Alexander, Phillipa --- "Costs column: Applications for exclusion of maximum costs" [2016] PrecedentAULA 22; (2016) 133 Precedent 45

APPLICATIONS FOR EXCLUSION OF MAXIMUM COSTS

By Phillipa Alexander

An application under s341 of the Legal Profession Act 2004 (NSW) to lift the maximum costs limitation imposed by s338 of that Act was recently considered by Neilson DCJ in Awad v ISPT Pty Limited & Jones Lang LaSalle (NSW) Pty Limited & Glad Cleaning Services Pty Limited (No 3).^[1] The plaintiff obtained judgment for $32,512 against two of the three defendants, following a nine-day hearing.

In essence, s338 provides that if the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a plaintiff in connection with the claim are fixed at 20 per cent of the amount recovered or $10,000, whichever is the greater. Claims brought under the Motor Accidents Act 1988 (NSW) or Motor Accidents Compensation Act 1999 (NSW), Workplace Injury Management and Workers Compensation Act 1998 (NSW) or the Dust Diseases Tribunal Act 1989 (NSW) are excluded from the operation of s338.^[2]

While the application in Awad's case was unsuccessful, His Honour's judgment provides some guidance as to the criteria to be applied.

Section 341 provides:

'A court hearing a claim for personal injury damages may by order exclude from the operation of this Division legal services provided to a party to the claim if the court is satisfied that the legal services were provided in response to any action on the claim by or on behalf of the other party to the claim, that in the circumstances was not reasonably necessary for the advancement of that party's case or was intended or reasonably likely to unnecessarily delay or complicate determination of the claim.'

Neilson DCJ identified five elements which may be relied upon by a plaintiff, namely:

(1) it was not reasonably necessary for the advancement of a defendant’s case;

(2) was intended to delay unnecessarily the plaintiff’s claim;

(3) was intended to complicate unnecessarily the determination of the plaintiff’s claim;

(4) was reasonably likely to delay unnecessarily the plaintiff’s claim; or

(5) was reasonably likely to complicate the determination of the plaintiff’s claim.

The plaintiff's counsel was unable to rely on any one of the above elements, arguing instead that it was an unnecessarily lengthy case in which no offer of settlement had been made by the defendants thereby forcing the plaintiff to continue the case to its conclusion. The plaintiff's counsel also relied on the dicta of Giles JA in Port Stephens Council v Theodorakakis (No. 2),^[3] where the opponent/plaintiff had sought an order that the costs of the claimant/defendant's unsuccessful application for leave to appeal be excluded from the maximum costs provisions.

Bryson JA, in dissent, considered that such an order should be made on the basis that the application was not reasonably necessary for the advancement of the claimant's case, as nothing was achieved by it and it was fruitless.^[4]

In refusing the order, Giles JA did not think the question was answered by the failure of the application and said “Whether action by a party was reasonably necessary for the advancement of the party's case was concerned with proportionality between the advancement of the case, and the action taken to advance it, by stating a standard of reasonable necessity. Although the party failed in the case, it may have been 'a damned nice thing – the nearest run thing you ever saw in your life', as Wellington said of Waterloo, and the action to advance the case could well have been reasonably necessary in the endeavour to advance it. Napoleon lost at Waterloo, but his deployment of his forces must at least for the most part have been reasonably necessary in the endeavour to win the battle.”^[5]

Ipp JA agreed with Giles JA that while the failure of the application for leave to appeal was relevant, it was not determinative; the application was reasonably arguable and there was nothing based on the proportionality of the claimant's action that suggested it was unreasonable to have brought the application.^[6]

While Neilson DCJ acknowledged that the Awad case was prolonged, he did not find that this was due to any act or default of the defendant. The proposition that simply failing to make a settlement offer can enliven an application under s341 was rejected by the court.

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A successful s341 application was made in Boyle v Coppock & Anor; Ek v Coppock & Anor.[7] The defendants brought a motion to strike out the plaintiff's claims. Levy SC DCJ held that the defendants' motion constituted action that was in the circumstances not reasonably necessary for the advancement of the defendants' interests in the litigation, or was reasonably likely to unnecessarily delay or complicate the determination of the claim. His Honour held that the timing of the strike-out motion was entirely misconceived, as the evidence-gathering by the plaintiff was not yet complete or closed off by case management orders at the time that the defendants' motion was filed. The motion also infringed s56 of the Civil Procedure Act 2005 (NSW), as it did not seek to identify the real issues for determination in the proceedings and had no prospects of success.

Where a plaintiff is unlikely to recover more than $100,000 on their claim, practitioners may wish to consider whether a s341 application should be made in circumstances where an unnecessary application has been made or where there has been undue delay by a defendant. Basing the application on one of the five elements referred to above would appear to be significant. An order may apply to the whole or part of the proceedings.

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

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^[1] [2015] NSWDC 331 (2 December 2015).

^[2] The maximum costs limitation provisions are now contained in Schedule 1 of the Legal Profession Uniform Law Application Act 2014 so continue to have application.

^[3] [2006] NSWCA 143 (5 June 2006).

^[4] [2006] NSWCA 143 (5 June 2006) per Bryson JA at [33].

^[5] [2006] NSWCA 143 (5 June 2006) per Giles JA at [6].

^[6] [2006] NSWCA 143 (5 June 2006) per Ipp JA at [19-20].

^[7] [2014] NSWDC 244 (18 December 2014).