I C Pipes Pty Ltd v DGS Trading Pty Ltd (No 3)

[2023] NSWSC 1146

Supreme Court

New South Wales

Medium Neutral Citation:

I C Pipes Pty Ltd v DGS Trading Pty Ltd (No 3) [2023] NSWSC 1146

Hearing dates:

20 September 2023

Date of orders:

21 September 2023

Decision date:

21 September 2023

Jurisdiction:

Common Law

Before:

Elkaim AJ

Decision:

Pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) the costs which are the subject of Order 5 made on 12 September 2023 are payable by way of a gross sum in the amount of $250,000.

Catchwords:

COSTS – notice of motion seeking gross sum costs order – concern regarding financial position of second and third defendant – complex and lengthy proceedings

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98(4)

Cases Cited:

IC Pipes Pty Ltd v DGS Trading Pty Ltd (No 2) [2023] NSWSC 1109

IC Pipes Pty Ltd v DGS Trading Pty Ltd [2023] NSWSC 1081

O’Connor v O’Connor [2022] NSWSC 940

Category:

Costs

Parties:

I C Pipes Pty Ltd (Plaintiff)
Sam Blanch (Second Defendant)
Blanch Consulting Services Pty Ltd (Third Defendant)

Representation:

Counsel:
Ms J Granger (Plaintiff)

Solicitors:
Bartier Perry (Plaintiff)

File Number(s):

2020/327509

JUDGMENT 

1. I gave my primary decision in this matter on 12 September 2023 (IC Pipes Pty Ltd v DGS Trading Pty Ltd(No 2) [2023] NSWSC 1109). I found in favour of the plaintiff, making orders for the accounting of monies by the second and third defendants to the plaintiff.

2. I also ordered that the above defendants pay the plaintiff’s costs of the proceedings (Order 5). The first and fourth defendants had previously “dropped out” of the proceedings.

3. On 13 September 2023 the plaintiff filed a notice of motion seeking an order under s 98(4) of the Civil Procedure Act 2005 (NSW) that the defendants be required to pay a specified gross sum for costs, rather than have their costs assessed.

4. The second defendant, who is the principal of the third defendant company and represented the company, did not take part in the hearing despite having participated in many of the prehearing preparations. I note that on 7 September 2023 he had made an application to give his evidence remotely (from regional Queensland), which I refused, although I did allow him to call two of his proposed witnesses by audio-visual link (IC Pipes Pty Ltd v DGS Trading Pty Ltd [2023] NSWSC 1081).

5. Not only did the second defendant not appear for the hearing, but there has been no word from him since, including no reaction to the notice of motion now before the Court. I am satisfied that he has received the judgment of 12 September 2023 and has been served with this notice of motion and all of the attendant documents.

6. The notice of motion is supported by an affidavit of Mr Adam Cutri dated 13 September 2023. He is the solicitor with the day-to-day carriage of the matter. In his affidavit he sets out his experience as a litigator and with the assessment of costs. He is an experienced commercial lawyer.

7. In his affidavit, at [11], he sets out a chronology of the matter. It began in the District Court in November 2020 against the first defendant only. In May 2021 the second, third and fourth defendants were added to the proceedings. In November 2021 contempt proceedings that had been brought by the plaintiff against the second defendant were dismissed by Gibb DCJ.

8. On 9 March 2022 Taylor DCJ gave leave for the filing of an amended statement of claim but because Taylor DCJ was concerned about the District Court’s jurisdiction, he ordered the proceedings to be transferred to the Supreme Court.

9. Because the transfer had been at the instigation of the District Court, and not by any party, the costs ramifications which would normally apply, based on the monetary extent of the plaintiff’s success, do not apply.

10. Mr Cutri, in his affidavit, points out that the matter has been before the courts for almost 3 years, there have been various interlocutory disputes and a need to subpoena large amounts of documents and obtain a forensic analysis. The forensic analysis formed the basis for the sums that I assessed.

11. Mr Cutri also points out that there are serious concerns about the financial capacity of the second and third defendants to meet their obligations under my orders, let alone to pay any costs. I note that the second defendant raised his financial incapacity as the reason that he wished to appear remotely. The judgment given by Gibb DCJ also refers to the limited assets held by the second and third defendants. No financial statements have been forthcoming from the second or third defendants so that, says Mr Cutri, “they are unlikely to be able to comply with any costs order in favour of the plaintiff in these proceedings.”

12. Mr Cutri provides an estimate of the plaintiff’s costs, including disbursements of $154,613.04 and professional fees of $315,152.50. He then goes on to say that:

“In my professional experience, a litigants party/party solicitor costs on the ordinary basis will be discounted on an application for gross sum costs by approximately 30-35%.”

13. Applying the above discount, the professional fees are reduced to $220,606.75. The disbursements have been reduced by 10%, down to the sum of $139,151.74. Accordingly, the total amount sought as a gross sum is $359,758.49, exclusive of GST. I understand that there will not be a liability for GST.

14. The exhibit to Mr Cutri’s affidavit includes a detailed chronology, the cost agreements with counsel who have been involved, invoices for the expert evidence and invoices rendered by the plaintiff’s solicitors.

15. The plaintiff submitted that the second and third defendants would be unable to meet the cost bill and that the assessment of costs would simply be an added expense and time-consuming enterprise.

16. In O’Connor v O’Connor [2022] NSWSC 940, Hammerschlag CJ in Eq stated the following principles for the awarding of a gross sum costs order, from [8].

“8. Section 98(4)(c) of the Civil Procedure Act 2005 (NSW) gives the Court the discretion to make an order that a party is entitled to a specified gross sum instead of assessed costs.

9. A gross sum costs order is a form of special order as to costs, which can be made when the circumstances warrant departure from the usual position that the beneficiary of a costs order needs to have them assessed, and that such an assessment is subject to review. A gross sum costs order is not warranted simply because a party has a costs order and it will convenience that party not to have their costs subject to the formal process of assessment with the time and expense involved in that process. There must be some good reason to make such an order.

10. Relevant factors may be the likely length and complexity of the assessment process, the possibility that additional costs of formal assessment would disadvantage the winner, that a party has unnecessarily contributed to the costs of the proceedings, especially where the costs are disproportionate to the result, and an expectation, based on prior experience, that further costs assessment is likely to be unduly protracted and unnecessarily add to the costs of the proceedings. The categories of relevant factors are not closed, and each case will turn on its own circumstances.”

17. The above quoted passages tend to suggest a gross sum costs order should not be made. However, his Honour went on to state that in O’Connor:

“12. The proceedings were neither lengthy nor unduly complex. They were a common or garden commercial dispute, perhaps with a little bit of family flavour. The plaintiffs conducted them economically and efficiently, albeit unsuccessfully.

13. There is nothing out of the ordinary about the assessment process that would be required”.

18. The flavour in this matter is to the contrary, with a long history going back to the District Court, complex issues, and a distinct lack of economic and efficient conduct on the part of the second defendant.

19. I think this is a matter where there can be a gross sum costs order and I intend to make such an order. As to the quantum there is no evidence before me to challenge the assessment made by Mr Cutri. As noted above, the second defendant has been silent.

20. I mentioned above the discounts that Mr Cutri had applied. I think there is a need for some further discounting, for two reasons:

1. The costs detailed, both professional and disbursements, precede the joining of the second and third defendants to the proceedings. While some of these costs are attributable to the investigation of a claim against the second and third defendants, they are not costs of the proceedings.

2. The costs of the contempt application that was dealt with by Gibb DCJ are included in Mr Cutri’s assessment. Her Honour dismissed the plaintiff’s notice of motion and made no order for costs “with the intention that costs lie as they fall”.

21. Other than counsel’s fees, which exceed $12,000, it is difficult to calculate the precise amount attributed to the contempt application. I also do not know the precise amount of costs incurred before the May 2021 amendment of the statement of claim to include the second and third defendants.

22. Bearing in mind I have a wide discretion in respect of costs I have decided to reduce the overall quantum to $250,000.

23. Accordingly, I make the following order: Pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) the costs which are the subject of Order 5 made on 12 September 2023 are payable by way of a gross sum in the amount of $250,000.

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Decision last updated: 21 September 2023