Huang v Attapallil (No.4)

[2018] NSWSC 769

Supreme Court

New South Wales

Medium Neutral Citation:

Huang v Attapallil (No.4) [2018] NSWSC 769

Hearing dates:

On the papers

Date of orders:

25 May 2018

Decision date:

25 May 2018

Jurisdiction:

Common Law

Before:

Garling J

Decision:

(1)   Order that Order 3 of the Court made 10 November 2017 be amended so as to read:

 

“Order the plaintiff to pay the third defendant’s costs on an indemnity basis.”

(2) Order that the plaintiff pay the third defendant’s costs determined as a gross sum in the amount of $27,890 in accordance with s 98(4)(c) of the Civil Procedure Act 2005.

Catchwords:

COSTS – application by third defendant for indemnity costs order and specified gross sum costs order – Civil Procedure Act 2005, s 98(4)(c) – where offer of compromise not accepted – where proceedings brought by plaintiff were summarily dismissed – claims were ill-conceived and doomed to fail – whether offer of compromise was a real and genuine offer – where costs incurred by third defendant were reasonable – indemnity costs order made – gross sum costs order made

Legislation Cited:

Civil Procedure Act 2005
Uniform Civil Procedure Rules 2005

Cases Cited:

Auspine Ltd v Australian Newsprint Mills Ltd [1999] FCA 673; (1999) 93 FCR 1
Gibson v Drumm [2016] NSWSC 570
Hadid v Lenfest Communications Inc [2000] FCA 628
Hamod v State of New South Wales [2011] NSWCA 375
Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738
Huang v Attapallil (No.2) [2017] NSWSC 1382
Savage v Australian Unit Fund Management Ltd [2011] NSWCA 270
The Uniting Church v Takacs (No.2) [2008] NSWCA 172

Texts Cited:

Not Applicable

Category:

Procedural and other rulings

Parties:

Biru Huang (P)
Alex Attapallil (D1)
Joseph Assi (D2)
Charles Thornley (D3)
Geoffrey O’Shea (D4)

Representation:

Counsel:
In person (P)
Mentioned (D1)
J Assi (D2)
F Elliott (D3)
G O’Shea (D4)

  Solicitors:
Lander & Rogers (D3)

File Number(s):

2016/332818

Publication restriction:

Not Applicable

Judgment

1. On 10 November 2017, for the reasons which I then published, I ordered that the whole of the proceedings commenced by Summons dated 8 November 2016 be dismissed. I ordered that Ms Huang pay the third defendant’s costs. The third defendant was Mr Charles Thornley. The reasons for these orders are to be found in Huang v Attapallil (No.2) [2017] NSWSC 1382 (“the principal judgment”).

2. I reserved to the third defendant the right to seek an alternative order for costs.

3. On 16 November 2017, the third defendant notified the Court and Ms Huang that it sought the following alternative costs orders:

1. the plaintiff to pay the third defendant’s costs of the proceedings on an indemnity basis; and

2. the Court, pursuant to s 98(4) of the Civil Procedure Act 2005, fix Mr Thornley’s costs and disbursements in the sum of $27,890.

4. On 16 November 2017, I ordered that the application for alternative costs orders be determined on the papers. I also made directions with respect to the filing of any affidavits and submissions.

5. This judgment, which assumes familiarity with the principal judgment, deals with the application by the third defendant, Mr Charles Thornley, for the alternative costs orders against the plaintiff, Ms Huang.

6. It is convenient to deal first with the question of whether the Court should make an indemnity costs order.

Third Defendant’s Submissions – Indemnity Costs

7. The third defendant drew attention to a number of matters uncontroversially demonstrated by the evidence.

8. The first was that on 15 November 2016, seven days after the third defendant became aware that the Summons commencing the proceedings had been filed, a letter was sent to Ms Huang. That letter explained in some detail why the Summons which had been filed in this Court was, in the opinion of the third defendant, doomed to fail. It warned that if, notwithstanding the contents of the letter, Ms Huang chose to continue with the proceedings, the third defendant would apply for summary dismissal and, in that case, would seek an order for costs on an indemnity and in a gross sum.

9. The letter offered this to Ms Huang:

“In order to avoid further legal costs being incurred (which you will be liable to pay if these proceedings are dismissed), please confirm by 5pm 18 November 2016 that you will consent to the proceedings being dismissed with no order as to costs.”

10. No response was received to this letter.

11. On 25 November 2016, the third defendant served an Offer of Compromise on Ms Huang. That Offer of Compromise accorded with the prescribed form. It stated that it was an offer of compromise made in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (“the UCPR”) and set out an offer in these terms:

“The third defendant offers to compromise the whole of the plaintiff’s claim on the basis that the following orders for disposal of the claim are made:

(a)   judgment in favour of the third defendant;

(b)   Summons filed 8 November 2016 is dismissed; and

(c)   no order as to costs with the intent that each party bear their own costs of these proceedings.”

12. The letter which accompanied that Offer informed Ms Huang that Mr Thornley’s costs to the date of the Offer were $7,500 including counsel’s fees. The Offer was not accepted.

13. The third defendant submits that he is entitled to an order for indemnity costs because appropriate formal warnings of an intention to claim indemnity costs had been made in the letter of 15 November 2016, and that the clear findings made in the principal judgment demonstrated that the various claims which Ms Huang made against the third defendant were doomed to fail.

14. The third defendant drew attention to the following disposition of Ms Huang’s claims in the principal judgment:

1. the finding at [139] in these terms:

“139.   The Thornley conduct claims and the Uniform Law claims cannot be brought by Ms Huang because she has no standing so to do, and are hypothetical. They are without merit and ought be summarily dismissed pursuant to the Court’s discretion in r 13.4 of the UCPR.”

2. the finding at [159] in these terms:

“159.   In all of the circumstances the seeking of the relief with respect to the criminal conduct claims is doomed to fail. There is no basis for Ms Huang to bring the current proceedings with respect to the criminal conduct claims.”

3. Finally, the third defendant drew attention to the contents of [160] of the judgment, which was a summary of all previous reasoning and which was in the following terms:

“160.   For these reasons, I conclude with respect to all of the relief sought in the current proceedings that Ms Huang cannot succeed, and the whole proceedings against all defendants should be summarily dismissed.”

15. The criminal conduct claims referred to in [159] of the principal judgment sought a variety of relief based upon an assertion that the third defendant had committed criminal offences. The judgment indicates that, even if Ms Huang were to succeed in obtaining any of the declarations sought, which would be contrary to the general practice of the Court, those declarations would be meaningless because a different onus, being the civil onus, would have been applied by the Court in considering whether the acts justified the conclusions underlying the declarations. The Court noted that no conviction would result and that the Court could not do any act consequent upon such declaration in either its criminal or civil jurisdictions.

16. The third defendant submitted that having regard to these parts of the judgment, Ms Huang’s proceedings were ill-conceived and they should never have been brought against him. The third defendant submitted that he ought be compensated in full by an indemnity order for his reasonable costs and disbursements in having the proceedings summarily dismissed, particularly given his clear warnings to Ms Huang that he would make such an application, and his attempts at an early stage to bring the proceeds to an end.

Ms Huang’s Submissions – Indemnity Costs

17. Ms Huang submitted lengthy written submissions (78 pages in total) and a lengthy affidavit sworn 1 February 2018.

18. Much of the submissions rehearsed, in detail, all of the facts underlying earlier litigation and the bringing of the proceedings. I determined the relevant issues raised by this material in the principal judgment.

19. In addressing the issue of whether or not indemnity costs should be ordered, Ms Huang submitted that this was not a case that could properly be regarded as hopeless. She submitted that the conduct complained of was of a very serious nature, involving a serious alleged fraud and conspiracy to defeat the course of justice and, given that the Court had a clear inherent and supervisory jurisdiction over the conduct of solicitors and barristers, it was appropriate for the proceedings to be brought.

20. Ms Huang accepted in her submissions that all that the Court was asked to do was to make declarations as to whether the conduct of the third defendant was in breach of his professional obligations and was in breach of the Criminal Code.

21. Ms Huang submitted that her invocation of the jurisdiction of the Supreme Court was appropriate. She said:

“There was every valid and proper reason in these circumstances to I should seek the assistance of the Court of inherent and supervisory jurisdiction as an unsuspecting member of the public to request scrutiny by the Court on a transparently basis as to whether the work undertaken by the second defendant, Mr Assi, was of a legal nature and for the Court to decide on the evidence before it whether Mr Attapallil was in breach of his obligations to me as my solicitor in allowing Mr Assi who had been convicted of serious criminal offending to perform my legal work … What else is a litigant sole found in this extraordinary set of circumstances – abandoned by their solicitor out of self‑interest from the consequences of this type of conduct, supposed to do? They had already taken my money.” (sic)

22. It is relevant to note that the justification for the commencement and continuation of the proceedings put forward by Ms Huang did not relate to any specific conduct on the part of the third defendant, other than unsupported assertion of a conspiracy to cause her harm, and an allegation which was baseless that a false affidavit had been sworn.

23. With respect to the Offer of Compromise, Ms Huang submitted that having regard to the terms of the offer contained in the Offer of Compromise, the Court would not conclude that it was a genuine offer made in an attempt to settle the proceedings which involved a real and genuine offer of compromise: The Uniting Church v Takacs (No.2) [2008] NSWCA 172 at [10]-[14] per Hodgson JA; [22]-[29] per Basten JA.

24. In particular, Ms Huang pointed to the fact that the period for acceptance was short and therefore unreasonable, the offer did not involve any real compromise and it was not unreasonable of her to have rejected the Offer.

25. Ms Huang submitted that the third defendant had not discharged its onus of demonstrating the matters required to give rise to an order for indemnity costs.

Discernment – Indemnity Costs

26. In my view, an indemnity costs order is appropriate in all of the circumstances of this case, for these reasons.

27. In the principal judgment the Court, at some length, between [16] and [86] reviewed the litigation history involving Ms Huang and the third defendant.

28. It is unnecessary to repeat all of that material here. However, it is appropriate to recall that in the relevant litigation brought by Ms Huang, at all times the third defendant, Mr Thornley, was the solicitor on the record for the person against whom the initial litigation was directed, namely, Mr Bernhard Drumm, a resident of New Zealand. Mr Thornley and Mr Drumm were opposed to Ms Huang, and had different interests in the litigation commenced by Ms Huang. The third defendant’s role as solicitor in the other proceedings was to advance his client’s interests, and not those of Ms Huang.

29. I noted, at [18] of the principal judgment, that in those proceedings, the conduct of the third defendant in respect of which Ms Huang made complaint was that he had knowingly sworn a false affidavit in proceedings in the District Court of NSW to obtain a transfer of those proceedings to New Zealand. It was further alleged that he had conspired with the lawyers representing Ms Huang to disadvantage her in some unspecified way.

30. I concluded in the principal judgment that the allegations being made in the proceedings with which I was dealing were similar to, and largely the same as, the allegations which Ms Huang had made in proceedings in the District Court, which she had commenced on 25 July 2016. I noted that the third defendant had written to Ms Huang in those proceedings outlining the difficulties connected with the orders being sought in that Court, and inviting her to withdraw the Summons insofar as it affected him, with each party to pay his and her own costs.

31. In the principal judgment, I noted that on 11 November 2016, Gibb DCJ dismissed Ms Huang’s Summons, dismissed a Notice of Motion which she had filed seeking an order that the proceedings be transferred to this Court, and ordered her to pay the defendant’s costs of the proceedings on an indemnity basis: see [82] of the principal judgment.

32. I remain satisfied that the relief sought in those proceedings largely mirrored the relief which had been sought in the proceedings summarily dismissed by Gibb DCJ. Ms Huang in her submissions accepted that this was so.

33. In those circumstances, although the time given in the Offer of Compromise was short, it was adequate to enable Ms Huang to make a decision because she was well informed of all the facts, and the issues and the period allowed by the offer was sufficient in all of the circumstances.

34. Ms Huang was well informed of all of the facts, including the difficulties with her litigation, by the argument which had taken place in the District Court before Gibb DCJ, including the correspondence which preceded that argument, by the terms of the judgment of Gibb DCJ, by the terms of the letter which was sent by the third defendant’s solicitors on 15 November 2016, and by the covering letter which accompanied the Offer of Compromise.

35. I am in no doubt whatsoever that Ms Huang well knew the deficiencies in her proceedings – which were obvious, even to a self-represented litigant – and determined nonetheless that she would continue. That decision was, in all of the circumstances, an unreasonable one.

36. In support of this conclusion, I note that Ms Huang did not adduce any evidence on the indemnity costs issue, that she did not herself have sufficient time to consider the offer, nor did she adduce any evidence that she had written to the solicitors for the third defendant asking for the time to be extended so that she could respond to the offer, having had a further period of consideration. The absence of any such evidence enables me to more comfortably reach the conclusion which I have expressed.

37. As I have earlier described, her claim was in its formulation hopeless and appropriate for summary dismissal. Ms Huang was warned in good time of the consequences of continuing with it. She acted unreasonably in pursuing her claim.

38. In all of those circumstances, I am well satisfied that an order for indemnity costs should be made.

Gross Sum Costs Order

39. As earlier indicated, the third defendant seeks a gross sum costs order in an amount of $27,890.

40. The legislative warrant for such an order is found in s 98(4)(c) of the Civil Procedure Act 2005 which provides:

“(4)   In particular, at any time before costs are referred for assessment, the Court may make an order to the effect that the party to whom costs are to be paid is entitled to:

(a) costs up to, and from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(c) a specified gross sum instead of assessed costs, or

(d) such proportion of the assessed costs as does not exceed a specified amount.”

41. The discretion to make a gross sum costs order is not confined, and may be exercised where circumstances warrant, having regard to the scope and purpose of the provision: Hamod v State of New South Wales [2011] NSWCA 375 per Beazley JA (Giles and Whealy JJA agreeing) at [813]; Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 per Giles JA at [21]-[22]. In particular, the power to make a gross sum costs order may be exercised where the assessment of costs would be protracted and expensive and, as well, if it appears that a party obliged to pay the costs would not be able to meet a liability of the amount likely to result from the assessment. However, as Giles JA noted in Harrison at [22], the power to make a gross sum costs orders should only be exercised if a Court can do so fairly, and in particular, if the Court has sufficient confidence, having regard to the materials available, that an appropriate sum can be determined.

42. When dealing with the making of a gross sum costs order, Beazley JA, with whom Giles and Whealy JJA agreed, said in Hamod this at [816]:

“The terms of s 98(4) together with the more general considerations reflected in the Civil Procedure Act …, suggest that factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred …; the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to the costs; and the capacity of the unsuccessful party to satisfy any costs liability …”

43. The exercise of the power under s 98(4)(c) of the Civil Procedure Act may be appropriate when the Court considers that it is desirable to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment. This may arise from the likely length and complexity of the assessment process or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: see Hamod at [817].

44. In making a gross sum costs order, the Court is not required to undertake a detailed examination of the type that would be appropriate to a taxation or formal costs assessment: Harrison at [39]; Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Hamod at [819]; Auspine Ltd v Australian Newsprint Mills Ltd[1999] FCA 673; (1999) 93 FCR 1 at 5.

45. The approach to a gross sum costs order must be, although an estimate, a process which is logical, fair and reasonable, and may involve an impressionistic discount of the costs actually incurred or estimated in order to take into account the contingencies that would be relevant in any form of costs assessment: Hamod at [820]. In exercising the power to award a gross sum for costs, the Court needs to be astute to prevent prejudice to the respondent on the one hand by overestimating the costs and, on the other hand, not to cause an injustice to the successful party by applying some form of fail-safe discount on the costs estimate submitted: Savage v Australian Unit Fund Management Ltd [2011] NSWCA 270 at [31]-[33]; Hamod at [793].

46. The evidence adduced by the third defendant demonstrated that he had entered into a written costs agreement with the firm, Lander & Rogers, with effect from 8 November 2016 with respect to the legal costs incurred in his defence of the proceedings.

47. Further, the evidence disclosed on an itemised basis that the costs billed by Lander & Rogers to the third defendant totalled $24,264.35, including GST. Counsel’s fees totalling $6,872.25 had been incurred and paid. In addition, a filing fee for the Motion in the Supreme Court of $395 had been incurred and paid. In total this came to $31,531.60.

48. The solicitor’s costs (but not counsel’s fees or other disbursements) were then said to be appropriately discounted by 15%, representing a broad brush discount for any sums which might not be allowed on assessment, resulting in a total of $27,891.94. This sum was then rounded down.

43. In her submissions on the question of the making of a gross sum costs order, and the amount of it, Ms Huang drew attention in detail to several of the items described in the Table of Costs prepared by Lander & Rogers and tendered in the proceedings. She submitted, by reference to a significant number of identified items, that upon a costs assessment they would not be properly allowable.

44. Ms Huang drew attention to a decision in Gibson v Drumm [2016] NSWSC 570, a proceeding in which the third defendant acted for the defendant, Mr Drumm. In that judgment Young AJ made a gross sum costs order on an indemnity basis against Mr Gibson, but in so doing, made some remarks of a broad and general kind with respect to some items which were there claimed by the third defendant on behalf of Mr Drumm.

45. In that case, Young AJ indicated that certain items claimed would not be allowable, after making those deductions, then having made a generalised deduction of 12% to the entirety of the solicitor’s bill to reflect what might happen upon a costs assessment.

46. In addition to challenging some items in the Table of Costs tendered in these proceedings, Ms Huang submitted that the Court would not allow the hourly rate claimed by any of the solicitors who had expended time and worked on these proceedings. In support of the claim that the hourly rates should be reduced, Ms Huang relies upon a costs assessment in Local Court proceedings where a costs assessor reduced the hourly rate which had been charged by various solicitors employed by Lander & Rogers who had been engaged on that matter. The reasons of the costs assessor are not before this Court. One obvious reason why the costs assessor would have reduced the costs in that circumstance is that the proceedings were brought in the Local Court where the issues are less complex, the facts are generally less complex and the ordinary rates allowed for lawyers in that litigation are significantly less than those allowed for litigation in this Court. Whatever the specific reasons of the costs assessor were, I would not regard the way in which a costs assessor has approached a bill for proceedings in the Local Court as providing any basis for the reduction of hourly rates for proceedings in this Court.

47. I have read through the table of Lander & Rogers’ costs. I have had regard to the submissions of Ms Huang in detail. None of the submissions are persuasive. The rate of the costs charged is reasonable. The total of the costs charged is reasonable. In my view, the costs sought to be recovered, being the sum remaining after the application of a 15% discount, is a reasonable sum.

48. To the extent that there are any items which would not be allowed on a costs assessment, in my view the allowance of 15% is adequate and appropriate.

49. Accordingly, I am persuaded that a gross sum costs order in the amount of $27,890 ought be allowed.

Orders

56. I make the following orders:

1. Order that Order 3 of the Court made 10 November 2017 be amended so as to read:

“Order the plaintiff to pay the third defendant’s costs on an indemnity basis.”

2. Order that the plaintiff pay the third defendant’s costs determined as a gross sum in the amount of $27,890 in accordance with s 98(4)(c) of the Civil Procedure Act 2005.

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Decision last updated: 28 May 2018