Cachia v Hanes and Another

179 CLR 403

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(Judgment by: Mason CJ, Brennan J, Deane J, Dawson J, McHugh J)

Cachia
vHanes and Another

Court:

Judges:
Mason CJ
Brennan J
Deane J
Dawson JToohey J
Gaudron J

McHugh J

Legislative References:
Supreme Court Act 1970 (NSW) - s 76(1)
Litigants in Person (Costs and Expenses) Act 1975 (UK) - s 1(1)
Supreme Court Act 1970 (NSW) - s 19
Judiciary Act 1903 (Cth) - The Act

Case References:
-

Hearing date: 16 June 1993
Judgment date: 13 April 1994

Canberra

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Judgment by:
Mason CJ
Brennan J
Deane J
Dawson J
McHugh J

The respondents failed in proceedings against the appellant in the Supreme Court of New South Wales. They unsuccessfully sought orders requiring the appellant to restore structural support to their land at Castle Hill. The respondents were legally represented but the appellant was not. On 7 October 1987 costs were awarded in favour of the appellant against the respondents. On taxation, a master disallowed many items claimed by the appellant in his bill of costs.

This appeal is from a judgment of the Court of Appeal of New South Wales dismissing by a majority (Clarke and Handley JJA; Kirby P dissenting) an appeal from the order of the master on the review of the taxation of the appellant's costs. ^[1] The grant of special leave, pursuant to which this appeal is brought, was confined to the disallowance of the appellant's claim for compensation for the loss of his time spent in the preparation and conduct of his case and for out of pocket expenses, being travelling expenses, associated with the preparation and conduct of his case.

The claims for loss of time were quantified in the bill of costs at $85 per hour. This figure was based on the fees charged by the appellant as a self-employed consulting engineer. However, the taxing officer found that there was insufficient evidence to show that the appellant had lost money from his consulting practice in defending the case.

Section 76(1) of the Supreme Court Act 1970 (NSW) (the Act) provides:

Subject to this Act and the rules and subject to any other Act:

(a)

costs shall be in the discretion of the Court;

(b)

the Court shall have full power to determine by whom and to what extent costs are to be paid; and

(c)

the Court may order costs to be taxed or otherwise ascertained on a party and party basis or on any other basis.

So far as is relevant, s 76(2) defines "costs'' to include "costs of or incidental to proceedings in the Court'', although a definition of "costs'' as including "fees, charges, disbursements, expenses and remuneration'' is provided by s 19(1).

Under s 122 of the Act, the rules in the Fourth Schedule to the Act came into operation on the commencement of the Act, subject to and together with rules made by the Rule Committee. Section 123 provides that rules may be made by a Rule Committee consisting of the Chief Justice, certain other judges and representatives of the legal profession. Section 124 provides that any of the rules in the Fourth Schedule may be altered, added to or rescinded and any further or additional rules may be made by the Rule Committee for the purpose of carrying the Act into effect. Without limiting the generality of that provision, that purpose includes "(j) ... regulating any matters relating to the costs of proceedings in the Court'' and "(k) ... regulating any matters relating to the taxation or other ascertainment of costs, under the inherent jurisdiction of the Court or under any Act''.

Part 52 of the Supreme Court Rules 1970 (NSW) (the rules) deals with costs. Under r 3, the provisions of that Part "apply, subject to their terms, to and in respect of costs payable or to be taxed under any order of the Court or under the rules and costs to be taxed in the Court under any Act''. Under r 4(1), the "powers and discretions of the Court under section 76 of the Act [which relates to costs generally] shall be exercised subject to and in accordance with'' Pt 52. Rule 23(1) provides that, save for immaterial exceptions, "costs shall be taxed on a party and party basis''. Rule 23(2) provides:

On a taxation on a party and party basis there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed.

It is fundamental to the appellant's argument that the time he lost in preparing and conducting his case constitutes "costs'' within the meaning of this rule. He is, however, unable to sustain that proposition. The "costs'' provided for in the rules do not include time spent by a litigant who is not a lawyer in preparing and conducting his case. They are confined to money paid or liabilities incurred for professional legal services. It is only in that sense that the rules speak of "costs''.

Rule 67(1) provides:

Subject to this rule, the provisions of Schedule G or of any costs determination, as the case requires, shall apply to the taxation of costs incurred in relation to proceedings commenced in the Court after the commencement of these rules or in respect of business done in any proceedings in the Court after the Act applies to the proceedings.

Schedule G, which contains the relevant scale of costs, as in force when the appellant did the work and now, contains nothing, apart from its provision for allowances to witnesses, which indicates that the costs for which it provides are otherwise than costs in the conventional sense, namely remuneration for work performed by a solicitor or a solicitor's clerk. Indeed, the clear indications are that the costs provided for are costs of that kind.

Rule 67(2) gives to the taxing officer a discretion to allow costs in relation to items not mentioned in, or of an amount higher than that prescribed by, Sch G. In exercising that discretion he is required by r 67(3) to have regard to a number of matters:

(a)

the complexity of the item or of the proceedings in which it arose and the difficulty or novelty of the questions involved;

(b)

the skill, specialised knowledge and responsibility required of and the time spent and work done by the solicitor or counsel;

(c)

the number and importance of the documents (however brief) prepared or perused;

(d)

the place and circumstances in which the business involved was transacted;

(e)

the importance of the proceedings to the client;

(f)

where money or property was involved, its amount or value;

(g)

any other fees and allowances payable to the solicitor or counsel in respect of other items in the same proceedings, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.

Paragraph (g) suggests that r 67(3) was intended to provide an exhaustive list of matters to which the taxing officer should have regard. ^[2] At the very least, any other matter considered by the taxing officer would need to be ejusdem generis. ^[3] The list of factors in r 67(3) assumes that the costs in the taxing officer's discretion are for work done by a practitioner or practitioner's employee. Paragraphs (a), (b), (e) and (g) are in their very terms inapplicable to a litigant in person. The other paragraphs might be applied to work done by a litigant in person, but there is no mention of the considerations which might be thought to be central to the taxation of the costs of a litigant in person such as the nature of the work done, the time taken to do it, and the skill with which it was performed.

To use the rules to compensate a litigant in person for time lost would cut across their clear intent. Costs, within the meaning of the rules, are reimbursement for work done or expenses incurred by a practitioner or practitioner's employee. Compensation for the loss of time of a litigant in person cannot be said to constitute costs within the meaning of the rules.

This is hardly surprising. It has not been doubted since 1278, when the Statute of Gloucester ^[4] introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation. They were never intended to be comprehensive compensation for any loss suffered by a litigant. As Coke observed of the Statute of Gloucester, the costs which might be awarded to a litigant extended to the legal costs of the suit, "but not to the costs and expences of his travell and losse of time''. ^[5]

A somewhat anomalous exception was introduced by London Scottish Benefit Society v Chorley ^[6] in which a solicitor successfully acted for himself in litigation. It was held that he was entitled to the same costs as if he had employed a solicitor, except for items such as obtaining instructions or attendances, which were unnecessary because he was his own client. The justification given for the privileged position afforded to a solicitor acting for himself is somewhat dubious, but it serves to emphasise the general rule. Brett MR put it thus: ^[7]

I cannot think that any privilege of a solicitor exists. I am wholly unable to agree to any argument standing upon that footing. I should have thought that a person wrongfully brought into litigation ought to be indemnified against the expenses to which he is unjustly put; but there cannot be a perfect indemnity, because it is impossible to determine how much of the costs is incurred through his own over-anxiety. When an ordinary party to a suit appears for himself, he is not indemnified for loss of time; but when he appears by solicitor, he is entitled to recover for the time expended by the solicitor in the conduct of the suit. When an ordinary litigant appears in person, he is paid only for costs out of pocket. He cannot himself take every step, and very often employs a solicitor to assist him: the remuneration to the solicitor is money paid out of pocket. He has to pay the fees of the court, that is money paid out of pocket; but for loss of time the law will not indemnify him. When, however, we come to the case of a solicitor, the question must be viewed from a different aspect. There are things which a solicitor can do for himself, but also he can employ another solicitor to do them for him; and it would be unadvisable to lay down that he shall not be entitled to ordinary costs if he appears in person, because in that case he would always employ another solicitor.

And Bowen LJ, after observing that costs are the creature of statute and referring to the passage in Coke's Institutes to which we have referred, said: ^[8]

Professional skill and labour are recognised and can be measured by the law; private expenditure of labour and trouble by a layman cannot be measured. It depends on the zeal, the assiduity, or the nervousness of the individual. Professional skill, when it is bestowed, is accordingly allowed for in taxing a bill of costs; and it would be absurd to permit a solicitor to charge for the same work when it is done by another solicitor, and not to permit him to charge for it when it is done by his own clerk.

Those assertions that it would be "unadvisable'' or "absurd'' to refuse to allow a solicitor who acts for himself "to charge'' for the work done by himself or his clerk ignore the questionable nature of a situation in which a successful litigant not only receives the amount of the verdict but actually profits from the conduct of the litigation.

Both the general principle and the exception have been accepted in this court. In Guss v Veenhuizen (No 2 ), ^[9] Gibbs ACJ, Jacobs and Aickin JJ, after citing London Scottish Benefit Society v Chorley and H Tolputt & Co Ltd v Mole , ^[10] said of a solicitor who acts for himself: ^[11]

Those authorities establish that the litigant in person does not recover such costs in such circumstances in the capacity of a solicitor, but because, he happening to be a solicitor, his costs are able to be quantified by the court and its officers.

They went on to cite with approval the passages from the judgments of Brett MR and Bowen LJ in London Scottish Benefit Society v Chorley which we have cited above. It is, however, important to note that no general submission was advanced in Guss v Veenhuizen (No 2 ) to the effect that a successful solicitor litigant who acts for himself is never entitled to recover "costs'' in respect of his own time and services. The argument in the case was about whether the solicitor litigant was precluded from recovering "costs'' in respect of his own time and services in relation to an appeal to this court by reason of the fact that he was not on this court's register of practitioners.

If the explanations for allowing the costs of a solicitor acting for himself are unconvincing, the logical answer may be to abandon the exception in favour of the general principle rather than the other way round. ^[12] However, it is not necessary to go so far for the purposes of the present case. It suffices to say that the existence of a limited and questionable exception provides no proper basis for overturning a general principle which has, as we have said, never been doubted and which has been affirmed in recent times.

Nevertheless, at first instance in Buckland v Watts ^[13] Donaldson J, whilst feeling constrained by authority to hold that a litigant in person was not entitled to claim costs for time spent in preparing his case, expressed the view ^[14] that "the reasoning which supports the reported decisions that solicitor litigants in person should recover more than their out-of-pocket expenses seems to me to support a similar decision in favour of lay litigants in person''. The Court of Appeal, on the other hand, sought to support both the general principle and the exception. Sir Gordon Willmer said: ^[15]

What a successful party who has got an order for costs is entitled to recover falls, as is well known, under two headings. One heading covers his disbursements; that is to say, money which he has actually had to pay out to other people, such as witnesses, counsel, professional advisers and so forth. The other heading is described as "costs''. This is intended to cover remuneration for the exercise of professional legal skill ... It is because there has been an exercise of professional legal skill that a solicitor conducting his own case successfully is treated differently from any other successful litigant in person conducting his own case. We are not concerned with the exercise of other professional skills. Other professional people, who become involved in litigation and conduct their own cases, may recover something in respect of their own professional skill in so far as they qualify as witnesses and are called as such. Nobody else, however, except a solicitor, has ever been held entitled to make any charge, as I understand it, in respect of the exercise of professional legal skill and it is this which the appellant has sought to do in the present case. I have much sympathy for him, as indeed had Donaldson J, but I can find no ground, either in principle or on authority, for allowing him anything by way of remuneration for the exercise of a professional skill which he has not got.

Rather too much emphasis may have been given in the cases to costs which are awarded to a solicitor acting for himself. They are awarded upon an exceptional basis and not upon the basis upon which costs are ordinarily awarded, namely, as an indemnity for legal costs actually incurred. It is, we think, not possible to reason by way of the exception that litigants in person are treated unequally and then to conclude that the very basis upon which costs are ordinarily awarded should be abandoned so that the exception becomes the rule.

Not only is it false reasoning, but it is not a course which is available having regard, not only to the quite clear case law upon the subject, but also, more importantly, to the plain import of the rules which govern the jurisdiction of the court to make an order for costs and any subsequent taxation of costs. Taxation is to take place, not at large, but "on a party and party basis''. Taxation on a party and party basis is required to be in accordance with the relevant table in Sch G and that makes no provision for the reimbursement of a litigant for time lost in the preparation or presentation of his case. It does provide for solicitors' costs which have been incurred. That affords some basis (although insufficient in our respectful view) for an award of costs in favour of a solicitor acting for himself and so performing professional duties, but it affords no basis whatsoever for an award by way of recompense to a litigant for time lost in the preparation or presentation of his case.

Even less do the rules provide for the substitution of an antithetical basis for the accepted basis upon which a taxation of party and party costs is conducted. We speak of antithesis because, as we have said, the accepted basis for an award of costs is that they are by way of indemnity. They are intended to reimburse a litigant for costs actually incurred; they are not intended to compensate for some other disadvantage or inconvenience suffered by the litigant.

If costs were to be awarded otherwise than by way of indemnity, there would be no logical reason for denying compensation to a litigant who was represented. That would in some cases dramatically increase the costs awarded to a successful litigant. In corporate litigation of complexity, for example, a litigant may expend considerable time and effort in preparing its case.

Whilst the restricted basis upon which party and party costs are awarded may be debated as a matter of policy, it is to be borne in mind that party and party costs have never been regarded as a total indemnity to a successful litigant for costs incurred, let alone total recompense for work done and time lost. Putting to one side the question posed by the relatively rare exception of a solicitor acting in person, there is no inequality involved: all litigants are treated in the same manner. And if only litigants in person were recompensed for lost time and trouble, there would be real inequality between litigants in person and litigants who were represented, many of whom would have suffered considerable loss of time and trouble in addition to incurring professional costs. The partial indemnity which the law allows represents a compromise between the absence of any provision for costs (which prevails as a matter of policy in some jurisdictions) and full recompense. In these days of burgeoning costs, the risk of which is a real disincentive to litigation, the proper compromise is a matter of both difficulty and concern.

That choice has been made in New South Wales at least in the rules which govern the taxation of costs -- rules which are in accordance with established law. The Rule Committee may or may not be able to use its statutory powers to change the basis upon which costs are awarded so that they become, not costs in the accepted sense of the word, but compensation of a more comprehensive kind. We express no view upon that. No doubt the Rule Committee, if it had such power, would wish to inform itself adequately of the reasons for and against such a change and no doubt it would be able to do so in a way in which a judge or court cannot.

Whilst the right of a litigant to appear in person is fundamental, it would be disregarding the obvious to fail to recognise that the presence of litigants in person in increasing numbers is creating a problem for the courts. ^[16] It would be mere pretence to regard the work done by most litigants in person in the preparation and conduct of their cases as the equivalent of work done by qualified legal representatives. All too frequently, the burden of ensuring that the necessary work of a litigant in person is done falls on the court administration or the court itself. Even so, litigation involving a litigant in person is usually less efficiently conducted and tends to be prolonged. ^[17] The costs of legal representation for the opposing litigant are increased and the drain upon court resources is considerable. On the other hand, there is no doubt that the inability of a litigant in person to obtain recompense for time spent in the conduct of successful litigation must on occasions be a significant deterrent to the exercise of his right to come to court in person. ^[18] We mention these matters not to express any view, but merely to indicate that there are considerations which must be weighed before any reasoned conclusion can be reached. A court engaged in litigation between parties, even if it were not constrained by the legislation and rules, is plainly an inappropriate body to carry out that exercise or to act upon any conclusion by laying down the precise nature of any change required.

In England, where change was considered desirable, legislation was thought necessary. Section 1(1) of the Litigants in Person (Costs and Expenses) Act 1975 (UK) provides:

Where, in any proceedings to which this subsection applies, any costs of a litigant in person are ordered to be paid by any other party to the proceedings or in any other way, there may, subject to rules of court, be allowed on the taxation or other determination of those costs sums in respect of any work done, and any expenses and losses incurred, by the litigant in or in connection with the proceedings to which the order relates.

And limits have been prescribed by the Rules of the Supreme Court 1965 (UK). Order 62, r 18 provides:

(1)

Subject to the provisions of this rule, on any taxation of the costs of a litigant in person there may be allowed such costs as would have been allowed if the work and disbursements to which the costs relate had been done or made by a solicitor on the litigant's behalf together with any payments reasonably made by him for legal advice relating to the conduct of or the issues raised by the proceedings.

(2)

The amount allowed in respect of any item shall be such sum as the taxing officer thinks fit but not exceeding, except in the case of a disbursement, two-thirds of the sum which in the opinion of the taxing officer would have been allowed in respect of that item if the litigant had been represented by a solicitor.

(3)

Where it appears to the taxing officer that the litigant has not suffered any pecuniary loss in doing any item of work to which the costs relate, he shall be allowed in respect of the time reasonably spent by him on that item not more than £8.25 per hour.

(4)

A litigant who is allowed costs in respect of attending court to conduct his case shall not be entitled to a witness allowance in addition.

...

(6)

For the purpose of this rule a litigant in person does not include a litigant who is a practising solicitor.

We should add that the English legislation and rule represent a straightforward approach to the problem, in contrast to the approach adopted in some cases where courts have treated the loss in earnings of a litigant incurred in the course of the presentation or conduct of his case as a disbursement. ^[19] Clearly, that is merely an indirect way of recompensing a litigant for time spent in the preparation or conduct of his case which, if it is not contemplated by the relevant legislation or rules, is not permissible. Of course, a litigant who qualifies as a witness is entitled to the ordinary witness' fees.

The disbursements claimed by the appellant and disallowed upon taxation were, on the one hand, travelling expenses in addition to a witness' fee for preparation and, on the other hand, travelling expenses to hear judgment. Either the appellant was entitled to the witness' fee or he was not; he was not entitled to travelling expenses in addition to or in lieu of the fee. And since the appellant was not entitled to any recompense for his appearance in court to hear judgment, it was, we think, within the discretion of the Taxing Master to disallow any travelling expenses as an out-of-pocket expense incurred for that purpose. They were not an out-of-pocket expense which would have been recoverable by him or his solicitor in this case had he been legally represented.

For these reasons, we think that the appeal should be dismissed.