LGS v Barbagallo (No.4)

[2013] NSWSC 311

Supreme Court

New South Wales

Case Title:	LGS v Barbagallo (No.4)
Medium Neutral Citation:	[2013] NSWSC 311
Hearing Date(s):	On the papers
Decision Date:	10 April 2013
Before:	McDougall J
Decision:	Earlier costs order stands.
Catchwords:	COSTS - apportionment of costs - apportionment of costs not capable of mathematical precision.
Cases Cited:	LGS v Barbagallo [2012] NSWSC 1099 LGS v Barbagallo [2013] NSWSC 68
Category:	Costs
Parties:	LGS (NSW) Pty Limited (Formerly In Vivo Communications Pty Limited) (Subject to Deed of Company Arrangement) ACN 076 683 013 (First Plaintiff) LGS (VIC) Pty Limited (Formerly In Vivo Communications (Vic) Pty Limited (Subject to Deed of Company Arrangement) ACN 079 799 787 (Second Plaintiff) Francesco Barbagallo (First Defendant) Chiron Communications Pty Ltd (ACN 068 226 166) (Second Defendant) Adrenalin Strategics Pty Ltd (Third Defendant)
Representation
- Counsel:	Counsel: I M Jackman SC / M R Tyson (Plaintiffs) D R Pritchard SC (Defendants)
- Solicitors:	Solicitors: Bartier Perry (Plaintiffs) HWL Ebsworth (Defendants)
File Number(s):	2006/293462

JUDGMENT

1. The plaintiffs (collectively "In Vivo") sued the first defendant (Dr Barbagallo), claiming that Dr Barbagallo had taken and misused confidential information of In Vivo. They joined his company as a second defendant. It is convenient to refer only to Dr Barbagallo in these further reasons.

2. For brief reasons given on 23 August 2012, I ordered judgment for the defendants on In Vivo's claim, with In Vivo to pay costs. I reserved liberty to the parties to apply for other or special costs orders. By notice of motion filed on 7 September 2012, Dr Barbagallo availed himself of that liberty. (I should add that I gave more detailed reasons for those orders on 18 September 2012, [2012] NSWSC 1099, but nothing of present moment turns on this.)

3. The special costs orders sought by Dr Barbagallo were as follows:

   (1) that his costs be paid on the indemnity basis, either in whole or from specific dates;

   (2) fixing those costs in a gross sum;

   (3) that the moneys held in court as security for his costs be paid out to him forthwith; and

   (4) that non-parties to the litigation, Ms Sullivan and a company controlled by her, LGS Enterprises Pty Limited, pay his costs.

4. I gave judgment on 13 February 2013: [2013] NSWSC 68. The orders made were as follows (from [89] of those reasons):

   (1) Subject to order (5) below, order that the costs payable by the plaintiffs to the defendants be assessed on the indemnity basis.

   (2) Order that the moneys paid into court by the plaintiffs as security for the defendants' costs, together with all interest accrued on those moneys, be paid out to the defendants forthwith.

   (3) Stay order (2) for 21 days from the date of delivery of these reasons.

   (4) Order that, for the period 29 August 2008 to 2 August 2012, LGS Enterprises Pty Ltd and Lisa Gaye Sullivan be jointly and severally liable with the plaintiffs for payment of the defendants' costs.

   (5) Subject to order [6] below, order the respondents to the notice of motion filed on 7 September 2012 to pay 75% of the applicants' costs thereof, assessed on the ordinary basis.

   (6) Order that any application to discharge or vary order (5) be made by written submissions served and delivered to my Associate within 14 days of the date of publication of these reasons, identifying both the orders sought and the reasons why they are sought; submissions in answer to be served and delivered to my Associate within 7 days thereafter; any such contest to be decided "on the papers".

   (7) Order that the said notice of motion otherwise be dismissed.

5. After delivery of those reasons, Dr Barbagallo's lawyers pointed out, very properly, that there was an error in my factual findings which grounded order (4): namely, the order that LGS Enterprises and Ms Sullivan be jointly and severally liable with the plaintiffs for payment of the defendants' costs for the specified period. Accordingly, on 13 February 2013, I corrected that order by substituting the date 13 May 2012 for the date 29 August 2008 referred to in order (4).

The present application

1. LGS Enterprises and Ms Sullivan submit that they should be ordered to pay either 12.5% of the costs of the notice of motion, on the ordinary basis, or alternatively 25% of so much of those costs as relate to the costs orders sought against them as non-parties, again on the ordinary basis.

2. Dr Barbagallo opposes those suggested orders.

3. Stepping back from the detail for a moment, and looking at the notice of motion filed on 7 September 2012 at a level of some generality, it may be observed that:

   (1) Dr Barbagallo succeeded in relation to the first and third of the issues referred to at [3] above;

   (2) Dr Barbagallo succeeded in part as to the fourth of those issues; and

   (3) Dr Barbagallo failed as to the second of those issues.

4. In substance, it was that measure of success and failure that led me to apportion the cost of the notice of motion in the way that I did.

The submissions

1. Mr Pritchard of Senior Counsel, for LGS Enterprises and Ms Sullivan, makes the entirely understandable point that the ambit of the non-party costs orders made against his clients has now been reduced very substantially. As originally ordered, his clients would have been liable to pay costs for a period of almost four years (from 29 August 2008 until 2 August 2012). As the order was varied, that liability covered a period of less than three months (from 13 May to 2 August 2012).

2. Mr Pritchard noted that on Dr Barbagallo's evidence, of the total costs in excess of $933,000.00 said to have been incurred for his defence, only about $43,000.00 had been incurred over the period from 13 May to 2 August 2012: some 4.6% of the total costs said to have been incurred.

3. In those circumstances, Mr Pritchard submitted, the third party costs order made was very substantially different from the one sought; and the difference was very much to the disadvantage of Dr Barbagallo.

4. Mr Pritchard made other submissions, including that other issues had been raised in respect of the non-party costs orders, and that the issue of deregistration (which in my view triggered the order) "was, with respect, only a minor matter".

5. Mr Jackman of Senior Counsel and Mr Tyson of Counsel, for Dr Barbagallo, submit that on In Vivo's own evidence, the plaintiffs (that is to say, the entities that I have referred to as "In Vivo") ceased trading in April 2008, went into external administration at that time and thereafter made no payment towards their legal costs. They submitted that in the whole of the circumstances it was clear that the opposition to the notice of motion was generated entirely by LGS Enterprises and Ms Sullivan. That followed, they submitted, because it was clear that the plaintiffs themselves had no ability to pay costs, and thus could not really be concerned with whatever orders might be made; and because in any event it was LGS Enterprises and Ms Sullivan that had the real economic interest in opposing the special costs orders sought.

6. Further, Mr Jackman and Mr Tyson submitted, the submissions put for the respondents to the notice of motion (both the plaintiffs and the non-parties against whom costs orders were sought) were uniform on all issues. Thus, so far as the court could tell, it was not only the plaintiffs but also LGS Enterprises and Ms Sullivan who opposed all the orders sought.

Decision

1. Except for the first point, the other issues raised by Mr Pritchard had been taken into account in fixing the figure of 75% and I do not propose to revisit them. The crucial question, in my view, is whether the variance between the order sought and the order ultimately (after correction) made is such as to justify revisiting the costs of the notice of motion.

2. To my mind, the appropriate way to look at the present application is to start with the proposition that, in substance, the applicant Dr Barbagallo succeeded on three of the four claims put by him and failed on one. For better or worse, that was the basis on which I made the costs orders that I did in respect of the notice of motion. That remains the position. However, it must be acknowledged (as Mr Pritchard submitted) that Dr Barbagallo's success on one of those issues - the fourth - is now significantly less than it might appear to have been based on my reasons given on 13 February 2013. Is that a reason for varying the percentage?

3. In my view, the answer to the question is "no". The discretion in relation to costs is not capable of mathematical precision in its exercise. Attempts to split up issues, and to reflect success or failure on issues (and partial success or failure within issues) rarely produce anything more than confusion. It is necessary to avoid becoming mired in the detail, and to have regard to the essence of what happened.

4. To focus minutely on relative success and failure would require the court to ignore the reality. The respondents to the notice of motion all opposed all the relief sought. Dr Barbagallo obtained relief, in whole or in part, in respect of three of the four claims made by him. The opposition of the respondents was uniform. The same evidence was marshalled, and the same submissions were made, by all of them, without any indication of disunity in the ranks. All that would have happened regardless of the duration of the period of deregistration.

5. Further, I think, it is reasonable to infer, as Mr Jackman and Mr Tyson submitted I should, that the opposition was in substance instigated and funded by the non-parties, just as (regardless of the niceties of deregistration) the non-parties must have funded, or caused to be funded, In Vivo's conduct of the proceeding from April 2008 on. The interest of the non-parties was not merely in opposing the orders sought directly against them. It lay also in opposing other orders which would impact on the quantum of their liability if they were ordered to pay any costs.

6. In those circumstances, I do not propose to disturb or revise order (5) made on 13 February 2013.

Costs of this application

1. I order that the costs of the notice of motion filed on 6 September 2012 include the costs of the further application dealt with by these reasons.

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