Ferguson v Singler (No 2)

This is an application by the plaintiff, Mr Jeffrey Ferguson, for judicial review pursuant to s 69 of the Supreme Court Act 1970 (NSW) quashing a certificate issued by a costs review panel on 12 June 2013. The application calls for consideration of aspects of Pt 3.2 of the Legal Profession Act 2004 (NSW) (the Act), which is entitled “Costs Disclosure and Assessment”, as it was in April 2013, that being when the assessment by the costs review panel took place prior to the giving of reasons and the issuing of the certificate.

The second and third defendants, who were the two members of the costs review panel, entered submitting appearances. The real dispute is between the plaintiff and the first defendant, Mr Tony Singler.

On 7 April 2003, Mr Ferguson and Mr Singler were involved in a motor vehicle accident in Newcastle. They have played different roles at different stages of the litigation over the twelve years since then, and for ease of comprehension I shall refer to each of them by name throughout this judgment.

Mr Singler sued Mr Ferguson in negligence in the District Court of New South Wales. The matter was heard and determined by Sidis DCJ. The judgment and verdict of her Honour of 15 May 2009 was in favour of Mr Ferguson. Mr Singler was ordered to pay the costs of Mr Ferguson.

Mr Singler appealed that decision. He succeeded in the Court of Appeal: see Singler v Ferguson [2010] NSWCA 325. The matter was remitted to the District Court for rehearing, and various costs orders were made.

It is useful to set out the orders of the Court of Appeal of 29 November 2010 in their entirety:

On 10 June 2011, Mr Ferguson was unsuccessful in his application for special leave to appeal against the decision of the Court of Appeal in the High Court of Australia.

On 9 May 2012, Mr Singler applied for the costs of the appeal that Mr Ferguson had been ordered to pay to Mr Singler to be assessed, pursuant to s 353(1) of the Act (Mr Singler was the moving party with regard to the assessment because the parties had been unable to agree about costs; nothing turns on that fact).

On 20 August 2012, Mr Terence Stern, the first costs assessor, determined the costs of the appeal payable by Mr Ferguson to Mr Singler (pursuant to order 5 of the Court of Appeal) to be $144,789.12. The first costs assessor also certified that the costs of that assessment should be split evenly between Mr Singler and Mr Ferguson. The reasons for that determination became exhibit H before me.

On 28 September 2012, Mr Ferguson applied for that decision to be reviewed, pursuant to s 373(1) of the Act.

On 29 April 2013, Mr Mark Campbell and Mr John McIntyre, the review panellists, determined that, because they were unable to agree, they would not interfere with the determination of Mr Stern of 20 August 2012. The reasons for that determination became exhibit K before me. Pursuant to s 375(4) of the Act, in those circumstances the order of Mr Stern was to stand.

With regard to that specific topic, the costs review panel stated (at paragraph 5.5 of Exhibit K):

Although a large amount of background and contextual material was included in the determination of the costs review panel, no further substantive reasons were given for its determination that affirmed the determination of the first costs assessor. The costs review panel subsequently issued the certificate in question reflecting that determination.

The costs review panel also issued a certificate to the effect that Mr Ferguson must pay the costs of the review that it had undertaken. That certificate was part of exhibit K before me.

Thereafter, pursuant to the remitter from the Court of Appeal, there was a further hearing of the substantive dispute in the District Court before Mahony SC DCJ. That rehearing was part heard as at the date of the hearing before me.

At an early stage of the proceedings before me, Mr Ferguson sought leave to file an amended summons in Court. Mr Singler opposed that application. I granted leave to Mr Ferguson to do so, and delivered short reasons in support of my decision: see Ferguson v Singler (Supreme Court (NSW), 20 November 2014, unrep).

The amended summons of 20 November 2014 of Mr Ferguson notifies the following grounds of judicial review:

By the end of her oral submissions, counsel for Mr Ferguson had made it clear that grounds one and two were two sides of the same coin: the proposition that the reasons given by the costs review panel were so inadequate as to constitute a jurisdictional error on its part.

The contentions before me were founded upon the approach of the costs review panel to the question only of the costs incurred in the appeal to the Court of Appeal. To be clear, the costs of the hearing before Sidis DCJ and of the rehearing of the matter by Mahony DCJ are not the subject of the application for judicial review. Nor, of course, is the correct approach to the substantive dispute, a question that was resolved by the refusal of the High Court to grant special leave over four years ago.

A preliminary issue arose as to whether this issue should be resolved in the District Court rather than this Court. Mr Singler submitted that I would be reluctant to grant judicial review because there is a right of appeal pursuant to statute available to Mr Ferguson.

Mr Singler submitted that, as a result of the costs review panel affirming the decision of the first costs assessor, an appeal could be founded upon the decision of the first costs assessor, and that appeal would be available pursuant to s 384 of the Act. That section is as follows:

He submitted that the grounds of Mr Ferguson founded upon asserted legal error are within the jurisdiction of the District Court pursuant to that section, and that that is itself a reason to for me to decline to grant judicial review.

To the contrary, Mr Ferguson submitted that it can be seen that, in Bobb v Wombat Securities Pty Ltd & Ors [2013] NSWSC 757, Beech-Jones J summarised the view of Knox SC DCJ that the inadequacy of reasons of a costs assessor could not be dealt with under s 384(1) of the Act: at [9]. Furthermore, Beech-Jones J did not adjudicate upon the correctness of that approach: at [21].

Mr Singler replied that the decision of Beech-Jones J in that matter permitted Mr Bobb to pursue the matter in the District Court, and Mr Bobb did so. Furthermore, the matter was subsequently appealed. It was said that the Court of Appeal was not called upon to consider whether the ground of inadequate reasons was an error of law for the purposes of s 384 of the Act, because that was determined in the proceedings before Beech-Jones J: see Bobb v Wombat Securities Pty Ltd (No 2) [2014] NSWCA 261 at [15]-[18]. Accordingly, that latter decision was said to be authority for the proposition that inadequacy of reasons can be the subject of a statutory appeal to the District Court.

Finally, Mr Singler invited my attention to Levy v Bergseng [2008] NSWSC 294 at [50]. There Rothman J said:

In short, Mr Singler submitted that the contentions of Mr Ferguson are questions of law; that they can be dealt with in the District Court; that that is where they should be resolved; and in the circumstances I would withhold the discretionary remedy of judicial review.

I determine this preliminary question on the following five bases. The authorities are not pellucidly clear as to the breadth of s 384 of the Act. The litigation between Wombat Securities and Mr Bobb was complicated and multi-faceted, and the judgments are not without their intricacies. The substantive question was fully argued before me, beyond this threshold question, and featured very detailed and helpful written and oral submissions. The dispute between these two litigants has been going on for many years. Whilst it is true that the possible availability of relief pursuant to statutory appeal argues against judicial review, I do not consider that it should be determinative of the exercise of my discretion in the circumstances of this dispute.

For the foregoing five reasons, I do not consider that the threshold question should stand in the way of relief being granted by me, if otherwise appropriate. I turn to consider the substantive questions.

Before turning to the basis of the grounds, and the submissions about them, it is useful to summarise and set out some sections within Pt 3.2 of the Act, and the relevant regulations.

Subdivision 2 of Div 11 of Pt 3.2 is entitled “Assessment”. It contains s 357, which creates the regime of referral of costs disputes to cost assessors.

Section 358 of the Act is relevantly as follows:

Section 359 of the Act is relevantly as follows:

Subdivision 3 is entitled “Party/party costs”. Contained within it are ss 364 and 365 of the Act, which are as follows:

Subdivision 4 is entitled “Determinations”. Its provisions are relevantly as follows:

Subdivision 5 is entitled “Review of determination by panel”. Section 373 of the Act creates the regime whereby a dissatisfied party to a costs dispute may apply for review of a determination of a costs assessor.

Section 374 of the Act provides for referral of an application to a panel. The section goes on relevantly to say:

Section 375 of the Act sets out the general functions of the cost review panel, and is as follows:

Section 376 of the Act is relevantly as follows:

Section 378 of the Act provides for the provision of a certificate by a cost costs review panel that sets out its determination.

Section 380 of the Act is as follows:

Pt 9 of the Legal Profession Regulation 2005 (NSW) (created pursuant to s 383 of the Act) is entitled “Costs disclosure and assessment - Pt 3.2 of the Act”. It provides details with regard to notifications between the parties of applications for assessments of party/party costs, and objections thereto, and responses to such objections (clause 125); the basis on which the costs of a party/party costs assessments should be payable (clause 126); and the contents of the statement of reasons for the determination of a costs assessor about party/party costs (clause 128). It also provides details with regard to reviews by costs review panels, including service of an application upon the other party (clause 132); and the contents of the statement of reasons of the determination of a costs review panel (clause 134).

The latter clause is as follows:

It can be seen in short that Parliament has created a detailed regime by way of the Act and its Regulation whereby disputes about party/party costs can be resolved by a costs assessor; that costs agreements between a party and his or her lawyer can be called for and considered by a primary costs assessor in the process of assessing party/party costs; that costs assessors must accord the parties to a costs dispute procedural fairness by way of the opportunity to make written submissions; that determinations of costs assessors can be reviewed by a costs review panel; that in doing so the costs review panel must fulfil the functions of the costs assessor; that both costs assessors and costs review panels must give reasons for their decisions; and that both primary costs assessors and the costs review panel can have before them documents and submissions from the parties to the dispute about costs.

Turning now to the substantive grounds of judicial review argued before me, it is useful to deal with them a little out of order.

Mr Ferguson submitted that the costs review panel failed to afford him procedural fairness. That was said to be because there were relevant documents before the costs review panel of which Mr Ferguson (and his lawyers) had no knowledge, and those documents were taken into account in the determination of the costs review panel. (When I discuss that asserted ignorance of Mr Ferguson and his lawyers, I shall refer compendiously to all of them simply as Mr Ferguson, unless a distinction between them needs to be drawn).

The documents said to be before the costs review panel without the knowledge of Mr Ferguson are detailed in the affidavit of Peter Utiger (the solicitor for Mr Ferguson) read before me at page 4 of annexure A:

Mr Ferguson submitted that he was unaware that items two to five had been provided to the costs review panel until 19 November 2015, that is, the day before the hearing before me, and well after, of course, the determination of the costs review panel.

Mr Ferguson accepted that a copy of item 6 was received by his solicitors on 21 July 2014. However, it was said that neither Mr Ferguson nor his lawyers knew, at the time of the assessment by the costs review panel, that item 6 was before the costs review panel.

Mr Ferguson asserted that his lack of knowledge that items 2 to 4 were before the costs review panel constitutes procedural unfairness, but he accepted that that procedural unfairness did not result in a practical injustice. Accordingly, he did not submit that they could found relief.

However, he submitted that the fact that items 5 and 6 were received and considered by the costs review panel, when those items are considered together, was both procedurally unfair and resulted in a practical injustice to him.

Mr Ferguson drew my attention to clause 7(a) of item 5, which is as follows:

He submitted that clause 7(a) in item 5, the date of which is 30 May 2006, is void. That was said to be in accordance with s 324(1) (that section having being the subject of an amendment that entered into force on 1 October 2005) and s 327(4) of the Act.

Section 324(1) of the Act was, as at 30 May 2006, as follows:

Section 327(4) of the Act was as follows on the same date:

Separately, Mr Ferguson also relied upon an excerpt from the letter of senior counsel of 28 July 2010, item 6, which is as follows:

Mr Ferguson then drew my attention to an invoice that is contained in the affidavit of Mr Utiger, with an entry on 1 October 2009 with a fee recorded as $7,000.

In short it was submitted that, if Mr Ferguson had known of the date of that letter of 28 July 2010, and its reference to future fees, he may have been in a position to impugn invoices that had been rendered in the past (such as the invoice of 1 October 2009) at that rate. Again, it was said that a question about the validity of lawyer/client costs may well have informed the quantum of party/party costs.

In summary, the submission of Mr Ferguson was that, if he had known of the documents excerpted above, he may very well have submitted that those lawyer/client fees were not payable by Mr Singler. And he may well have gone on to submit that that fact could be taken into account by the costs review panel with regard to the quantum of party/party costs payable.

With regard to the “onus” attaching to the proof of a practical injustice, Mr Ferguson asserted that, once Mr Ferguson had established a denial of procedural fairness, the burden fell upon Mr Singler to establish that, if procedural fairness had been afforded, there could not have been a different outcome; my attention was invited to Stead v State Government Insurance [1986] HCA 54, (1986) 161 CLR 141 and Re Minister for Immigration; ex parte Lam [2003] HCA 6; (2003) 214 CLR 1.

Mr Singler did not dispute the factual contention that Mr Ferguson was not aware of the entirety of the documents that were before the costs review panel. However, he submitted that that was not sufficient to lead to my intervention, because it had not led to practical injustice to Mr Ferguson.

Separately, even if Mr Ferguson were to succeed on this ground, Mr Singler made it quite clear that the usual rule that costs should follow the event should not apply in this case, because that ignorance on the part of Mr Ferguson was not to be laid at the feet of Mr Singler or his lawyers. It is unnecessary at this stage to recount the details of his submissions about matters of fact on that topic.

In support of the proposition that no practical injustice had been occasioned to Mr Ferguson, Mr Singler submitted that the hourly or daily rates at which the fees of senior counsel were to be paid could never have been determinative of the question of what amount of costs between Mr Singler and Mr Ferguson were fair and reasonable. That was because the assessment was not of lawyer/client costs between Mr Singler and his lawyers; rather, it was an assessment of party/party costs between Mr Singler and Mr Ferguson.

Mr Singler also submitted with regard to item 6 that, irrespective of his knowledge of the document, Mr Ferguson had in any event already made comprehensive submissions with regard to the fees of senior counsel: Mr Ferguson had raised an issue about the fees at page 39 of his notice of objection (which became exhibit C before me), and submitted that the fair and reasonable rates should be $550 per hour and $5,500 per day.

Mr Singler submitted that, with regard to this assertion of denial of procedural fairness, the “onus” remains upon Mr Ferguson to demonstrate that there was sufficient error to justify judicial review in his favour. In particular, Mr Singler did not accept that there had been a shift of “onus” with regard to the question of practical injustice. He submitted that it remained incumbent upon Mr Ferguson, the party seeking judicial review, to demonstrate not only a denial of procedural fairness, but also that that denial resulted in a practical injustice to Mr Ferguson.

The foundation of procedural fairness was recently summarised in Frost v Karouche [2014] NSWCA 39 by Leeming JA (Beazley P and Basten JA agreeing) at [41]:

As I have said, there was no dispute that, as things turned out, documents were before the costs review panel of which Mr Ferguson and his lawyers were unaware. I infer without difficulty, in the context of this hard-fought dispute that has extended over many years, that, if the lawyers of Mr Ferguson had known of those documents, they may well have made submissions about them; at the least, about the topic of whether Mr Singler was actually lawfully required to pay some or all of the fees of one or more of his lawyers, in light of the contents of ss 324(1) and 327(4) of the Act. That was a denial of procedural fairness to Mr Ferguson.

As I have recounted, the second dispute between the parties was whether or not it was incumbent upon Mr Ferguson to establish that that occasioned to him a practical injustice; and, if so, whether he can do so.

As for the question of “onus” with regard to demonstration of practical injustice I do not propose to tarry to provide a detailed analysis of the question. Indeed, it could well be inapposite to speak of one party establishing a lack of procedural unfairness, and then in some formal sense placing an “onus” on the resisting party to demonstrate the absence of practical injustice to the first party.

I think that it is enough to say that, in Stead v State Government Insurance at 147, the High Court of Australia spoke of the appellant needing to show “…that the denial of natural justice deprived him of the possibility of a successful outcome…”, and that in Re Minister for Immigration; ex parte Lam Gleeson CJ at [37] – [38] said:

In other words, Gleeson CJ was casting the responsibility of demonstrating practical injustice upon the party asserting that it had occurred.

In short, I approach the question on the basis that it is incumbent on Mr Ferguson to show a denial of procedural fairness, and also that it is incumbent upon him to show that he has suffered a practical injustice as a result.

As the unanimous judgment of the High Court of Australia in Stead v State Government Insurance shows, I should not be overly conclusive with regard to the question of whether, if Mr Ferguson had been aware of those documents, the costs review panel would have come to a different determination. In particular, to the extent that part of the submissions of Mr Ferguson is the proposition that, if he had known of the documents, he would have been able to demonstrate that something contrary to the Act had occurred, of course I do not make any such finding. Quite apart from anything else, I have not heard a word from any of the persons said to have been involved in that allegedly invalid process. To make any such determination in those circumstances would almost certainly be itself a denial of procedural fairness to those persons. It is for the same reason that I have not referred to those persons by name.

The authorities do not state that this question of practical injustice requires me to be affirmatively satisfied that, if Mr Ferguson had known of the documents, he must have made submissions, which in turn must have led to a different result. The authorities establish that it is sufficient for Mr Ferguson to demonstrate that a different result, if he had known of the documents and been in a position to make submissions about them, would have been reasonably possible.

I am satisfied of that proposition. That is because I consider that the costs review panel could have found the submission about invalidity of some lawyer/client fees attractive; could have regarded it as relevant to the question of party/party costs; and could have come to a different decision as a result of it.

In short, I consider that Mr Ferguson was denied procedural fairness, in that relevant documents were before the costs review panel of which he was unaware. And I also consider that Mr Ferguson has suffered a denial of procedural fairness that should be characterised as a practical injustice: he was unaware of documents that were before the body that was to determine a long-standing dispute about a very substantial sum of money, and, if he had not suffered from that lack of awareness, he could well have made submissions that could have led to a different result.

It follows that I consider that Mr Ferguson is entitled to have the certificate of the costs review panel quashed.

As against the possibility that I am wrong in my determination that the decision of the costs review panel should be quashed on the ground of a denial of procedural fairness, I turn to deal briefly with grounds 1 and 2 on a contingent basis. Because I am undertaking the exercise in that limited way, I shall be briefer than I would be if I regarded these grounds as determinative.

Mr Ferguson contended that the costs review panel misconstrued its function and committed a jurisdictional error. He submitted that those errors arose as a result of the failure on the part of the members of the costs review panel to provide reasons setting out their contrasting positions, or reasons setting out the basis of their disagreement, whether broad or specific.

He also notified, as a separate ground, that the reasons provided by the costs review panel were inadequate. However, as I have said, by the end of the hearing the position of Mr Ferguson was made clear: it was not that the reasons were inadequate, but rather that there were really no reasons at all, once one cut away contextual matters, matters that were not in dispute, and recitation of submissions. And the fact that there were no reasons at all means that the costs review panel failed fundamentally to carry out its function lawfully. In other words, he was content for me to regard the first two grounds as having the one foundation, and for me to consider them together.

As I have said, the salient reasons of the costs review panel were as follows: “…In this matter despite significant discussion and debate by the cost assessors making up the Review Panel, they were unable to reach agreement.” That is the extent of the exposition of the views of the costs review panel, and of the two panellists.

It was submitted that, pursuant to ss 370, 375(2), and 380 of the Act, it was incumbent upon each of the panellists to do what a cost assessor would have been required to do; namely, give reasons for his or her determination. It was said that that was a necessary prerequisite of the costs review panel lawfully exercising its jurisdiction. That was said to be the case even though it was accepted that, as a result of the inability of the two panellists to agree, by way of s 375(4) of the Act the “determination” of the costs review panel would have no effect other than to affirm the determination of the first cost assessor.

Quite apart from failure to comply with what were said to be the requirements of the statute, it was said that the lack of reasons on the part of each member of the costs review panel makes review (appellate or otherwise) of the determination of the costs review panel impractical, if not impossible.

Senior counsel for Mr Singler submitted that this particular question has not been the subject of judicial consideration in the past; counsel for Mr Ferguson did not submit to the contrary.

The position of Mr Singler was that the costs review panel is to provide detailed reasons if the two panellists are in agreement. That does not apply, however, if the two panellists cannot agree. Parliament has chosen to create a two person panel, with no mechanism for supplementation in the case of disagreement. Parliament has also chosen to create a mechanism whereby, in the case of disagreement, the costs review panel simply affirms the decision of the first costs assessor. In those circumstances, one can readily see why Parliament would not impose an obligation for reasons upon the costs review panel when its members cannot agree: the exercise would be fruitless, and the reasons would be inoperative.

In short, Mr Singler accepted that there were no detailed reasons given by the two individual members of the costs review panel. However, he submitted that they were not inadequate because there was no purpose, due to the statutory criterion for affirmation, for giving reasons. On the same basis, it was submitted that the costs review panel had not committed a jurisdictional error by failing to give detailed reasons.

I accept the submissions of Mr Singler with regard to this ancillary question. That acceptance is primarily founded on a close reading of the statute.

It can be seen from s 375(2) of the Act that it is the panel that has all of the functions of the costs assessor, and not each individual panellist. That means that it is the panel that must provide, pursuant to s 370 of the Act, a statement of the reasons for the determination of the panel.

An identical analysis may be made of s 380 of the Act, which is the section that explicitly imposes a responsibility to give reasons upon the panel, not the panellists.

Here, the costs review panel has given a statement of the reasons for its determination: the two panellists could not agree, and accordingly, by way of statute, the determination of the costs assessor was affirmed.

I consider that the submission of Mr Ferguson would have force if s 375(2) of the Act spoke of the panellists having all of the functions of a costs assessor, including the provision of reasons, or if s 380 of the Act imposed an obligation to give reasons upon the panellists. But those are not the words that Parliament has chosen to use. The same may be said of the wording of clause 134 of the Regulation.

In short, I consider that the costs review panel has provided its reasons, in accordance with the statute and the delegated legislation.

Secondly, I consider that there is force in the submission of Mr Singler that a statute should not be interpreted in a way that imposes duties upon persons exercising a public function that would, by way of the statutory regime, be otiose in any event.

Thirdly, I reject the proposition of Mr Ferguson that the absence of reasons of the two disagreeing panellists somehow disadvantages a person in his position. That is because there could not, as a matter of mathematics, be “majority” reasons for the determination of the costs review panel that could be the subject of appeal or other review. All that one would have would be two sets of disagreeing reasons, each of them ineffectual in any event by way of operation of statute. And to continue the analogue with judicial reasoning, to the extent that the determination of the first costs assessor was being affirmed by the operation of statute, separate reasons of the two panellists that were without effect would be nothing more than analogous to “obiter dicta” that were not determinative of the dispute between the parties.

In short, I do not accept that the approach adopted to the question of reasons by the costs review panel demonstrates an error of law, whether jurisdictional or otherwise. If this were the only ground upon which Mr Ferguson sought judicial review, for the three foregoing reasons I would decline to intervene.

The agreed position between the parties was that the costs of the hearing should be reserved. That was on the basis that, whichever party succeeded before me, the history with regard to the documents and correspondence passing between the two firms of solicitors could inform any costs order that I made.

I indicated to the parties on the hearing day that I was content to accept that joint submission, and that on the date of delivery of this judgment costs would be reserved for further short argument as necessary. I shall make some mechanistic orders to that effect.

Accordingly, I make the following orders: