High Court puts the lid on the honey pot … Common law revised … Solicitors and barristers no longer able to charge costs when acting for themselves … Same principle applies for litigants in person … Chorley exception was a “privilege” and an affront to equality before the law … Stinging Nettle … Stephen Murray reports
The majority, comprising Chief Justice Susan Kiefel, Justice Virginia Bell, Justice Patrick Keane and Justice Michelle Gordon, were emphatic in ruling that the Chorley exception had no place in Australian law:
“… the Chorley exception is not only anomalous, it is an affront to the fundamental value of equality of all persons before the law. It cannot be justified by the considerations of policy said to support it. Accordingly, it should not be recognised as part of the common law of Australia.”
The High Court dispute had its origins in work barrister Janet Pentelow had done on retainer for Bell Lawyers in a matter under the Family Provision Act. A dispute about her fees in that matter was eventually resolved in her favour, after proceedings in the Local Court and then the Supreme Court.
Costs in those subsequent proceedings were awarded in her favour, for which Pentelow claimed $44,880 for work she had undertaken herself.
Bell Lawyers made an application for costs assessment, with the assessor rejecting Pentelow’s claim on the basis that the Chorley exception did not apply to barristers. The assessor’s decision was affirmed in an appeal to the Review Panel. Pentelow appealed the decision to the District Court, but the appeal was dismissed by Judge Judith Gibson.
Pentelow appealed to the NSW Court of Appeal, which by a two to one majority, held that the Chorley exception could be applied to barristers on the same principle that it applied to solicitors, namely that their costs could be quantified according to the same principles.
The reasoning in Chorley was that if a solicitor were not entitled to claim costs when acting in their own cause, they would “always employ another solicitor”, thereby increasing the costs incurred in the matter.
The High Court majority rejected this reasoning saying the view that it is “somehow a benefit” that a solicitor acts for himself or herself, because the expense to the losing party can be expected to be less, is “not self-evidently true”. In fact, the majority said, costs could be higher as a result of the lack of objectivity and impartial and independent advice brought to the matter.
The majority said the view that solicitors should be encouraged to act for themselves was “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”.
The majority was also not persuaded by the reasoning that because a lawyer’s contribution to litigation could be quantified either by a scale of costs or by time, this justified an exception to the rule that self-represented litigants should not be awarded compensation for their time.
The majority said “there is no reason why, in principle, the reasonable value of the time of any litigant cannot be measured”. It observed courts regularly valued the provision of labour or services in calculating payments in contractual disputes.
The majority said that to have a principle that courts could not determine the value of time of non-solicitor litigants was “to exalt the position of solicitors in the administration of justice to an extent that is an affront to equality before the law.”
The majority rejected the Chorley reasoning that the solicitor exception was not a privilege, saying there is an “air of unreality” in that view. It said that to modern eyes, it was patently a solicitor’s privilege, and that “a privilege of that kind is inconsistent with the equality of all persons before the law”.
The majority considered the 1976 decision of the High Court in Guss v Veenhuizen, which was understood to have confirmed the status of the Chorley exception in Australian law. The majority said it may “fairly” be said that the decision in Guss proceeded on an “uncritical acceptance” of the authority of Chorley, “and so did not establish a principle carefully worked out in a succession of cases in this court”.
The majority said that the decision in Chorley, on which Guss rested, departed from principle in several respects, as expounded by the High Court majority in Cachia v Haines in 1994. There the majority described the Chorley exception as “somewhat anomalous” and the justification for the exception as “somewhat dubious”.
Considering the majority’s reasoning in Cachia, the majority observed that costs are “not awarded as compensation for lost earnings, much less as a reward for a litigant’s success”. Instead, they are “confined by the concern” that a successful party be provided with a measure of indemnity against the expense of professional legal costs incurred in the litigation.
However, if the general rule was to be overturned “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 majority in Cachia said:
“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.”
The majority in Bell said that importantly for present purposes, the Cachia majority had recognised the Chorley exception, though relatively rare, did involve inequality before the law, and that, in the absence of any compelling reason to the contrary, the court should accept the “logical answer” and hold that the Chorley exception was not part of the common law of Australia.
The majority rejected submissions made on behalf of Pentelow that abolishing the Chorley exception would occasion “serious inconvenience” to the use of in-house solicitors. It said this submission failed to appreciate that such arrangements were treated as being outside the general rule because the recovery of the professional costs falls by way of indemnity to the employer.
However, the majority was not so certain whether the same view applied in relation to a solicitor employed by an incorporated legal practice of which he or she is the sole director and shareholder. The majority said it might be queried whether a solicitor in that position had sufficient detachment to be characterised as acting in a professional legal capacity, and it might be queried whether costs claimed by an incorporated legal practice for the work of its sole director fall within the expansive view of the indemnity principle.
The majority said the resolution of this question should be left to consideration of the legislation which provides for incorporation of solicitors’ practices and its intersection with the application of the general rule, and that the matter was ultimately one for the legislature.
Justice Stephen Gageler, agreeing with the majority, said it was “entirely appropriate” for the Court as “ultimate custodian of the contemporary common law of Australia” to take the step foreshadowed in Cachia of determining the solicitors’ exception to the general rule be abandoned.
Justice Gageler observed that the Supreme Court of New Zealand had declined to abandon the Chorley exception only last year, but submitted that this was because the applicable rules were seen to have been framed on the basis of the exception continuing to apply and that it had not been presented with a principled basis on which it could abandon the exception and yet maintain the ability of a party to recover the costs of using an employed lawyer.
He said the New Zealand court should have been persuaded of the view that the recovery of costs by a party using an employed solicitor was an application of the general principle rather than an exception to it, with the general rule engaged on the basis that the costs of using an employed solicitor are awarded on an indemnity basis.
Justice James Edelman, agreeing with the majority, that the Chorley exception was not part of the Australian law, saying it was a judicially developed rule which did not form the basis of subsequent statutory enactments on costs, and it was inconsistent with the underlying foundation of principle upon which costs rules have developed.
Justice Edelman ventured that “the Chorley rule is unjustifiable as a matter of principle with wholesale reform”. He pointed to the reforms made in England in 1998, which allowed all self-represented litigants, including barristers and solicitors, to claim for those costs which would have been allowed if performed by a legal representative. He said, however, that no party in these proceedings had suggested such reform, which might substantially increase the costs of litigation.
He said that if the general rule was not to change, then as a matter of principle “it is impossible to justify an exception that recognises costs for expenditure of time in litigation by an unrepresented solicitor litigant who performs work on the case but not by any other unrepresented litigant”.
Justice Geoffrey Nettle, while agreeing with the plurality that the Chorley exception did not apply to barristers, did not see the need or justification to decide whether the exception should be abolished.
He said that considered afresh, he would agree the exception was undesirable, not because it was anomalous or an affront to equality before the law, but because it created a situation in which a successful litigant not only recovered the amount of a verdict but also profited from the conduct of the litigation.
He said that, despite that difficulty, the Chorley exception was a rule of practice of long standing, which had been widely acted upon. He said the “ramifications of abrogating the exception are potentially very wide and … to a large extent unknowable”.
He questioned the assurance from the plurality that the position of in-house solicitor should not be disturbed by the abolition of the exception, questioning why there should be a distinction. He said the matter of abolishing the exception should have been left to the legislature.
Pentelow was ordered to pay the costs of Bell Lawyers in the District Court and the Court of Appeal, as well as the costs of the High Court appeal.