Kalloghlian v Mitry Lawyers Pty Ltd (No 3)

[2022] NSWSC 1201

Supreme Court

New South Wales

Medium Neutral Citation:

Kalloghlian v Mitry Lawyers Pty Ltd (No 3) [2022] NSWSC 1201

Hearing dates:

On the papers

Decision date:

08 September 2022

Jurisdiction:

Equity

Before:

Peden J

Decision:

The respondents’ application for a special costs order is dismissed with costs.

Catchwords:

COSTS — Party/Party — Application for costs on an indemnity basis — Whether indemnity costs should be ordered — No basis for finding the motion had no prospects of success

COSTS — Application for a gross sum costs order — Whether a gross sum costs order should be made — Issue whether costs assessment would be delayed — No basis for such a delay

Legislation Cited:

Civil Procedure Act 2005 (NSW) s 98

Cases Cited:

Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12

Harrison v Schipp (2002) 54 NSWLR 738

Hillebrand v Penrith Council [2000] NSWSC 1058

Kalloghlian v Mity Lawyers Pty Ltd (No 2) [2022] NSWSC 1071

Re Indoor Climate Technologies Pty Ltd [2019] NSWSC 356

Saba v Plumb [2017] NSWSC 955

Category:

Costs

Parties:

Avedis Kalloghlian (Plaintiff/Applicant)
Mitry Lawyers Pty Ltd (First Respondent)
Richard Louis Mitry (Second Respondent)

Representation:

Counsel:
T Sperber (Solicitor) (Plaintiff/Applicant)
A Haslam (Solicitor) (First and Second Respondent)

Solicitors:
TPS & Co (Plaintiff/Applicant)
Gilchrist Connell (First and Second Respondent)

File Number(s):

2019/75533

Publication restriction:

Nil

Judgment

1. On 10 August 2022, I delivered judgment in this matter (Kalloghlian v Mitry Lawyers Pty Ltd (No 2) [2022] NSWSC 1071), dismissing the applicant’s motion seeking personal costs orders against the respondents.

2. At [118] of my reasons, I ordered that the applicant pay the respondents’ costs on the ordinary basis as agreed or assessed, unless a party sought a different costs order.

3. The respondents have now sought a special costs order to have their costs paid:

1. on an indemnity basis from 7 September 2021 onwards; and/or

2. as a specified gross sum pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW) (CPA).

4. The applicant resists the application for a special costs order and submits that the respondents’ application for a special costs order should be dismissed with costs.

Background

5. The relevant background facts and procedural history of the matter are set out in Kalloghlian v Mity Lawyers Pty Ltd (No 2) [2022] NSWSC 1071 at [10]-[80].

6. By way of summary, in 2017, Mr Kalloghlian’s builder sued him for unpaid progress claims in the District Court and Mr Kalloghlian cross-claimed for defective works to operate by way of set off.

7. In April 2019, Mr Kalloghlian’s claim against the builder for defects was transferred to this Court in an enlarged claim, that included claims against the architect. As part of the leave granted to expand and transfer his claim, Mr Kalloghlian was ordered to pay the builder the unpaid progress claims together with costs. Mr Kalloghlian’s substantive proceedings settled in November 2020.

8. On 7 September 2021, Mr Kalloghlian filed a notice of motion in the then finalised substantive dispute, seeking personal costs orders against Mitry Lawyers Pty Ltd and, latterly, Mr Mitry (the respondents), which I dismissed.

Indemnity costs

9. The respondents seek an order that the plaintiff pay their costs on an indemnity basis from 7 September 2021 on the basis that the motion ought never have been brought.

10. Section 98(1)(c) of the CPA provides:

Courts powers as to costs

(1) Subject to rules of court and to this or any other Act:

…

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

11. In considering the respondents’ application for indemnity costs, I note the comments of Allsop P in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [5]:

Three things need be borne in mind in a judgment such as this on costs: the desirability of avoiding unnecessary recitation of cases (abounding as they are in this area); the desirability of not restating, in different terms, approaches to the broad discretion that have been well settled; and the desirability of dealing with the arguments without over-elaboration, if this is possible.

12. In Re Indoor Climate Technologies Pty Ltd [2019] NSWSC 356 at [8], Black J summarised the applicable principles relating to the making of indemnity costs orders:

The principles on which an order for indemnity costs may be made are also well established. Section 98(1)(c) of the Civil Procedure Act 2005 (NSW) permits the Court to order costs on an ordinary or indemnity basis. Rule 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, unless the Court otherwise orders or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 of the Uniform Civil Procedure Rules deals with an order for costs on an indemnity basis. Costs are awarded on the ordinary basis unless there are exceptional circumstances: Leichhardt Municipal Council v Green [2004] NSWCA 341. An order for indemnity costs is not made to punish an unsuccessful party for persisting with a case that fails, but to compensate a successful party fully for costs incurred, when the Court takes the view that it was unreasonable for the other party to have subjected the successful party to the expenditure of costs: Hamod v New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20]. Whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24]; Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6]. That is to be determined by reference to the conduct of the proceedings, not the conduct that is the subject of the substantive dispute.

13. In this case, the respondents submitted that an order for indemnity costs should be made against the applicant because the applicant’s conduct in the proceedings unnecessarily caused the respondents to incur costs and that the applicant’s motion had no real prospects of success.

14. The applicant submitted that there was nothing to support a finding that the applicant’s motion had no reasonable prospects of success. The applicant said that the motion was hotly contested, and the applicant was ultimately unsuccessful. Nevertheless, the case was not hopeless.

15. An indemnity costs order may be made “where an action has been commenced or continued in circumstances where the moving party, properly advised, should have known that it had no chance of success”: Baulderstone Hornibrook Engineering (No 2) v Gordian Runoff Ltd [2009] NSWCA 12 at [4] (Allsop P, with whom Beazley and Campbell JJA agreed). For example, where a cause of action is clearly statute barred, such cause of action has no reasonable prospects of success: Hillebrand v Penrith Council [2000] NSWSC 1058 (Austin J).

16. However, as Ward CJ in Eq (as her Honour then was) noted in Anderson v Canaccord Genuity Financial Ltd (No 2) [2022] NSWSC 649 at [96]:

… the authorities make clear that there must be a high degree of certainty concerning the deficiencies in a losing party’s case, such that it plainly had “no chance of success”, was pursuing a “hopeless case”, was “always clearly foredoomed to fail” or was “wholly untenable and misconceived”, which are readily apparent at the date from which an exceptional award of indemnity costs is sought (Colgate-Palmolive at [10] per Wigney J); and that caution has been expressed as to the risks of considering the question of prospects with the benefit of hindsight “after the matter has been fully argued and has enjoyed the considerable attention of experienced solicitors and senior and junior counsel” (Colgate-Palmolive at [12] citing Re Kingsheath Club of the Clubs Ltd (in liq) [2003] FCA 1589 at [5] per Goldberg J).

17. While the applicant’s motion sought to engage the summary disciplinary jurisdiction of the Court 10 months after the conclusion of the proceedings, which had never been determined on its merits, and this made it difficult to judge whether the respondents’ conduct could have caused the alleged loss, I do not consider this to be a ”pathological” case, such that it could be described as “hopeless”: see eg Sanelli v Sanelli [2010] VSC 78 at [30] (Mukhtar AsJ).

18. Therefore, I do not consider it appropriate to make an order for indemnity costs.

Payment of costs in gross sum

19. The respondents have also sought an order under s 98(4)(c) of the CPA that the applicant pay their costs fixed in the gross sum.

20. Section 98(4)(c) of the CPA provides:

Courts powers as to costs

(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

…

(c) a specified gross sum instead of assessed costs …

21. In Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21], Giles JA observed:

The power conferred by [section 98(4)] is not confined, and may be exercised whenever the circumstances warrant its exercise. It may appropriately be exercised where the assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment …

22. Black J summarised the relevant principles in relation to gross sum costs orders in Saba v Plumb [2017] NSWSC 955 at [23]:

Section 98(4) of the Civil Procedure Act 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: 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. In Hamod v New South Wales [2011] NSWCA 375 at [816] – [817], Beazley JA (with whom Giles and Whealy JJA agreed) summarised factors relevant to the making of a gross sum costs order as follows:

The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie’s Uniform Civil Procedure NSW at [s 98.45].

The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]–[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.

23. In the present case, the respondents submitted that a gross sum costs order ought to be made because a formal assessment of costs would likely be delayed by the applicant. The respondents submitted that this is particularly so in circumstances where monies remain outstanding by the applicant in relation to Counsel’s fees of the substantive proceedings, and where an invoice issued to the applicant by the first respondent on 24 April 2019 remains unpaid and is the subject of Local Court debt recovery proceedings.

24. While there is no clear evidence that the respondents will have difficulty enforcing a costs order against the applicant, the respondents raised the logical consequence of costs orders having an adverse impact on the applicant’s financial position. The respondents argued that, in such circumstances, it would be unjust for the respondents to be required to incur the further time and expense associated with the costs assessment process.

25. I do not consider there to be sufficient grounds to make an order under s 98(4)(c) of the CPA that the applicant pay the respondents’ costs fixed in the gross sum, for the following reasons:

1. There is evidence that the applicant does have sufficient funds to comply with a costs order likely to result from a costs assessment.

2. The 24 April 2019 invoice is unpaid because the applicant is disputing it in the Local Court.

3. The applicant’s solicitor gave evidence on instructions that any costs assessment will not be delayed.

Order

26. The respondents’ application for a special costs order is dismissed with costs.

**********

Decision last updated: 08 September 2022