Otta International Pty Limited v Asia Pacific Carbon Pte Ltd (No 2)
[2017] NSWSC 1481
•27 October 2017
|
New South Wales |
Case Name: | Otta International Pty Limited v Asia Pacific Carbon Pte Ltd (No 2) |
Medium Neutral Citation: | [2017] NSWSC 1481 |
Hearing Date(s): | On the papers |
Decision Date: | 27 October 2017 |
Jurisdiction: | Common Law |
Before: | Adamson J |
Decision: | (1) Order the third and fourth defendants to pay the plaintiff’s costs of the proceedings on the ordinary basis up to 3 December 2016 and on an indemnity basis thereafter. |
Catchwords: | COSTS – application for gross sum order under |
Legislation Cited: | Civil Procedure Act 2005 (NSW), s 98 |
Cases Cited: | Bechara (t/as Bechara and Co) v Bates [2016] NSWCA 294 |
Category: | Costs |
Parties: | Otta International Pty Limited (ACN 002 393 535) (Plaintiff) |
Representation: | T Terei (Director of Plaintiff company, by leave) |
File Number(s): | 2015/220270 |
JUDGMENT
Introduction
On 20 September 2017 I made orders and delivered reasons in this matter: Otta International Pty Limited v Asia Pacific Carbon Pte Ltd [2017] NSWSC 1267. I ordered judgment in favour of the plaintiff in the sum of $165,868.69 against each of the third and fourth defendants and ordered the third and fourth defendants to pay the plaintiff’s costs of the proceedings, subject to an application for a different costs order being made within seven days.
The plaintiff has applied for an order for costs on an indemnity basis and that its costs be the subject of a gross sum costs order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW). The third and fourth defendants contended that the costs ought be awarded on the ordinary basis and have opposed the plaintiff’s application for a gross sum costs order and submitted that the costs ought be assessed. They also contended that the invoices rendered by the plaintiff’s various legal representatives did not distinguish between the costs incurred in proceeding against each defendant and therefore included costs incurred in proceeding against the first and second defendant for which the third and fourth defendants contended they ought not be liable. Further, they submitted that no costs should be allowed for either of the two affidavits of Mr Terei, the director and principal of the plaintiff, since the affidavits were not read at the final hearing of the proceedings.
The parties’ applications
The plaintiff’s application for indemnity costs
The plaintiff relied, in support of his application, for indemnity costs, on two offers of compromise dated 2 December 2016. The first, addressed to the third defendant, was in the following terms:
“The plaintiff offers to compromise this claim on the following terms:
1. The third defendant pay the plaintiff $30,000, payable over 2 years from the date of this offer as follows:
(a) $7,500 on 2 June 2017;
(b) $7,500 on 2 December 2017;
(c) $7,500 on 2 June 2018; and
(d) $7,500 on 2 December 2018.
2. The third defendant pay the plaintiff’s costs of the proceedings between the plaintiff and the third defendant, as agreed or assessed.
3. This offer of compromise is open for acceptance for a period of 28 days from the date of this offer.
4. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005.”
The second, addressed to the fourth defendant, was in the following terms:
“The plaintiff offers to compromise this claim on the following terms:
1. The fourth defendant pay the plaintiff $120,000, payable over 2 years with $20,000 to be paid within 3 months from the date of this offer (on or before 2 March 2017) and the amount of $100,000 to be paid as follows:
(a) $25,000 on 2 June 2017;
(b) $25,000 on 2 December 2017;
(c) $25,000 on 2 June 2018; and
(d) $25,000 on 2 December 2018.
2. The fourth defendant pay the plaintiff’s costs of the proceedings between the plaintiff and the fourth defendant, as agreed or assessed.
3. This offer of compromise is open for acceptance for a period of 28 days from the date of this offer.
4. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005.”
In my view both offers of compromise comply with r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).
Each of the defendants would have been better off, had they accepted the plaintiff’s offers of compromise, since the judgment sum, even having regard to pre-judgment interest (which needs to be deducted for the relevant period from the date of the offer for purposes of comparison) is greater than the amount for which the plaintiff was willing to compromise the proceedings. Accordingly, UCPR r 42.14 applies, since the judgments obtained by the plaintiff are no less favourable than the terms of the respective offers not accepted by the third and fourth defendants.
The third and fourth defendants submitted that costs should be awarded on the ordinary basis. I am not satisfied that the effect of the offers of compromise should be other than as provided for in the UCPR. No reason has been put forward as to why the offers should not have the usual consequence intended by the UCPR. In these circumstances, I am satisfied that, under UCPR 42.14(2), the plaintiff is entitled to an order that the third and fourth defendants respectively pay the plaintiff’s costs on the ordinary basis up to 3 December 2016 (being the day following the day the offers were made) and on an indemnity basis thereafter.
The plaintiff’s application for a gross sum costs order
The plaintiff has applied for a gross sum costs order. Mr Terei, who appeared by leave on behalf of the plaintiff, submitted from the bar table that he has spent considerable sums on legal costs and would prefer the litigation to be at an end. He has applied for a gross sum costs order so that he does not have to be involved in what could be a lengthy and expensive exercise of costs assessment. The third and fourth defendants contended that the costs ought be assessed.
In Bechara(t/asBecharaand Co) v Bates [2016] NSWCA 294, the Court of Appeal summarised the relevant principles applicable to the making of a gross sum costs order pursuant to s 98(4) of the Civil Procedure Act in the following passage:
“[12] The power to award a lump-sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison vSchipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at 742–723 [21]–[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123.
[13] 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: Hamodv New South Wales [2011] NSWCA 375 at [818] per Beazley JA (Giles and Whealy JJA agreeing).
[14] 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: AuspineLtd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1999] FCA 673 at 5 [16]; Pensonv Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7].
[15] The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod v New South Wales at [814].
. . .
[18] The Court is satisfied that the total costs of this litigation will become even more disproportionate if the costs are referred for assessment and a lump-sum costs order is not made. The reasoning in Hamod v New South Wales at [816]–[817] is apposite.”
In the present case, the costs are disproportionate to the judgment sum. The proceedings were commenced in this Court in 2015 because of the sums claimed and remained in this Court after default judgment was entered against the first defendant on 27 May 2016 in the sum of $694,711.49. There were eleven directions hearings (nine of which were listed before me), which were largely occasioned as a result of non-compliance by the third and fourth defendants with the UCPR (such as the fourth defendant purporting to file a defence on behalf of all defendants); applications made by the third and fourth defendants which were without merit (such as the application for security for costs against the plaintiff although there was no basis for considering that it would be unable to meet an adverse costs order); or breaches by them of directions made by the Court (which required extensions to directions for filing of affidavit evidence). There were also costs expended relating to unsuccessful court-ordered mediation.
I note that, because of the amount of the judgment sum ordered against the first defendant, UCPR r 42.34 does not apply although the proceedings could have been commenced in the District Court: UCPR r 42.34(1).
I am satisfied that this is an appropriate case for a gross sum costs order since this will avoid the lengthy and expensive process of assessment. As neither party is presently represented it is unlikely that the assessment process would go smoothly. The plaintiff has incurred and paid significant amounts for legal expenses. Mr Terei sought leave to appear on behalf of the company for the final hearing of the matter because the plaintiff, which had already incurred significant legal expenses in prosecuting its claims against the defendants, wished to avoid further expenditure on legal fees.
The quantum of the gross sum costs
A distinction is to be drawn between the costs incurred before 3 December 2016 and those incurred from that date. In light of the plaintiff’s entitlement to indemnity costs from 3 December 2016 all the costs from this date should be included since they all appear to me to be reasonable (and, indeed, do not cover a significant period since the plaintiff was not represented by lawyers in the latter stages). The question is what discount should be applied to the total costs incurred prior to that date.
Mr Terei has tendered the invoices from his legal representatives and receipts for disbursements (including court fees of $5,013). The invoices from Curlington Legal (the firm on the record from the commencement of proceedings until March 2017) contain detailed descriptions of the work performed but do not indicate the hourly charge-out rate for legal services. The invoices also included some amounts which are clearly referable to the plaintiff’s claims against other defendants (against whom either judgment has been entered, as in the case of the first defendant, or not pressed, as in the case of the second defendant, which is apparently insolvent). For example, there is an entry for 11 August 2016 which relates to consideration of registering a foreign judgment. This is a reference to judgment against the first defendant, which was incorporated in Singapore. It is plain that the time occupied by obtaining judgment against the first defendant (which was obtained by default) was relatively insignificant when compared with the time required to prosecute the plaintiff’s claims against the third and fourth defendants.
Further, I note that each of the invoices from Curlington Legal contains a significant discount of the total of the individual entries. For example, for the invoice dated 30 December 2015, Curlington Legal’s professional costs amounted to $4,590 (excluding GST); and the disbursements amounted to $3,280 (excluding GST). The total invoiced (excluding GST) was $5,370 as the total had been discounted by $2,750. Thus, a substantial discount was built into the total claimed by the plaintiff having regard to the approach taken by the plaintiff’s former legal representatives. This would have had the result that, had the costs been assessed, there is a real prospect that the plaintiff’s costs would be assessed at a figure close to 100% of the amounts invoiced.
Curlington Legal ceased to act on about 17 March 2017. Subsequently the plaintiff was advised, largely for the purposes of the mediation, by English Law. Although Mr Terei conducted the hearing himself on behalf of the plaintiff, he was able to do so on the basis of pleadings filed by Curlington Legal which did not require any material amendment at the hearing. Although Mr Terei did not read his lengthy affidavit or a shorter second affidavit, he tendered all of the documents which were exhibited to his affidavits, which had been prepared by Curlington Legal. In these circumstances, while I accept the force of the submissions made by Mr and Mrs Kane that the costs of Mr Terei’s affidavits ought not be allowed in full, the content of the body of affidavits largely reflected the documentary exhibits and the representations contained in the pleadings. If it were not for the substantial discounting which has already occurred as a result of the approach of Curlington Legal, I would have been disposed to make a specific deduction from the costs associated with the preparation of Mr Terei’s affidavit. I am, however, satisfied that a large proportion of the costs associated with the preparation of those affidavits (particularly the first) was productive, in that the documents were identified and assembled in a useful order (largely chronological) and became exhibits in the proceedings. To the extent to which I have discounted the fees by reason of the costs incurred in the preparation of the affidavits which were not referable to the documents exhibited to them, the discount is reflected in the discount referred to below.
It is usually the case where parties are represented for the party’s legal representative, or a qualified expert, to opine in an affidavit as to the reasonableness of the fees charged and the proportion of such fees which would be likely to be received on assessment. There is no evidence of that nature in support of the present application. However, s 98(4) of the Civil Procedure Act does not require such evidence to be given. Indeed, to require such evidence would tend to work an injustice against parties who, like the plaintiff in the present case, were once represented (and therefore incurred legal costs) but chose to continue unrepresented because of the amount of those costs.
Having regard to what I consider to be the modest level of fees charged by the plaintiff’s former legal representatives (particularly Curlington Legal, whose fees were heavily discounted before they were invoiced), I do not consider it to be appropriate to apply a substantial discount to the amount sought. The plaintiff has claimed an amount of $58,310.33, which includes $5,013 court fees. Taking into account all of the matters referred to above I am satisfied that it is appropriate to make a gross sum costs order in the amount of $50,000.
Orders
I make the following orders:
(1)Order the third and fourth defendants to pay the plaintiff’s costs of the proceedings on the ordinary basis up to 3 December 2016 and on an indemnity basis thereafter.
(2)In respect of the costs payable pursuant to order (1) above, order the third and fourth defendants, pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW), to pay to the plaintiff the amount of $50,000 within 28 days of the date of this order.
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