SUPREME COURT OF QUEENSLAND

CITATION:	Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2024] QSC 197	
PARTIES:	JAMES BOYD THOMPSON
(applicant)
v
CAVALIER KING CHARLES SPANIEL RESCUE (QLD) INC
(first respondent)
AND
PETER ARTHUR
(second respondent)	
FILE NO:	12173 of 2018	
DIVISION:	Trial Division	
PROCEEDING:	Application 	
ORIGINATING COURT:	Supreme Court at Brisbane	
DELIVERED ON:	29 August 2024	
DELIVERED AT:	Brisbane	
HEARING DATE:	18 July 2024	
JUDGE:	Muir J	
ORDER:	1.	The 22 March Directions issued by the second respondent are set aside. 
2.	By 4.00pm on 12 September 2024, the second respondent is to issue further directions to the parties consistent with these reasons.  
3.	I will hear the parties as to costs.  	
CATCHWORDS:	PRACTICE AND PROCEDURE – TAXATION OF COSTS – DIRECTIONS BY COSTS ASSESSOR– NATURAL JUSTICE – where the applicant challenges directions made by the costs assessor – where the applicant submits that he has not been afforded procedural fairness – where unredacted documents were provided to the costs assessor and redacted copies to the applicant – where the applicant submits the unredacted copies of all documents relied upon by the first respondent to support the items claimed in the costs statement ought to be provided to both parties, or alternatively if the first respondent maintains legal professional privilege over some parts or all of the documents then identical documents are provided to the applicant and costs assessor – whether the directions should be set aside 
Civil Proceedings Bill 2011 (Qld)
Civil Proceedings Act 2007 (Qld)
Uniform Civil Procedure Rules 1999 (Qld), r 5, r371, r 720b, r 742

Amos v Wiltshire [2018] QCA 208
Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2024] QSC 28
Clay v Kurelic [2001] WASC 318
Giannarelli v Wraith (No 2) (1991) 171 CLR 592
Gower Chemicals Group Litigation v Gower Chemicals Limited & Anor [2008] EWHC 735 (QB)
Halliday v High Performance Personnel Pty Ltd (in liq) (1993) 67 ALJR 678
Ji v Bluestars Real Estate Pty Ltd [2018] VSC 11
Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2024] NSWDC 233
Osland v Secretary, Dept of Justice (2008) 234 CLR 275
Pamplin v Express Newspapers Ltd [1985] 1 WLR 689
Re Watling Roche's Bill of Costs [2000] 1 Qd R 692
Remely v O’Shea & Ors [2008] QCA 389
South Coast Shipping Co Ltd v Havant Borough Council [2002] 3 All ER 779
Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2020] QCA 2; [2023] QSC 214
Woollahra Municipal Council v Westpac Banking Corp (1994) 33 NSWLR 529
Zaghloul v Woodside Energy Ltd [2019] WASCA 187
	
COUNSEL:	The applicant appeared in person
ACLG Lawyers for the first respondent
The second respondent appeared in person	
SOLICITORS:	The applicant appeared in person
ACLG Lawyers for the first respondent
The second respondent appeared in person	

Introduction
[1]	By an application filed 16 April 2024, the applicant, sought the removal of the second respondent as the costs assessor appointed to assess an order for costs made against him in favour of the first respondent, on the basis that the second respondent was biased and failed to afford the applicant procedural fairness. But at the hearing of the application, the applicant resiled from his allegation of bias and it emerged (and was agreed by all parties) that the real issue for my determination is whether certain directions made by the second respondent on 22 March 2024 accorded with the principles of natural justice as required under r 720(2)(b) of the Uniform Civil Procedure Rules 1999 (Qld) (‘UCPR’) or under the common law. 
Preliminary procedural issue
[2]	As set out under the “Relevant background” heading below, the second respondent was appointed following the setting aside of a costs assessor’s certificate issued by another costs assessor.  It follows that the issue for my determination does not fall strictly within the Court’s powers of review under UCPR r 742(1). But given the impasse in the costs assessment process, the determination of the issue is one that may be characterised as ancillary to the issuing of a costs assessor’s certificate; or otherwise falling within (or ancillary to) the broad powers of the court provided by UCPR r 371(2), (where there has been a failure to comply with the UCPR – in this case the principles of natural justice [720(2)(b)]). 
[3]	I am therefore satisfied I have the power to determine the issue. This finding is consistent with the interests of justice and the overriding philosophy of UCPR r 5. 
Relevant background
[4]	The parties to the substantive proceedings have a long and chequered history dating back to 2018. The current application arises from the unanimous decision of the Court of Appeal in Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2020] QCA 2 dismissing an appeal by the applicant with costs. These costs were subsequently assessed by a costs assessor before the applicant successfully obtained orders setting aside that costs assessor’s certificate and the registrar’s costs order against him. At that time, consequential orders and directions were also made for the further conduct of the costs assessment, contingent upon the applicant paying monies into court and serving further material (which he did). This compliance triggered the registrar’s selection of one of five costs assessors listed in that order, from which the second respondent was selected and appointed as costs assessor on 25 October 2023.
[5]	On 6 February 2023, the second respondent requested the solicitors for the first respondent provide the documents on their file relied upon to support the items claimed in the costs statement. This was followed by a further direction by the second respondent asking for submissions concerning any privilege and confidentiality claimed over those documents.
[6]	Shortly after, the solicitors for the first respondent replied claiming privilege over some of the documents, noting that they were “low in number and should not inhibit the costs assessment process”; and that [in their view], the consequence of the claim of legal professional privilege: 
“… will result in you [the costs assessor] having to decide parts of the assessment in the absence of some documents (Clay v Kurelic [2001] WASC 318). Should the claim for legal professional privilege be accepted – a redacted version of that document can be provided within the file.”
[7]	On 8 March 2024, the applicant requested a copy of all documents given to the costs assessor; and on 12 March 2024, the second respondent requested submissions from the parties on his proposed directions. After some toing and froing, further directions were made on 22 March 2024, as follows: 
“…Mr Delaney sends to me such part of the costs applicant’s file upon which it intends to rely in this assessment (if the file sent to me contains copies of any documents over which privilege is claimed, please mark them so I can readily identify them as being privileged and if parts only of documents are claimed as attracting privilege, those parts should be marked in order for me to identify and read the parts over which privilege is claimed); and 
… to protect against inadvertent disclosure, the copy file sent to the costs respondent should not contain copies of any documents over which privilege is claimed or if parts only of documents are claimed as attracting privilege, those documents should be provided to costs respondent with the privileged parts redacted out in such a way that those parts cannot be read.” 
[8]	The first respondent partially complied with the 22 March Direction by providing the second respondent with unredacted version of the documents (highlighting the sections where claims for privilege are maintained) but did not provide the applicant with any documents. It is accepted that in anticipation of the present application the second respondent did not and has not read any of the documents over which the claim for privilege is maintained. 
[9]	The applicant challenges the 22 March Direction on the basis that he has not been afforded procedural fairness and seeks a ruling to the effect that unredacted copies of all documents relied upon by the first respondent to support the items claimed in the costs statement ought to be provided to both parties; or if the first respondent maintains legal professional privilege over some or all of the documents, they can only be viewed by the second respondent if the applicant is able to view them as well.
[10]	For the reasons that follow, I am satisfied that such a ruling should be made.  
Legal Principles 
[11]	The starting point is UCPR r 720 which provides as follows: 
“720 Procedure on assessment
(1) A costs assessor appointed to carry out a costs assessment is to decide the procedure to be followed on the assessment.
(2) However, the procedure must be—
(a) appropriate to the scope and nature of the dispute and the  amount in dispute; and
(b) consistent with the rules of natural justice; and
(c) fair and efficient.” [underlining added]
[12]	Ordinarily, as part of the costs assessment process, documents underpinning a costs item will be provided to the costs assessor to substantiate a contested costs item; this is the case in both solicitor-client and party-party cost assessments. The preservation of both confidentiality and legal professional privilege in cases where documents have been provided to the costs assessor is crucial to the principles of procedural fairness.  These concepts, while originating from the common law, are enshrined in 
ss 78 and 79 of the Civil Proceedings Act 2007 (Qld) as follows: 
“78 Preservation of confidentiality
(1) A person who gains confidential information through being a costs assessor or an account assessor must not—
(a) make a record of the information other than—
(i) for the purpose of carrying out the assessment; or
(ii) to discharge another function under a law; or
(b) disclose the information other than—
(i) under an order of a court or tribunal; or
(ii) as authorised by the person to whom the confidential information relates.
(2) In this section—
confidential information includes information about a person’s affairs, but does not include—
(a) 	information already publicly disclosed unless further  disclosure of the information is prohibited by law; or
(b) statistical information not likely to result in the identification of the person to whom the information relates.”
79 Preservation of privilege
Privilege continues despite disclosure to a costs assessor or an account assessor.”
[13]	These sections do not affect the operation of the common law principles of natural justice discussed below. The underlying intention behind s 79 of the Civil Proceedings Act is plainly to ensure that the provision of documents to a costs assessor does not constitute a waiver of privilege. This section appears to be more relevant perhaps to solicitor-client costs assessments where both parties have seen the privileged material and therefore disclosure of the material to the costs assessor does not constitute a waiver of privilege. 
[14]	A party’s right to confidentiality and legal professional privilege, can, in some cases be tested. If there is a real dispute between the parties over the categorisation of documents as privileged, a costs assessor may order the production of documents. Relevantly, a costs applicant may be faced with a choice to either provide documents containing privileged information or assert privilege and refuse to provide the documents to a costs assessor. This is the process of “election”. 
[15]	Election prevents a costs applicant from “having their evidential cake and eating it.” It essentially prevents that party from asserting privilege over a document upon which they intend to rely upon to substantiate a claim for costs by having to decide – or elect, whether to rely on the document, (in which case, the opponent will see it); or whether to assert privilege over it (in which case they will not be able to rely on it). 
[16]	In some cases, “election” may not be necessary if the parties are able to agree on a regime with respect to the disclosure of privileged documents. Rarely will the party liable for costs insist on seeing every document that is placed before the costs assessor. Instead, they will trust the assessor to carry out a proper examination of the privileged documents.  A more courteous and efficient fact-finding procedure appears to suffice for all but the most contentious of assessments. This “informal approach” has been described in England as “sensible, pragmatic and time and cost saving”.
[17]	A recent example of where a costs assessment was conducted using such an informal approach or procedure is found in the case of Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2024] QSC 28 which I heard last year. This case involved cross applications by the plaintiff (CMC) and the defendant (WICET) under UCPR r 742 to review a costs assessor’s assessment of CMC’s costs.  In Civil Mining, the verification process undertaken by the costs assessor resulted in there being an “information asymmetry” in the sense that the costs assessor had access to all of CMC’s solicitors’ files (with confidentiality and privilege preserved by ss 78 and 79 of the Civil Proceedings Act) but WICET’s solicitors did not. 
[18]	In practice, an information asymmetry only arises if the parties agree to proceed on an informal basis. In the present case there is no such agreement.
[19]	The conflict between natural justice and legal professional privilege is well recognised both here in and in England.  In Pamplin v Express Newspapers Ltd [1985] 1 WLR 689, Hobhouse J observed that such a conflict is usually avoided because of the flexibility and informality of taxation proceedings. His Honour went on to observe that if a claimant sought to rely on privileged documents to support a claim for costs, the claimant must elect to either waive the privilege and let the opposing party see the documents, or assert the privilege, and risk not being able to prove the claim.   
[20]	This approach was confirmed in South Coast Shipping Co Ltd v Havant Borough Council [2002] 3 All ER 779, where Pumfrey J relevantly observed that: 
“Once the document is of sufficient importance to be taken into account in arriving at a conclusion as to recoverability, then, unless otherwise agreed, it must be shown to the paying party or the receiving party must content itself with other evidence. 
…
The solution is imperfect, but is dictated by the existence of the privilege:  the fairest result given the existence of the privilege is that either both or neither can deploy the privileged material.”
[21]	As can be seen, the outcome may be imperfect but the rules of natural justice triumph.
[22]	The principle that the party liable to pay costs is entitled as a matter of natural justice to view the documents produced to the taxing officer was recognised by the Australian High Court in Giannarelli v Wraith (No 2) (1991) 171 CLR 592. On this issue, the following remarks of McHugh J in Giannarelli are most apposite:
“… in Pamplin expressly and in Goldman by inference, the courts said that ultimately a party either waives the privilege entirely and allows the taxing officer and the other side to see the privileged documents or asserts the privilege and maintains the confidentiality of his or her documents. This is the only acceptable view.
Accordingly, in this case, if the respondents decide to disclose privileged documents to the taxing officer, he is obliged to make copies of the documents available to the appellants.”
[citations omitted and emphasis added]
[23]	It follows that if a party having their costs assessed elects to disclose privilege documents to a costs assessor, these documents must also be provided to the party liable to pay those costs. But should the party having their costs assessed exercise their right to non-disclosure of privileged documents, the costs assessor will have to decide any contested items on the evidence before him, without drawing adverse inferences from the failure to produce the privileged documents. 
[24]	In either case, the following observations of Judge Gibson in Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2024] NSWDC 233 remain helpful, particularly as they concern the overriding importance of efficient and economical costs assessments being undertaken: 
“A long time has passed since Giannarelli v Wraith (No 2) was handed down, and the above remarks are to be found in several judgments, including at appellate level, where the view is taken that the rigid principles enunciated by McHugh J have softened with the advent of the twenty-first century. In Zaghloul v Woodside Energy Ltd [2019] WASCA 187 at [74], the Court stated:
“Next, in assessing the costs claimed in a bill of costs, a taxing officer has the power to summon and examine witnesses, require the production of documents, and administer an oath so as to receive evidence. Those powers may be called in aid in a case where there is a real doubt about whether the costs claimed by a party have in fact been incurred. However, those powers are clearly discretionary and a taxing officer is under no obligation to exercise such powers in every case. To require evidence, on oath, to substantiate the costs claimed in a bill of costs, when no real doubt exists as to whether those costs were in fact incurred, would merely add to the costs of litigation for no material benefit. The modern approach to the taxation of costs is to ensure that taxations are conducted as efficiently and economically as is possible.”” 
[emphasis added and footnotes omitted]
Conclusion 
[25]	The applicant has not consented to a document regime or an informal approach to disclosure in the costs assessment. It follows that there should not be any information asymmetry between the parties, and the established principles of natural justice must be upheld. This means that the applicant is entitled to see what the second respondent sees in the costs assessment and that the first respondent will need to make an election about whether they wish to maintain their various claims for privilege.  
[26]	I am therefore satisfied that the 22 March Directions are contrary to the principles of natural justice and ought to be set aside.
Orders and Directions
[27]	I order and direct that:
1.	The 22 March Directions issued by the second respondent are set aside. 
2.	By 4.00pm on 12 September 2024, the second respondent is to issue further directions to the parties consistent with these reasons.  
[28]	I will hear the parties as to costs.