FEDERAL COURT OF AUSTRALIA

Freehills, in the matter of New Tel Limited (in liq) ACN 009 068 955 (No 4)
[2008] FCA 1085

COSTS – solicitor litigant – Chorley exception – whether solicitor litigant entitled to costs of acting for himself or herself

Held:  the question of costs be reserved for determination by the Full Court on the application for leave to appeal and if leave is granted, on the appeal.  

A & D Douglas Pty Ltd v Lawyers Private Mortgages Pty Ltd [2006] FCA 690

Cachia v Hanes (1994) 179 CLR 403

Dobree v Hoffman (1996) 18 WAR 36

Guss v Veenhuizen (No 2) (1976) 136 CLR 47

London Scottish Benefit Society v Chorley (1884) 13 QBD 872

Worchild v Petersen [2008] QCA 26

McIlraith v Ilkin [2007] NSWSC 1052

IN THE MATTER OF NEW TEL LIMITED (IN LIQUIDATION) ACN 009 068 955

THE APPLICATION OF FREEHILLS

WAD 188 of 2007

MCKERRACHER J

23 July 2008

PERTH

IN THE MATTER OF NEW TEL LIMITED (IN LIQUIDATION) ACN 009 068 955

THE COURT ORDERS THAT:

1.                  The costs of and incidental to the application be reserved for determination by the Full Court on the application for leave to appeal and if leave is granted, on the appeal. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF NEW TEL LIMITED (IN LIQUIDATION) ACN 009 068 955

REASONS FOR JUDGMENT

1                     On 2 July 2008, I dismissed the examinee’s application to set aside the orders permitting service out of the jurisdiction of the examination summons.  The plaintiff submitted that costs should follow the event. 

2                     The examinee submits that any decision in relation to costs should await the outcome of the examinee’s application for leave to appeal to the Full Court and if leave is granted, the examinee’s appeal.  It was submitted that there are conflicting lines of authority as to whether solicitors acting for themselves are entitled to recover their costs.  The ‘Chorley exception’ (from London Scottish Benefit Society v Chorley (1884) 13 QBD 872) is an exception - in the case of solicitors - to the general rule that successful litigants are not remunerated for the time spent in achieving success in the litigation. 

3                     On the one hand there is the view expressed by Parker J in the Full Court in Dobree v Hoffman (1996) 18 WAR 36 that the Chorleyexception does not apply.  On the other, a number of cases take the contrary view that there is no impediment to solicitors recovering their costs when acting for themselves.  These cases follow the judgment of the High Court in Guss v Veenhuizen (No 2) (1976) 136 CLR 47. 

4                     Dobree 18 WAR 36 was decided 20 years after Guss v Veenhuizen 136 CLR 47.  Parker J with whom Rowland and Steytler JJ agreed, pointed out in Dobree (at 45) that the High Court in Guss v Veenhuizen was concerned with a limited point.  His Honour considered that ‘no issue was raised for the decision of the Court whether a solicitor litigant in person is entitled to recover profit costs for his or her own time and effort’. 

5                     The contrary conclusion has been reached in A & D Douglas Pty Ltd v Lawyers Private Mortgages Pty Ltd [2006] FCA 690 at [10] per Dowsett J.  At [9] his Honour observed that since Cachia v Hanes (1994) 179 CLR 403, three State appellate courts had addressed the issue with varying outcomes.  His Honour then went on to conclude that the law in Australia had followed Chorley13 QBD 872 and Guss v Veenhuizen 136 CLR 47.  In his mind the matter had been settled.  His Honour concluded that:

… where one is addressing the question of costs to be awarded pursuant to a statutory power vested in a court, a solicitor litigant, acting for him or herself, may recover professional costs and appropriate outlays.  (at [10]). 

6                     This year the Court of Appeal in Queensland in Worchild v Petersen [2008] QCA 26 followed A & D Douglas [2006] FCA 690 as did, last year, the Supreme Courts of New South Wales in McIlraith v Ilkin [2007] NSWSC 1052 and Victoria in Winn v Garland Hawthorn Brahe (A Firm) (No. 1) [2007] VSC 360. 

7                     In McIlraith [2007] NSWSC 1052 Brereton J after conveniently outlining the history continued:

25        Were the question untrammelled by authority, I might well have taken the same course as the Supreme Court of Western Australia in Dobree. In particular, I would question the proposition, which underlies the Chorley exception, that as a solicitor can employ another solicitor to do the work he or she should be entitled to recover the costs of doing the work him or herself. To the contrary, there seems to me a substantial reason to do so. Where a solicitor represents a litigant, the court is entitled to expect the litigant to be impartially and independently advised by an officer of the court. Indeed, where the court concludes that a solicitor is not in a position to give impartial and independent advice to a party, because of the solicitor’s own interest in the outcome, the court has restrained the solicitor from continuing to act [see, for example, Kallinicos v Hunt [2005] NSWSC 1181; (2006) 64 NSWLR 561]. Where a solicitor acts for himself or herself there cannot be independent and impartial advice, and this is in principle a strong reason for holding that a solicitor litigant should not be entitled to costs of acting for him or herself.

26        However, I do not believe that it is open to me to follow the Supreme Court of Western Australia, or to discard the Chorley exception. First, I have already explained that Guss v Veenhuizun has decided the question, and has not been overruled by Cachia v Hanes. Secondly, in Atlas Corporation Pty Ltd v Kalyk [2001] NSWCA 10, the Court of Appeal held that, despite Dobree, Guss was an authoritative endorsement by the High Court of the Chorley exception, that the statements of the majority on that issue were not obiter dicta, and that it had not been overruled in Cachia, and so was binding; accordingly the court followed Guss. Thirdly, in Khera v Jones [2006] NSWCA 85, a Court of Appeal constituted by Mason P and Ipp JA (who, it will be remembered, had given the first instance judgment in Dobree), while indicating a preference, if the matter were uncluttered by authority, for the approach adopted in Dobree, refused leave to appeal on the basis that there was little reason to think that the court would depart from its “firm and comparatively recent decision” in Atlas. For this court, the decisions of the Court of Appeal in Atlas and in Khera are conclusive. The Chorley exception is the law in New South Wales. Subsequently, in the Federal Court of Australia, Dowsett J in A & D Douglas Pty Ltd v  Lawyers Private Mortgages Pty  Ltd [2006] FCA 690, has agreed (at [10]) that Guss and Cachia state the law in Australia, and that the Chorley exception applies.

8                     In Winn [2007] VSC 360, Kaye J said:

4          The applicable principles are quite longstanding and not significantly in dispute. There has now been a longstanding rule of practice that a solicitor who is admitted to practice in a jurisdiction is entitled to an award of costs where that solicitor has acted for himself or herself as a litigant and succeeds in the litigation. See for example London Scottish Benefit Society v Chorley, Crawford and Chester, Guss v Veenhuizen (No.2).

5          On the other hand, it is well established that a litigant in person other than a solicitor is not entitled to costs including costs arising from time spent in preparing for the case. See Buckland v. Watts, Cachia v Hanes.

6          I should say that the rule which was stated by the High Court in Guss in 1976 has been seriously doubted by the High Court in Cachia v Hanes. As a result, that rule has no longer been followed by the Full Court of Western Australia: see Dobree and Ors v Hoffman. However, in Brott v Almatrah, Batt J held that he was bound by the rule and therefore held that the solicitor who represented himself in the Magistrates' Court with success should have been entitled to an order for costs.

7          The same view has been adopted by the New South Wales Court of Appeal in Atlas Corporation Pty Ltd v Kalyk. Like Batt J, I consider that I too am bound by the statement of the rule in Guss' case, notwithstanding the well justified criticisms of that rule stated by the High Court in Cachia's case. … (footnotes omitted)

9                     It may be that the Chorley exception will be revisited by the High Court in due course for the persuasive reasons expressed by Parker J in Dobree 18 WAR 36 but until that time, like other judges I would consider myself bound by Guss v Veenhuizen 136 CLR 47 to follow and apply the Chorleyexception.  Notwithstanding this, another single judge interlocutory decision will not add a great deal to the debate.  Particularly bearing in mind that the application for leave to appeal and appeal is imminent and as the Chorley exception is the only basis raised for opposing costs, I consider that it would be appropriate to reserve the question of costs of and incidental to the application for determination by the Full Court on the application for leave to appeal and if leave is granted, on the appeal. 

10                  I will make that order.

Associate:

Dated:         23 July 2008