Cervetto & Co, Re; Re FAI Car Owners Mutual Insurance Co Ltd [1992] QSC 154

TR.AJ'JSCRJPT OF PROCEEDINGS State Reporting Bureau. 4th Floor, The Law Couns, George Street, BRJSBA.NE. 0. 4000 Tel. (07) 227.4360 (Copyright in this transcript is vested in the Cro'Wll. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MACKENZIE J Mise No 1227 of 1990 IN THE MATTER OF THE COSTS ACT 1867 IN THE MATTER OF A BILL OF COSTS OF MESSIEURS CERVETTO& COMPANY, SOLICITORS OF IPSWICH, AGAINST FAI CAR OWNERS MUTUAL COMPANY LIMITED BRISBANE .. DATE 29/4/92 JUDGMENT 1 -- 1 of 13 -- 290492 JUDGMENT HIS HONOUR: In this matter, the orders that I make are the following: (1) that the application for review be refused insofar as it relates to the apportionment of costs; (2) that the application for review be granted insofar as it relates to the disallowance of items on the basis that the applicant should have obtained the client's consent to the incurring expenses because they would not otherwise have been necessarily or properly incurred , provided that the basis of apportionment applied by the Taxing Officer and approved in clause (1) of this order shall be applied to any such items in respect of which apportionment is appropriate; (3) that the Taxing Officer be directed to retax the bill in accordance with clauses (1) and (2) hereof; (4) that each party bear its own costs of the appli9ation. I publish my reasons. 2 20 30 40 50 60 -- 2 of 13 -- IN THE SUPREME COURT OF QUEENSLAND Before Mr. Justice Mackenzie No. 1227 of 1990 IN THE MATTER of the Costs Act 1867 - and - IN THE MATTER of a Bill of Costs of Messieurs CERVETTO & COMPANY, Solicitors of Ipswich against FAI CAR OWNERS MUTUAL INSURANCE COMPANY LIMITED JUDGMENT MACKENZIE J. Delivered this 29th day of April, 1992. Counsel: G.J. Robinson for Applicant S.E.J. Jensen for Respondent Solicitors: Cervetto & Co. for Applicant Mcinnes Wilson & Jensen for Respondent Hearing Date: 6th February, 1992 -- 3 of 13 -- IN THE SUPREME COURT OF QUEENSLAND No. 1227 of 1990 IN THE MATTER of the Costs Act 1867 - and - IN THE MATTER of a Bill of Costs of Messieurs CERVETTO & COMPANY, Solicitors of Ipswich, against FAI CAR OWNERS MUTUAL INSURANCE COMPANY LIMITED JUDGMENT MACKENZIE J. Delivered this 29th day of April, 1992. On 28th February, 1991 a Bill of Costs rendered to FAI for work done on behalf of FAI in an action in the District Court at Ipswich was taxed. The taxation was unusual in that the Bill was originally delivered at $7,255.85 but, of that sum, $6,971.29 was taxed off. After costs under the one-sixth rule and taxing fees had been awarded to the respondent, the applicant solicitors were left to make a payment of $437.94 to the respondent. The solicitors filed objections to the disallowance on taxation of a number of items and on 24th January, 1992 the Taxing Officer gave answers to the objections, disallowing all objections. The action was brought both for personal injuries and for property damage to a motor cycle arising out of a road incident. The defendant's third party insurer pursuant to the provisions of the Motor Vehicles Insurance Act was Suncorp, and it had become defendant by election insofar as the action related to personal injuries. FAI was the defendant's insurer in respect of the property damage claim of the order of $950. On the morning of the trial the quantum of property damage was admitted. -- 4 of 13 -- 2 In addition an application was made by the plaintiff to increase his claim to $40,000. That fact is reflected in Item 180 in the Solicitor and Client Bill. Prior to that, the items relate to pre-trial matters. Suncorp had given its instructions to defend on 26th September, 1986.. On 1st June, 1988 FAI had written to the applicants instructing them in the following terms: "We advise that we are prepared to indemnify our mutual claim in relation to this incident and request that you act on our behalf in the matter relating to property damage . . . We advise that we will pay the reasonable costs associated in the defence of this property damage claim." There was no objection to the Taxing Officer's finding that the retainer from FAI had been entered into on 1st June, 1988. In the answers to objections the Taxing Officer analysed the bases for the objections to the taxation under three headings: (1) the ratio of apportionment of common items; ( 2) whether it was necessary or proper to incur certain costs; and ( 3) whether the costs which had been allowed on a party and party taxation should necessarily be allowed on a subsequent solicitor and client taxation. As to the first of these, upon taxation the Taxing Officer made the following ruling: "Where applicable items are to be apportioned - FAI to pay 6.8% of item until item 180 and from then on at the rate of 2.4%. (Based on property damage as percentage of total claim)." As to the second, the Taxing Officer disallowed a number of items because the consent of the client was not obtained prior to the incurring of the costs. From the answers to objections, it appears to have been argued that discovery and interrogation were ordinary interlocutory steps not requiring express instructions -- 5 of 13 -- 3 and that, as a whole, the disallowed items were not "unusual expenses" in respect of which the client should be warned before · they were incurred. The Taxing Officer acceded to FAI 1 s contention that it would not be the usual procedure to interrogate or require discovery where such a small quantum of property damage was involved and that it would have been appropriate for specific instructions to be obtained by the applicant before taking those and the other steps. As to the third of the bases for objections, the ruling upon taxation was to the effect that the client was entitled to object to items notwithstanding that they had been allowed in full on party and party taxation. The reason for this was that "the client could not be seen to have adopted and therefore had not had the benefit of the items allowed in the party and party bill as no instructions had been obtained in relation to the party and party taxation". Another element in the ruling was that the party and party costs were unable to be recovered from the plaintiff and therefore the client had not had the benefit of payment of such costs. As to the question of the ratio of apportionment of common i terns the Taxing Officer 1 s decision on objections is to the effect that where i terns were to be apportioned FAI would be required to pay a percentage reflecting the proportion that the property damage claim bore to the total claim. The Taxing Officer had been referred to the "rule of thumb" that where there is no agreement to the contrary as to how the costs of the defence of two defendants are to be borne, each of the defendants is liable to the solicitor for half the costs of the defence -- 6 of 13 -- 4 (Beaumont v. Senior (1903) 1 K.B. 282 and cf. Ellingsen v. Det Skandinaviske Compani (1919) 2 K.B. 567). The Taxing Officer's expressed reason for taking this course was that notwithstanding the fact that the two defendants had common representation, it would be grossly unfair or unjust for FAI to bear one half of the costs of the entire defence, especially where the property damage claim would ordinarily have been pursued in the Magistrates Court at little cost. Further, it was said, it would seem unjust to have a situation where a property damage insurer incurred extra costs simply because he had chosen to "tack on" to the major insurer in order to save the costs of having separate representation. Reference was also made to the Schedule to the District Court Rules in which it was provided that, for claims less than $5,000, it may be appropriate to award costs on the Magistrates Court· scale. The duty of a solicitor not to incur unreasonable costs was also referred to. The Taxing Officer noted a passage in the judgment of Atkin L.J. in Ellingsen at 570 in which he said that the principle of equal apportionment may, in some cases, have curious results but appeared to be too well established to be disturbed by decision of the Court of Appeal. That comment was interpreted by the Taxing Officer as expressing reservations as to the application of the rule if the circumstances were different. Before the Taxing Officer and before me, FAI relied on Korner v. Korner (1951) Ch. 310 which was cited with approval of the Full Court in R. v. Hore ex parte Brisbane City Council (1969) Qd.R. 75 at 89, both concerning party and party taxations. In Korner v. Korner the appellant had brought action against the -- 7 of 13 -- 5 company, his brother and six other defendants. He succeeded against his brother but was unsuccessful against all other defendants. Singleton L.J. at 17 said: "The main contest, the real fight, was between the plaintiff and the unsuccessful defendant, Emil Korner. That entailed a lengthy enquiry into what was the agreement between them and into the questions raised by ... the defence of Emil Korner .... Neither the defendant company nor any of the other defendants raised these matters .... " All the defendants were represented by the same solicitors and those against whom the action did not succeed appealed against the decision of the Taxing Master, alleging that he had departed from the "rule of thumb" under which they claimed to be each entitled to one-eighth of the total costs of defending the action rather than the lesser sum, based on a proportion of the fee for instructions on brief and counsel's fees as may be attributable to their defences, allowed upon taxation. At p. 17- 18 Singleton L.J. said the following: " This rule, a rule of thumb, is no doubt convenient in an ordinary case; but I do not think that it can be said that it must be applied in every case. Regard must be had to the nature of the case and to the nature of the defences raised to the same claim .... if the claim of these defendants is right, each will be entitled to one-eighth of the fee allowed for instructions for brief and of counsel's fees on that contest, though they did not raise such matters and though the plaintiff succeeded on them against the defendant who did raise them. That cannot be right. It is not disputed that it would result in injustice against the plaintiff. I do not know of any authority which compels the court to follow the rule which I have mentioned in every class of case, and even if to follow it would result in injustice. To do so would be to fly in the teeth of the generally accepted principle as stated in Ellingsen's case 'that the successful party is to be recompensed the liability he has reasonably incurred in defending himself' . Wynn-Parry J. thought the authorities in which the rule has been applied to be all authorities in which the plaintiff was pursuing -- 8 of 13 -- 6 the same action against all the defendants. That may be a somewhat narrow view. At the same time, I agree with him that the rule ought not to be extended. I regard it as something convenient to be applied in anordinary or straight-forward case. I do not think it apt in any degree for application to this case, havingregard to the different defences which were raised and to the fact that the plaintiff succeeded on the main issue, an issue in which only one of the defendants was involved." It was not submitted that there was a distinction between party and party and solicitor and client taxations in this connection. It was submitted, on behalf of FAI, that it was therefore open to the Taxing Officer to fix FAI's costs in the proportion that the relevant property damage amount bore to the much larger personal injuries claim. It was submitted that the Taxing Officer's finding was sensible and appropriate in all of the circumstances. I should mention that in the course of FAI's argument I was referred to an unreported decision of Dowsett J. in Grainger v. C.P.F. Pty. Ltd. & Ors (unreported 26th March, 1986) in which he apportioned all the costs of an action to the claim for damages for personal injuries where the property damage amounted to only $60 in an award of over $170,000. I do not derive any assistance from that decision in resolving the present matter as it is clearly a case of exercise of the discretion to award costs rather than a decision establishing principles upon which costs should be allowed on taxation after an order for costs has been made. The principle upon which a review of a taxation of costs proceeds is that stated in Australian Coal & Shale Employees Federation v. The Commonwealth (1953) 94 C.L.R. 621 AT 628 where Kitto J. stated the following: -- 9 of 13 -- 7 "I respectfully adopt the summary of the law on this matter which was made by Jordan C.J. with the concurrence of Harvey C.J. in Eq. & Street J. in Schweppes Limited v Archer. His Honour said, 'In appeals as to costs, the principles to be applied are these. The Court will alwaysreview a decision of a Taxing Officer where it is contended that he has proceeded upon a wrong principle, for the purpose of determining the principle which should beapplied; and an error in principle may occur both in determining whether an item should be allowed and in determining how much should be allowed. Where no principle is involved, and the question is, whether the Taxing Officer has correctly exercised thediscretion which he possesses and is purporting to exercise, the Court is reluctant to interfere. It has undoubted jurisdiction to review the Taxing Officer's decision even where an exercise ofdiscretion only is involved, and will do so freely on a proper case, using its own knowledge of the circumstances; Western Australian Bank v Royal Insurance Company, Clark Tait & eo v Federal Commissioner of Taxation, but it will in general interfere only where the discretion appears not to have been exercised at all, or to have been exercised in a manner which is manifestly wrong; and where the question is one of amount only, will do so only in an extreme case." In the case of the determination of the ratio of apportionment of common items, I am of opinion that the Taxing Officer's answers to objections do not indicate a departure from appropriate principles and while there may be a variety of valid approaches to the apportionment of costs, I am not prepared to say that any error has been demonstrated that invalidates the result reached by the Taxing Officer. It must be borne in mind that the case is a rather unusual one and for that reason a result that might not be appropriate in the usual class of case is not necessarily inappropriate in it. -- 10 of 13 -- 8 As to the question of whether it was necessary or proper to incur certain costs, the nature of the case is also relevant. The property damage claim had been joined in the action for personal injuries. In itself it was only a small claim. Had the plaintiff brought it in its natural court, unrelated to the claim for personal injuries, it would have been dealt with in a rather more summary way procedurally than an action in the District Court would normally be dealt with. It is in that context that the letter of instructions of 1st June, 1988 should be viewed. It refers to a willingness to pay "reasonable costs". The reason underlying the answers to objections appears to be that if the intention of the solicitors was to charge costs at District Court scale, it would have been appropriate to take specific instructions from the client. It was argued on behalf of the applicant that the items disallowed by the Taxing Officer as a group did not constitute "unusual expenses" within the meaning of the rule in Re Blyth and Fanshawe Ex parte Wells (1882) 10 Q.B.D. 207. Analysis of the items wholly disallowed indicates that the majority of them are for attendances of various kinds. Others seem to relate to work done by agents, and the question of authority to engage the agent seems to have been an issue in relation to at least some of them. Others relate to preparation for the trial. In Re Blyth and Fanshawe, the relevant principle is stated as follows by Baggallay J.: "I take it to be the general rule of law, and an important rule which is to be observed in almost all cases, that if an unusual expense is about to be incurred in the course of an action it is the duty of the solicitor to inform his client fully of it, and not to be satisfied simply by taking his authority to -- 11 of 13 -- 9 incur the additional expense, but to point out to him that such expense will or may not be allowed ontaxation between party and party whatever may be theresult of the trial." In a case where the plaintiff has brought an action in a higher court than that in which he might have, it seems to me to lead to harsh consequences if a successful defendant is at risk of having costs awarded only on the lower scale, and if a solicitor is to be taken to have a duty to warn the client before he takes steps otherwise appropriate in that court. In the particular circumstances of the case, I am left with the feeling that the Taxing Officer's discretion has miscarried by reason of application of this principle, and that, subject to any specific objections to individual items, items disallowed on this basis should be allowed. If any are found to fall within a category in which apportionment is appropriate, that principle will apply on the same basis as for other items. There remains the argument that costs which were allowed on a party and party taxation should necessarily be allowed on a subsequent solicitor and client taxation. In view of my conclusions on the other points taken, it has become academic to decide this. The "in principle" allowance of items disallowed on the basis of the failure to obtain specific approval of the client to incur them has the result that the remaining question is how they should have been apportioned between the two clients, not whether they are allowable on taxation of the Solicitor and Client Bill. The orders that I make are as follows: -- 12 of 13 -- 10 1. That the application for review be refused insofar as it relates to the apportionment of costs. 2. That the application for review be granted insofar as it relates to the disallowance of items on the basis that the applicant should have obtained the client's consent to the incurring of expenses because they would not otherwise have been necessarily or properly incurred; provided that the basis of apportionment applied by the Taxing Officer and approved by cl. 1 of this order shall be applied to any such i terns in respect of which apportionment is appropriate. 3. That the Taxing Officer be directed to retax the Bill in accordance with cl. 1 and 2 hereof. 4. That each party bear its own costs of the application. -- 13 of 13 --