Litigation Fund WCX Pty Ltd v Mitchell (No 4)

[2025] NSWCA 106

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Litigation Fund WCX Pty Ltd v Mitchell (No 4) [2025] NSWCA 106

Hearing dates:

On the papers

Date of orders:

21 May 2025

Decision date:

21 May 2025

Before:

Mitchelmore JA; McHugh JA; Ball JA

Decision:

(1)   The applicant pay the first respondents’ costs of the notice of motion filed on 11 March 2025 on an indemnity basis;

(2)   The amount of the costs referred to in (1) be fixed as a gross sum;

(3)   Within 21 days of today’s date, the applicant file and serve any evidence on which it relies and a short outline of written submissions not exceeding 5 pages on the quantification of the gross sum;

(4)   Within a further 7 days, the first respondents file and serve a short outline of written submissions not exceeding 2 pages in response; and

(5)   The amount of the gross sum be fixed on the papers.

Catchwords:

COSTS – where respondents seek indemnity costs – where applicant advanced unmeritorious grounds in application for review – indemnity costs granted

COSTS – where respondents seek gross sum costs order – where there is a real doubt about whether applicant can meet a costs order against it – gross sum costs order made

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98(4)(c)

Corporations Act 2001 (Cth), s 1335

Supreme Court Act 1970 (NSW), s 46(4)

Cases Cited:

Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353

Degmam Pty Ltd (In liq) v Wright (No. 2) [1983] 2 NSWLR 354

Flynn v PPK Mining Equipment Pty Ltd [2023] NSWCA 151

Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213

Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27

Litigation Fund WCX Pty Ltd v Darren Mitchell (No 2) [2025] NSWCA 33

Litigation Fund WCX Pty Ltd v Mitchell (No 3) [2025] NSWCA 67

Category:

Costs

Parties:

Litigation Fund WCX Pty Ltd (Applicant)
Darren and Rosaline Mitchell (First Respondents)
Roads and Maritime Services (now known as Transport for NSW) (Second Respondent)

Representation:

Counsel:
R Coshott (Applicant, with leave)
J Redwood SC with H Cooper (First Respondents)

Solicitors:
Ironbridge Legal (First Respondents)

File Number(s):

2024/351500

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Court of Appeal

Citation:

Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27 and Litigation Fund WCX Pty Ltd v Darren Mitchell (No 2) [2025] NSWCA 33

Date of Decision:

28 February 2025 and 10 March 2025

Before:

Griffiths AJA

File Number(s):

2024/351500

JUDGMENT

1. THE COURT: On 11 April 2025, the Court delivered judgment (see Litigation Fund WCX Pty Ltd v Mitchell (No 3) [2025] NSWCA 67 (WCX 3) in which it dismissed an application by Litigation Fund WCX Pty Ltd (WCX) for a review under s 46(4) of the Supreme Court Act 1970 (NSW) of decisions of Griffiths AJA delivered on 28 February 2025 (see Litigation Fund WCX Pty Ltd v Darren Mitchell [2025] NSWCA 27 (WCX 1)) and 10 March 2025 (see Litigation Fund WCX Pty Ltd v Darren Mitchell (No 2) [2025] NSWCA 33 (WCX 2)) in which his Honour ordered that (1) WCX provide security in the amount of $70,022.50 (including GST) for the costs of the first respondents, Mr and Mrs Mitchell (the Mitchells), of an appeal against orders made by the primary judge, McGrath J, on 20 September 2024 and 11 December 2024; (2) a gross sum costs order made by the primary judge against WCX in favour of the Mitchells in the amount of $134,607.95 be stayed pending the hearing and determination of the appeal against that order; and (3) WCX pay the Mitchells’ costs of the motions before his Honour on an indemnity basis and fixed in a gross sum of $69,336.33 (plus GST) and that those costs be paid within 28 days.

2. At the time the Court delivered judgment in WCX 3, it reserved the question of costs and gave directions for the filing of submissions on that question with the intention that it be dealt with on the papers. This judgment deals with that question.

3. The Mitchells seek their costs on an indemnity basis and seek an order that the costs of the application for review be fixed in a gross sum of $27,824.50 (inclusive of GST). WCX objects to the costs being assessed on an indemnity basis and to a gross sum costs order. It also objects to an affidavit of the Mitchells’ solicitor, Mr Trevor Withane, which was affirmed on 23 April 2025 and which was filed in support of the gross sum costs order. However, if the Court is minded to make a gross sum costs order and admits the affidavit, WCX seeks to file and to rely on (expert) evidence relevant to the assessment of a gross sum. It also seeks leave to cross–examine Mr Withane.

4. For the reasons that follow, we have concluded that:

1. WCX should pay costs of the application for review on an indemnity basis;

2. Those costs should be fixed in a gross sum;

3. The Mitchells should be entitled to rely on the affidavit of Mr Withane;

4. WCX should be given an opportunity to respond to that affidavit; and

5. The assessment of an appropriate gross sum should occur on the papers.

Indemnity costs order

5. One circumstance where it may be appropriate to order an unsuccessful party to pay costs on an indemnity basis is where the claim or application had no reasonable prospects of success: see Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 (Chaina) at [106]-[113] (Basten JA, with whom Young CJ in Eq agreed). Another related circumstance is where a party has contributed unnecessarily to the costs of the proceedings or application: Degmam Pty Ltd (In liq) v Wright (No. 2) [1983] 2 NSWLR 354 at 358, which was quoted with approval in Chaina.

6. In applying those principles to this case, it needs to be borne in mind that two amounts are in issue in the substantive appeal. One is the amount of $135,180.55, which was paid by WCX into the Mitchells’ solicitors’ trust account on account of costs to be incurred by the Mitchells in pursuing representative proceedings funded by WCX which WCX sought to recover following termination by it of the relevant funding agreement. The other amount was the costs which WCX was ordered to pay and which were assessed on a gross sum basis by the primary judge in the amount of $134,607.95. It was and is incumbent on both parties to conduct the appeal with that in mind and in a way that ensures to the extent reasonably possible that the costs of the appeal are proportionate to the amount in issue in the proceedings – that is, to an amount of approximately $270,000.

7. It also needs to be borne in mind that in order to succeed on its application for review, it was necessary for WCX to establish that Griffiths AJA had made an error of principle or was plainly wrong in concluding that WCX should provide security for the Mitchells’ costs of the appeal and in imposing as a condition of a stay of the primary judge’s gross sum costs order that the total amount the subject of that order be paid into Court: see WCX 3 at [20]. Given the discretionary nature of the decisions and the careful and detailed reasons of Griffiths AJA, that was a difficult thing to do.

8. Despite those considerations, WCX sought to take obviously unmeritorious points on its application for review. The main issue of principle in relation to the application for security for costs raised by WCX — whether the Mitchells had to establish the existence of special circumstances in seeking security under s 1335 of the Corporations Act 2001 (Cth) — had been determined in the Mitchells’ favour on a basis that was plainly correct. Both before Griffith AJA and before us, WCX relied on Flynn v PPK Mining Equipment Pty Ltd [2023] NSWCA 151 as establishing the requirement of special circumstances. However, as Griffiths AJA pointed out (WCX 1 [32]) that case was plainly distinguishable because in that case one of the entities from whom security was sought was a natural person, with the result that s 1335 did not apply.

9. Similarly, in relation to the question of a stay, the Mitchells agreed to a stay, but on the basis that the amount in issue should be paid into Court. That was a reasonable approach to take bearing in mind that WCX had led no evidence on the application for security for costs that it had any assets from which a judgment could be satisfied. The primary basis on which WCX resisted the imposition of that condition was that the Mitchells had recovered their costs from the amount which was held in their solicitors’ trust account. But that was plainly no answer in circumstances where the substantive issue before the primary judge and on appeal is whether the amount held in trust was available to the Mitchells to continue to conduct the class action. If the Mitchells are right about that issue, they have a strongly arguable case that they should be entitled to recover the gross sum costs order in addition to the amount held in trust. In those circumstances, the imposition of the condition was reasonable and well within Griffiths AJA’s discretion.

Gross sum costs order

10. The power to make a gross sum costs order is conferred by s 98(4)(c) of the Civil Procedure Act 2005 (NSW). One circumstance in which it may be appropriate to make a gross sum costs order is where a party’s conduct has unnecessarily contributed to the costs of the proceedings and those costs are unlikely to be recoverable. As Giles JA explained in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21]:

The power conferred by r 6(2) 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 (Leary v Leary (1987) 1 WLR 72; Sparnon v Apand Pty Ltd (von Doussa J, 4 March 1998, unreported); Beach Petroleum NL v Johnson (1995) 57 FCR 119; Hadid v Lenfest Communications Inc [2000] FCA 628).

11. In the present case, for the reasons already given, there is real doubt about whether WCX will be in a position to meet any costs order against it. Moreover, it appears from the way in which WCX has conducted the appeal to date that it intends to take every point available to it and thereby cause the Mitchells to incur costs which are disproportionate to the amount in dispute. The likelihood is that WCX will take a similar approach to the assessment of costs. In those circumstances, it is appropriate to make a gross sum costs order.

Orders

12. The Mitchells’ application for a gross sum costs order was consistent with the orders made by the Court in WCX 3. It was inevitable in those circumstances that if the Court acceded to that application (which it has) it would have to give further directions for the filing of evidence relevant to the assessment of an appropriate amount. In those circumstances, the Mitchells should be entitled to rely on Mr Withane’s affidavit.

13. Plainly, WCX should have an opportunity to respond to Mr Withane’s evidence. However, there is no reason why it should be given leave to cross-examine Mr Withane. There is no reason to doubt the accuracy of the figures contained in Mr Withane’s affidavit. The affidavit contains a description of each item of work claimed by the Mitchells, the amount claimed in respect of that item and how that amount is calculated. Given that information, WCX is in a position to make whatever points it wishes in submissions and any evidence it wishes to file. Particularly having regard to the amount claimed, leave to cross-examine Mr Withane is not warranted.

14. Accordingly, the orders of the Court are:

1. The applicant pay the first respondents’ costs of the notice of motion filed on 11 March 2025 on an indemnity basis;

2. The amount of the costs referred to in (1) be fixed as a gross sum;

3. Within 21 days of today’s date, the applicant file and serve any evidence on which it relies and a short outline of written submissions not exceeding 5 pages on the quantification of the gross sum;

4. Within a further 7 days, the first respondents file and serve a short outline of written submissions not exceeding 2 pages in response; and

5. The amount of the gross sum be fixed on the papers.

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Decision last updated: 21 May 2025