Birketu v Castagnet

1. [1]

   HIS HONOUR: The case of Burrows v MacPherson & Kelley Lawyers (Sydney) [1] was characterised by Leeming JA as one that fell at the intersection of two principles, both of which were confirmed by the High Court’s judgment in Bell Lawyers v Pentelow, [2] namely that, on the one hand, a self-represented party who obtains a costs order in litigation, even a legal practitioner, may not recover costs in respect of his or her own time and effort deployed in the litigation in his or her own interest; whereas on the other, a party which employs salaried solicitors (such as a government department, a statutory authority, a bank or another private corporation) may recover costs for their time, by reference to rates charged in private practice, even though the employed solicitor represents a fixed cost to the employer. This case too falls at that same intersection, but in a materially different context: in Burrows, the incorporated legal practice that acted in the relevant proceedings as the solicitors for the solicitor litigant was a separate and distinct legal entity, which was retained by the solicitor litigant (another incorporated legal practice). In this case, as in the Victorian case of United Petroleum Australia Pty Ltd v Herbert Smith Freehills, [3] the lawyers in respect of whose work costs are claimed were the employed solicitors of the law firm which was the litigant.

2. [2]

   The second defendants, being the partners in the law firm Atanaskovic Hartnell (“the Firm”), sued the first plaintiff Birketu Pty Ltd (“Birketu”) to recover their professional fees and disbursements for having acted for Birketu in six matters, covered by seven invoices totalling $1,093,648. On 9 August 2019, Hammerschlag J, as the Chief Judge in Equity then was, gave judgment for the Firm for $928,982 (relating to six of the invoices) and reserved for further consideration the seventh (“the investigation invoice”), which related to a retainer to investigate the circumstances in which the Firm’s former employed solicitor Brody Clarke had perpetrated frauds on Birketu for which the Firm was potentially, and ultimately held to be, vicariously liable. [4] Subsequently, on 15 May 2020, his Honour held that the Firm was not entitled to recover on the investigation invoice, except to a very small extent, and gave judgment for the Firm for the additional amount of $14,930, otherwise dismissing the summons. [5] On 19 June 2020, after a hearing on the papers, his Honour made orders that Birketu pay the Firm’s costs up to and including 16 September 2019 attributable to its claim on the six invoices, assessed on the ordinary basis, and that the Firm pay Birketu’s costs of the proceedings from 10 August 2019, assessed on the indemnity basis. [6]

3. [3]

   Throughout the proceedings in the Equity Division, the Firm acted for itself. His Honour’s reasons in the costs judgment include the following observation: [7]

4. [4]

   On 24 December 2021, the Firm served a copy of its proposed application for costs assessment on Birketu. The costs which it foreshadowed claiming included costs for work done by the Firm’s employed solicitors, though not by its partners. On 13 January 2022, solicitors acting for Birketu wrote to the Firm objecting to the entirety of its claim for professional costs for work done by the Firm’s employed solicitors. The Firm responded taking issue with that objection on 24 January 2022, and filed its application for costs assessment on 1 February 2022, still including claims for work done by its employed solicitors.

5. [5]

   The assessment was assigned to the first defendant, a costs assessor, who notified the Firm and Birketu’s solicitors that he had been so appointed on 17 February 2022. On 9 March, submissions were made to him on behalf of Birketu in respect of the further conduct of the assessment, and on 10 March the Firm made submissions (relating to costs agreements between the Firm and their counsel, and as to whether the costs claimed were proportionately and reasonably incurred). On 16 March, the Firm made further submissions, in response to Birketu’s 9 March submissions. On 23 March, Birketu’s solicitors applied by email to the costs assessor for an extension of time to put on further submissions, which extension was granted, and on 6 April 2022 Birketu made further submissions in reply to the Firm’s earlier submissions.

6. [6]

   On 22 April, the assessor wrote to the Firm and Birketu’s solicitors, relevantly as follows:

7. [7]

   On 6 May 2022, Birketu’s solicitors wrote to the assessor, asserting that although the 22 April email was not strictly an interim determination, it constituted a finding capable of appeal, and requesting the assessor’s formal reasons for the decision set out in that email. On 6 July, Birketu’s solicitors requested a response to their email of 6 May, reiterating the request for formal reasons for the decision set out in the 22 April email. The assessor responded on the same day, rejecting the request, and stating that he had not made any interim determination, and that the only determination that he would make in the matter would be his final determination, which would be accompanied by reasons.

8. [8]

   By summons filed on 2 August 2022, Birketu claims a declaration that the Firm is not entitled to recover in the assessment the professional costs of its employed solicitors in the proceedings; an order setting aside the assessor’s decision not immediately to cease with the assessment of those costs; an injunction restraining the assessor from assessing those costs; and an injunction restraining the Firm from claiming those costs.

9. [9]

   The Firm submitted that there was no reviewable decision of the assessor, that even if such a decision could be identified there was no jurisdictional error nor error of law on the face of the record, and that in any event prerogative relief should be refused on discretionary grounds, particularly because there was a full scheme of merits and judicial review available following conclusion of the assessment process. However, the Firm joined with Birketu in inviting the Court to resolve for the parties the substantive legal question of the application of Bell v Pentelow to the professional costs of employed solicitors of a litigant law firm operating in a traditional partnership (as distinct from an incorporated legal practice), so long as that could be done without resort to contentious matters of fact. Below, I deal first with the question of judicial review, before turning to the question of declaratory relief.

Prerogative relief

1. [10]

   Birketu’s summons included claims in the nature of certiorari and prohibition. [8] The basis of Birketu’s claim for judicial review, and the nature and character of the decision of which it claims to seek review, has been somewhat fluid. Originally, the decision was characterised as one by the assessor that:

   1. (1)

      the Firm is at liberty to claim whatever it contends is within the scope of order (2) of the orders made by Hammerschlag J;

   2. (2)

      whether the Firm is entitled to the costs it has claimed is a matter to be determined by the assessor in the assessment;

   3. (3)

      he would not cease with the assessment of professional costs of employed solicitors of the Firm insofar as they were claimed; and

   4. (4)

      the costs order entitled the Firm to seek to recover by way of assessment the professional costs of its employed solicitors.

2. [11]

   Birketu contended that the assessor erred in failing immediately to determine that the Firm was not entitled to recover the professional costs of its employed solicitors and by not immediately ceasing with the assessment of those costs, “contrary to the judgment of Justice Hammerschlag in Atanaskovic v Birketu [2020] NSWSC 779, applying Bell Lawyers Pty Ltd v Pentelow…”. The grounds of review were said to be:

   1. (1)

      that the assessor’s decision was beyond the scope of the powers and functions conferred on him and therefore amounted to a jurisdictional error capable of review by the Court in its supervisory jurisdiction; and

   2. (2)

      further or alternatively, the decision amounted to an error of law on the face of the record also capable of review including pursuant to Supreme Court Act 1970 (NSW), s 69(3).

3. [12]

   In the reply submissions, however, the case was refined, in substance, to the contention that, by declining to refuse to consider whether the Firm’s recoverable costs included charges for work done by its employed solicitors (as distinct from work done by its principals in respect of which costs were admittedly not recoverable), the assessor threatened to embark on the determination of an issue which he had no jurisdiction to consider, namely the recoverability under the costs order of costs in respect of work done by the Firm’s employed solicitors.

4. [13]

   Certiorari lies only in respect of a decision that has a discernible or apparent effect on legal rights. [9] However, this is not necessarily confined to the ultimate decision in the decision-making process, and embraces a preliminary stage of the decision making process which has a sufficient effect on the final or ultimate decision, such as where the preliminary decision is a condition precedent to the ultimate decision. [10]

5. [14]

   The indication given by the Assessor in the 22 April email does not satisfy this requirement. It has no effect on legal rights. It is merely a statement that the Assessor will consider the recoverability of costs for work done by employed solicitors in the course of the assessment, rather than as a preliminary point. It is unnecessary to resort to his later correspondence for that conclusion, though it confirms it. The rights of all parties are entirely unaffected by it, and it is not amenable to certiorari.

6. [15]

   The Assessor’s 22 April email does not reveal any misconception of his jurisdiction, which is to determine the quantum of costs recoverable under the costs orders of 19 June 2020. By s 93C(3) of the Legal Profession Uniform Law Application Act 2014 (NSW) (“LPULAA”), the Assessor’s jurisdiction includes jurisdiction to determine any question of law anterior or incidental thereto:

7. [16]

   That provision was introduced for more abundant caution, to put to rest any doubt as to an Assessor’s capacity to resolve such questions. [11] Assessors frequently have to determine issues such as whether there is an enforceable costs agreement, whether counsel’s fees or expert’s fees are recoverable in particular circumstances, and whether the costs of agents or paralegals or other unqualified persons are recoverable in a particular case. They also often have to construe costs orders to determine their scope. In principle, if a rule of law precludes recovery of costs in respect of work done by employed solicitors then they should apply that rule, and they may err in law if they do not do so. If so, that is amenable to correction on review by a review panel, [12] or on appeal. [13] But even if to err in law in so doing were to amount to an error of jurisdiction, rather than an error within jurisdiction – which may be doubted in the light of s 93C which would seem to give jurisdiction to decide questions of law – merely to indicate that the Assessor will embark on the process of considering the question is not.

8. [17]

   Nor is any error of law apparent, on the face of the record or otherwise, in declining summarily to refuse to consider the Firm’s claim for costs in respect of work done by its employed solicitors. It is unnecessary for this purpose to resolve whether the limitation in Supreme Court Act 1970 (NSW), s 69(3) to an “ultimate determination” has the effect that reasons do not form part of the record where a decision under review is not necessarily the final determination of proceedings, although I incline to the view that its true effect is only to exclude reasons for decisions anterior to those for the decision immediately under review, and to render part of the record the reasons for the decision under review, whether or not it is the “ultimate” decision in the proceedings. [14] Here, assuming that the 22 April email and the later 6 July email constitute part of the record, there is no error of law in merely stating that the Assessor will consider the recoverability of costs for work done by employed solicitors in the course of the assessment, rather than as a preliminary point.

9. [18]

   The Assessor’s “decision” that he will consider the recoverability of costs for work done by the Firm’s employed solicitors in the course of the assessment and not summarily disallow them is not amendable to certiorari, involves no error of jurisdiction, and involves no error of law. The claim for prerogative relief is misconceived.

Declaratory relief

1. [19]

   Although it might be objected that resolving the issue by the grant of declaratory relief would in effect be giving an advisory opinion to the Assessor, as I have indicated above, [15] Birketu, notwithstanding its opposition to prerogative relief, agreed that there would be benefits for the parties, including a significant saving of time and costs, if this Court were to resolve the substantive question of principle, so long as that could be done without resort to controversial facts. Both parties made extensive submissions in respect of Bell v Pentelow and its application to work done by a litigant law firm’s employed solicitors, including whether United Petroleum should be followed in this State. I have considered whether it would be better to await the decision of the Assessor and any Review Panel before a Court considers the question, and whether its determination would benefit from their consideration of the question of principle and elucidation of the facts, but have come to the conclusion that the scale of the dispute, the neat question of principle on which it turns, and the great extent to which its resolution will simplify the costs assessment, all favour deciding the question now. Doing so is more than giving advice to the Assessor; a declaration that binds the parties will conclusively establish their rights. In making a declaration, the Court will in effect be deciding a preliminary point in the assessment.

2. [20]

   Birketu’s submissions were replete with suggestions that the question had been determined by Hammerschlag J, and that it was somehow inappropriate if not improper for the Assessor to do other than accept what his Honour had said. I reject this submission. The question of the recoverability of costs for work done by the Firm’s employed solicitors was not argued before his Honour. The judgment contains a passing observation on the question, but it was not informed by argument, nor was it necessary to his Honour’s decision. The purpose of the reference was merely to found his Honour’s rejection of the Firm’s submission that the change in the law wrought by Bell v Pentelow was somehow a consideration relevant to his Honour’s exercise of the costs discretion.

3. [21]

   Costs are awarded as between parties to litigation to compensate the successful party for the expenses it has incurred in vindicating its position. The recovery of costs is governed by the indemnity principle, namely that a costs order compensates for expenditure incurred, and is not intended to be a source of profit. However, a party/party costs order does not provide a complete indemnity, and the beneficiary of an order is not entitled simply to recover whatever amount it has agreed to pay to its own lawyers. In order to avoid injustice to the paying party, recoverable costs as between parties are controlled, historically by taxation and now by assessment, to those that are objectively a “fair and reasonable amount of costs for the work concerned”. [16]

4. [22]

   The recoverable costs are limited, in principle, to the amount expended by a party on the litigation, chiefly on its lawyers, but also including associated expenditure such as reasonable witness expenses and out-of-pocket expenses. It is well established that the costs which a party is entitled to recover under a costs order do not include compensation for its own time and labour in preparing for or conducting litigation. [17] The rule that self-represented litigants are not entitled to their time is not a special rule for self-represented litigants, but an application of the general rule that costs are not recoverable in respect of a litigant’s own time or labour. These principles were recognised in the joint judgment of Kiefel CJ, Bell, Keane and Gordon JJ in Bell Lawyers v Pentelow (footnotes omitted): [18]

5. [23]

   Notwithstanding the general rule that a litigant was not entitled to recover costs in respect of its own time and labour, until the decision of the High Court in Bell v Pentelow, lawyers who being parties to litigation acted for themselves and received the benefit of a costs order were permitted, under the Chorley exception, [19] to recover in their capacity as a litigant the costs of legal work done by themselves, including by their employed solicitors. Separately, the rule that a party is not entitled to compensation for its own time and labour has been held, under the “employed solicitor exception”, not to prevent a litigant who employs an in-house lawyer, rather than an external law firm, from recovering costs assessed on the same basis as would be the case had an external lawyer done the work (although it has been acknowledged that this might not be appropriate if it was clear that allowing costs on such a basis might confer a substantial profit on the litigant and thus infringe the indemnity rule). [20] Bell v Pentelow abrogated the Chorley exception, but without disturbing “the well-established understanding in relation to in-house lawyers employed by governments and others, that where such a solicitor appears in proceedings to represent his or her employer the employer is entitled to recover costs in circumstances where an ordinary party would be so entitled by way of indemnity”. [21]

6. [24]

   The issue in the present case is whether abrogation of the Chorley exception involves denying that solicitor litigants can recover costs in respect of work done by their employees (though not of work done by themselves personally); or whether preservation of the employed solicitor exception involves that they are entitled to recover such costs. The reasons of the High Court in Bell v Pentelow do not explicitly address this question. It was addressed by the Victorian Court of Appeal in United Petroleum, in which it was held that, in the light of Bell v Pentelow, recovery ought not be permitted. Birketu submits that I am bound to follow the decision of the Victorian Court of Appeal; while the Firm submits that it is distinguishable and “plainly wrong”. In light of the submission that it is “plainly wrong”, it is more satisfactory first to consider the question as a matter of principle.

7. [25]

   In Attorney General v Shillibeer, [22] it was held that the Crown was entitled to ordinary costs in respect of work done by its salaried solicitor. Parke B said: [23]

8. [26]

   In Raymond v Lakeman, [24] Romilly MR denied that the party/party costs recoverable by a company which had a salaried solicitor were controlled by the agreement between the company and its solicitor. In argument, his Lordship responded to an objection that, inasmuch as the standing solicitors of a company were paid by a fixed salary, the company had no right to charge the paying party – one Mr Curling – with more than their own solicitors could have charged them, as follows: [25]

9. [27]

   Then in delivering judgment, the Master of the Rolls said: [26]

10. [28]

    In Galloway v Corporation of London, [27] the plaintiff’s suit against the Corporation of London had been dismissed with costs. The City Solicitor was a salaried officer of the Corporation. Page Wood VC said: [28]

11. [29]

    After rejecting an argument that such an arrangement was unlawful, the Vice Chancellor concluded: [29]

12. [30]

    These cases were followed in this country by the Full Court of the Supreme Court of Queensland in Irving v Gagliardi; Ex parte Gagliardi (No 2), [30] in which Griffith CJ, with whom Harding and Chubb JJ concurred, regarded them as binding. His Honour said: [31]

13. [31]

    In Henderson v Merthyr Tydfil Urban District Council, [32] a public body employed a solicitor as their clerk at a fixed annual salary, for which (inter alia) he was to prosecute and defend all legal proceedings taken by or against them. Out-of-pocket expenses were to be paid for by them. In an action brought against them, judgment was entered for them with costs, to be taxed as between solicitor and client. On taxation the registrar struck out all items, except out-of-pocket expenses paid by the solicitor, on the ground that all work done by him in the conduct of the action was covered by his salary. That decision was held to be wrong. Channell J said: [33]

14. [32]

    In this State, these cases were applied by Taylor J in McCullum v Ifield, [34] to hold that the fact that the solicitor for the Government Insurance Office who acted for the insured defendant was paid a salary was no bar to the recovery by the defendant of full party-party costs against the plaintiff. His Honour explained the cases as holding that the fact that a solicitor is employed and paid a salary does not affect the principle that the successful party is entitled to an indemnity against its costs, and pointed to the irrelevance of the private arrangements between the solicitor and the employer: [35]

15. [33]

    This approach has been applied consistently and ubiquitously. [36] It was reviewed in this State in Commonwealth Bank of Australia v Hattersley, [37] in which Davies AJ held that the costs of work done by corporate employed solicitors were to be assessed on the same basis as those of comparable work performed by independent solicitors exercising comparable skills. His Honour explained: [38]

16. [34]

    These cases show that the rationale for the “employed solicitor exception” is that a party entitled to the costs of litigation who is represented by a solicitor is entitled to recover the costs of engaging a solicitor; that entitlement is unaffected by the circumstance that the solicitor is a salaried employee of the party as distinct from a conventionally retained independent solicitor; and (arguably subject to the indemnity rule), as between party and party those costs are assessed objectively, and do not depend on the private arrangements between the litigant and its (employed) solicitor.

17. [35]

    As has been noted, the judgment of the High Court in Bell v Pentelow does not explicitly resolve the present question. In those circumstances, it is necessary to explore the policy and intent that underlies that judgment to ascertain how that policy and intent informs the answer to the question.

18. [36]

    First, I do not think that the High Court had in mind a litigant solicitor’s own employed solicitors when it made clear that it was not intending to displace the “employed solicitor exception”. Kiefel CJ, Bell, Keane and Gordon JJ said (footnotes omitted): [39]

19. [37]

    It is important to observe that in Henderson Borough Council v Auckland Regional Authority, [40] referred to in Bell v Pentelow at [49], the New Zealand Court of Appeal was concerned with a barrister and solicitor (in a fused profession) employed by the Auckland Regional Authority, one of the litigants – and not with an employed solicitor in a law firm.

20. [38]

    Gageler J said (emphasis added): [41]

21. [39]

    The authorities cited by Gageler J confirm that his Honour was addressing the position where a party is represented in the proceeding by a solicitor who is an employee of the party, typically a government officer or instrumentality.

22. [40]

    In my view, the High Court had in mind “in-house” lawyers employed by government departments and corporations, who act as solicitor for the employing department or corporation in litigation, and not employed solicitors in a law firm which as a party to litigation has some or all of the work done by those employees.

23. [41]

    Secondly, the High Court’s rejection of the Chorley exception was founded on three main considerations, namely:

    1. (1)

       the view that solicitors should be encouraged to act for themselves is contrary to the modern orthodoxy that it is undesirable, as a matter of professional ethics, for a solicitor to act for himself or herself in litigation; [42]

    2. (2)

       to act upon a principle that evidence enabling the quantification of the value of the time of non-solicitor litigants in person should not be received or acted upon by the courts is to exalt the position of solicitors in the administration of justice to an extent that is an affront to equality before the law; [43] and

    3. (3)

       the exception was recognised as the solicitor’s privilege that, to modern eyes, it patently is. A privilege of that kind is inconsistent with the equality of all persons before the law. [44]

24. [42]

    As it seems to me, those same reasons unambiguously favour the position that a solicitor litigant should not be able to recover costs in respect of work done by his or her own employees, any more than for work done by him or herself. To permit a solicitor to recover such costs would be to provide an incentive for solicitors to act for themselves, while allocating as much of the work as they could, to their employees; and it would preserve the appearance that a solicitor was in a privileged position as a self-represented litigant in being able to recover costs for work done by his or her own firm.

25. [43]

    Thirdly, one of the reasons which historically supported the Chorley exception but was found by the High Court in Bell v Pentelow to be “not persuasive” [45] specifically included the costs of a litigant solicitor’s employed solicitor. In Chorley, Bowen LJ explained the rationale for the exception as follows (emphasis added): [46]

26. [44]

    In Cachia v Haines, Mason CJ, Brennan, Deane, Dawson and McHugh JJ, commenting on this rationale for the Chorley exception, said (emphasis added): [47]

27. [45]

    Thus recovery of costs where work was done by the solicitor litigant’s own employee was thought to be justified by the Chorley exception (rather than by the in-house solicitor rule). The rejection in Bell v Pentelow of the reasoning of Bowen LJ set out above as “not persuasive” involves rejection of the rationale upon which it had until then been supposed that a solicitor litigant could recover costs for work done by his or her employed solicitor.

28. [46]

    Thus it seems to me that in Bell v Pentelow, the High Court did not have a law firm litigant’s employed solicitors in mind when it preserved the “employed solicitor exception”; the policy reasons which moved it to abrogate the Chorley exception equally favour denying a law firm litigant recovery of costs for work done by its employed solicitors; and the rationale which had previously been supposed to support recovery of by a solicitor litigant of costs for work done by his or her employed solicitor was rejected.

29. [47]

    In United Petroleum, the Victorian Court of Appeal held that a litigant law firm was not entitled to recover costs of work done by its own employed solicitors.

30. [48]

    For the Firm, it was argued that United Petroleum was distinguishable, on the basis that the Victorian legislation did not expressly include “remuneration” in the definition of costs – an aspect of the NSW definition which was given some significance in Bell v Pentelow. [48] However, the Victorian Court itself attributed no significance to the absence of “remuneration” from the definition, recognising that the issue in Bell v Pentelow was not definitional but involved the broader question of whether the Chorley exception should continue to be recognised as part of the common law of Australia. The Court said (footnotes omitted):

31. [49]

    The case cannot be distinguished on a basis that the Court itself eschewed as one for its decision.

32. [50]

    It was next argued that each of the three reasons given by the Victorian Court for its conclusion was “problematic”. The first was: [49]

33. [51]

    Although the Firm submits that the distinction referred to in that passage is illusory, I disagree. In the cases of solicitors employed by government departments or corporations, the litigation is being prosecuted or defended for the benefit of the department or corporation that is the employed solicitor’s client, albeit that it is also his or her employer. That employed solicitor is on the record as the solicitor acting for the client/employer. The employer is not self-represented: it has a solicitor acting for it, who has his or her own independent professional obligations. It is therefore not self-represented, but represented by a solicitor in the litigation, albeit one that is “employed” rather than “retained”. In the case of a law firm’s own employed solicitors, however, the position is otherwise. The litigation is being prosecuted or defended for the benefit of the firm; the partners in which do not engage their employees to act for them, but merely allocate the work to them. The firm does not have a solicitor as a distinct entity acting for them; the firm is acting for itself, albeit that some of the work is performed by employees of the firm. Although some of the work may be performed by its employed solicitors, the firm is acting for itself. As the Victorian Court pointed out, this distinction was recognised by the High Court in the passage quoted earlier [50] when the plurality said, referring to lawyers employed by governments and others, that “such a solicitor appears in proceedings to represent his or her employer”. In the context of the conduct of litigation, in the eyes of the law the salaried in-house solicitor is independent of his or her employer, whereas a law firm’s employed solicitors are not.

34. [52]

    The second reason was as follows: [51]

35. [53]

    For the reasons I have given, it seems to me that the policy that underlies Bell v Pentelow, of removing an apparent privilege, supports its removal in the case of work done by a solicitor’s employees as well as work done by the solicitor personally. This is in substance the same as the second reason advanced by the Victorian Court.

36. [54]

    The third reason given by the Victorian Court was: [52]

37. [55]

    However, the Victorian Court did not found on this, appreciating that it was of limited significance: [53]

38. [56]

    I respectfully agree – while the absence of authority is of limited significance, the very fact that recovery of costs for work done by an employed solicitor of a litigant law firm has hitherto been treated as based on the Chorley exception is a reason for treating the abrogation of that exception as extending to deny recovery for work done by an employed solicitor as well as work done by a principal of the firm.

39. [57]

    The Victorian Court added: [54]

40. [58]

    That analysis is consistent with what I have identified above as the policy reasons underlying Bell v Pentelow.

41. [59]

    The Firm argued that two decisions of this Court told against the extension of Bell v Pentelow to work done by a solicitor litigant’s employees. The first was Burrows; and the second was Spencer v Coshott. [55]

42. [60]

    In Burrows, Leeming JA confirmed that the abrogation by the High Court of the Chorley exception did not affect the ability of a litigant to recover amounts calculated at professional rates for work done by salaried solicitors as part of party/party costs, [56] and concluded:

43. [61]

    The decisive point, therefore, was that the lawyers acting in the litigation were employees of M&K Lawyers Group, an incorporated legal practice which was a distinct legal identity from the client M&K Sydney. As to the position of work done by a solicitor litigant’s own employed solicitors, his Honour said:

44. [62]

    Thus his Honour did not express a view as to the correctness of United Petroleum. The Firm submitted that his Honour’s acknowledgement – that the Victorian Court’s treatment of the “employed solicitor” rule as inapplicable to a firm of solicitors tended against his Honour’s conclusion – involved an acknowledgement of at least some degree of inconsistency, and that I should therefore not follow United Petroleum. However, as I understand Leeming JA’s judgment, his Honour accepted that in “manifestly different” cases which fall at the intersection of the two principles, there may properly be different results. In Burrows, the existence of distinct legal identities between the litigant and the lawyers was critical. In the case of a law firm’s own employees, there is no such distinction.

45. [63]

    In Spencer, Simpson AJA, with whom Bell P and Emmett AJA agreed, said: [57]

46. [64]

    Again, the existence of distinct legal identities between the solicitor litigant and the lawyers (relevantly, an incorporated legal practice) acting for him was critical, and her Honour distinguished United Petroleum on that basis: [58]

47. [65]

    Accordingly, neither Burrows nor Spencer governs the present situation, whereas United Petroleum is precisely on point.

48. [66]

    It follows that, in my respectful judgment, United Petroleum is not only not plainly wrong, so that I should follow it as a matter of precedent, but it is correct in principle.

Disposition

1. [67]

   Birketu’s claim for prerogative relief was misconceived and must be dismissed. However, in order to resolve the dispute between the parties, at least in a respect which will substantially reduce the scale, scope and cost of the assessment process, it is appropriate to make a declaration to the effect that the Firm is not entitled to recover costs for work done by their employed solicitors.

2. [68]

   For the foregoing reasons, the following orders should be made:

   1. (1)

      Declare that under the costs order made in proceedings 2018/164411 on 19 June 2020 being the subject of the cost assessment proceeding 2022/029349 before the first defendant, the second defendants are not entitled to recover costs for work done by the employed solicitors of their own firm.

   2. (2)

      Otherwise dismiss the summons.

[Counsel addressed on costs]

1. [69]

   On the question of costs, the plaintiffs although unsuccessful in the application for prerogative relief have in substance obtained a substantial victory, both as a matter of principle, and as a matter of money when the implementation of that principle is translated to the costs assessment. On the other hand, the costs of the proceedings were unnecessarily increased by the inclusion of the misconceived application for prerogative relief. It is not appropriate in these cases to take too fine a comb to the apportionment of costs. In my view, justice will be done if the second defendants are required to pay one half of the plaintiff’s costs of the proceedings in this Court, subject to the following further remarks.

2. [70]

   The plaintiffs’ affidavit evidence unnecessarily exhibited and therefore reproduced copies of judgments of the Court, sometimes including the same judgment on multiple occasions. The Court expects solicitors to exercise responsible judgment as to whether it is necessary to annex or exhibit and reproduce documents, and not simply to exhibit everything that is thought remotely to touch on the issue. Without confining the jurisdiction or the discretion of the relevant assessor in any other way, I direct that in the assessment of the costs recoverable by the plaintiffs under the preceding order, the costs of exhibiting and reproducing the documents that comprise tabs 1 through to and inclusive of tab 6 of exhibit CAP1 referred to in the affidavit of Craig Anthony Powell of 29 July 2022, be disallowed.