Hundy v Turner

[2019] NSWSC 1881

Supreme Court

New South Wales

Medium Neutral Citation:	Hundy v Turner [2019] NSWSC 1881
Hearing dates:	On the papers
Date of orders:	20 December 2019
Decision date:	20 December 2019
Jurisdiction:	Equity
Before:	Darke J
Decision:	Gross sum costs order made in favour of the plaintiff in the sum of $40,500.
Catchwords:	COSTS – specified gross sum costs order – where orders made by consent for the appointment of trustees for sale of property co-owned by plaintiff and defendant – defendant ordered to pay the plaintiff’s costs as agreed or assessed – where parties’ solicitors entered into negotiations concerning the plaintiff’s costs – where plaintiff’s solicitor experienced difficulties contacting the defendant’s solicitor – where delay by defendant’s solicitor contacting plaintiff’s solicitor – specified gross sum costs order made
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 98 Conveyancing Act 1919 (NSW), s 66G
Cases Cited:	Boyd v Thorn (2017) 96 NSWLR 390; [2017] NSWCA 210 Calderbank v Calderbank [1976] Fam 93 Ghougassian v Fairfax Community Newspapers Pty Ltd [2015] NSWCA 307 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 In the matter of GTH Equipment [2017] NSWSC 1816 James v Australian and New Zealand Banking Group Limited [2016] NSWSC 833 Stoddart (NSW) Pty Ltd v Kellyville Building Pty Ltd [2019] NSWSC 1480
Category:	Costs
Parties:	Stephen John Hundy (Plaintiff) Tracey Lee-Ann Turner (Defendant)
Representation:	Counsel: Mr P Afshar (Plaintiff)   Solicitors: Elringtons Lawyers (Plaintiff) Joe Weller & Associates (Defendant)
File Number(s):	2018/325818
Publication restriction:	Nil

Judgment

1. This is an application by the plaintiff for a specified gross sum costs order in respect of the costs of the proceedings. The plaintiff seeks an order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) that the defendant pay the plaintiff’s costs of the proceedings (including this application) in a total gross sum of almost $43,000.

2. The plaintiff was appointed as the trustee in bankruptcy of the estate of John McLaughlin. On 7 December 2018, Kunc J made orders appointing the plaintiff and Christopher Darin as trustees for the sale of certain land in Tallong, New South Wales, pursuant to s 66G of the Conveyancing Act 1919 (NSW). The land was formerly co-owned by Mr McLaughlin and the defendant. His Honour also made orders on that occasion that the defendant pay the plaintiff’s costs of the proceedings.

3. On 4 October 2019, following a period of negotiation between the solicitor acting for the plaintiff and the solicitor acting for the defendant in relation to the costs to be paid by the defendant, the plaintiff filed the present application. The Court made directions for the filing and service of any affidavits and for the provision of written submissions in respect of the application, with the view to the matter being determined on the papers.

4. The plaintiff relies upon the following affidavits:

• Affidavits of the plaintiff affirmed on 23 October 2018 and 9 September 2019;

• Affidavits of Mitchell Evelyn affirmed on 17 September 2019 and 31 October 2019.

5. The defendant did not file or seek to rely upon any affidavits.

Summary of the salient evidence

6. On 1 February 2016, the plaintiff was appointed as trustee in bankruptcy of the estate of Mr McLaughlin. On 16 November 2017, he became the registered co-owner of the Tallong property with the defendant upon the lodgement of a transmission application with the Land Titles Office.

7. In about September 2017, the plaintiff reached an agreement with the defendant to place the property on the market for sale. It appears the plaintiff and defendant jointly instructed the plaintiff’s solicitor to act upon such sale. An agency agreement was apparently signed by both parties to appoint a real estate agent to market and sell the property. The plaintiff also obtained a valuation of the property from Douglas Walker and Associates, who valued the property at $300,000.

8. On 14 June 2018, the plaintiff received a letter from the defendant (dated 18 May 2018). The letter relevantly stated:

Following further advice on this matter there appears to be significant doubt about whether you have authority to sell my share of the land.

Accordingly, I now unconditionally and immediately rescind the consent I previously gave you and your firm to sell the land.

Please cancel all previous consents I may have given concerning the land and please note I am currently seeking further legal advice with respect to the land and the following three issues.

The first issue is whether you have legal authority to sell the land. I have been advised there are a number of legal cases which suggest you do not have such authority. I have also been advised that there is a matter currently in the High Court of Australia which may also have significant implications for my interests in the land. (See Commissioner of Taxation for the Commonwealth of Australia v Tomaras & Ors B9/2018; [2018] HCA Trans 56).

I have also been advised that there may be certain indigenous rights which may preclude or impact upon the sale of the land. I am currently intending to seek advice from a solicitor who has specialized in these matters over the past 25 years to see if there are restrictions on the disposition of the land.

I am also advised that Mr McLaughlin is currently negotiating with the Australian Taxation Office (“ATO”) and the Department of Finance (“DOF”) to have his tax debt remitted in full or in part.

I repeat my request that you do not sell the land which is half owned by me.

Alternatively I ask that you delay the proposed sale of land…until his applications have been determined by the ATO and the DOF.

Conclusion and Costs

I also confirm that if you do proceed to sell the land without my consent, I would suffer very serious and irreversible damages. As you are aware the importance of the land to Mr McLaughlin and me has for many years been spiritual, cultural and environmental and very personal. Despite the effluxion of time since Mr McLaughlin and I changed our personal relationship, neither of us has ever resiled from the mutual promises we made to each other that we would never sell the land.

The land has value for us which far beyond mere monetary value. Our view which has been confirmed by two independent lawyers is that monetary “damages” would not compensate me or Mr McLaughlin in the event that you sell the property without my consent.

As one of the lawyers said:

“It is a specific block of land in a specific locale. The appropriate compensation (if it arises), in the event that his debts are remitted could only be a remedy of “specific performance”. That is having the block of land re-conveyed to him and his former partner [ie me].”

The sample principle would apply if you sold the block without my permission. I would be required to seek an injunction to stop the transfer out of my name. This would no doubt be an expensive exercise for Mr McLaughlin’s Estate as it would for me.

Accordingly, I repeat my request that you exclude the block of land from Mr McLaughlin’s estate or transfer the land to me for a nominal amount of $10.

9. On 20 July 2018, the plaintiff’s solicitor responded. The letter noted that the defendant had previously reached an agreement with the plaintiff to sell the property. The letter stated that it appeared from the defendant’s letter that the defendant had terminated his instructions to the solicitors. A response was given to the individual points raised by the defendant. The defendant’s offer to purchase the plaintiff’s interest in the property for $10 was rejected, noting that the property had been valued by Douglas Walker and Associates at $300,000. It was stated that the plaintiff had instructions to commence proceedings in the Supreme Court to appoint trustees for sale in respect of the property.

10. A further letter was sent to the defendant on the same day. The letter was expressed to be written “without prejudice” and in terms offered that the defendant could purchase the plaintiff’s interest in the property for $150,000 (conditional on the defendant doing everything required to discharge a mortgage that was registered in respect of the property). The offer was expressed to be open until 4:00pm on 2 August 2018 after which, it was stated, the plaintiff intended to commence proceedings seeking the appointment of trustees for sale. The defendant did not respond to this letter.

11. There is no further evidence of any relevant events between June 2018 and the commencement of proceedings on 24 October 2018.

12. The first return date of the Summons was 23 November 2018. On that occasion, there was no appearance by the defendant. The matter was stood over to 7 December 2018. The plaintiff was directed to notify the defendant of the date.

13. The Court record indicates that on 5 December 2018 the defendant filed a Notice of Appearance. The Notice was filed by a solicitor acting on behalf of the defendant.

14. On 7 December 2018, the Court made orders by consent appointing the plaintiff (and Mr Darin) as trustees for sale of the property. Order 3 of the orders made that day provided that the defendant pay the plaintiff’s costs of the proceedings on a party/party basis, with liberty to apply for a different costs order within fourteen days. No such liberty was exercised at the time.

15. On 29 April 2019, the plaintiff and Mr Darin completed the sale of the property (the details of which are not in evidence). After applying part of the proceeds of sale towards the costs of the sale (which included real estate agents commission, legal fees in relation to the sale, and professional fees of the trustees), the net proceeds, being the sum of $220,818.84, was paid into the plaintiff’s solicitor’s trust account.

16. On 17 May 2019, the plaintiff’s solicitor sent a letter to the defendant’s solicitor. The letter noted Order 3 of the Court’s orders made on 7 December 2019 and stated that the professional fees incurred by the plaintiff in relation to the proceedings were in excess of $23,000 plus GST. The plaintiff’s solicitor stated, however, that she would discount those fees to what she believed was a fair and reasonable sum of $18,678 (inclusive of GST). The letter stated the plaintiff had incurred disbursements in the sum of $1,514.00 and barrister’s fees in the sum of $5,555.00. In total, the amount claimed from the defendant was $25,747.00. The letter concluded by asking the defendant’s solicitor to confirm the above so that the distribution of the net proceeds of sale of the property could proceed accordingly.

17. No response to this letter was received. On 28 May 2019, a follow up email was sent by the plaintiff’s solicitor.

18. On 29 May 2019, the defendant’s solicitor responded by email. The defendant’s solicitor stated that “for consent orders, the costs seem a bit steep”, and observed that the costs were presumably on a party/party basis. The defendant’s solicitor enquired whether the plaintiff’s solicitor was able to give him more information that might enable him to understand the costs claim.

19. On 3 June 2019, the plaintiff’s solicitor responded by email which provided an itemised account of the work done in the proceedings. The plaintiff’s solicitor also attached a copy of the barrister’s invoice. The plaintiff’s solicitor requested a response within five days.

20. There was no response to this email within the five day period. On 11 June 2019, the plaintiff’s solicitor sent a follow up email. Another follow up email was sent on 14 June 2019.

21. On 17 June 2019, the plaintiff’s solicitor called the defendant’s solicitor. A file note of the conversation made by the plaintiff’s solicitor is in evidence. It seems that the defendant’s solicitor asked if the plaintiff’s solicitor had sent through the detailed itemised account of work done in relation to the proceedings. The plaintiff’s solicitor appears to have advised the defendant’s solicitor that a detailed account was sent on 3 June 2019. It seems that the defendant’s solicitor then asked if he could have ten minutes to inspect the itemised account. The conversation appears to have ended at that point. The defendant’s solicitor appears to have called back shortly afterwards and stated that he had had an opportunity to inspect the fee entries. At some point during this conversation, the plaintiff’s solicitor asked if the defendant’s solicitor had seen the letter dated 17 May 2019. The defendant’s solicitor responded that he had not. The conversation appears to have ended with the defendant’s solicitor stating that he would seek instructions from the defendant in relation to the above.

22. On 19 June 2019, the plaintiff’s solicitor sent a follow up email to the defendant’s solicitor concerning the matters raised in the 17 June 2019 telephone conversation. A further follow up email was sent on 24 June 2019.

23. On 14 July 2019, the defendant’s solicitor responded by email. The email contained an offer, expressed to be made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93, that the defendant pay the sum of $5,000 in respect of the plaintiff’s legal costs. The offer was expressed to be open for seven days.

24. On 18 July 2019, the plaintiff’s solicitor responded. The plaintiff’s solicitor rejected the defendant’s solicitor’s offer, stating that it was manifestly inadequate and would not even cover the plaintiff’s disbursements. The letter went on to note the history of the costs negotiations, including the fact that the costs were already discounted as set out in the 17 May 2019 letter. The plaintiff’s solicitor then made an offer that the defendant pay 50% of the $25,747.00 sum (which was the sum offered to be paid in the plaintiff’s solicitor’s letter dated 17 May 2019), totalling $12,873.50. That offer was expressed to be made in accordance with the principles in Calderbank v Calderbank (supra) and was expressed to be open for acceptance until 4:00pm on 25 July 2019. The letter also noted that the plaintiff’s solicitor was concerned that the defendant was causing further costs to accrue in the matter due to the failure to respond to the 17 May 2019 letter for close to two months and for submitting the $5,000 offer, which the plaintiff’s solicitor described as “grossly unreasonable”. It was stated that if the defendant did not accept the offer, then the plaintiff’s solicitor had instructions to proceed to costs assessment.

25. There was no response to the plaintiff’s solicitor’s offer. On 29 July 2019, the plaintiff’s solicitor attempted to call the defendant’s solicitor but could not reach him. He left a message requesting the defendant’s solicitor to call him back. On 31 July 2019, the plaintiff’s solicitor sent a further email to the defendant’s solicitor. No response was received by the plaintiff’s solicitor.

26. As noted earlier, the plaintiff filed the present motion seeking a specified gross sum costs order on 4 October 2019. There is evidence that the plaintiff’s motion was served on the defendant’s solicitor by email and by post on that day.

27. By 14 October 2019, the defendant’s solicitor had not acknowledged service of the motion. On that day, the defendant’s solicitor was contacted by an administrative assistant working in the plaintiff’s solicitor’s firm. The defendant’s solicitor acknowledged that he had received the motion. He advised the assistant that he would contact the plaintiff’s solicitor “when he needed to discuss things with him later”.

28. The defendant did not file any affidavits in opposition by 22 October 2019. The plaintiff’s solicitor sent an email on 23 October 2019 enquiring as to whether the defendant’s solicitor intended to file any affidavits. The email requested a reply by 5pm the same day. No email response was received by the plaintiff’s solicitor.

29. The plaintiff’s solicitor called the defendant’s solicitor the following day. After reaching him, the defendant’s solicitor advised that he was with a client and asked whether he could call back later that afternoon. The plaintiff’s solicitor said that would be alright, but the defendant’s solicitor did not call back as foreshadowed.

30. A further call was made to the defendant’s solicitor on 25 October 2019 but the call was not answered. The plaintiff’s solicitor then sent an email noting that there had been no evidence served by 22 October 2019 and seeking clarity as to the defendant’s position in respect of the motion.

31. The defendant’s solicitor responded by email on 30 October 2019. The email stated that the defendant’s solicitor expected to have something for the plaintiff’s solicitor later that day. Shortly after this email, the plaintiff’s solicitor responded noting the extraordinary delays in receiving responses to communications. It was further noted that the plaintiff’s solicitor was now operating on the understanding that the defendant did not intend to put on any affidavits in opposition to the motion and noted that the plaintiff’s solicitor intended to proceed to prepare written submissions.

32. There was no response to this email by the defendant.

33. In support of his application, the plaintiff has adduced evidence of the actual legal costs incurred in the proceedings up to 10 May 2019. The total sum is $32,697.90 (inclusive of GST), comprising:

• $23,299.00 in solicitors fees;

• $5,050.00 in barristers fees;

• $1,123.00 in filing fees;

• $61.00 to request a copy of a judgment;

• $300.00 for process server fees;

• $2,864.90 for GST.

34. The plaintiff’s solicitor adduced an itemised account of the $23,299.00 in professional fees based on the time spent on the matter by various solicitors and administrative assistants. The evidence indicates that two solicitors undertook most of the work. The hourly rate for the more junior of the two solicitors was between $390.00 and $420.00 per hour. The more senior solicitor’s charge out rate was between $450.00 and $500.00 per hour. Two other senior solicitors also undertook work on the matter, one of whom was charged out at $530.00 per hour and the other at between $520.00 and $550.00 per hour. Two administrative assistants also undertook some work on the matter, each being charged out at $250.00 per hour.

35. The plaintiff’s solicitor also deposed that he estimated that legal costs of about $7,000 plus GST had been incurred due to the failure of the parties to reach agreement on costs. He also estimated that the legal costs of this application would be up to $14,000 (including disbursements, GST and counsel’s fees). That is a total of $21,700.

36. The plaintiff’s solicitor deposed that based on his experience as a solicitor admitted into practice in the Australian Capital Territory in November 2014, and having experience in commercial and property litigation, an overall discount of around 20–25% would usually be applied when costs are assessed on the ordinary basis.

Submissions

37. In his written submissions, the plaintiff identified s 98(4) of the Civil Procedure Act as the relevant provision governing the Court’s discretion to award costs on a specified gross sum basis. By reference to Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9] and In the matter of GTH Equipment [2017] NSWSC 1816 at [9], the plaintiff submitted that the purpose of awarding costs on a specified gross sum basis was to “avoid the expense, delay and aggravation” involved in protracted litigation arising out of taxation. The plaintiff submitted that if no such order were made in the present case, there would likely be a protracted assessment process. This was said to be due to the defendant’s conduct both prior to the proceedings and after the orders were made appointing the trustees for sale.

38. The plaintiff further submitted that if the Court was minded to make a specified gross sum order, then the Court should vary Order 3 made on 7 December 2018 such that the defendant’s costs be paid out of the defendant’s share of the proceeds of sale. However, upon the Court requesting further submissions as to whether such an order would be inconsistent with statements of principle expressed by Macfarlan JA and Leeming JA in Boyd v Thorn (2017) 96 NSWLR 390; [2017] NSWCA 210 at [41]–[49] and [180]–[181], the plaintiff did not press that order.

37. Although the defendant did not initially provide written submissions by the date set in the Court’s timetable, the defendant provided written submissions following the Court’s request for further submissions. It is not necessary to refer to those submissions insofar as they concern the question whether the defendant’s costs should be paid out of the defendant’s share of the proceeds of sale. As to whether the Court ought to make a specified gross sum costs order, the defendant noted that Mr Evelyn’s estimate of further costs (contained in his 17 September 2019 affidavit) was imprecise. The defendant suggested that if the Court was not minded to order that the costs be paid out of the defendant’s share of the proceeds of sale, then the entire application was essentially misconceived, and as a result “the Plaintiff ought to not be awarded costs in these proceedings.” The defendant submitted that the proceeds from the sale of the property were not large and the legal costs had potential to significantly reduce the amount to be distributed. It was put that if the relief sought by the plaintiff is refused then an order for costs to be payable “as agreed or assessed” would have the capacity to allow more of the proceeds of the sale of the property to be available for distribution to the parties. I confess that I found that last submission impossible to comprehend.

Determination

40. As the plaintiff submitted, the power to award costs on a specified gross sum basis is found in s 98(4) of the Civil Procedure Act. I have recently summarised the principles applied by the Court in such applications in Stoddart (NSW) Pty Ltd v Kellyville Building Pty Ltd [2019] NSWSC 1480 at [23]–[26]. I adopt those principles here.

41. I am satisfied that this is an appropriate case to make an order that the plaintiff’s costs (including the costs of this application) be awarded on a specified gross sum basis. I generally accept the plaintiff’s submissions in this regard. Notwithstanding the prompt resolution of the substantive issues in the proceedings, the evidence shows that the defendant (by her solicitor) has persistently failed to engage with the plaintiff’s solicitors in the resolution of a relatively simple claim for costs. The evidence does not explain the defendant’s conduct. The defendant’s solicitor has not provided any evidence of his own to explain the course he took during these negotiations. The evidence indicates that the defendant’s solicitor has adopted a similar attitude in respect of the preparation of the present application, notably by failing to engage in a timely manner with the plaintiff’s solicitors, and by the belated provision of written submissions. The Court therefore cannot be confident, were the matter to proceed to assessment, that the defendant through her solicitor would not adopt a similar attitude to the assessment process (cf Ghougassian v Fairfax Community Newspapers Pty Ltd [2015] NSWCA 307 at [63]). This is of added significance in the context of a modest bankrupt estate and the relatively small amount of costs claimed by the plaintiff. Any assessment of costs that was not able to be conducted efficiently is itself likely to result in the incurring of costs that would likely be disproportionate to the real amount in issue.

42. I think that the Court has all the information necessary to undertake a rational and reasonable assessment of the plaintiff’s costs that does justice to both parties (see James v Australian and New Zealand Banking Group Limited [2016] NSWSC 833 at [17]). The plaintiff has adduced an itemised account of the costs incurred by the plaintiff up to 10 May 2019 on a solicitor-client basis. That account includes a breakdown of the time spent on the matter by solicitors and administrative staff of varying levels of experience. Those costs seem to be reasonable in all circumstances of the case. The defendant did not submit otherwise. I think it is appropriate to award a figure in the order of $24,523.43 on account of the plaintiff’s costs of the proceedings up to 10 May 2019. That amount equates to the $32,697.90 total less a 25% discount. I would round that figure down to $24,500.

43. I accept the defendant’s submission that there is imprecision in the estimate of legal costs incurred by the plaintiff after 10 May 2019. The figures do not, however, appear to me to be unreasonably high. It is clear that considerable time and effort had to be directed towards the issue of costs between 17 May 2019 and October 2019. In addition, the present application involved the preparation of three affidavits and written submissions of counsel. Nevertheless, in view of the broad nature of the estimates, it would have been appropriate to apply a greater discount, in the order of 35%, were it not for the Calderbank offer made by the plaintiff on 18 July 2019 to accept only $12,873.50 for costs. Taking the making of that offer into account, I consider that a discount of only 25% is warranted. On that basis, the costs after 10 May 2019 would be about $16,275. I would round that figure down to $16,000.

44. Accordingly, I will order that the defendant pay the plaintiff’s costs of the proceedings (including the present application) in the specified gross sum of $40,500 instead of assessed costs.

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Decision last updated: 20 December 2019