News — Comparison with NSW Costs Assessment Regime

It is fair to say that Western Australian lawyers avoid taxation of costs as much as is possible. The best costs are agreed costs. Failing that, in the Supreme Court at least, there is always the option of having costs assessed provisionally, and such an assessment makes agreeing costs much easier.

 

That said, one way or another, there are a lot of matters, party/party and less commonly solicitor/client that go on to the taxation process. 

Taxation of costs is an adversarial process, part of the substantive matter in a party/party application, and a stand-alone matter in the Supreme Court if the dispute is between a practitioner and his or her client. It mirrors litigation generally, with personal appearances to provide advocacy and even examination of witnesses if that is necessary. It has always been that way; taxation of costs, as a body of law, arrived with Captain Stirling in 1829. The first law Stirling enacted in his role of Governor of the new colony established a Court of Civil Judicature. Right from the start people were arguing about costs.

There is however another way. In 1993 New South Wales moved from a judicial/adversarial costs assessment to an administrative system.  The NSW Parliament had high hopes for this fundamental reform. It was to ensure that a winning litigant recovered all the reasonable costs of litigation and was also to put a lid on the ever rising costs of litigation. 

Although the Costs Assessment Scheme is housed in the NSW Supreme Court it does not operate judicially. Instead the Scheme acts as a clearing house, and subcontract the assessment of costs to practicing lawyers.  It contracts up to 80 lawyers who work on an hourly basis assessing costs in their own area of speciality. They do not use scales of costs in the way we do in Western Australia; for the most part scales of costs have been abolished (although there is some talk of introducing ‘benchmark’ costs).

Costs assessment is done mainly on the papers. The assessing practitioner has the legal file and written submissions from both parties.  He or she uses one central test in the assessment: “Are the cost charged reasonable?”. In essence, the costs assessor has to consider much the same things that costs assessors in judicial assessment regimes have always had to consider, whether it had been fair and reasonable to do the work the costs related to, whether the work was fairly and reasonably done and, in the absence of a valid costs agreement, whether the amounts charged for that work were fairly and reasonably done. Reasonableness of course is a wide concept and must now include the concept of proportionality. If the legal works assessed are subject to a valid costs assessment then they are assessed against that costs agreement. The certificate of assessment can be enforced as if it were a judgement of the court.

A disgruntled party can seek review of a costs assessment from a panel of two senior costs assessors.  An appeal from a review panel goes to the court for a judicial determination.
As part of my PhD thesis I did a comparative analysis of the NSW system as compared to our own.  It seems that their system is faster, it may be cheaper, and it is certainly more transparent. It is easily accessible for country practitioners. One question that would spring to most peoples’ minds would be the old ‘who will guard the guardians’? On its surface the concept of practicing lawyers being the arbiters of legal costs seems problematic. My research showed that the NSW assessors were harder on bills filed by clients than is our Supreme Court. Many of the assessors are quite senior practitioners who are working at a fee far below their usual charge out as a service to the profession.

The NSW system is well used. According to the most recent annual report (2016) there were 1,340 costs assessment applications. Of these 182 went on to review.  Party/party assessments, at 553, were less than half the overall volume (it does not seem possible to know how many party/party assessments occur in Western Australia).  Clients had 171 bills assessed, and as has been noted in an earlier article, lawyers having their own bills assessed as a debt recovery mechanism made up 32 percent of applications (434). 

Does the New South Wales system work? Yes. Did it fulfil its purposes? No, probably not. Winning litigants may recover a small amount more of what they have spent as compared to their counterparts in Western Australia, but if they have been charged an uplift fee (uplift fees were introduced as part of the same reform package) then they are probably worse off. There is no evidence that the scheme put a cap on the costs of litigation. It did, however remove a burden from the courts (judges have called costs assessment a waste of time) and it did provide practitioners with a very fast and cost effective way of chasing unpaid fees.

The New South Wales costs assessment scheme has not displaced specialist costs firms. Specialist firms like Coulson Legal are engaged in preparing files for the assessment process, drafting submissions and of course handling reviews and appeals. It seems that the use of specialist representation for costs matters is more usual in New South Wales than it is here in Western Australia (though in WA it is not unusual for specialist costs lawyers to be engaged for the purpose of special costs applications).

After all, if you want something done right it pays to engage someone who really knows what they are doing!