Wiesac Pty Ltd v Insurance Australia Ltd (No 3)

The applicant sought judicial review of a costs assessor’s decision. Flanagan J was asked to consider whether the decision to disallow costs of junior counsel when the defendant was also represented by senior counsel was “manifestly wrong”. In so doing, his Honour helpfully set out the relevant principles to review of costs assessors’ decisions, when costs of two counsel will be allowed, and when a costs assessor’s decision will be “manifestly wrong”.

Flanagan J

16 April 2021

The defendant insured the plaintiffs, which were, respectively, the landlord and tenant of a commercial building which was affected by the January 2011 floods. [19]–[21]. After a three-day trial, Davis J delivered a 54-page judgment, in which his Honour found for the defendant with costs on a standard basis. [4], [26]–[27]. At trial, the defendant was represented by both senior and junior counsel. [2].

Upon the defendant’s costs being assessed, the costs assessor disallowed the cost of its junior counsel for appearance at the trial. [5]. The defendant subsequently sought review of the costs assessor’s decision pursuant to r 742 Uniform Civil Procedure Rules 1999 (UCPR). [10]. Importantly, the defendant did not avail itself of the procedure set out in r 738 to require the costs assessor to provide reasons for this decision. [9].

The defendant advanced two grounds of review: [11]:

a) That the costs assessor erred in identifying that senior counsel could have adequately presented the case without having junior counsel; and

b) That the costs assessor’s exercise of the discretion to disallow the cost of junior counsel was manifestly wrong.

Before addressing these grounds, Flanagan J adopted Martin J’s discussion of the scope of r 742 in Pinehurst Nominees Pty Ltd v Coeur De Lion Investments Pty Ltd [2015] QSC 122. [13]. Although the discretion conferred by r 742 is a broad one, the Court should be cognisant of the fact that it is being asked to displace an exercise of discretion by the costs assessor, and that the onus lies on the applicant to satisfy the Court that the costs assessor was wrong. [13]–[14]. Turning more specifically to the general principles as to when it would be necessary or proper to allow for the costs of junior counsel, his Honour referred to Stanley v Phillips (1966) 115 CLR 470 and determined that it is something which “must be assessed having regard to the nature and circumstances of the proceeding”. [15]–[18].

The defendant’s first ground of review relied upon a statement made by the costs assessor on 13 October 2020, setting out some of his reasoning in respect of the decision not to allow the costs of junior Counsel. [39]–[42]. However, Flanagan J was wary about treating such a letter in the same manner as formal reasons provided pursuant to a request under r 738. [46]. In light of a reference by the costs assessor to Stanley v Phillips (which his Honour considered to state the correct test), and as the letter did not constitute formal reasons pursuant to r 738, Flanagan J was not satisfied that this ground of review had been made out. [47].

Turning then to the second ground of review, Flanagan J noted that there was no precise meaning of the phrase “manifestly wrong”, and nor is it “particularly amenable to precise definition”. [48]. However, his Honour considered that a decision would be manifestly wrong where it “was not open to the costs assessor on the facts before them, or was not within the costs assessor’s lawful discretion”. [48]. The Court is not required to substitute its own opinion, but rather must determine on the basis of the material before it whether or not the decision “reveals an exercise of discretion that is manifestly wrong”. [49]. Importantly, this enquiry can be made without written reasons being provided by the costs assessor, and “does not necessarily invite an enquiry as to what weight the costs assessor placed on various matters nor on whether the costs assessor failed to take into account a relevant matter”. [50].

Applying these principles to the facts of this case, Flanagan J found that the core task undertaken by junior counsel in this case – cross-examining an accounting expert in relation to business interruption loss in the context of an insurance policy – was “an exercise of some complexity”. [51]. So, too, was the litigation complex. [52]. His Honour considered this factor to strongly favour that the cost of junior counsel was properly incurred. [52]. Notably, Flanagan J also considered the fact that Davis J’s judgment was subject of a feature in the Australian Insurance Law Bulletin and an article in the Insurance Law Journal, as well as being reported in the Queensland Reports ([2019] 1 Qd R 198) as being indicia of the general importance of this case. [53]–[54].

In the event, and having particular regard to the nature and complexity of the proceedings, Flanagan J found that the cost of junior counsel was a proper cost in all the circumstances. [55]. Accordingly, the costs assessor’s decision was manifestly wrong and set aside. [55]–[56].

M Paterson