Frigger v Kitay [No 9]
[2016] WASC 92
•30 MARCH 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FRIGGER -v- MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION) [No 9] [2016] WASC 92
CORAM: ALLANSON J
HEARD: 13 FEBRUARY 2015
DELIVERED : 30 MARCH 2016
FILE NO/S: CIV 2765 of 2010
MATTER :Section 78 of the Trustees Act 1962 and Section 1321 of the Corporations Act 2001
BETWEEN: ANGELA CECILIA THERESA FRIGGER
ANGELA CECILIA THERESA FRIGGER AND HARTMUT FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND
HARTMUT HUBERT JOSEF FRIGGER
PlaintiffsAND
MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)
First DefendantCOMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)
Second Defendant
Catchwords:
Security for costs - Top up application - Turns on own facts
Security for costs - Factors in the exercise of discretion - Litigation funder supporting party - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 1321
Rules of the Supreme Court 1971 (WA), O 25 r 2, O 66 r 2(f)
Trustees Act 1962 (WA), s 71, s 78
Result:
Plaintiffs' application dismissed
Defendants' application allowed
Security for costs ordered
Category: B
Representation:
Counsel:
Plaintiffs: In person
First Defendant : Mr D A Lenhoff
Second Defendant : Mr D A Lenhoff
Solicitors:
Plaintiffs: In person
First Defendant : Holborn Lenhoff Massey
Second Defendant : Holborn Lenhoff Massey
Case(s) referred to in judgment(s):
Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171
Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972
Frigger v Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [2013] WASC 229 (S)
Global Finance Group Pty Ltd (in liq) v Marsden Partners [2004] WASC 52
Green v CGU Insurance Ltd [2008] NSWCA 148; (2008) 67 ACSR 105
Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621
Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276
KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189
PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 65 ALJR 642
The Public Trustee (WA) v Brumar Nominees Pty Ltd [No 3] [2013] WASC 6
Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319
Waters v Commonwealth of Australia (Australian Taxation Office) [2015] FCAFC 46
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57
ALLANSON J: The plaintiffs and the defendants have each applied for orders that the opposing party give security for the costs of these proceedings. At the same time, the plaintiffs filed an application for orders preventing the defendants' current solicitors from continuing to represent them in these proceedings. That application was heard by another judge. I have delayed delivering these reasons until the questions regarding the defendants' representation were resolved.
Background
Computer Accounting & Tax Pty Ltd is in liquidation. Mr Kitay is the liquidator. Mr and Mrs Frigger are the shareholders in the company. Computer Accounting & Tax is the registered proprietor of two properties - it is sufficient for present purposes to refer to them as the Armadale property and the Perth property.
Mrs Frigger commenced these proceedings on 4 November 2010 by an originating summons. She was then the sole plaintiff, and the first defendant, Mr Kitay, was the sole defendant. Later, Mrs Frigger and her husband 'in their capacities as trustees of the Frigger Super Fund' were added as second plaintiffs. In 2014, Mr Frigger was named as a party in his personal capacity.
The plaintiffs originally sought:
1.an order pursuant to s 78 of the Trustees Act 1962 (WA) that the Perth property and the Armadale property, vest in Mr Frigger and Mrs Frigger in their capacity as trustees of the Frigger Super Fund;
2.a declaration pursuant to s 1321 of the Corporations Act 2001 (Cth) regarding interests in a term deposit at St George Bank; and
3.orders pursuant to s 1321 of the Corporations Act regarding the plaintiffs' entitlement to repayment of a taxing fee paid in other proceedings.
Although commenced by originating summons, the matter proceeded as if commenced by writ of summons, with pleadings. The plaintiffs filed a statement of claim on 11 March 2011. The statement of claim was amended in May 2011. The plaintiffs initially alleged that Computer Accounting & Tax and Mr Frigger and Mrs Frigger were parties to an enforceable agreement under which Mr Frigger and Mrs Frigger advanced the funds for the purchase of the two properties as loans, subject to an agreement that the properties would later become assets of a trust.
On 25 October 2012, the plaintiffs filed a re‑amended statement of claim, in which they alleged that Computer Accounting & Tax holds the beneficial interest in each property on an express trust. Subsequent amendments have claimed that the facts relied upon give rise to a Quistclose trust.
As the matter has continued, issues have multiplied, particularly in the counterclaim and in the plaintiffs' reply and defence to counterclaim. In particular, the defendants have asserted a right of indemnity out of trust assets for any costs and liabilities incurred by Computer Accounting & Tax in its capacity as trustee.
Principles
The discretion to order that a plaintiff give security for costs under O 25 r 1 of the Rules of the Supreme Court 1971 (WA) is unfettered. The defendants are plaintiffs, within the meaning of the rule, in respect of any claims in the counterclaim not arising out of the claims made against them.
I approach this matter on the basis that there is not an entitlement to security once the defendant has established that the plaintiff will be unable to pay its costs if the defendant is successful; nor is there a predisposition towards an order for security: see the extensive review of the authorities in Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497. There are several cases which have identified the factors commonly considered in such applications: see KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189, 196 ‑ 198; Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [6]. None of these lists is, or claims to be exhaustive, and the factors will vary from case to case. In exercising a discretion, the weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed: PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 65 ALJR 642, 643.
The bona fides of a claim and its merits may be considered in the exercise of the discretion, at least where there is material from which an assessment may be made: see, for example, Brian E Fencott and Associates Pty Ltd v Eretta Pty Ltd (513 ‑ 514). Generally, however, the court should not embark on a detailed consideration of the merits: Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972, 50636; Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621, 624; Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276 [83] ‑ [84]. Even though this matter has proceeded for some years, I am not satisfied that I should now attempt an assessment of the strength of either claim.
I proceed on the basis that both claim and counterclaim are made in good faith. Neither party has put forward a sound basis for any other conclusion
The plaintiffs' application
In December 2011 the plaintiffs obtained an order for security for costs in the total amount of $150,000, to be given in three tranches. The defendants have paid $100,000 into court. A third amount is to be paid at the time of listing for trial.
At various times during 2014, the plaintiffs foreshadowed, but did not press, an application to increase the amount of the security based on two factors: first, the current amount will be inadequate, given the projected length of the trial; second, the defendants are funded by a litigation funder, and the plaintiffs assert that the funder is not solvent.
An application for security for costs should be made promptly, and the failure to do so is a factor in the exercise of the discretion. The plaintiffs obtained security early in these proceedings, and the current application is for a 'top up'. Although they vacillated over bringing the application during the latter part of 2014, the estimates of length of trial and particularly the length of time for the counterclaim have changed and remain uncertain. I do not regard delay as a factor against the plaintiffs.
The first defendant's position as a liquidator does not prevent the making of an order for the provision of security for costs.
An important factor in the present case is the existence of a litigation funder, Hillcrest Litigation Services Ltd. The relevance of the presence of a commercial funder behind a party was discussed by the New South Wales Court of Appeal in Green v CGU Insurance Ltd [2008] NSWCA 148; (2008) 67 ACSR 105.
The litigation funder is party to a contract with the defendants under which it will receive part of the proceeds of any recovery in these proceedings. Copies of the litigation funding agreement were put before the court, with very limited redactions for the purposes of preserving confidentiality, in an earlier application relating to costs: see Frigger v Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [2013] WASC 229 (S). Relevantly to the present application, the effect of the agreement is that Hillcrest agrees to pay any taxed costs (which are taxed on a party party basis) payable by the first defendant to any other party whether arising upon the dismissal or discontinuance of the proceedings or otherwise, but only to the extent that those costs were incurred during the term of the agreement; to provide any security for costs ordered by the court in the proceedings during the term of the agreement; and to indemnify and keep indemnified the defendants in respect of adverse costs orders. The first defendant is liable for payment of any costs above party and party costs.
In the circumstances of this case, I am satisfied that the agreement is a matter that favours an order for security which, according to the funding agreement, the funder would be obliged to comply with: see, for example, Green v CGU Insurance Ltd [51] ‑ [53]. There is in this case, however, a peculiar complication. The plaintiffs allege that the litigation funder is itself insolvent. The evidence presented in support of that allegation was inadequate ‑ one page from Appendix 4C to a quarterly report lodged with the ASX by the funder. Mrs Frigger also referred to the results of her research into the solvency of the company which is providing the funding, but did not attach the documents on which her statements of opinion were based. But even if, on the evidence presented at the time of the application, there was reason to question whether the funder could continue as a going concern, the evidence is no longer current. Because of the delay pending the resolution of the plaintiffs' application to restrain the defendants' solicitors from continuing to act, it is now more than six months from when that quarterly report was lodged. Were the solvency of the funder to be determinative in this application, I would allow the parties to file further evidence and submissions regarding the current position.
I am satisfied, however, that the application should be dismissed on another basis.
In the course of this matter, including the many interlocutory applications that I have already heard over about two years, the plaintiffs have on occasion been represented but frequently have not. As a rule, Mrs Frigger has made submissions on behalf of the plaintiffs on these occasions. There is not currently a solicitor on the record, although the plaintiffs say they have engaged a solicitor (Peter J Griffin & Co), who will come onto the record once the matter is listed for trial. The plaintiffs advised the court that they have also arranged counsel, again on the basis that counsel will be involved only when the matter is listed for trial. In the time I have been managing this action, two solicitors (not including Peter J Griffin & Co) and two barristers (not including the barrister foreshadowed for trial) have appeared for the plaintiffs, while most of the many applications have been conducted by Mrs Frigger in person. In these circumstances, the estimation of allowable legal costs already incurred and of projected future costs is particularly difficult.
The evidence on which the plaintiffs rely to show their estimated costs is a 'draft bill', apparently prepared by Mrs Frigger. In applications for security, sometimes evidence is presented in an affidavit prepared by a practitioner who has specialised as a costs consultant. The court often will act on the evidence of an estimate by lawyers engaged in the proceedings of the costs they expect will be incurred. I am not satisfied that the 'draft bill' apparently prepared by one of the plaintiffs enables a reliable estimate of future costs. There is no basis on which I can be satisfied that the estimation of costs has been done by someone with the necessary expertise or experience. To some degree, the court may be able to act on its own experience. But there is no evidence showing to what extent the matters in the draft bill are outside the security already ordered, or which work has been or will be done other than by legal practitioners.
In the present matter, where the court has already ordered a significant amount of security, it is not simply a matter of quantification, but goes to whether any additional order should be made at all. The plaintiffs have not produced evidence to satisfy the court that the existing security of $150,000 is inadequate.
I will dismiss the plaintiffs' application.
The defendants' application
In January 2015, the defendants applied for security for costs. The application is based, primarily, on three factors:
1.The plaintiffs' stated intention to leave Australia indefinitely.
2.Costs orders have been made from time to time against the plaintiffs in these proceedings, but have not been paid.
3.The defendants have been unable to enforce existing costs orders against the plaintiffs, largely because the plaintiffs' property in Western Australia is mortgaged to a company, H & A Frigger Pty Ltd, which the plaintiffs set up in 2012.
The defendants only now bring their application, nearly five years after these proceedings began. The precipitating factor, however, has been the conduct of the plaintiffs over the recent period. Where previously there may not have been reason to believe that the plaintiffs would be unable to pay the defendants' costs if their action is ultimately unsuccessful, the plaintiffs have now given good reason for that belief. While delay is clearly a relevant matter, it is not determinative against the present application.
The plaintiffs' stated intention to leave Australia
In September 2014, both in correspondence to my associate and in oral submissions in court, Mrs Frigger pressed for a trial before March 2015, on the basis that the plaintiffs intended to leave Australia in mid-March 2015. On 25 September, in court, Mrs Frigger said that the plaintiffs would not be in Australia either 'indefinitely' or 'for an indefinite period' from March 2015. The defendants and the court understood this to be more than a holiday. In submissions in this application, however, Mrs Frigger said that she was referring only to a holiday that the she and her husband intended to take.
I will consider the application for security on the basis that there has been a misunderstanding and the plaintiffs do not intend to leave Australia permanently.
The failure to pay existing costs orders
I made costs orders against the plaintiffs, to be payable forthwith, in May 2013 and in January, September (twice), and November 2014. The total of these costs orders is $32,308.87. Each of those orders has either been taxed, or costs were fixed at the time the orders were made. There is an additional amount of $7,387.97, being the cost taxed and allowed in an appeal by the plaintiffs in CACV 120 of 2013, an appeal which they discontinued. The plaintiffs have not paid any of those costs ordered.
In court, Mrs Frigger asserted the plaintiffs' intention to not pay those amounts previously ordered because they should be set off against amounts owed to them by Computer Accounting & Tax under a running account. The running account, and whether any balance is owed to the plaintiffs, is in issue in the proceedings.
Under O 25 r 2, the court may order security where a plaintiff is 'in default in respect of any costs ordered to be paid by him in any proceedings previously brought by him against the same defendant or another defendant for substantially the same cause of action or in relation to substantially the same subject matter'. The failure by the plaintiffs to pay existing costs orders that were ordered to be paid forthwith is also relevant to the general discretion to order security: see, for example, Waters v Commonwealth of Australia (Australian Taxation Office) [2015] FCAFC 46. In my view, it is a relevant circumstance that the failure is not because the plaintiffs are impecunious, but appears to be the result of a deliberate decision to not pay. The explanation may lie in the failure of the plaintiffs to be represented and properly advised. It was apparent on the hearing of the application that Mrs Frigger did not appreciate the distinction between pleading that there was a running account, and providing evidence for the purposes of the application to establish a right of set off. But while the state of the running account is in issue in the proceedings, it is not for the plaintiffs to arrogate to themselves the decision that it gives rise to a set off against existing judgments. The decision by the plaintiffs to not pay existing orders can engender no confidence that they will meet future costs orders that might be made against them.
The mortgages
The plaintiffs own land, either individually or as joint tenants, in Applecross, Bayswater and Como. Mortgages have been registered over all three properties in favour of H & A Frigger Pty Ltd. The Como property and the Bayswater property are each mortgaged to secure the sum of $800,000, and the Applecross property may be mortgaged for up to $2.5 million.
All motor vehicles in the names of the plaintiffs have a security registered against them to H & A Frigger Pty Ltd.
The presence of these mortgages and securities has prevented the defendants from enforcing the costs orders made in their favour against property of the plaintiffs.
The plaintiffs are the directors of H & A Frigger Pty Ltd, but its two shares are owned by persons resident in Germany. Mrs Frigger told the court that the mortgages secure loans from people in Germany. There are no written loan agreements.
The evidence about the arrangements under which the properties are encumbered is sparse. In her affidavit filed in this application, dated 12 February 2015, Mrs Frigger explained the creation of the mortgages. She said that in 2012 and 2013 she and her husband assisted their children to purchase real estate. In 2014, they purchased a commercial property in the Frigger Super Fund, partly funded from borrowed funds. It was necessary to obtain overseas finance for those purchases. The mortgages registered against the real properties were bona fide to secure funds obtained overseas for the purchase of the properties (at [9] - [10]).
In her oral submissions, Mrs Frigger said that the borrowings 'came straight into our bank account in Australia from overseas. That's the best I can do at this stage. I haven't put it before you. I would have to search through numerous bank statements to find out when and where that money came through …' (ts 235 - 236). She agreed that there were bank statements evidencing over $4 million coming into the plaintiffs' bank account. Given the relatively short period over which these transactions occurred, I asked if the plaintiffs wanted the opportunity to file a further affidavit exhibiting that evidence, and made an order permitting them to do that within two weeks. The plaintiffs did not file any further evidence.
An application of this nature is not the occasion for findings on disputed facts. It is sufficient for present purposes to find that although the plaintiffs apparently have significant assets in Western Australia those assets are all subject to mortgages. As a result, although the plaintiffs appear to be not without means, they may not have property available to meet an order for costs should an order be made against them.
The plaintiffs as trustees
In submissions, the plaintiffs also denied liability to pay existing costs orders on the basis that those orders, or at or at least the majority of them, are against them in their representative capacity as trustees of the Frigger Super Fund. They complain that the defendants are seeking to recover the costs against them personally for costs they incurred in their capacity as trustees.
The principles applying to costs orders against trustees were summarised by Pritchard J in The Public Trustee (WA) v Brumar Nominees Pty Ltd [No 3] [2013] WASC 6:
In the absence of a special order, a plaintiff who sues in a representative character will personally be liable to pay the costs of the defendant in the case of a nonsuit or of a judgment for the defendant. In the case of a plaintiff who is a trustee, that rule reflects the basic principle that a trustee is personally liable for debts incurred as trustee in the administration of the trust fund. However, a trustee has a right to reimburse itself out of trust property for all expenses reasonably and properly incurred in the execution of its powers and duties as a trustee. Alternatively, the trustee can pay those expenses out of trust property.
See Rules of the Supreme Court, O 66 r 2(f). See also Trustees Act 1962 (WA), s 71; Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319, 335, 336; Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 52 (Owen J).
In short, the plaintiffs are personally liable on the orders made, even where those costs relate to issues where they have sued in their capacity as trustees.
Other factors
The plaintiffs also submit that the defendants are the 'aggressor' and the plaintiffs' claims are, in effect, defensive. As the matter has continued, issues have multiplied, particularly in the counterclaim and in the plaintiffs' reply and defence to counterclaim. But on consideration of the history of these proceedings, I cannot accept the plaintiffs' argument that their claim for ownership of the Perth and Armadale properties is a defensive claim. When Mrs Frigger initiated these proceedings, she was attempting to overcome the consequences of Computer Accounting & Tax being the registered proprietor of both properties, and an earlier decision of Simmonds J that the company owned the Armadale property in its own right. This is not a ground for exercising the discretion in favour of the plaintiffs.
I do not understand any of the cases as establishing a principle that a litigant who is receiving funding through a litigation funder should not have the benefit of an order for security. The presence of a funder is but one factor to be considered in the exercise of the discretion. In the circumstances of this funding agreement, and the reason why an order for security is otherwise called for, I do not regard the funding agreement as a reason for denying the order sought by the defendants.
Conclusion on defendants' application
On the state of the evidence, I am satisfied that unless an order for security is made in favour of the defendants, they would be unable to enforce a judgment for costs should they be successful following trial. I am also satisfied that, in the exercise of the court's discretion, an order should be made in favour of the defendants.
Even at this stage, where the matter has proceeded for some years, it has not yet been fully pleaded. Estimating future costs is very difficult. The best the court can do is to estimate the sum which it thinks just to order to be secured, having regard primarily to a reasonable estimate of the likely taxable costs of the defendants, and an assessment of the extent to which those costs arise out of the trial of the plaintiffs' claims rather than the counterclaim: see, for example, Global Finance Group Pty Ltd (in liq) v Marsden Partners [2004] WASC 52 [57].
The defendants have put forward a draft bill of costs for the party/party costs from 1 January 2015. It is supported by affidavit evidence of an experienced legal practitioner. The draft bill is based upon a trial of eight days, and includes costs already incurred in the application for security for costs, but is otherwise prospective. In making an order for security, the court does not set out to give a complete indemnity to the defendants: Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171, 175. The estimate given by defendants is for costs of approximately $162,000. In my experience, for a matter of this complexity, that is not an unreasonable estimate.
The defendants submit that that amount should be reduced by one third for the court time devoted to the proof of claims not in the statement of claim. It is very much a matter of impression but my assessment of the matter is that the reduction should properly be about 40%. In assessing the amount of a proper security, the court will normally make a further reduction on the basis that the amount is not intended to provide a complete indemnity.
I will order that the plaintiffs provide security for costs in the amount of $80,000. That security is to be by payment into court.
The risk of further delay
The issues between the parties spill into some relatively complex areas of law. The plaintiffs, although they apparently have access to legal advice, have prepared documents, including pleadings, themselves. This has led to many interlocutory disputes. The matter has proceeded slowly. In 2015, there are still pleading disputes over the most recent amendments by the plaintiffs to the reply and defence to counterclaim (judgment in that matter is to be handed down at about the same time as these reasons). The plaintiffs have been pressing the court to program this matter for trial as soon as possible. They have alleged deliberate delay by the defendants. Despite the need for progress, there are now competing applications for security, the application to restrain the solicitors for the defendant, and further delay.
I will order security to be given by the plaintiffs by payment into court by a fixed date, and will hear the parties as to the time that should be allowed.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FRIGGER -v- MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION) [No 9] [2016] WASC 92 (S)
CORAM: ALLANSON J
HEARD: ON THE PAPERS
DELIVERED : 13 APRIL 2016
FILE NO/S: CIV 2765 of 2010
MATTER :Section 78 of the Trustees Act 1962 and Section 1321 of the Corporations Act 2001
BETWEEN: ANGELA CECILIA THERESA FRIGGER
ANGELA CECILIA THERESA FRIGGER AND HARTMUT FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND
HARTMUT HUBERT JOSEF FRIGGER
PlaintiffsAND
MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)
First DefendantCOMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)
Second Defendant
Catchwords:
Practice and procedure - Costs - Whether to be fixed or taxed - Scale costs - Turns on own facts
Legislation:
Legal Profession (Supreme Court) (Contentious Business) Determination 2014 (WA), Item 10(1)
Result:
Plaintiffs to pay defendants' costs
Costs to be taxed
Category: B
Representation:
Counsel:
Plaintiffs: No appearance
First Defendant : No appearance
Second Defendant : No appearance
Solicitors:
Plaintiffs: In person
First Defendant : Holborn Lenhoff Massey
Second Defendant : Holborn Lenhoff Massey
Case(s) referred to in judgment(s):
Frigger v Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 9] [2016] WASC 92
Verney v Verney [2016] WASC 110
ALLANSON J: On 30 March 2016, I made orders on the parties' competing applications for security for costs. I dismissed the plaintiffs' application and allowed that by the defendants. The defendants have asked me to fix costs, but, in effect, to conduct an assessment based on an affidavit as to the time actually spent in preparing for and arguing the applications. The schedule in the Consolidated Practice Directions, by reference to which costs are generally fixed, may fall well short of the amount that would be fixed on taxation. Mr Lenhoff, solicitor for the defendants, made it clear that the defendants were not seeking costs fixed in accordance with that schedule.
I do not believe that it is generally desirable for a judge to attempt to fix costs if it cannot be done within the schedule in the Consolidated Practice Directions, or with minor adjustments. But there are instances where the court might act to avoid further costs being incurred in the taxation process: see, for example, Verney v Verney [2016] WASC 110. And this matter has features which support a quick resolution of the costs question. There have been many interlocutory applications, in some of which costs have been fixed but in others order have been made for the costs to be taxed. It would be preferable to alleviate the cost to the parties and to the court of another taxation. The defendants are a liquidator and a company in liquidation, with funding constraints. The defendants have, to date, experienced difficulty in enforcing existing costs orders.
At the request of the defendants, on 30 March 2016, I ordered that the plaintiffs have to 8 April 2016 to file any submissions in response to the submissions and affidavit of Mr Lenhoff regarding the defendants' costs, and that the decision whether the costs are to be fixed or taxed, and if fixed in what amount, would be determined on the papers. The plaintiffs did not file any submission or request an extension of time by 8 April 2016.
Background
The background to this matters is set out in the reasons for judgment on the application for security: Frigger v Kitay in his capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 9] [2016] WASC 92.
In short, on 21 August 2014, the plaintiffs applied for additional security for costs, to be paid into the court. The application was supported by an affidavit of Mrs Frigger, sworn 21 August 2014. On 16 January 2015 the defendants filed their application, supported by an affidavit of David Abraham Lenhoff, sworn 16 January 2015. On 2 February 2015, Mrs Frigger swore an affidavit in response to the application.
At a directions hearing on 6 February 2015, the competing applications were programmed for a hearing on 13 February 'for no more than one hour'. Written submissions were dispensed with, unless a party chose to file them.
On 12 February 2015, Mrs Frigger swore a second affidavit in opposition to the security for costs application. On 12 February, the defendants filed written submissions.
The competing applications were heard on 13 February 2015. The direction limiting the length of the hearing proved ineffective, and the hearing time was approximately two hours and 45 minutes. At the conclusion of the hearing I reserved the decision, while giving the plaintiffs the opportunity to file a supplementary affidavit. The plaintiffs did not file further evidence.
Delivery of reasons was deferred while the plaintiffs' application to restrain the defendants' solicitors was determined by another judge. On 30 March 2016, the decision on the applications for security was handed down. The plaintiffs' application was dismissed. The defendants' application was successful, although the amount awarded was less than the amount sought.
The defendants are entitled to their costs.
Can costs be fixed?
In his affidavit regarding the costs incurred, Mr Lenhoff deposes that he is a solicitor with more than five years post admission experience and a 'senior practitioner'. He maintained an accurate record of the time spent on matters. He says that he will, for the purposes of this application, rely on the current hourly charge out rate for senior practitioners in the determination of $473 an hour, although his charge out rate is less than that. Mr Lenhoff states that he spent the following time:
1.seven hours and 30 minutes drafting and settling a conferral letter, a minute of proposed orders, and supporting affidavit;
2.seven hours drafting and settling submissions relied upon by the defendants at the hearing;
3.one hour and six minutes preparing for court;
4.three hours at the hearing itself;
giving a total of 18 hours and 36 minutes, at $8,797.80.
Mr Lenhoff says he further attended a conference 0.8 of an hour with a costs consultant, and spent at least two hours perusing documentation including the plaintiffs' affidavits. This gives a further two hours and 48 minutes at $1,324.40.
Finally, he seeks an allowance of two hours and 30 minutes for perusing the judgment, preparing the affidavit in support of the costs orders, and a minute of orders, and attending on the reserved decision: $1,182.50.
The total is $11,304.70. The maximum allowable under the item 10(a) of the Legal Profession (Supreme Court) (Contentious Business) Determination 2014 is $11,550. That, however, is on the basis of two days preparation and one day hearing. My preliminary assessment of this matter is that it falls far short of a requiring two days preparation, even allowing for the fact that there were competing applications. I had dispensed with the requirement for written submissions, (although the defendants chose to file them). The defendants' affidavit was largely material relating to its attempts to enforce earlier costs orders, that is, material the defendants had already compiled. The applications were not complex in either law or fact.
I do not, however, believe that I should deny the defendants the opportunity to justify their costs in an amount greater than allowed in the schedule to the consolidated practice directions. That will require taxation. There is no satisfactory shortcut to a fair assessment in this case.
The costs of the applications are to be taxed if not agreed.
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