Colagrossi v Transport for NSW (No.2)
[2019] NSWSC 1074
•22 August 2019
Supreme Court
New South Wales
- Amendment notes
Medium Neutral Citation: Colagrossi v Transport for NSW (No.2) [2019] NSWSC 1074 Hearing dates: 15 July 2019 Date of orders: 22 August 2019 Decision date: 22 August 2019 Jurisdiction: Common Law Before: Garling J Decision: (1) Order that:
(a) on or before 12 noon 6 September 2019, the plaintiff provide security to the defendant for the costs to be incurred until the completion of the discovery process in the amount of $1.25 million by way of payment into court or by providing to the solicitor for the defendant an irrevocable bank guarantee issued by an Australian bank in the sum of $1.25 million (security); and
(b) if security is not provided in accordance with these orders, the proceedings be stayed until security is provided.
(2) Order that the defendant has liberty to apply for additional sums of security for additional stages of the proceedings (following discovery).
(3) Order the plaintiff to pay the defendant’s costs of the Notice of Motion filed 20 June 2019 insofar as the Motion claimed an order for security for costs.Catchwords: COSTS – Security for costs – representative proceedings - application by the defendant – costs of discovery Legislation Cited: Civil Procedure Act 2005 Cases Cited: Maloney v Commissioner for Railways (NSW) [1978] 52 ALJR 292 Texts Cited: Practice Note SC Gen 17 – Representative Proceedings Category: Costs Parties: Rosa Maria Colagrossi (P)
Transport for NSW (D)Representation: Counsel:
Solicitors:
A M Hochroth / T Senior (P)
N Simpson (D)
Mitry Lawyers (P)
Lander & Rogers (D)
File Number(s): 2018/263841 Publication restriction: Not Applicable
Judgment
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The plaintiff, Rosa Maria Colagrossi, brings proceedings against Transport for NSW pursuant to Part 10 of the Civil Procedure Act 2005, claiming damages for nuisance alleged to have arisen from the construction of the Sydney Light Rail Project from Circular Quay, in the heart of the Central Business District of Sydney, to the south-east of Sydney.
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As one of a number of interlocutory proceedings, the defendant seeks that the plaintiff provides security for costs. This judgment deals with that application.
Notice of Motion
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On 20 June 2019, the defendant filed a Notice of Motion seeking, amongst other things, the following order:
“An order pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW), s 67 of the Civil Procedure Act 2005 (NSW), s 183 of the CPA and/or alternatively, pursuant to the Court’s inherent jurisdiction that:
(a) on or before a specified date the plaintiff provide security to the defendant for the costs to be incurred until the completion of the discovery process in the amount of $4 million or such other amount as the Court deems fit by way of payment into court or irrevocable bank guarantee issued by an Australian bank (security); and
(b) if security is not provided in accordance with these orders:
(i) the matter to be listed for mention before Justice Garling within 7 days; and
(ii) the proceedings be stayed until security is provided.
(c) an order that the defendant has liberty to apply for additional sums of security for additional stages of the proceedings (following discovery).
(d) costs of the defendant’s application for security for costs.”
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At the hearing of that Motion, counsel for the defendant clarified the position with respect to its claim for security for costs, seeking that the plaintiff provide the sum of $1.25M.
Evidence
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The evidence relied upon by the defendant in support of its Motion consisted of two affidavits of its solicitor, Ms Colleen Palmkvist, the first sworn on 20 June 2019 and the second sworn on 11 July 2019. No objection was taken to the contents of either of these affidavits and Ms Palmkvist was not required for cross-examination. Indeed, the submissions which were made by the plaintiff did not suggest that the Court would not accept anything in the affidavits of Ms Palmkvist.
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The plaintiff adduced no evidence on the Motion.
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In her second affidavit, Ms Palmkvist provided various updates as to the defendant’s costs of the proceedings. In the absence of any challenge to that material, there is no reason for the Court not to accept it, and the Court can safely act upon all of the evidence including the estimated costs.
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Between the commencement of the proceedings and up to 30 May 2019, the defendants have incurred costs of $413,000. It will be convenient to use rounded figures in this judgment.
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Ms Palmkvist, based on her experience as a litigation lawyer for over 15 years (including the conduct of other representative proceedings) has estimated that the defendant’s legal costs and disbursements (excluding GST) to the conclusion of the discovery process and based on the categories of discovery which had been agreed with the plaintiff, would be in the order of $2.75M.
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In her second affidavit, Ms Palmkvist also set out the basis of how that sum was arrived at. The amount is made up as follows:
Item
Anticipated costs (exclusive of GST)
Costs incurred to date
$412,855.22
Lander & Rogers’s estimated costs for discovery
$2,260,815.53
E-discovery provider costs to host email
$50,000
Counsels’ further costs estimated until completion of discovery (as instructed by counsel)
$25,000
Total
$2,748,670.75
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It appears from the evidence that documents falling within the discovery categories are held on five different electronic databases, in hardcopy archives and in the email boxes of selected employees of the defendant.
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Ms Palmkvist noted that with respect to the electronic databases and email boxes, it is possible to run key word searches on those databases and email boxes. The effect of a key word search, leaving aside the particular words to be searched, is to eliminate documents held on the database which are not relevant. However, following upon such keyword search, it is necessary for documents to be examined for the purpose of determining whether it is appropriate that they be discovered and whether in respect of the documents, any claim for privilege ought be made.
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With respect to the electronic document databases, and based upon instructions she has received, Ms Palmkvist estimated that there were a little over 190,000 potentially relevant documents which would need to be extracted and read. Naturally, many of those documents would consist of multiple pages.
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As well, over 6,600 emails have been identified as being potentially relevant, and would need to be examined.
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As well, the hardcopy archives consist of about 22 archive boxes of hardcopy documents regarding the procurement of the Light Rail Project. Ms Palmkvist estimated that those documents are contained within 110 binders, and that each of those binders would need to be reviewed.
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There is no reason to doubt the accuracy of the estimate of the size of the discovery process required of the defendant by the plaintiff, nor is there any reason to doubt the accuracy of the estimates provided by Ms Palmkvist with respect to the costs of that process. Naturally, as the evidence of Ms Palmkvist makes plain, the sum for the costs of the discovery process is simply an estimate. However, that estimate is soundly based on work already done and on her experience.
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Finally, Ms Palmkvist in her affidavit makes allowance for the fact that the costs which she has estimated would not necessarily all be recoverable from the plaintiff on the ordinary basis and makes allowance for any revision of the agreed discovery categories. Having made those allowances, Ms Palmkvist sets out the claim by the defendant for an order for security for costs in the sum of $1.25M. It is to be observed that this sum is less than half of the estimated costs of the delivery of discovery.
The Plaintiff’s Submissions
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The plaintiff does not oppose an order for security for costs. She accepts that the Court has power to make the order sought. However, she submits that no allowance ought be made in an order for security for the costs incurred to date, being the sum of $413,000.
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As well, she submits that, on the probabilities, the agreed discovery process can continue to be narrowed, thereby becoming less costly to the parties as the process unfolds.
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The plaintiff submits that the appropriate course for this Court is to order her to lodge the sum of $250,000 by way of security for costs in the knowledge that the defendant could seek further sums by way of further tranches in due course when the extent of the discovery exercise becomes clearer.
Discernment
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Without taking the time to engage in lengthy discussion about the juridical basis for an order for security for costs, it is plain that the Court has abundant power in proceedings of this kind to make an order against a plaintiff for security for costs.
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As well, given that the plaintiff represents a large number of group members and is funded by a third party litigation funder, which seeks ultimately to benefit financially in a significant way from any successful proceedings brought by the plaintiff or any settlement into which the plaintiff enters, it is entirely appropriate to make an order for security for costs.
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The first argument of the plaintiff, that it is inappropriate to order security for costs with respect to costs incurred to date, is unpersuasive in the circumstances of this case.
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I note that Practice Note SC Gen 17 – Supreme Court Representative Proceedings, provides in paragraph 7.1 that parties are expected, on the initial return of representative proceedings before the Court, to be in a position to deal with, amongst other things, whether any security for costs will be sought and if so “… the amount, manner and timing of the provision of such security”.
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When the proceedings were first before the Court for directions on 3 October 2018, counsel then appearing for the plaintiff acknowledged that due to late service of the Statement of Claim, the issue of security for costs could not be dealt with on that day. He said that he expected that matter could be agreed between the parties, and made provision in the orders that were sought (although they were not ultimately made) for any dispute with respect to security for costs to be listed before the Court at an early date.
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At all times in the course of these proceedings, it was in the forefront of the plaintiff’s mind that she would or may be obliged to provide security for the defendant’s costs. Indeed, counsel for the plaintiff on the first day expressed a view that that matter would be agreed.
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When the matter was next before the Court on 26 October 2018, counsel then appearing for the plaintiff, who is the counsel who appeared on this Motion, informed the Court with respect to security costs:
“There has been some concern among the parties about the other matters that your Honour raised, for example security for costs, and we are awaiting a letter from [the defendant] about that and about the amount of security that will be proposed. There is no issue that my client will have to pay security. There will be a negotiation or a debate and hopefully we can avoid troubling your Honour about the quantum.”
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Clearly, the quantum of any order for security for costs depended, in part, on the extent of discovery required by the plaintiff of the defendant.
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When the matter was next before the Court on 7 December 2018, in response to questioning by the Court, counsel for the plaintiff (with reference to the issue of security for costs) said:
“Your Honour we have asked our learned friends. We have said ‘Look we are happy to negotiate. Give us your estimates’. They haven’t done that yet. What I am told – I had a conversation with my learned friend just before your Honour came on and my question was ‘When will you be able to give us your estimate?’ And I am told that can be done in the next couple of days.
…
We would like to get this sorted out, at least as an initial matter, to get something sorted out by way of security, because we want to know what the position is and we want to get that moving; really, it is up to our learned friends in the first instance to tell us something more than just a headline of this is going to be a very expensive case.”
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Clearly, the parties could not resolve the issue by agreement, but there can be no doubt that the plaintiff was on notice of a claim for security for costs at the very earliest time, and there is no reason to think that the costs incurred in the proceedings whilst negotiations (which were ultimately unsuccessful) took place, was any reason to exclude that sum from the proper estimate.
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It seems that this submission of the plaintiff seeks to take advantage of the delay occasioned by the parties having negotiations in an attempt to resolve the amount to be provided. The parties remain a long way apart on that issue. There is no evidence which would enable the Court to draw any conclusion that one or other party was acting unreasonably during the negotiations.
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There is simply no persuasive or logical reason to exclude the costs incurred by the defendant to date in estimating the amount to be provided for security for costs.
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The second submission of the plaintiff, that only $250,000 ought to be ordered by way of security for costs, and that the defendant ought make further application, is based upon the expressed hope that the extent of the discovery process recently agreed between the parties can be reduced, and thereby become less costly.
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I reject this submission. First, the hope of further reduction of the extent of the exercise is not supported by any evidence and is nothing more than a mere assertion of counsel. As Barwick CJ said in Maloney v Commissioner for Railways (NSW) [1978] 52 ALJR 292 at 293:
“The fertile but unqualified imagination of counsel … can never be a substitute for … evidence.”
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Secondly, the hope of a reduction is inconsistent with the extent of discovery sought by the plaintiff and agreed to by the defendant at about the time of the hearing of the application for security for costs. Any significant reduction ought already to have occurred if it was possible.
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Thirdly, it has the substantive and practical effect of putting the onus on the defendant to make application for further amounts by way of security in circumstances where the evidence on the motion does not suggest any reason to think that the present circumstances about the extent of discovery might change.
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Fourthly, a conclusion by the Court that $250,000 is the appropriate sum for security is contrary to the unchallenged evidence of Ms Palmkvist as to a reasonable estimate of the costs of providing discovery.
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Fifthly, the order sought by the defendant is for security in a sum which is less than half of the estimated costs of providing discovery. Even if the discovery process can be reduced and thereby made less expensive, there is a significant allowance for that already built into the order which has been sought by the defendant.
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Finally, if the hope of counsel for the plaintiff came to fruition, and the discovery exercise is significantly reduced, with the consequence that the sum ordered is excessive, it is open to the plaintiff to seek a variation of the interlocutory order of the Court on the basis of the changed circumstances.
Conclusion
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In my opinion, it is entirely appropriate that the plaintiff is ordered to provide security for costs in accordance with the defendant’s Motion in the sum of $1.25M.
Orders
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I make the following orders:
Order that:
on or before 12 noon 6 September 2019, the plaintiff provide security to the defendant for the costs to be incurred until the completion of the discovery process in the amount of $1.25 million by way of payment into court or by providing to the solicitor for the defendant an irrevocable bank guarantee issued by an Australian bank in the sum of $1.25 million (security); and
if security is not provided in accordance with these orders, the proceedings be stayed until security is provided;
Order that the defendant has liberty to apply for additional sums of security for additional stages of the proceedings (following discovery).
Order the plaintiff to pay the defendant’s costs of the Notice of Motion filed 20 June 2019 insofar as the Motion claimed an order for security for costs.
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Amendments
28 August 2019 - Clerical error - coversheet
Decision last updated: 28 August 2019
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