Makaroff v Nepean Blue Mountains Local Health District (No 2)

[2019] NSWSC 1043

Supreme Court

New South Wales

Medium Neutral Citation:

Makaroff v Nepean Blue Mountains Local Health District (No 2) [2019] NSWSC 1043

Hearing dates:

On the papers

Date of orders:

15 August 2019

Decision date:

15 August 2019

Jurisdiction:

Common Law

Before:

Harrison AsJ

Decision:

The Court orders that:

 

(1) The second defendant’s costs are assessed at a gross sum of $176,000.

 (2) The plaintiff and second defendant are to pay their own costs of the special costs application.

Catchwords:

COSTS – Gross sum award of costs – Where the plaintiff is impecunious

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 98,
Supreme Court Rules, r 6(2)
Uniform Civil Procedure Rules, r 42.1

Cases Cited:

Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd (No 10) [2017] NSWSC 16
Board of Examiners v XY (2006) 25 VAR 193
Chaina v Presbyterian Church (NSW) Property Trust (No 6) [2014] NSWSC 1009
Evans Shire Council v Richardson (No 2) [2006] NSWCA 61
Ghougassian v Fairfax Community Newspapers Pty Ltd [2015] NSWCA 307
Hamod v State of New South Wales [2011] NSWCA 375
Hamod v State of New South Wales (No 4) [2007] NSWSC 1363

Hamod v State of New South Wales (No 11) [2008] NSWSC 967
Hamod v State of New South Wales (No 13) [2009] NSWSC 756
Harrison v Schipp [2002] NSWCA 213
Kostov v Zhang (No 2) [2016] NSWCA 279
Makaroff v Nepean Blue Mountains Local Health District [2019] NSWSC 715
Northern Territory v Sangare [2019] HCA 25
Sedgwick v Varzonek (No 2) [2015] NSWSC 1613
Smoothpool v Pickering [2001] SASC 131
Wakim v State of New South Wales [2017] NSWSC 1492
Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99

Category:

Costs

Parties:

Diana Makaroff (Plaintiff)
Nepean Blue Mountains Local Health District (First Defendant)
Dr Paul Percy (Second Defendant)

Representation:

Counsel:
M Hutchings (Second Defendant)

  Solicitors:
Self represented (Plaintiff)
HWL Ebsworth Lawyers (Second Defendant)

File Number(s):

2013/168790

Publication restriction:

Nil

Judgment

1. HER HONOUR: This judgment concerns whether a special costs order should be made. On 14 June 2019, I delivered judgment in Makaroff v Nepean Blue Mountains Local Health District [2019] NSWSC 715. Judgment was entered in favour of the defendants and a costs order made that the plaintiff pay the defendants’ costs. I ordered the defendants to provide to my associate by email written submissions concerning special orders as to costs by 21 June 2019, and the plaintiff to provide written submissions in reply by 5 July 2019. The first defendant does not seek a special costs order. It has already been awarded costs on an ordinary basis on 14 June 2019.

2. The plaintiff is Diana Lynn Makaroff. The first defendant is Nepean Blue Mountains Local Health District (“Nepean Hospital”). The second defendant is Dr Paul Percy, the plaintiff’s former treating general practitioner.

3. On 8 July 2019, my associate emailed the plaintiff’s solicitor, Mr Margiotta, requesting the plaintiff’s written submissions. On 11 July 2019, my associate again emailed the plaintiff’s solicitor granting an extension of time to file and serve written submissions by 18 July 2019.

4. On 18 July 2019, the plaintiff’s solicitor emailed by associate advising that he was no longer acting on behalf of the plaintiff. On 19 July 2019, my associate emailed the plaintiff advising that if she wished to provide written submissions concerning special orders as to costs, she was to do so by email by 4.00 pm Friday 9 August 2019. The plaintiff sent two emails to my associate, one dated 8 September 2019, the other dated 9 August 2019. I have treated the contents of those emails as the plaintiff’s submissions.

Dr Percy’s submissions

5. In an attempt to finally conclude the proceedings (and expressly to avoid the delay of costs assessment), Dr Percy seeks an order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) that the plaintiff pay his costs of the proceedings in a gross sum costs order specified in the sum of $200,000 (representing 57% of the total costs and disbursements incurred by him to date). According to Dr Percy, it is in the parties’ best interests and accords with the operation of s 56 of the Civil Procedure Act.

6. Dr Percy relies upon the affidavit of his solicitor Stacey Marie King dated 20 June 2019.

History of the proceedings

7. In June 2013, these proceedings were commenced in this Court. Initially, Nepean Hospital was the only named defendant. At that time, Stacks Goudkamp was representing the plaintiff.

8. On 17 June 2014, a notice of change of solicitor was filed appointing Anthony Margiotta of Margiotta Solicitors & Attorneys as the plaintiff’s solicitor.

9. A mediation took place between the plaintiff and Nepean Hospital some time in 2015. No settlement could be reached at that time.

10. On 15 December 2015, the plaintiff filed an amended statement of claim joining Dr Percy as the second defendant to the proceedings.

11. On 2 June 2016, a further notice of change of solicitor was filed on behalf of the plaintiff, this time appointing Stephen Smart & Associates as the plaintiff’s solicitor.

12. On 26 October 2016, a further mediation took place. Again, the parties were unable to reach a settlement at that time.

The first offer of compromise

13. On 28 October 2016, the defendants served the first joint offer of compromise for $250,000 plus costs. It reads:

“The first and second defendants offer to compromise the plaintiff’s claim in the following manner:

1.   Judgment for the plaintiff for $250,000.

2. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules.

3.   This offer is open until 29 November 2016.”

14. This first offer of compromise was not accepted. Dr Percy submitted that it is strongly arguable that he would be entitled to indemnity costs from this date, but it is noted that he has not applied for indemnity costs.

15. On 23 November 2016, the matter was listed for directions. The defendants sought a hearing date. However, the plaintiff sought an order for further evidence including an updated psychiatric report and a report from a general practitioner addressing liability. In circumstances where the plaintiff’s representatives could not provide any explanation for the delay, the matter was stood over for a period of one week and the plaintiff was ordered to file an affidavit as to the need for further reports.

16. On 30 November 2016, the matter was listed for a directions hearing. At that time orders were made for the service of a general practitioner’s report and an updated report from Associate Professor Carolyn Quadrio.

17. On 5 April 2017, the matter was again listed for directions hearing at which time the plaintiff was still not in a position to obtain a hearing date. The plaintiff instead sought orders for service of a life expectancy report. The defendants objected to service of any further evidence. Ultimately, the plaintiff was allowed an opportunity to serve a report by 31 May 2017. An order was also made that should the plaintiff not serve the report on time, then she could not rely on it unless she was granted leave from the Court.

18. On 20 June 2017, Stephen Smart & Associates filed a notice of ceasing to Act. On 20 July 2017, Turner Freeman served a Notice of Appointment of Solicitor.

19. On 14 July 2017 and 28 July 2017, the matter was again listed for directions hearing. No substantive orders were made at that time, as Turner Freeman were still awaiting receipt of the plaintiff’s file and could not commit to a timetable or hearing date.

The second offer of compromise

20. On 15 August 2017, the defendants served a second joint offer of compromise for $250,000 plus costs. It reads:

“The first and second defendants offer to compromise the plaintiff’s claim in the following manner:

1.   Judgment for the plaintiff for $250,000.

2. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules.

3.   This offer is open until 14 September 2017.”

21. The second offer of compromise was not accepted.

22. On 16 August 2017, the matter was listed for a further directions hearing. At that time orders were made regarding service of updated quantum reports by the plaintiff and a supplementary report from Dr Duke. The matter was also listed for a further directions hearing on 20 December 2017 for allocation of a hearing date.

23. By letter dated 1 September 2017, Dr Percy’s solicitors were advised that Turner Freeman was no longer acting for the plaintiff.

24. On 11 September 2017, Margiotta Solicitors & Attorneys filed a notice of change of solicitor.

25. On 20 December 2017, the matter was listed for directions hearing. The plaintiff sought further time for service of a report from Ms Prattley. In the circumstances, a hearing date could not be allocated.

26. On 7 February 2018, the matter was listed for directions hearing. At this time, approximately 15 months after the mediation, orders were finally made listing the matter for hearing for 10 days commencing on 3 September 2018.

27. On 27 July 2018, the matter was listed for directions hearing. At that time further orders were made to prepare the matter for hearing.

28. The final hearing of this matter proceeded as scheduled on 3 September 2018 for 10 days before me.

Dr Percy’s instructions, billing arrangements and costs

29. On 23 December 2015, TressCox Lawyers received instructions from Avant Insurance Limited to act on behalf of Dr Percy in relation to the plaintiff’s claim. Upon receipt of those instructions, a file was created.

30. From receipt of instructions from Avant Insurance Limited in December 2015, fee earners in the employ of TressCox Lawyers who performed work on this matter entered their time on the matter under number 1XXXX.

31. For the period between December 2015 and 4 February 2018, TressCox Lawyers employed a computerised accounting, time recording and billing system called 3E.

32. On 5 February 2019, TressCox Lawyers merged with HWL Ebsworth Lawyers. Upon the merger, the TressCox file numbere 1XXXX was closed and a new HWL Ebsworth file was opened in relation to this matter under number 8XXXX. From 5 February 2018, fee earners in the employ of HWL Ebsworth who performed work on this matter entered their time under the file number 8XXXX.

33. For the period from 5 February 2018 to date, HWL Ebsworth Lawyers employed a computerised accounting, time recording and billing system called Aderant Expert. HWL Ebsworth itemised tax invoices together with supporting documents and invoices for experts or other professional fees (such as mediator fees) which were billed directly to their client.

Briefing of counsel

34. After the matter was set down for hearing on 7 February 2018, HWL Ebsworth received instructions to brief counsel.

35. In accordance with those instructions, on 9 March 2018, Matthew Hutchings of counsel was briefed to advise and appear on behalf of Dr Percy.

The file

36. Both TressCox and HWL Ebsworth operate on a paper light basis.

37. Ms King deposes that she has reviewed both the electronic and hard copy file for this matter. The hard copy file consists of approximately 20 A4 lever arch folders and the electronic file is 2.1GB of data, including but not limited to:

1. three folders and/or approximately 2700 electronic files of correspondence (including email correspondence);

2. eight folders of subpoena and medical records; and

3. three folders of expert reports and other evidence.

Hearing and preparation for hearing

38. The final hearing in this matter commenced on 3 September 2019. The plaintiff served 10 witness statements, including two statements from the plaintiff. Nepean Hospital served three witness statements. Dr Percy served his witness statement.

39. As part of the preparation of each witness statement, counsel for Dr Percy, Matthew Hutchings, and Ms King were required to meet with the witnesses.

40. In addition to the witness statements, the defendants also tendered two A4 lever arch folders containing the defendants’ tender bundle. Ms King also prepared an agreed tender bundle on behalf of all of the parties which was tendered at the hearing.

Bills rendered to the client

41. Annexure A to Ms King’s affidavit is a summary of all invoices issued to Avant Insurance Limited, the insurer, and includes the following information:

1. the date of the invoices;

2. the invoice number (if any);

3. the invoice issuer;

4. the legal fees on invoice (excluding GST);

5. the disbursements on invoice (excluding GST);

6. the GST on invoices; and

7. the invoice total.

42. As at the date of this affidavit, the total fees billed to Avant Insurance Limited is $351,909.71 including GST.

Costs orders in the proceedings

43. A review the Online Registry show indicates that the following costs orders have been made in these proceedings in favour of the defendants:

44. On 30 November 2016, Registrar Bradford ordered the plaintiff pay the defendants’ costs of 23 November 2016;

45. On 28 July 2017, Registrar Bradford ordered that the plaintiff pay the defendants’ costs of 14 July 2017.

46. No adverse costs orders have been made against the Dr Percy in this matter.

The plaintiff’s submissions

47. As previously stated, on 8 August 2019, the plaintiff emailed my associate stating that her former solicitor is no longer practising. She says that she has been trying to obtain legal advice but has not been able to secure a solicitor as she has no money to pay anyone. The plaintiff requested that the costs order be waived as she has been homeless and camping in a paddock since the end of 2014. Her only assets are an old horse trailer and a 16-year-old Mazda ute.

48. On 9 August 2019, the plaintiff again emailed my associate advising that she had had telephoned a local community centre that morning for free legal advice. She was informed that if costs for order was made against her she would be made bankrupt and would therefore lose many of her legal rights including her right to appeal. The plaintiff says that her right to appeal should be determined by the Court of Appeal.

49. The plaintiff also referred to [583] of my judgment where I stated that costs are discretionary. The rest of [583] reads, “Costs follow the event. The plaintiff is to pay the defendants’ costs.” She says that there had been a number of attempts to settle her case but the stumbling block was always her first solicitor’s excessive legal fee of $264,000 which prevented a settlement. If she is declared bankrupt, her legal rights against her first solicitors will also be taken away from her. The plaintiff has requested that I exercise my discretionary powers in her favour so as to prevent her inevitable bankruptcy.

Should a gross sum costs order be made?

Dr Percy’s submissions

50. As previously stated, in the interests of concluding the matter and precluding the need for a costs assessment process, Dr Percy seeks a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act. The sum sought by Dr Percy is $200,000. This sum includes a significant discount in favour of the plaintiff and represents only 57% of the total costs and disbursements Dr Percy incurred. According to Dr Percy, it would be wholly consistent with ss 98(4)(c) and 56 of the Civil Procedure Act for the Court to order the plaintiff to pay his costs in a specified gross sum.

51. That is particularly so given the prolonged history of the proceedings, the plaintiff’s limited financial circumstances, and the apparent delay that has occasioned almost every step that the plaintiff has been required to take in the proceedings.

52. Dr Percy is concerned by the likely expense, delay and aggravation of embarking upon a costs assessment. Going by the history of the proceedings, it is unlikely that the costs assessment would proceed in an orderly, cost efficient manner.

53. Dr Percy further submitted that the determination of the quantum of the specified gross sum that the plaintiff should be ordered to pay depends in part upon the impression made by Dr Percy’s evidence. Also, the content of the Court file must also be considered, which records the significant delay in the conduct of the proceedings by, or on behalf of, the plaintiff. The impression made by the evidence is sufficient for the purpose of arriving at an appropriate specified gross sum that does justice to both the plaintiff and Dr Percy.

54. Dr Percy argued that the costs need not be meticulously assessed; a broad-brush approach is appropriate and in accordance with the stated objects of the Civil Procedure Act. However, if the Court determined that the discount was insufficient, the Court should order a specified gross sum calculated from the total costs sought but discounted by an appropriate percentage. Dr Percy said that it would be more appropriate to make a percentage reduction rather than to decline to make a gross sum costs order at all.

The law

55. The starting point for a costs order is s 98 of the Civil Procedure Act. It relevantly reads:

“98 Courts powers as to costs

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

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

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

(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.

(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.

(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, or

(d) such proportion of the assessed costs as does not exceed a specified amount.

…”

(My emphasis)

56. Further, UCPR 42.1 reads:

“42.1 General rule that costs follow the event

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.”

57. The onus is on the offeror, in this case Dr Percy, to satisfy the Court that it should exercise the costs discretion and make a special costs order in its favour: see Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26].

58. As previously stated, an order in accordance with UCPR 42.1 that the plaintiff pay the defendants’ costs on an ordinary basis was already made on 14 June 2019.

59. In Harrison v Schipp [2002] NSWCA 213 (“Schipp”), Giles JA contemplated the operation the Court’s power to order the payment of costs in a specified gross sum pursuant to Part 52A of the Supreme Court Rules, r 6(2). His Honour's approach in that case has been frequently approved and adopted in the determination of s 98(4)(c) applications.

60. In Schipp, Giles JA held that the making of such an order did not at all require a judge to engage in a task of ordinary costs assessment. At [21]-[22], his Honour stated:

“[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) l 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).

[22] 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 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 LenfestCommunications 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 (CA, 21 February 1996, unreported, per Clarke JA).”

61. The determination of the quantum of the specified gross sum to be ordered entails a review of the successful party’s costs by reference to the pleadings, the complexity of the issues raised on the pleading, the interlocutory processes undertaken, and the required preparation for final hearing and (where relevant) the conduct of the final hearing: see Smoothpool v Pickering [2001] SASC 131 at [12].

62. In Hamod v State of New South Wales (No 13) [2009] NSWSC 756 (“Hamond (No 13)”) Harrison J considered a s 98(4)(c) application. In Hamond No 13, both defendants sought a gross sum costs order from an impecunious plaintiff whose conduct in the proceedings had been often dilatory, if not obstructive: see Hamod v State of New South Wales (No 4) [2007] NSWSC 1363 and Hamod v State of New South Wales (No 11) [2008] NSWSC 967.

63. Harrison J identified the purpose of s 98(4)(c) to be the avoidance of the “expense, delay and aggravation involved in protracted litigation arising out of the assessment process”.

64. In Hamond (No 13) at [27]-[35], Harrison J considered the available material in support of the application, which included the invoices received by the defendant, the need to apply a broad brush in determining the quantum of a specified gross sum costs order, and the savings to the defendant of avoiding the assessment process. Harrison J granted the order. The plaintiff included that decision in his appeal from his Honour’s principal judgment in the proceedings.

65. In Hamod v State of New South Wales [2011] NSWCA 375, the Court of Appeal upheld Harrison J’s gross sum costs order. Beazley P summarised the applicable relevant principles attending to the consideration of a s 98(4)(c) application in Hamod [2011] NSWCA 375 at [814]-[820]:

“[814] The courts have typically applied a discount in assessing costs on a gross sum basis...

[815] In Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 11 9 ... von Doussa J noted that the specified gross sum costs procedure was particularly useful in complex cases, that the power must be exercised judicially and only after giving the parties an adequate opportunity to make submissions, and that before exercising the power the court should be confident that the approach taken to estimate costs is fair, logic al and reasonable.

[816] 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... 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...

[817] 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... 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...

[818] The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings...

[819] The assessment of any lump sum to be awarded must represent a review of the successful party’s costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing... In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment...

[820] The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for exam ple, by relying on costs estimates or bills) ... The approach taken to estimate the costs to be ordered must be logic al, fair and reasonable... This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment...”

66. The operation of s 98(4)(c) has been frequently considered since Hamod [2011] NSWCA 375.

67. In Chaina v Presbyterian Church (NSW) Property Trust(No 6) [2014] NSWSC 1009 (“Chaina (No 26)”), Davies J determined an application for a specified gross sum costs order. In making the order sought Davies J observed at [50]:

“[50] I have taken into account the following matters in concluding that a specified gross sum for costs should be ordered:

(a) The time and delay in completing a formal costs assessment and the cost of doing so;

(b) The number of costs orders made to date, most of which favour the Defendant. The most significant of the costs orders was made by Hoeben J on 23 November 2009;

(c) The fact that the Plaintiffs are unrepresented, and are likely to remain unrepresented through any costs assessment process. The difficulties that attended the hearing of the substantive proceedings when the Plaintiffs were unrepresented were significant. The position would be magnified in any costs assessment process, not the least reason for which would be that the Plaintiffs are un likely to be able to engage any form of advisor to assist them through the process;

(d) Although there was some evidence of assets owned by the Plaintiffs or some corporate vehicle which they controlled (their house in Vaucluse and a number of luxury cars) there is strong likelihood that the Plaintiffs will not be able to satisfy any costs judgment against them...

(e) Mr and Mrs Chaina’s conduct in the present proceedings has unnecessarily contributed to the costs of the proceedings in circumstances where those costs incurred by the Defendant have been disproportionate to the result of the proceedings.”

68. In Chaina (No 26), Davies J then observed at [56]:

“…As a broad rule of thumb, a successful party will recover 70% to 80% of costs assessed on the ordinary basis”.

69. In Ghougassian v Fairfax Community Newspapers PtyLtd [2015] NSWCA 307, (“Ghougassian”) Emmett JA held at [62]:

“[62] Under s 98(4) (c) of the Civil Procedure Act, the court may make a costs order as a specified gross sum, rather than assessed costs. The discretion conferred by that provision may be exercised where the assessment of costs may be protracted and expensive and i f it appears that a party obliged to pay the costs may not be able to meet a liability to do so. The power may also be exercised where a party’s conduct contributes unnecessarily to the incurring of costs”. (footnotes omitted)

70. In Sedgwick v Varzonek (No 2) [2015] NSWSC 1613, Slattery J held at [34]-[36]:

“[34] The applicable principles in relation to the making of specified gross sum costs orders under CPA, s 98(4)(c) may be shortly stated. Although the CPA s 98(4)(c) power has been described as particularly suited to complex litigation, the rule is expressed in general terms and is not limited to cases of that type: Australasian Performing Rights Association Ltd v Marlin [1999] FCA l 006 at [3] (Burchett J)...

[35] Probable inability to pay a costs order will usually provide a proper basis for the making of as 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered then the successful p arty is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp [2002] NSWCA 213; 54 NSWLR 738 (“Schipp”) at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 (“Hadid”) (Lehane J).

[36] But there are many other reasons for making such an order. Here there is a pressing need in the interests of a number of parties interested in these proceedings to bring consequential aspects of the proceedings to a rapid conclusion...”

71. In Kostov v Zhang (No 2) [2016] NSWCA 279, Meagher and Payne JJA observed at [27]:

“[27] A ‘broad brush’ approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint MillsLtd [1999] FCA 673; (1999) 93 FCR 1 at 5; [1999] FCA 673; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7].”

See also Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [31] and [38].

72. In Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd (No 10) [2017] NSWSC 16, Ball J held at [38]:

“[38]…the exercise of the power conferred by section 98(4)(c) is particularly appropriate where costs have been incurred in a lengthy case and it is desirable to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment. This may arise either from the likely length and complexity of the assessment process 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”.

73. In Wakim v State of New South Wales [2017] NSWSC 1492, Fagan J made such an order and applied a 20% discount. His Honour stated at [23]-[24]:

“[23] The defendant submits that it is reasonable to apply a discount of 15% to the solicitors’ costs but no discount to counsel’s fees or to the other disbursements. The 15% reduction would produce a figure for solicitors’ costs of $202,550 and a total, taken together with undiscounted counsel’s fees and disbursements, of $320,400.

[24] I consider that the discount should be nearer to 20% to allow for the inherent uncertainty of estimation of such a substantial sum of costs incurred in the conduct of the case over three years, with the unusual feature that most of the work was interlocutory in nature. I will allow slightly over $195,000 for solicitors costs and assess the gross sum at $310,000.”

74. As to the plaintiff’s financial position, the relevance of a party’s impecuniosity to an adverse order for costs was recently considered in the case of Northern Territory v Sangare [2019] HCA 25 (“Sangare”). By reference to the judgment of Chernov JA (with whom Neave JA agreed) in Board of Examiners v XY (2006) 25 VAR 193, Keifel CJ, Bell, Gageler, Keane and Nettle JJ held in Sangare at [27]:

“[27]… In point of principle, it is basic justice that a successful party should be compensated for expenses it has incurred because it has been obliged to litigate by the unsuccessful party… The statutory power to order costs affords the successful party necessary protection against unmeritorious litigation; and unmeritorious litigation is no less unmeritorious because it is pursued by a person who is poor or who is a litigant-in-person.”

75. Their Honours continued in Sangare at [35]:

“[35] …as a matter of authority, the courts have consistently rejected the suggestion that a costs order should not be made against an impecunious party because it would be futile to do so. The circumstances that a person may not presently, or even foreseeably, be able to meet an order for costs has not been regarded as a reason to regard the creation of the debt as an exercise in futility. The very existence of the debt created by the order is a benefit to the creditor. The successful party is better off with the benefit of the order than without it. It simply cannot be assumed that the respondent will never have the means to pay the debt in whole or in part or that it might not be otherwise be turned to valuable account by the appellant.” (footnotes omitted)

Conclusion

76. The plaintiff changed solicitors on a number of occasions. She says she incurred fees of $264,000 in relation to her first solicitors’ legal representation alone. This seems a large sum, and there is no actual evidence to support her assertion. The evidence obtained by the parties (including her own) was largely unfavourable to her, and she had the benefit of legal representation to advise her of her chances of success if she elected to proceed to a 10 day trial. There will be expense and delay involved in embarking on a costs assessment in a situation where the plaintiff is unrepresented and her assets very modest. In my view, the award of a gross sum for costs would obviate the costs assessment process and it will do justice to both parties. I note that as the Court held in Sangare outlined above at [74]-[75] of this judgment, the plaintiff’s impecuniosity is no reason not to award a gross sum for costs.

77. I am satisfied firstly, that after reviewing the legal work undertaken and the disbursement incurred, I can fairly and confidently reach an appropriate costs sum on the material; and secondly, there is material available and upon which I can reach an appropriate estimate of costs that is logical, fair and reasonable. Dr Percy’s costs are calculated on a solicitor/client basis and total $351,909.71. While there is no estimate of the costs incurred on an ordinary basis, the disbursements and barristers’ fees would be the same. However, Dr Percy is only claiming 57% of the total costs order in the sum of $200,000. Taking these matters into account and making a deduction for solicitors’ fees, I allow Dr Percy’s costs at 50% of $351,909.71. That equates to $175,954.86 rounded up to $176,000. I therefore make a gross sum order for costs in the sum of $176,000.

Costs of this application

78. If the application for a gross costs order is opposed, Dr Percy seeks the costs of the application. In the exercise of my discretion, the appropriate order is that each party to pay their own costs of this costs application.

Result

79. The second defendant’s costs are assessed at a gross sum of $176,000. With respect to the parties’ costs of the special costs application, I order that the plaintiff and second defendant pay their own costs.

The Court orders that:

(1)   The second defendant’s costs are assessed at a gross sum of $176,000.

(2)   The plaintiff and second defendant are to pay their own costs of the special costs application.

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Decision last updated: 15 August 2019