Indigo Financial Money Pty Ltd v Bolivar Road Pty Ltd - [2012] SASC 228

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
INDIGO FINANCIAL MONEY PTY LTD & ANOR v BOLIVAR ROAD PTY LTD & ORS
[2012] SASC 228
Reasons of Judge Withers a Master of the Supreme Court
12 December 2012
PROCEDURE - COSTS
Lump sum costs - claim for lump sums costs refused.
Supreme Court Civil Rules 2006 (SA) r 264; Real Property Act 1886 (SA) s 191(j), referred to.
Indigo Financial Money Pty Ltd & Anor v Bolivar Road Pty Ltd (In liq) [2012] SASC 214; Hillpalm Pty Limited & Anor v Wilson & Ors [2009] NSWSC 362, applied.
Cornwall & Ors v Rowan (No 4) (2006) 244 LSJS 183; [2006] SASC 111; Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119; Harrison v Schipp (2002) 54 NSWLR 738; Seven Network Limited v News Limited [2007] FCA 2059; Wenkart v Pantzer (No 3) [2010] FCA 1423; Russo v Buck & Ors (No 5) [2010] SASC 27, considered.

INDIGO FINANCIAL MONEY PTY LTD & ANOR v BOLIVAR ROAD PTY LTD & ORS
[2012] SASC 228

JUDGE WITHERS. These reasons should be read in conjunction with my earlier reasons refusing an application for security for costs – see FDN 81. In those reasons some history of the matter was provided along with some detail of the amount of short form costs claims lodged by the defendant applicants and the responses of the plaintiff respondents. An appeal against that decision has subsequently been dismissed – see Indigo Financial Money Pty Ltd & Anor v Bolivar Road Pty Ltd (In liq) [2012] SASC 214.
On 21 June 2012 the defendant applicants applied by interlocutory application (FDN 75) for an assessment of costs by way of a lump sum or, alternatively, for a preliminary assessment of issues in dispute. This application was supported by an affidavit of the solicitor for the defendant applicants filed on the same day. In that affidavit the solicitor attested that on 18 October 2011 the first and third defendants had served three short form bills of costs; one relating to the trial of this action, the second relating to the first appeal to the Full Court and the third relating to a second appeal to the Full Court. Those short form bills do not include copies of invoices for disbursements, particularly counsel fees. On 3 February 2012 the plaintiff respondents had served responses to the three short form bills. The solicitor for the defendant applicants attested that the parties had been unable to reach agreement on the issue of costs. He sought that the Court fix a lump sum amount in the amount of $450,000.00, being some $11,000.00 less than the combined amount of the three short form bills. The balance of the affidavit related to issues relevant to the plaintiff respondents’ application for security for costs.
The three short form bills were lodged pursuant to orders of the Court that the plaintiffs pay the party/party costs of the defendants. The defendant applicants have also sought that their legal costs be paid on the footing of an indemnity as part of their claim for compensation pursuant to s 191(j) of the Real Property Act 1886 (SA) and/or as part of their claim for damages pursuant to an undertaking given by the plaintiffs to support an extension of the time for the removal of caveats over certain properties. Such a claim is permissible – see Hillpalm Pty Limited & Anor v Wilson & Ors [2009] NSWSC 362.
There is some tension between the two contemporaneous claims. On the one hand the defendant applicants claim from the plaintiff respondents by way of compensation and/or damages an amount equivalent to the full amount of their legal costs incurred in defending the plaintiffs’ claims, and on the other hand the same defendant applicants seek only party/party costs and by way of a lump sum to completely resolve the costs issues. The defendants’ substantive claim has been listed for hearing on 18 February 2013.
In argument the defendant applicants asserted that they were presently prepared to accept a lump sum assessment on a party/party basis to resolve any costs issues and waive costs to which they might otherwise be entitled after 18 October 2011 when the short form bills were filed. It was asserted that this was motivated by a belief on their part that the plaintiff respondents would in any event be unlikely to be able to pay those costs and therefore a desire to minimise the costs of resolving any dispute about costs. No formal abandonment or modification was made of the substantive claim.
Supreme Court Rule 6R 264(5)(c) provides that in exercising its general discretion as to costs the Court may award costs by way of a lump sum. It also provides in 6R 264(5)(d) that the Court may award costs on any other basis the Court considers appropriate. A broad discretion is given to the Court in relation to costs but that discretion must be exercised judicially.
In Cornwall & Ors v Rowan (No 4) (2006) 244 LSJS 183; [2006] SASC 111, the Full Court had cause to consider the then Rules relating to lump sum costs. In that action the Court cited with approval (at [15]) what von Doussa J had said in Beach Petroleum NL & Anor v Johnson & Ors (No 2):
[15] In Beach Petroleum NL v Johnson[1] von Doussa J said:
I agree however with the submission of Mr Rice that before exercising the power to fix a gross fee, the Court should be confident that the approach taken to estimate costs is logical, fair and reasonable. On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary “fail safe” discount on the cost estimate submitted to the Court: Leary v Leary.[2]
[1] (1995) 57 FCR 119 at 123.
[2] [1987] 1 WLR 72 at 76; [1987] 1 All ER 261 at 265.
It similarly referred to Harrison v Schipp in [16] of its decision when it said:
[16] Along similar lines, Giles JA in Harrison v Schipp[3] said:
Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson (at 124), the gross sum “can only be fixed broadly having regard to the information before the Court”; in Hadid v Lenfest Communications Inc[4] (at [35]) it was said that the evidence enabled fixing a gross sum “only if I apply a much broader brush than would be applied on taxation, but that … is what the rule contemplates”. The approach taken to estimate costs must be logical fair and reasonable (Beach Petroleum NL v Johnson (at 123); Hadid v Lenfest Communications Inc (at [27]). The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available (Wentworth v Wentworth (Court of Appeal, 21 February 1995, unreported) per Clarke JA).
[3] (2002) 54 NSWLR 738 at 743, [22].
[4] [2000] FCA 628.
In Cornwall (at [21]), the Court in considering the evidence to be provided said:
[21] In most cases it would be desirable that an independent costs expert review the file and the charges made and perhaps perform some random sample checks of the costs charged for work performed against what would have been allowable under the relevant scale. There may be other ways of checking the accuracy of the amounts actually billed by the solicitor. If an estimate is to be made by a Court which is not accustomed to assessing or taxing costs and the estimate is to be logical, fair and reasonable, some expert evidence of that nature will generally be necessary. It was not provided in this case, and that presents some difficulty.
The Court in Cornwall found that it could fix a lump sum largely because the major component of the claim for costs was the attendance of the solicitor and the appearance of counsel at trial and on the appeal. This was readily translatable from time charging to scale.
In Seven Network Limited v News Limited [2007] FCA 2059, Sackville J set out a number of principles in relation to lump sum cost awards which he found to be established by the authorities – see [25]. Paraphrasing his Honour’s principles, they were as follows:
(1)The purpose is to avoid expense, delay and aggravation involved in a protracted litigation or taxation.
(2)No process similar to taxation will take place but rather a broad brush will be used.
(3)The Court must be confident that the approach taken to the estimate is logical, fair and reasonable and should avoid both over-estimating and under-estimating.
(4)The fundamental principles in relation to assessment of costs on a party/party basis will have to be taken into account by the Court, in particular, the Court will need to be satisfied that costs are only being awarded for necessary and proper steps in the litigation.
At [29], Sackville J noted:
[29] It is necessary for the Court to have sufficient information to enable it to make a logical, fair and reasonable estimate. … In practice, this may involve the parties adducing evidence from experts costs assessors addressing whether the costs claimed by the successful party were ‘necessary or proper for the attainment of justice or for maintaining or defending the rights of a party’ (O 62 r 19) or, in more general terms, whether the amounts sought would have been recoverable on a taxation of costs.
That sentiment as to the adequacy of the evidence provided is repeated in various other authorities. In Wenkart v Pantzer (No 3) [2010] FCA 1423, Flick J considered a claim for gross costs in which reliance was placed on an opinion of a costs expert contained in an affidavit. That affidavit failed to satisfy his Honour and at [28] he said:
[28] … the difficulty of attempting any assessment, without the benefit of more focussed evidence, is peculiarly exacerbated by the course which the proceeding has taken over the best part of this last decade. For the Court to fix any percentage would have the potential to cause injustice to Mr Pantzer by fixing a “fail safe” discount and may also occasion prejudice to Dr Wenkart by over-estimating the costs that may be recoverable: Beach Petroleum NL v Johnson.
His Honour declined to make an order because of the absence of sufficient evidence.
I note that in Russo v Buck & Ors (No 5) [2010] SASC 27, his Honour Judge Lunn in this Court declined to make an order for a lump sum amount of costs pursuant to 6R 271(6)(c) on that occasion because of the difficulty in apportioning costs between different defendants and costs orders in different terms. His Honour noted at [11] that the costs are only to be fixed as a lump sum if that would be fair to all parties. However, his Honour also noted at [14] as follows:
[14] Under 6R 274(2)(b)(ii) the Court on a preliminary assessment of costs under 6R 271 can make interim orders. Although there is no direct authority on the point, I consider this justifies the Court, where there is likely to be a substantial delay in adjudicating on the costs, making an order for the immediate payment of such an amount on account of the costs payable under the order for costs which appears to be beyond any reasonable dispute.
His Honour went on to make such an order in that particular matter.
At argument counsel for the defendant applicants argued that in the event that the Court was not satisfied that a lump sum amount of costs should be ordered then by way of a “fallback position” the defendant applicants would firstly seek the fixing of an amount by way of an interim order and the amount suggested was the amount of the first short form bill of $347,070.00. A further “fallback position” was that if that fixing was not to occur then the Court should at least order an interim allocatur in terms of the costs admissions made by the plaintiff respondents in their responses to the short form bills.
Counsel for the plaintiff respondents objected to these proposed “fallback positions” arguing that he had been given no notice of those submissions, that they did not appear in the defendant applicants’ written submissions, nor in the application or supporting affidavit and in the circumstances the plaintiff respondents would suffer prejudice if the Court were to so determine without providing the plaintiff respondents with a fair opportunity to be heard in opposition if that be their position. On the material before the Court I accept that there was no notice of these fallback applications given before the address to the Court by counsel for the defendant applicants. In the circumstances I decline to make such orders at this time. That does not preclude the defendant applicants from giving appropriate notice and seeking to have such orders made.
The only evidence relied on by the defendant applicants in support of the lump sum costs claim, apart from the short form bills, was Appendix 18 to an expert report which had been filed and which the expert asserted was a schedule of costs forwarded to him by the solicitors for the defendant applicants – see FDN 69A. It is a schedule which covers a period from 9 July 2008 to 20 May 2011. There is no verification of that schedule by the solicitor for the defendant applicants. Two single solicitor items amount to $82,752.00. Counsel fees of $116,620.00 appear to be claimed. There is no explanation provided as to the scale items, some of which are substantial. Counsel for the plaintiff respondents objected to the admissibility of that document and in the circumstances I rule it inadmissible. It would be unfair for the Court to fix costs relying on a document that was forwarded to another person for a different purpose and in respect of which no formal verification upon which a cross-examination might occur had been given.
In the circumstances of this matter I am not satisfied that there is sufficient evidence before the Court to enable it to fix a lump sum for costs that is fair, logical and reasonable. In my view for such costs to be fixed in a matter of this type the defendant applicants would at least need to provide an expert report from an independent expert who has examined the files, examined the applicants’ papers and assessed an amount that he or she anticipates would be allowed on a taxation of costs on a party/party basis. There would need to be verification that the independent expert had been provided with all the information that he sought and had examined the files and made random checks of various claims in much the manner contemplated by the Full Court in the Cornwall decision.
In my view the Court may make a lump sum assessment of costs at any stage of the resolution of costs issues and the refusal to make a lump sum assessment at this stage does not preclude the Court from making a lump sum assessment at some later stage. Nor does it preclude the Court from making an interim order as to costs or for the entry of a default allocatur in terms of the costs admitted by the plaintiff respondents. However, in view of the nearness of trial and the importance of the defendants’ outstanding costs claim in successfully resisting a claim for security for costs by the plaintiff, there is a significant likelihood that such orders if made would be stayed until trial.
I note the recent decision of White J in this matter (supra) and in particular his comments at [55]. Rather than agitating further interlocutory activity in this matter the parties should ensure their readiness for trial on 18 February 2013.
For the foregoing reasons, I make the following orders:
1.The defendant applicants’ present application for lump sum costs is refused.
2.Further consideration of the application for directions and preliminary assessment of issues of costs is adjourned.
3.The defendant applicants are to pay the plaintiff respondents their costs of and incidental to the present application for lump sum costs, including the argument on 8 November 2012 and the preparation of submissions in respect thereof but not otherwise in respect of interlocutory application FDN 75, which costs remain in the adjudication.
4.I certify fit for counsel.