James v Phillips (No 2)

[2017] NSWSC 257

Supreme Court

New South Wales

Medium Neutral Citation:	James v Phillips (No 2) [2017] NSWSC 257
Hearing dates:	On the papers
Date of orders:	16 March 2017
Decision date:	16 March 2017
Jurisdiction:	Equity
Before:	Pembroke J
Decision:	Order that the plaintiffs pay to the defendants the sum of $65,789.63.
Catchwords:	COSTS - Civil Procedure Act 2005 (NSW) s 98(4) - Civil Procedure Act 2005 (NSW) s 98(2) - lump-sum costs order - calculation on indemnity basis - recovery of costs in Federal Circuit Court – unreasonable costs - discount
Legislation Cited:	Civil Procedure Act 2005 (NSW) Legal Profession Uniform Law (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 Deputy Commissioner of Taxation v Platinum Builders Pty Ltd (2008) 3 BFRA 105 EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361 (Comm) Fordyce v Fordham (2006) 67 NSWLR 497 Hamilton v Caltex Oil (Australia) Pty Ltd [1964] Tas SR 224 Hamod v New South Wales [2011] NSWCA 375 Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640 Harrison v Schipp (2002) 54 NSWLR 738 Ireland v Retallack (No 2) [2011] NSWSC 1096 James v Phillips [2017] NSWSC 148 Norfeld v Jones (No 2) [2014] NSWSC 199 Penson v Titan National Pty Limited (No 3) [2015] NSWCA 121
Texts Cited:	Stuart Westgarth & Raja Balachandran, “Review of Billing Practices – The Way Forward”,
Category:	Costs
Parties:	Gaye James – first plaintiff Gary Phillips – second plaintiff Brian Phillips – first defendant Dobrinka Zlatevska – second defendant
Representation:	Counsel: P W Bates – for the plaintiffs D A Lloyd – for the defendants   Solicitors: Needs Chan & Monahan – for the plaintiffs TressCox Lawyers – for the defendants
File Number(s):	2016/00284041

Judgment

Introduction

1. This judgment continues the protracted litigation that followed the death of Hazel Florence Phillips. The history of this litigation already includes orders by four Judges of this Division, the Court of Appeal, the District Court of Queensland and the Federal Circuit Court. My principal judgment on 24 February 2017 summarises this history, which I will not repeat except where necessary: James v Phillips [2017] NSWSC 148 at [3]–[7].

2. In the principal judgment, I dismissed the plaintiffs’ claims to set aside orders of the Court of Appeal. The defendants now seek a gross-sum costs order calculated on an indemnity basis. As I have noted previously, the power to make such an order emanates from both the inherent jurisdiction of a superior court and Civil Procedure Act 2005 (NSW) (“CPA”), s 98(1)(c), (4)(c): Ireland v Retallack (No 2) [2011] NSWSC 1096 at [4]–[7]. The plaintiffs concede that the Court should exercise the power in this case. Given my observations as to the plaintiffs’ responsibility for complicating and elongating these proceedings (at [20]), that concession is entirely appropriate: see Hamod v New South Wales [2011] NSWCA 375 at [818] (Beazley JA; Giles and Whealy JJA agreeing). Furthermore, it is clear that the Court has sufficient available materials to quantify the gross sum fairly: see Harrison v Schipp (2002) 54 NSWLR 738 at [22] (Giles JA).

3. The only matter remaining is quantification. The defendants claim the full amount of costs incurred since September 2016 in relation to proceedings in this Court and in the Federal Circuit Court. The plaintiffs opposed this Court’s jurisdiction to make a costs order in respect of the federal proceedings; objected to the recovery of other invoiced costs; and sought a 20% discount. I address the three points in turn.

Federal Circuit Court Proceedings

4. In late 2016, the defendants issued a bankruptcy notice to the plaintiffs in an attempt to recover the assessed costs in the underlying Succession Act proceedings in this Court. The plaintiffs responded by seeking ex parte relief in the Federal Circuit Court. Those proceedings were dismissed by consent, and that Court noted the agreement of the parties that costs in that Court would follow the event in these proceedings. The defendants now seek $18,372.20 in relation to the Federal Circuit Court proceedings.

5. The plaintiffs initially submitted that the Supreme Court has no power to make this costs order because the Federal Circuit Court proceedings were not, and could not be, “transferred” to this Court within CPA, s 98(6)(c). They later drew my attention to a decision of this Court which they thought might be relevant to their argument. I do not think it is and do not propose to address it.

6. I do not accept the submission that this court lacks the relevant power. The general power to order “costs” under CPA, s 98(1) is not lightly to be confined: see Fordyce v Fordham (2006) 67 NSWLR 497 at 510 [71]–[73] (McColl JA). The express definition of “costs” in s 98(6) to include costs in transferred proceedings does not constrain the wide discretion under s 98(1).

7. In Deputy Commissioner of Taxation v Platinum Builders Pty Ltd (2008) 3 BFRA 105 at [8], Jacobson J interpreted the Federal Court’s general conferral of power to award costs as permitting an order for costs incurred in Supreme Court proceedings. His Honour then observed (at [9]):

what is necessary for the exercise of the power is to find some connection between the Supreme Court proceedings and the proceedings in [the Federal Court], in order to justify the order … [emphasis added]

8. While I have no doubt about the existence of the power, I approach its exercise with reluctance. It remains open to the first defendant to seek indemnity costs in the Federal Circuit Court. It is unclear to me whether a Judge of that Court would necessarily make a gross-sum costs order on an indemnity basis. The parties’ agreement that costs in the Federal Circuit Court proceedings would “follow the event” in these proceedings does not necessarily contemplate such an order. I should not pre-empt the exercise of that Court’s jurisdiction. Comity and the differences between the rules of court governing costs at the state and federal level justify some hesitation in exercising any discretionary power in this Court. I do not consider it appropriate that the gross sum to which the defendants are entitled should include any amount to reflect costs in the Federal Circuit Court.

Invoiced Amounts

9. The defendants seek $71,649.94 in relation to these proceedings and $3,111.00 as costs thrown away in recovering sums from the underlying proceedings. The plaintiffs object: first, that amounts arising from conversations between different solicitors at TressCox Lawyers are overheads already reflected in that firm’s hourly rate; and secondly, that costs associated with obtaining finance from LawCover are too remote for recovery.

10. By their nature, and expressly under the rules of court, indemnity costs extend to all costs other than costs that appear to be unreasonably incurred or unreasonable in amount: Uniform Civil Procedure Rules 2005 (NSW), r 42.5; EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 at 72–4 (Megarry V-C). In testing unreasonableness, it is appropriate to enquire whether the solicitor could properly charge the amounts to clients: Hamilton v Caltex Oil (Australia) Pty Ltd [1964] Tas SR 224 at 229 (Crawford J). This enquiry directs attention to Legal Profession Uniform Law (NSW) Pt 4.3. However, as the order is for gross-sum costs, the Court is entitled to apply a “broad brush” approach: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5 [16] (O’Loughlin J); Penson v Titan National Pty Limited (No 3) [2015] NSWCA 121 at [27] (Campbell AJA).

11. Some commentators have expressed the view that internal firm communications should be treated as an overhead expense: Stuart Westgarth & Raja Balachandran, “Review of Billing Practices – The Way Forward”, at 5. But the practice of including them as discrete time-billed items cannot be described as unreasonable, and there is no evidence of actual double recovery by TressCox Lawyers.

12. It may be correct that litigation funding expenses are too remote for recovery as damages in the law of torts or contract. But see Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361 (Comm). However, it was not unreasonable for TressCox to incur costs by contacting LawCover, and the amount of those costs was not unreasonable.

Discount

13. The plaintiffs submit that a 20% discount on the incurred costs would be appropriate considering the indemnity basis of the costs.

14. In general, the purpose of such a discount is to account for deductions that would have been made on a formal costs assessment. But the court does not simply apply a “fail safe” discount: see Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640 at [56]–[58] (Brereton J).

15. While the invoices in this matter are not plainly unreasonable, my impression is that they err on the side of excess: Norfeld v Jones (No 2) [2014] NSWSC 199 at [9]–[10] (Campbell J). For example, they attribute more cost to “reviewing”, “considering” and “discussing” documents than a costs assessor might permit having regard to “the complexity, novelty or difficulty of the issues involved” and “the labour and responsibility involved”: Legal Profession Uniform Law (NSW) s 172(2)(b). In all the circumstances, I propose to apply a 12% discount.

Conclusion

16. For these reasons, I have calculated the amount of costs to which the defendants are entitled pursuant to a gross-sum costs order under CPA, s 98(4)(c) as $65,789.63.

Orders

17. I order the plaintiffs to pay to the defendants the sum of $65,789.63.

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Decision last updated: 16 March 2017