Brabazon, Mark --- "Appeals from costs assessments in NSW" [2016] PrecedentAULA 76; (2016) 137 Precedent 24

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APPEALS FROM COSTS ASSESSMENTS IN NSW

By Mark Brabazon SC

When NSW enacted the sweeping costs reforms of the Legal Profession Reform Act 1993 (NSW), the designers of that legislation would not have anticipated how their work would transform the quiet backwater of costs taxation into the contentious turmoil of costs assessment and costs appeals that we know today. Were they not simplifying the law? Were they not sweeping away needless and costly formalities and replacing them with virtuous deregulation and informality? Were they not engaging the efficiencies of a free market by outsourcing the quantification of legal costs to experienced practitioners who, by the simple application of their knowledge and experience, could assess the fair market value of a piece of legal work without tedious bean-counting and the slavish application of scales? It is fair to say that the expectations of the drafters have not been entirely fulfilled.

The NSW costs reform experiment has been influential. In the decades since its introduction, most of Australia has adopted: the deregulation of costs (though not necessarily the abandonment of scales for general legal work in the absence of a costs agreement); obligations of ‘costs disclosure’ as a corresponding consumer protection measure with the intent of creating an informed market for legal services; and the ‘fair and reasonable’ criterion for party/party as well as practitioner/client costs. Some jurisdictions have also adopted the one-stop-shop approach,^[1] by which a single institutional mechanism is used to quantify both practitioner/client and party/party costs. But jurisdictions other than NSW have baulked at the outsourcing experiment. The general referral of costs disputes to a publicly appointed but otherwise private decision-maker for authoritative quantification remains largely a NSW phenomenon.^[2]

In response to the Chief Justice’s Review of the Costs Assessment Scheme, discussed below, and approximately coinciding with the implementation of the Legal Profession Uniform Law (NSW) (Uniform Law), the rules relating to appeals from costs assessments have been significantly rewritten. This article briefly surveys the old rules as they developed prior to 2015; then outlines the new rules and how they will affect the running of an appeal; and, finally, identifies a number of loose ends that remain to be clarified.

THE OLD RULES

The original mechanism for challenging a costs assessor’s determination was relatively simple. An appeal lay by right to the Supreme Court for error of law.^[3] A successful appeal usually led to a remittal for redetermination, although the Court also had power to substitute its own determination, which would generally be exercised if the correct outcome could be identified. An unlimited appeal also lay by leave to the Supreme Court in proceedings relating to a ‘bill of costs’ (practitioner/client assessments, etc), or to the court or tribunal that had ordered costs (party/party assessments); if leave was granted, the appeal proceeded as a ‘new hearing’.^[4]

Supreme Court appeals and leave applications were heard by the Masters in the Common Law Division. Costs appeals burgeoned, although the sums involved were often quite small. In practice, most appeals were framed by reference to an error of law under the as-of-right provision, sometimes accompanied by an application for leave. Two legislative responses followed.

The first was the addition in 1999^[5] of a right of merits review by a ‘review panel’ consisting of two relatively senior costs assessors, whose decisions were subject to the same appeal rights as those of a costs assessor. This meant that an application for leave to appeal directly from an assessor’s determination was practically always doomed, because the dissatisfied party had the option of going to review. The total volume of appeals (including leave applications) nevertheless continued to be significant.

The second response came in 2008,^[6] when the forum for error-of-law appeal and practitioner/client appeal by leave was changed to the District Court. This removed from the Supreme Court the largest practical element of control then exercised by that Court over the fees charged by legal practitioners. It has also led to the development of a degree of expertise and case law with respect to the assessment of legal costs within the District Court, although the number of judges who are actively familiar with the area is inevitably much smaller than the number who decide costs appeals.

THE NEW BROOM

A new regime for regulating the legal profession commenced on 1 July 2015. Its centrepiece is the Uniform Law, adopted and applied in NSW by the Legal Profession Uniform Law Application Act 2014 (NSW) (Application Act). Part 4.3 of the Uniform Law regulates practitioner/client costs (and related areas concerning third-party payers), but largely leaves the mechanism for quantifying costs to participating jurisdictions. That mechanism is costs assessment under pt 7 of the Application Act, most of which represents a re-enactment of corresponding provisions of the previous legislation. The previous provisions relating to costs assessment and the associated appeal regime, mainly found in the Legal Profession Act 2004 (NSW) ss382, 384 and 385, continue to apply in a practitioner/client or third-party payer context where the principal law practice was first instructed before 1 July 2015 (the date of an indirect retainer, such as of a barrister, does not count)^[7] and in a party/party context where the proceeding in which the relevant costs order was made had commenced before that date.^[8] This gives the former appeals regime a long tail, particularly in a practitioner/client context.

The drafting of the Uniform Law roughly coincided with a separate NSW development: 18 years after the original 1993 reforms, the Chief Justice commissioned a review of the costs assessment scheme.^[9] The review attempted to identify ways in which the existing system could be improved. It did not set out to challenge the basic policy settings; that was a matter for parliament. Its goal was to make the system work as well as possible within the basic policy parameters that parliament had set. One of the areas that it addressed related to appeals.

The appeals regime in the Application Act, as it stood from 2 July 2015,^[10] removed the possibility of appeals directly from the determination of a costs assessor, as had been recommended by the Chief Justice’s review. It also retained the bifurcation between appeal of right for error of law and appeal by leave otherwise, but directed all appeals to the District Court – this was inconsistent with the review recommendations. That regime was short-lived, and will probably never apply in real life.^[11] It was replaced from 24 November 2015 by the present rules,^[12] which do reflect the recommendations of the review.

The present rules take a fresh approach. They do away with the distinction between fact and law appeals, and in most cases do away with the need to establish grounds for leave to appeal. An appeal now lies as of right to the District Court if the amount of costs in dispute is at least $25,000 and to the Supreme Court if that amount is at least $100,000. Above $100,000, an appeal lies to either court. The relevant appellate jurisdiction of the District Court is unlimited; it is not affected by the $750,000 jurisdictional limit that applies to a demand in an action in that Court.^[13] Below the as-of-right thresholds, an appeal lies by leave of the Court in question. The Supreme Court also has power to remit or remove proceedings down to or up from the District Court.^[14]

An appeal to either Court is governed by the Application Act s89 and Uniform Civil Procedure Rules (2005) (NSW) (UCPR), pt 50.^[15] A District Court appeal is still nominally final: there is no further appeal to the Supreme Court,^[16] although the usual remedies of judicial review remain available.^[17]

The identification of a material error of law – one which impugns the decision appealed from – is no longer a gatekeeper of the right to appeal, but it remains important. An appellant who can demonstrate such an error is in a much stronger position than one who must rely on demonstrating an error of fact, discretion or judgment – particularly given that the review panel is a specialist tribunal comprised of members with a particular expertise in determining such matters as the fair market rate for particular legal services and the time that is reasonable for a practitioner of a given expertise, experience and charge-out rate to spend on particular tasks. An appellant will have difficulty in persuading a court that the evaluative judgment of a review panel has gone wrong. An appellant is likely to find more joy in an error of law, or in a factual error of a non-evaluative kind. These are likely to be the real focal areas in future appeals. Thus, if the assessment and review have proceeded on the papers (as has always been the case, but need not be so in future once rules are made for oral hearings under the Application Act s69(1A)), a key dispute of primary fact, such as whether or when a document was given or signed,^[18] may be determined differently if it is tested by oral evidence and cross-examination on appeal.

LOOSE ENDS?

A number of issues remain to be clarified regarding the appeal process. The Application Act s89(2) states that a court on appeal ‘has all the functions of the review panel’, and s89(4) says that ‘[a]n appeal is to be by way of a rehearing, and fresh evidence or evidence in addition to or in substitution for the evidence before the review panel or costs assessor may, with the leave of the Court, be given on the appeal’. A ‘function’ is defined to include ‘a power, authority or duty’.^[19] Section 88(2) says that a review panel ‘has, in relation to the application for review, all the functions of a costs assessor in relation to the assessment concerned and is to determine the application, subject to [Part 7 of the Act] and the costs assessment rules, in the manner that a costs assessor would be required to determine an application for costs assessment’.

The Application Act s88(3) provides that ‘the review panel is not bound by the rules of evidence and may inform itself on any matter in the manner it thinks fit’.^[20] Is this a power that applies to a court on appeal? Does the hearsay rule, for example, apply to evidence on a rehearing under s89? Clearly, it does not apply to evidence before the review panel and, unless substituted evidence is tendered and admitted on appeal, the inevitable conclusion is that hearsay evidence before the review panel may be acted on by the court. If so, this raises an interesting question whether the court in admitting fresh, additional or substitutionary evidence is bound by the rules of evidence. If not, the best guidance is probably obtained by asking what is required in a particular case in order to achieve practical justice. If a lack of rigour of proof below has produced a real risk of injustice, the appropriate response would be to apply such rigour on appeal.

Another question relates to the form of judgment that a court should give if it allows an appeal. The Application Act ss87 and 88 require a review panel to issue certificates. By giving the functions of the review panel to an appellate court without power of remittal, it seems clear that the court must issue a final instrument that has the same legal effect as a review panel certificate. The issue should preferably be dealt with in the UCPR; until then, individual judges may craft their own solutions.

CONCLUSION

It remains to be seen whether the new appeal rules will affect the volume of appeals. They should, however, focus the appeal process on more productive arguments. As seems inevitable with legislation in this area, there are still loose ends, including some concerning the appeal process itself.

Mark Brabazon SC is the Chair of the Costs and Fees Committee of the NSW Bar Association, a member of the Costs Assessment Rules Committee, and the Chair of the Council of Law Reporting for NSW. He was a member of the Chief Justice’s Review of the Costs Assessment Scheme. The views expressed here are those of the author personally. PHONE: [phone] EMAIL: [e-mail].

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^[1] For example, the Costs Court in Victoria (Supreme Court Act 1986 (Vic) Pt 2 Div 2B, inserted by Courts Legislation Amendment (Costs Court and Other Matters) Act 2008 (Vic)).

^[2] Queensland has a system of referral-out under judicial oversight and control (Uniform Civil Procedure Rules 1999 (Qld) ch 17A).

^[3] Legal Profession Act 1987 (NSW) s208L, as inserted by the Legal Profession Reform Act 1993 (NSW) sch 3(1) with effect from 1 July 1994.

^[4] Ibid, s208M.

^[5] Legal Profession Act 1987 Part 11, Div 6, Subdiv 4A, inserted by Legal Profession Amendment (Costs Assessment) Act 1998 (NSW) Sch 1 [13].

^[6] Legal Profession Act (NSW) 2004 ss384, 385, as amended by the Courts and Crimes Legislation Amendment Act 2008, Sch 14 [1], [2].

^[7] Uniform Law, Sch 4 cl 18.

^[8] Application Act, Sch 9 cl 1(a), (4); Legal Profession Uniform Law Regulation 2015 (NSW) cl 59.

^[9] Justice Brereton, Report of the Chief Justice’s Review of the Costs Assessment Scheme (Supreme Court of New South Wales, 12 March 2013) <http://www.lawlink.nsw.gov.au/practice_notes/nswsc_pc.nsf/pages/607> and announcement of Chief Justice Bathurst (21 May 2014) <http://www.lawlink.nsw.gov.au/practice_notes/nswsc_pc.nsf/pages/644> .

^[10] The version that applied on 1 July followed the previous law: s82, 83. The version that applied from 2 July was set out in s89 as substituted by the Legal Profession Uniform Law Application Legislation Amendment Act 2015 (NSW) Sch 1 [27].

^[11] No specific transitional rule governs the repeal of the appeal provisions that applied from 1 July to 23 November, and the general rule in the Interpretation Act 1987 (NSW) s30 only preserves things already done and rights accrued, etc – it follows that those intermediate provisions can apply only to an appeal or leave application from a review panel decision before 23 November that is not still governed by the pre-1 July law under its transitional rules (see notes 7, 8 above).

^[12] Application Act s89, as amended by the Courts and Other Justice Portfolio Legislation Amendment Act 2015 (NSW) Sch 1.13 [3].

^[13] See District Court Act 1973 (NSW) ss4 (definition of ‘jurisdictional limit’), 44 and other provisions referring to the jurisdictional limit. Jurisdiction in a statutory appeal does not depend on s44 at all. See also n16 below regarding the meaning of ‘action’.

^[14] Application Act s89(3), (3A).

^[15] An appeal to the Supreme Court is also governed by the Supreme Court Act 1970 (NSW) s75A, but that section does not materially add to what is separately prescribed by the Application Act s89.

^[16] A statutory appeal to the District Court is not an ‘action’ within the meaning of the appeal right in the District Court Act 1973 (NSW) s127 (cf s4): Cook v Head [1976] 1 NSWLR 176; Muldoon v Church of England Children’s Homes Burwood [2011] NSWCA 46; (2011) 80 NSWLR 282.

^[17] Supreme Court Act 1970 (NSW) s69.

^[18] See Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474.

^[19] Uniform Law s6(1), adopted by Application Act s3(2).

^[20] Similar provisions apply to a costs assessor: Application Act s69(2).