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Abraham, Romaine --- "Costs Column: Pre-Litigation Offers and Inter Partes Matters Assessed in Chambers in the Victorian Costs Court" [2023] PrecedentAULA 67; (2023) 179 Precedent 38

Pre-litigation offers and inter partes matters assessed in chambers in the Victorian Costs Court

By Romaine Abraham

The decision of Conidi JR in Erdevicki v Amaca Pty Ltd^[1] concerns the review of a Costs Registrar’s determination of inter partes costs assessed in chambers in accordance with the alternative assessment procedure in pt 8 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Supreme Court Rules).

Rule 63.88 of the Supreme Court Rules enables the Costs Court to calculate an estimate of the ‘approximate total’ for which an order on taxation would likely be made if the itemised bill of costs were to be taxed. The Costs Court is empowered under the Supreme Court Rules to make an estimate in the absence of the parties and without having made any determination on the individual items claimed within the bill.^[2]

BACKGROUND

Costs orders were made in the substantive proceedings by Keogh J on 12 November 2020 in the Supreme Court of Victoria.^[3] A summons for taxation was filed on 27 August 2021 with an itemised bill of costs, claiming a total of $300,159.01 (in the amounts of $181,303.95 for professional costs and $118,855.06 for disbursements).

The respondent filed a summarised Notice of Objections on 8 October 2021. A mediation that was initially scheduled for 13 October was cancelled and the matter was referred to assessment in chambers in accordance with r63.88 of the Supreme Court Rules.^[4] A more detailed Notice of Objection was filed by the respondent on 3 December.

On 8 December a Notice of Estimate was sent to the parties in the amount of $221,350.00 marking a reduction of approximately 26 per cent from the amount claimed by the applicant in their bill of costs.^[5] A Notice of Objection to the Estimate was filed by the applicant on 21 December.^[6]

BASIS OF OBJECTION

At a mention conducted before the Costs Registrar on 27 January 2022, the applicant confirmed that their objection to the estimate was limited to the costs of the taxation, and in particular the costs of drawing and engrossing the itemised bill of costs ($38,878.40), an amount assumed by the applicant to have been disallowed in accordance with r63.85 of the Supreme Court Rules. Informally known as the 15 per cent rule, r63.85 states that if the amount claimed in an itemised bill of costs (including both professional costs and disbursements) is reduced by 15 per cent or more, no costs shall be allowed to the solicitor filing the bill for the drawing and engrossing of the bill and for attendances on taxation, unless otherwise ordered by the Costs Court.

The Costs Registrar advised the parties at the mention that in conducting the assessment and calculating the amount specified in the Notice of Estimate, the Costs Registrar had allowed the applicant’s costs of the taxation on a standard basis but had provisionally disallowed the amount claimed for the drawing and engrossing of the itemised bill of costs having regard to r63.85 of the Supreme Court Rules.^[7]

The respondent indicated its agreement to proceed to a limited taxation in accordance with the scope of the applicant’s objection, and as the respondent’s consent had been obtained, the Costs Registrar agreed to conduct the taxation restricted to the costs of the taxation as claimed within the applicant’s itemised bill of costs plus the additional costs of the taxation proceeding.

LIMITED TAXATION

A limited taxation was conducted on the papers by the Costs Registrar who had submissions on costs from both parties before him. The applicant contended in his costs submissions that the Court should, in relation to r63.85, otherwise order and allow the applicant his costs of drawing and engrossing the itemised bill of costs in light of the settlement offers made prior to the Notice of Estimate, which would have resulted in a better outcome for the respondent than the amount contained in the Notice of Estimate.^[8]

A CHRONOLOGY OF OFFERS EXCHANGED BY THE PARTIES

The applicant sought to rely on the pre-litigation offer of compromise and Calderbank letter made on 10 June as his entitlement to recover the cost of preparing the itemised bill of costs and argued it was open to him to do so in an assessment in chambers. The applicant asserted that the alternative assessment ‘procedure would be seriously flawed if it did not allow a party to benefit from a favourable settlement offer’.^[9]

The respondent refuted the applicant’s assertion that he had beaten the pre-litigation settlement offers and submitted that the applicant could not discharge the onus of proof that the amount specified in the Notice of Estimate had beaten that offer.^[10] The respondent’s challenge to this assumption was based on the assertion that the parties receiving a Notice of Estimate from a pt 8 assessment had no method of determining which items claimed within an itemised bill of costs had been allowed, partially allowed or disallowed.^[11]

A written ruling was provided to the parties on 14 April 2022. The Costs Registrar found that the applicant was unable to establish that the pre-litigation settlement offer had beaten the Notice of Estimate issued by the Court. Moreover, the Costs Registrar found that it could not be determined whether the applicant had beaten his offer of compromise without a seriatim taxation.

REVIEW HEARING

The applicant filed a Notice of Application for Review on 3 May 2022. The Application for Review was heard by Conidi JR on 16 August 2022, where the Costs Registrar’s decision was affirmed.

Judicial Registrar Conidi noted that an assessment conducted under pt 8 of the Supreme Court Rules allows for an estimate to be made on the papers, in the absence of the parties and, critically, without making any determination on the individual items within an itemised bill of costs.^[12] As permitted by this procedure, the process taken by a Costs Registrar in formulating an estimate could include a number of different considerations including the determination of different tranches of items with a global approach.^[13] Accordingly, Conidi JR asserted it was difficult to argue that a settlement offer can be directly compared to an estimate at a particular point in time for the purposes of determining if one had bettered the other, having regard to the considerations and methodologies utilised in the assessment process.^[14] The correct method of determining whether r63.85 of the Supreme Court Rules should be invoked is to undertake a taxation of costs with respect to the entire bill of costs.^[15] Judicial Registrar Conidi reiterated that it is the complete bill that must be taxed, not simply the costs claimed up to the costs of the taxation.^[16]

The effect of this decision is that a seriatim taxation of the itemised bill of costs must be undertaken if a party seeks to rely on a settlement offer on the question of their costs of the summons (including the costs of preparation of an itemised bill of costs).

Romaine Abraham is a costs lawyer based in Melbourne, Victoria.

^[1] [2023] VSC 81 (Erdevicki).

^[2] Cf with a taxation of costs, which is an item-by-item review of an itemised bill of costs before a Costs Registrar of the Costs Court acting as a taxing officer. A taxation of costs can be contested or uncontested.

^[3] Supreme Court Proceeding No S ECI 2015 05207.

^[4] Generally, if the amount claimed in an inter partes bill of costs exceeds $100,000.00 the matter will be listed for a mediation at first instance, and bills that claim a total of less than $100,000.00 will be listed directly for an assessment in chambers (unless advice is provided explaining why an assessment is not appropriate).

^[5] A Notice of Estimate is prepared by a Costs Registrar of the Costs Court following an in chambers assessment and sets out the estimate of the approximate total of costs likely to be allowed if the matter proceeded to a taxation of costs. A Notice of Estimate is not binding on the parties and either the paying party or the receiving party may object to the Notice.

^[6] A Notice of Objection to the Estimate must be filed within 21 days of the date of the Notice of Estimate. If a Notice of Objection to the Estimate is filed, the matter will be listed for a taxation of costs before the taxing officer responsible for the assessment in chambers.

^[7] The standard basis is the usual basis of taxation in inter partes matters in accordance with r63.31 of the Supreme Court Rules. Rule 63.30 of the Supreme Court Rules sets out the test for costs allowed on the standard basis: on a taxation on the standard basis, all costs reasonably incurred and of reasonable amount shall be allowed.

^[8] Erdevicki, above note 1, [14].

^[9] Ibid [18].

^[10] Ibid [22].

^[11] Ibid.

^[12] Ibid [49].

^[13] Ibid. Judicial Registrar Conidi noted examples where a global approach may be applied, which include solicitor and clerical attendances on the client; reading documents including the differentiation between perusing, scanning and examining; and the nature of counsel’s involvement in the proceedings.

^[14] Ibid [50].

^[15] Ibid [35].

^[16] Ibid.