on the basis of offers to settle which had been made prior to the hearing of the review. Evidence was tendered of three offers to settle, one by the defendant, one by the plaintiff and a second by the defendant.
  1. [47]
    The difficultly with the first offer however was that it was marked “without prejudice” rather than being marked “without prejudice save as to costs”, and there was nothing in the body of the letter to foreshadow that there was an intention to rely on it in relation to the question of costs. This is the defining feature of a Calderbank offer, and it seems to me that, without that intention having been signalled, the position is simply that it was a without prejudice offer, which cannot be relied upon in this context.[30]  I therefore cannot have regard to the first offer by the defendant.  The first offer by the plaintiff was one which was more favourable to the plaintiff than the final outcome, and it was submitted for the plaintiff that the offer was therefore irrelevant.  The difficulty with that submission is that it provides a relevant context for the interpretation of the second offer by the defendant, which was made in response to the offer by the plaintiff, and which was expressed to be a modification of the offer by the plaintiff.  This was done largely by modifying the terms so as to reduce the amount payable by the defendant to the plaintiff. 
  1. [48]
    These two offers were exchanged after the order had been made to pay money out of the trust account, and the offers make reference to this payment out. The plaintiff’s offer was marked expressly “without prejudice save as to costs”, whereas there was no particular marking on the letter from the defendant’s solicitors to the plaintiff enclosing the defendant’s response and counteroffer. There was some inconsistency between that annotation on the plaintiff’s letter and the fact that the enclosed “terms of settlement” included a statement that “this offer is made without prejudice”. If an offer is made to settle on the basis of certain specified terms of settlement, the offer may be without prejudice but the terms of the settlement can hardly be without prejudice. This provision should never have been included in the draft terms of settlement, and is best ignored. The fact that it was reproduced in the modified version of the terms of settlement in the defendant’s offer it should therefore also be ignored, and, given the lead adopted by the plaintiff, the counteroffer should also in my opinion be characterised as having been made without prejudice save as to costs. It is therefore appropriate that I look at it.
  1. [49]
    The difficulty for the defendant however when I look at it is that it appears to be internally inconsistent. That is to say, the document does not itself produce an internally consistent set of figures. Parts of the document purport to explain how a particular figure has been arrived at, but the application of the details of that explanation does not lead to the figure referred to in the terms of settlement as a net amount payable. It appears that, in an attempt to make the counteroffer adhere as closely as possible to the terms of the offer, the defendant’s solicitor has failed to adjust some items which ought in fact to have been adjusted. As a result the counteroffer suffers from the particular disadvantage that it is unclear exactly what the defendant is offering. In those circumstances it can hardly be said that it was unreasonable for the plaintiff to have failed to accept it,[31] and there is therefore no basis for ordering the plaintiff to pay the costs, whether of the review or the whole proceeding, on an indemnity basis because of an unreasonable failure to accept the offer that the defendant had made.
  1. [50]
    Courts ought not readily to order costs on the indemnity basis, and in the circumstances I am not persuaded that it is appropriate to take that step here. On the other hand it ought to have been apparent that the plaintiff at the time of the amended application, and indeed the original application, for the review were filed that that proposed review was far too wide. Although there has been some adjustment, it was really a very small addition indeed to the amount initially allowed by the costs assessor. In all the circumstances, I am not prepared to limit the order for costs in favour of the defendant in relation to the review in the way sought on behalf of the plaintiff. The costs of the review should follow the event on the review and, adopting a broad brush approach, it was the defendant who was successful on the review. I order the plaintiff to the pay defendant’s costs of the review. An order in those terms will carry the costs assessed on the standard basis only.
  1. [51]
    There were costs reserved by Martin J on 9 May 2018, and by Rosengren DCJ on 17 September 2018. The former was the return date of the plaintiff’s application for review under r 742, and apart from ordering that the matter be transferred to the District Court, which was not opposed, the balance of the order consisted solely of orders and directions in relation to the review. One was for the matter to come before a District Court Judge for further directions, and the latter hearing was pursuant to that direction, and dealt solely with the review. I regard those applications as being part of the review, so that under r 698 the costs of them are covered by my order that the plaintiff pay the defendant’s costs of the review. On 22 May 2015 McMurdo J, when ordering the assessment under the Act, ordered that the costs of the application before him abide the outcome of the costs assessment. It is not clear whether the costs assessor has already included those costs in his assessment of the costs of the assessment, but if not, they should be paid by the plaintiff.

Costs of the proceeding

  1. [52]
    That leaves the question of the costs of the proceeding as a whole. The plaintiff submitted that she was entitled to the costs of the proceeding, on the basis that she had in substance succeeded on her claim for unpaid legal costs, even though as a result of the assessment and review the amount recovered was substantially less than the amount sought. There would have been a substantial judgment for the plaintiff in the proceeding except for the fact that an order was made shortly before the hearing of the review for the payment of a sum from the money held on security on the basis of a solicitor’s lien. On the other hand, the real issue in the proceeding as a whole can be seen as the determination of the amount which the plaintiff was actually entitled to be paid by the defendant. That was the issue raised by the second ground of relief in the counterclaim, seeking assessment of costs under the Legal Profession Act 2007. 
  1. [53]
    Such an assessment was ordered, and the effect of that assessment was that a substantial amount was disallowed by the costs assessor. Because the plaintiff had been paid so little by the defendant, there remained however a substantial amount owing. As I remarked in the previous reasons, the parties were in the context of the assessment a long way apart, between the total amount claimed under the itemised bill and the amount conceded on behalf of the defendant in the “notice of objections” of the defendant; as it happens, the outcome of the costs assessment was essentially to split the difference. To the extent that either party was adopting an unrealistic position in relation to the quantum of the costs actually payable, the outcome suggested that both parties were being equally unrealistic.
  1. [54]
    Because of the way in which the proceeding has been conducted, some of the costs have already been dealt with, and I expect most of the legal costs in relation to the whole dispute will be covered by the costs of the costs assessment and the costs of the review. Both of these have already been dealt with, the former by the costs assessor in accordance with the statute, and the latter by me on the basis of costs following the event. The costs assessment was ordered after an assessment was sought in the counterclaim, and also sought in an application filed by the plaintiff, so that ultimately the proceeding just turned on the costs assessment and the working out of its consequences. In those circumstances, it seems to me to be quite unrealistic to approach the matter on the basis of the traditional approach where there is a claim and a counterclaim, where the costs of the proceeding generally are treated as part of the costs of the claim, and the costs of the counterclaim cover only costs specifically attributable to the counterclaim.[32]  This was in substance a fight about how much the defendant had to pay the plaintiff, and as I have said, in essence both sides have had some measure of success, and both sides have to some extent failed, in that dispute.  In my opinion the appropriate course is to make no order as to the costs of the proceeding, either claim or counterclaim, apart from my order in relation to the costs of the review.[33]  The balance of the costs can lie where they fall.  That will include the costs of the appearance before Boddice J on 10 April 2015. 
  1. [55]
    There have been orders for costs made in the past in favour of the plaintiff, which have not yet been assessed.[34]  Unless the parties have an uncharacteristic attack of pragmatism, those costs will have to be assessed, as will the costs of the review.  I will be surprised if the costs of the review do not exceed the total of the amounts at which the costs ordered in favour of the plaintiff are assessed.  In those circumstances, the appropriate course is to order that the balance of the money held in the trust account by way of security to abide the outcome of the proceeding be paid to the solicitors for the defendant.  This will avoid the risk of any need for a further hearing to deal with this, and in any case, I understand that the amount involved is quite small, and it is better to relieve the trustee of it sooner rather than later. 

Footnotes

[1]  The insertion was at a somewhat awkward position, but I accept that the correct interpretation of the clause in those agreements is that it provided for interest to compound monthly.

[2]  See also s 308(2) of the Act.

[3]  It has been done like this for a long time: see Wright v Southwood (1827) 1 Y&J 526; 148 ER 779.

[4]  The Act s 326.

[5]  Equity was more flexible: Dal Pont and Chalmers, Equity and Trusts in Australia and New England (2nd Ed 2000) p 124.

[6]  [1990] 1 AC 398.

[7]  [2013] QCA 393.

[8]  [2017] QSC 319.

[9]  See for example Costs Act 1867 s 33.

[10]  (1827) 1 Y&J 526; 148 ER 779.

[11]  This was before the Civil Procedure Act 1833 introduced a limited statutory power to allow interest.  A power to allow interest on all money judgments was not introduced in England until the Law Reform (Miscellaneous Provisions) Act 1934, and in Queensland until an amendment in 1972 to the Common Law Practice Act 1867. 

[12]  [1992] 2 Qd R 377.

[13]  (1870) LR 5 Ch App 233.

[14]  At p 383.  Reference was made to the then recent decision of the High Court in Hungerfords v Walker (1989) 171 CLR 125. 

[15]  [1998] 2 Qd R 228.

[16]  The equivalent of the costs assessor’s fees.

[17] Chiropractic Board of Australia v Jamieson (No 2) [2013] QSC 111, per Jackson J.

[18] Acts Interpretation Act 1954 s 7.

[19]  It is by no means clear anyway that the requirements of s 20 are not satisfied by the situation once a certificate is filed. Those requirements are that there be mutual debts in a proceeding; the plaintiff’s claim is a proceeding, which includes consequential or related proceedings such as the assessment pursuant to the order of the court, the debts are both liquidated once the assessments have been made, and they are mutual because they are each owed to the other in the same capacity. However I consider that it is unnecessary to rely on s 20.

[20] McQueen v Mount Isa Mines Ltd [2018] 3 Qd R 1 at [44]-[46].

[21] District Court of Queensland Act 1967 s 69.

[22]  There may be some analogy with the situation where a court imposes a constructive trust because a party insists on the party’s legal rights in circumstances where it is unjust to do so: Baumgartner v Baumgartner (1987) 164 CLR 137. 

[23]  Interest from the table to 14 September 2017, $5,467.85, plus 26 days, $13.53.

[24]  Interest from the table to 6 October 2017, $19,065.22, plus 4 days, $7.31.

[25]  Interest from the table to 6 October 2017, $324,438.62, plus 4 days, $124.44.

[26]  Interest from the table to 4 February 2019, $619.18, plus 9 days, $0.53.

[27] Curtin v Meadlow Holdings Pty Ltd [2001] QCA 145 at [39]; Cook’s Constructions Pty Ltd v Stork Food Systems Australia Pty Ltd [2008] QSC 220 at [48]. 

[28]  In Civil Mining and Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd (No 3) [2018] QSC 60 separate judgments were ordered because each would carry interest on a different basis under different statutes, one of which provided for interest under it to be payable until payment.  In a particular case, that may provide a good reason, although I see no reason why judgments for amounts inclusive of interest could not be set off under r 184.  Note the wording of s 58(3). 

[29]  On the first day the effect of the review was to increase the amount payable by only $55.

[30] Johns Perry Industries Pty Ltd v International Rigging (Aust) Pty Ltd [1988] 2 Qd R 556. 

[31] J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23. 

[32]  Cairns, Australian Civil Procedure (11th Ed 2016) p 302 [7.290]. 

[33]  For examples of this approach, see Ryan v Worthington [2016] QCA 128; Curtin v Meadlow Holdings Pty Ltd [2001] QCA 145 at [40]. 

[34]  Order of Dalton J of 22 January 2016; order of Koppenol DCJ of 5 February 2019. 

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Editorial Notes

  • Published Case Name:

    Chapman v Harris (No 2)

  • Shortened Case Name:

    Chapman v Harris (No 2)

  • MNC:

    [2019] QDC 78

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    24 May 2019

Appeal Status

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