In the matter of CharterLaw Legal Pty Ltd
[2025] NSWSC 357
•14 April 2025
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of CharterLaw Legal Pty Ltd [2025] NSWSC 357 Hearing dates: Last submissions due by 11 April 2025 Date of orders: 14 April 2025 Decision date: 14 April 2025 Jurisdiction: Equity - Corporations List Before: Black J Decision: Application for gross sum costs order dismissed
Catchwords: COSTS – Whether to make a gross sum costs order.
Legislation Cited: - Civil Procedure Act 2005 (NSW), s 98
Cases Cited: - Amirbeaggi v EB (No 2) [2023] NSWCA 184
- Gabrielle v Abood (No 4) [2023] NSWCA 100
- Re Beverage Freight Services Pty Ltd [2020] NSWSC 509
- Re Beverage Freight Services Pty Ltd [2020] NSWSC 797
- Re Sirrah Pty Ltd [2024] NSWSC 1277
- Saba v Plumb [2017] NSWSC 955
Category: Costs Parties: CharterLaw Legal Pty Limited (Plaintiff)
Paul Michales (Defendant)Representation: Counsel:
Solicitors:
Mr D Parish (Plaintiff)
Mr Q Nguyen (Solicitor – Defendant)
CharterLaw Pty Ltd (Plaintiff)
Q V Law (Defendant)
File Number(s): 2025/36726
JUDGMENT
-
By my judgment delivered on 28 March 2025 ([2025] NSWSC 297) (“Principal Judgment”), I set aside a creditor’s statutory demand (“Demand”) served by the Defendant, Mr Michales, on CharterLaw Legal Pty Ltd (“CLL”) and ordered that Mr Michales pay the costs of and incidental to CLL’s Notice of Motion filed 6 February 2025 on an indemnity basis, and otherwise pay the costs of the proceedings on an ordinary basis. CLL then indicated that it would seek a gross sum costs order in respect of those costs and I made orders for evidence and submissions as to that application, which was to be determined in Chambers. I determine that application by this judgment.
Evidence in respect of the gross sum costs application
-
Before turning to evidence in respect of the gross sum costs application, I should note that Mr Michales was not legally represented at the time that he issued the Demand and for most of the period leading up to the hearing of the application to set aside the Demand. He was legally represented at that hearing and his solicitor, Mr Nguyen, also made submissions in opposition to the gross sum costs application.
-
In the period since the delivery of the Principal Judgment, Mr Michales has sent numerous emails to the Court agitating the merits of his underlying dispute with CLL. I have not had regard to those emails, other than to the very limited extent that they are relevant to whether costs should be ordered on a gross sum basis. First, as I noted in the Principal Judgment, my proper role in a summary application to set aside the Demand did not extent to determining the underlying dispute between CLL and Mr Michales on its merits, but only to determining whether there was a genuine dispute as to the debt that Mr Michales claimed in the Demand, with the consequence that the Demand should be set aside. Second, as my Associate has pointed out to Mr Michales, at my request, my role in the matter was completed after I delivered the Principal Judgment, other than in respect of the question of costs. Any further contest as to the correctness of my judgment is now a matter for appeal.
-
Turning now to the evidence led in respect of the application, CLL reads the affidavit dated 2 April 2025 of Mr Peter McCrohon, who is a director of CLL, and also a solicitor now practising in the successor firm of CharterLaw Pty Ltd (“CharterLaw”), which represents CLL in the proceedings. Mr McCrohon’s evidence, which is disputed by Mr Michales, addresses an extended costs assessment process in respect of previous costs orders made in CLL’s favour and against Mr Michales, and expresses a concern that there may be delays and associated costs in any assessment in respect of costs ordered in these proceedings. The evidence, and the extent of the email correspondence sent by Mr Michales to the Court in the relatively short period since the Principal Judgment was delivered, suggests that Mr McCrohon’s concern is likely well-founded. Mr McCrohon also points to the fact that Mr Michales has not paid the amount of costs which was the subject of the previous assessment, or the contribution to the costs of the costs assessment which he was required to pay by the costs assessor.
-
Mr McCrohon also leads evidence of the relationship between CLL, which is no longer trading as a legal practice, and CharterLaw which acted for CLL in the proceedings, and his evidence is also that CharterLaw issued invoices to CLL for the work it undertook for CLL. He refers to a costs agreement dated 30 January 2025 between CLL and CharterLaw in respect of the proceedings brought by CLL to set aside the Demand and to a costs agreement with Counsel in respect of the proceedings He also refers to invoices issued by Counsel in respect of the proceedings. He sets out a summary of the solicitor/client costs billed to CLL in respect of the proceedings and identifies staff members of CharterLaw who worked on the proceedings, including himself. Mr McCrohon’s evidence, by way of submission, is that he considers it just and equitable for the Court to make a gross sum costs order in this application.
-
I have also had regard to detailed time records retained by CLL in respect of the proceedings, which include a significant amount of work done by Mr McCrohon and work done by other solicitors in CharterLaw. A difficulty arises at that point, where Mr McCrohon is, at the same time, a director of CLL and a solicitor in CharterLaw, and some of the work that is billed by CharterLaw (such as Mr McCrohon’s initial review of the Demand) would reasonably have been undertaken by Mr McCrohon as a director of CLL as the recipient of the Demand, and would not have been recoverable by CLL on that basis. That work is here claimed by CLL as a cost of the proceedings, where it is said to have been undertaken by Mr McCrohon in his other capacity as a solicitor in CharterLaw, rather than as a director of CLL. CLL also claims costs of Mr McCrohon as a solicitor in CharterLaw making inquiries to the Law Society of New South Wales addressing various claims by Mr Michales against CLL, but it is not apparent why those inquiries would not reasonably have been made by Mr McCrohon, as a director of CLL, in order to clarify CLL’s position. Other costs incurred by CLL, such as the preparation of a brief to Counsel, correspondence with Counsel and Court attendances, and the collation of documents for the Court book, would ordinarily be properly recoverable as the costs of the proceedings. I also note that the total time costs recorded in CharterLaw’s time records and billed are substantial, in respect of a relatively straightforward application to set aside a creditor’s statutory demand and an application to restrain a winding up application by Mr Michales which did not go to a contested hearing, particularly where Counsel was retained and has also billed for his time.
-
Mr Michales relies on an affidavit dated 5 April 2025, possibly prepared without the assistance of his solicitor, which advances allegations of fraud against CLL and contends that CLL was an unlicensed legal practice, which is a matter raised in the underlying dispute between CLL and Mr Michales.
The applicable principles and the parties’ submissions
-
The principles in respect of a gross sum costs application are well-established. I summarised those principles in Saba v Plumb [2017] NSWSC 955 at [23] as follows:
“Section 98(4) of the Civil Procedure Act [2005 (NSW) (“CPA”)] relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. That power is commonly exercised where costs have been incurred in a lengthy or complex case although it is not in its terms limited to such a case … The power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court typically applies a discount in assessing costs on a gross sum basis. [citations omitted]
-
I again adopted that summary in Re Beverage Freight Services Pty Ltd [2020] NSWSC 509 and I also addressed the relevant principles in Re Beverage Freight Services Pty Ltd [2020] NSWSC 797 at [19], as follows.
“As I noted in the Earlier Judgment [in that case], s 98(4) of the [CPA] relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. … that power is commonly exercised where costs have been incurred in a lengthy or complex case, but it is not limited to such a case: Simone Starr-Diamond v Talus Diamond (No 4) [2013] NSWSC 811 at [8]. … the power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court typically applies a discount in assessing costs on a gross sum basis: Ritchie’s Uniform Civil Procedure NSW [s 98.65]; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23. A gross sum costs order may also be made to avoid the expense, delay and aggregation involved in litigation arising out of an assessment: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738. Where a gross costs order is to be made, the Court is not required to undertake a detailed examination of the kind which would be undertaken in a cost assessment, in determining a gross sum payable, and will apply “a broad brush” approach: Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Harrison v Schipp above at [22].
-
I have drawn on my judgment in Re Sirrah Pty Ltd [2024] NSWSC 1277 at [16]-[17]. Mr Nguyen also draws attention to the observations of the Court of Appeal in Gabrielle v Abood (No 4) [2023] NSWCA 100 at [6] as follows:
“The power to make a gross sum costs order provided by s 98(4)(c) of the [CPA] is discretionary. Authority establishes that the discretion is not confined and may be exercised whenever the circumstances warrant its exercise; it should only be exercised when the Court considers that it can do so fairly between the parties, and that includes having sufficient confidence in arriving at an appropriate sum on the materials available; courts have typically applied a discount in assessing costs on a gross sum basis; and the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: see Hamod v New South Wales [2011] NSWCA 375 at [813] –[820] and authority there cited.”
-
Mr Parish, who appeared for CLL on the application to set aside the Demand and appears in this application, acknowledges that a Court may be reluctant to make a gross sum costs order where there may be doubt as to fairness to one or other party in the summary determination of the quantum of costs: Amirbeaggi v EB (No 2) [2023] NSWCA 184 (“Amirbeaggi”) at [3]. He nonetheless submits that the Court should usually make such an order where it is practicable and fair to do so, and there is likely to be a saving of the additional costs of taxation and a more expeditious outcome: Amirbeaggi at [4]. Mr Parish refers to the history of disputes between Mr Michales and CLL, as set out in Mr McCrohon’s affidavit, to the costs that were not paid by Mr Michales in respect of the earlier assessment, and to the several emails sent by Mr Michales to the Court in the period since the Principal Judgment was delivered. He also refers to the evidence put before the Court to support the application for a gross sum costs order and rightly recognises that the Court may adopt “broad brush” approach to the review of those costs.
-
Mr Nguyen in turn refers to the principles applicable as to whether a gross sum costs order should be made, which I have addressed above. He submits that the bill rendered by CharterLaw to CLL, including solicitor/client fees for the proceedings, indemnity costs for the motion and disbursements is “grossly excessive” given the relatively short length of the hearing. He also points to the fact that the costs claimed by CharterLaw substantially exceed, by a multiple of several times, CharterLaw’s original costs estimate in respect of the proceedings. Mr Nguyen submits that:
“The Court should not exercise its discretion to award a gross sum in the circumstances before it. It is submitted that the Court would not be able to do so fairly between the parties given the above, and that includes having sufficient confidence in arriving at an appropriate sum on the materials available, especially when CharterLaw themselves thought that the costs would only be in excess of $20,000.”
Determination
-
I have regard to the applicable principles and I bear in mind that there is likely to be a costs saving in a gross sum costs order, against the costs that will be incurred on an assessment, and a gross sum costs order would avoid the delay involved in an assessment. I also bear in mind that there is at least a risk that CLL will not recover costs that are ordered in its favour from Mr Michales, or the costs of an assessment, without taking further enforcement action. I have given those matters significant weight. However, I am ultimately not persuaded that this is properly a matter for a gross sum costs order. First, it seems to me that there is real complexity in determining whether some of the costs claimed are properly recoverable by CLL, in respect of work which could or should arguably have been undertaken by CLL as client rather than by CharterLaw as solicitors, and would not then be recoverable as a cost of the proceedings. That complexity is exacerbated by the fact that Mr McCrohon appears to have acted both as a director of CLL and as a solicitor in CharterLaw in respect of the proceedings. An assessor would be better placed than a Judge of the Court to undertake the detailed review that may be necessary to address that issue.
-
Second, as I noted above, the amounts claimed by CLL are here very substantial, for an application to set aside a creditor’s statutory demand, even taking into account the further interlocutory application to restrain the winding up application, which did not require a contested hearing.
-
On balance, the difficulty in determining whether some of the costs claimed are properly recoverable as legal costs of the proceedings, rather than not recoverable as work that could and should have been done by CLL as client, and the size of the costs claimed are such that I do not consider this application could fairly be dealt with by the summary process of a gross sum costs order. The determination of the costs ordered in the Principal Judgment will need to go to assessment, if the parties cannot reach agreement about them. I recognise that, given the history of the proceedings, the prospects of such an agreement may be slight, at best. The Plaintiff’s application for a gross sum costs order should be dismissed and it must pay Mr Michales’ costs of that application, as agreed or as assessed.
Orders
-
I therefore make the following orders:
The application made by the Plaintiff for a gross sum costs order be dismissed.
The costs payable pursuant to order 2 and 3 on 28 March 2025 be paid by the Defendant as agreed or as assessed.
The Plaintiff pay the costs of its gross sum costs application, as agreed or as assessed.
**********
Decision last updated: 14 April 2025
0
0
1