Russo v Buck & Ors (No 5) - [2010] SASC 27

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
RUSSO v BUCK & ORS (No 5)
[2010] SASC 27
Reasons of Judge Lunn a Master of the Supreme Court
16 February 2010
PROCEDURE
Application to appoint representative for deceased defendant under 87R 30.03 - no administration as yet of the deceased's estate - costs order made jointly in favour of deceased defendant and another defendant on which an order for lump sum fixation is sought - held 87R 30.03 does not extend to appointing a representative who is seeking a judgment for costs - application refused.

PROCEDURE
Application for lump sum fixation under 6R 271(6)(c) - principles to be applied - held no lump sum fair to the plaintiff could be fixed because of the difficulty in apportioning costs between different defendants and costs orders in differing terms - application refused.

PROCEDURE
Interim allocaturs - application under 6R 274(2)(b)(ii) for interim allocatur pending finalisation of adjudication - held interim order for payment on account of the costs to issue for $59,567.

RUSSO v BUCK & ORS (No 5)
[2010] SASC 27
Reasons on defendants’ applications for fixing lump sum costs and for interim allocaturs.

JUDGE LUNN: After a long and hard fought trial on 6 May 2007 the Chief Justice made the following costs order:
1That the plaintiff, Mr Russo, pay the costs of the action of the defendants, Private Funds Management Pty Ltd and Annette Conn, as between party and party.
2That the plaintiff, Mr Russo, pay one half of the costs of action of the defendants, Eric Geoffrey Buck and Elizabeth Ann Buck, on the basis of an indemnity.
3That this order is made subject to any specific costs orders made to date.
In the action the first to fourth defendants had been represented by the same solicitors and counsel and there has apparently been little, if any, differentiation in the work done by those solicitors for each of the respective defendants.
The first defendant, Eric Buck, died on 2 June 2009. As yet there has been no grant of administration over his estate.
Application to appoint a representative for the deceased defendant.
On 10 December 2009 the defendants’ solicitors took out an application that “the first defendant ….. cease to be a party to this action”. That application has not been pursued. Instead, the defendants have pursued by oral variation an application under 87R 30.03 that the second defendant be appointed to represent the estate of the first defendant for the purpose of these proceedings. 87R 30.03 provides:
30.03(1) Where a deceased person was before his death interested, or where the estate of a deceased person has an interest, in a matter in question in any proceedings but there is no representative, the Court may on such notice (if any) as it thinks fit:
(a)proceed in the absence of a person representing the estate;
(b)appoint a person to represent the estate for the purpose of the proceedings.
(2)An order made in the proceedings shall unless otherwise ordered by the Court, bind the estate to the same extent as it would have been bound had a representative of the deceased person been a party to the proceedings.
The applications, which are referred to below, for which the appointment under this Rule is sought, are for the lump sum adjudication of the costs payable to the first and second defendants on the order of the Chief Justice or alternatively an interim allocatur on those costs. If the appointment was made, and the applications were successful, it would mean that a judgment would be entered for the amount of the costs payable to the first and second defendants as adjudicated in favour of the second defendant for herself and as the appointed representative of the deceased first defendant. No authority was cited to me that an appointed representative under 87R 30.03 could have a judgment entered in his or her favour. My researches on the Rule, and the O 16 r46 of the English Rules of the Supreme Court 1883, from which 87R 30.03 was taken, do not suggest that it is possible for there to be judgment for such an appointed representative and indicate that the scope of the Rule is confined to appointing representatives for interests which will not otherwise be heard before judgment is granted for another party. (See The Annual Practice 1960 pp 370 et seq). If the interests of the late first defendant had devolved to an executor or administrator duly appointed for his estate, the correct procedure would have been to apply to substitute that executor or administrator as a party in the action in place of the first defendant under 87R 31.02. Such an executor or administrator could then have taken a joint judgment with the second defendant after an adjudication of the costs. In the absence of a duly appointed executor or administrator no one else has authority to take a judgment for such costs and to give a good discharge for their payment. In the scheme of the 1987 Rules, 87R 30.03 is not intended to operate instead of, or pending, a proper grant of administration for a deceased party seeking a judgment.
The order for costs was made in favour of the first and second defendants jointly. The second defendant in her own right cannot have the costs adjudicated or enforced independently of a personal representative of the first defendant. There is no basis on which the costs order in favour of the first and second defendants can be adjudicated upon or otherwise fixed until an executor or administrator is substituted for the deceased first defendant. Accordingly, I decline to make any order under 87R 30.03 in respect of the first defendant.
Application for fixing lump sum costs or interim allocaturs.
By an application of 10 December 2009 the defendants sought a lump sum assessment of all or part of the costs of the defendants or the issue of an interim allocatur for part of those costs. These applications were opposed by the plaintiff. He was not legally represented for the purpose of this application and had no understanding of the legal issues involved.
For the reasons given above, no such orders can be made for the first and/or second defendants. As it is a joint judgment for costs I reject that the second defendant is entitled to an allocator to be issued to herself alone in her right for one-half of the costs payable under the judgment.
On 8 December 2008 the first and second defendants filed a short form claim for costs under the Order of the Chief Justice totalling $607,013 of which half would be $303,506. On that day the third and fourth defendants also filed a short form claim for costs under the order of the Chief Justice seeking a total of $349,134 inclusive of GST. On 3 March 2009 I dispensed with responses on the basis that there was no utility in the process. The third and fourth defendants now seek a lump sum assessment under 6R 271(6)(c) without being required to proceed to a detailed adjudication of the costs.
In support of the application the solicitor for the defendants filed an affidavit exhibiting a report from Mr Cogan as a costs expert on what he concluded should be the proper amount of the costs. I do not consider that this report should be received as expert evidence on the topic. No order has been made under s 67 of the Supreme Court Act for a report by a costs expert. Although there are instances interstate of Courts considering such reports in fixing costs, I am not aware of it ever having been done in this Court. The usual practice is for such costs issues to be referred to a Master under 6R 270. Mr Cogan also appeared as counsel for the defendants on the costs argument. I treat his report (as varied by an e-mail of 27 January 2010 from the defendants’ solicitors) as merely being an adjunct to his written submissions, but of no evidentiary status.
I consider that the authorities under 6R 264(5)(c), and its predecessors, are applicable to a lump fixation of costs to be directed on a preliminary assessment under 6R 271(6)(c). Under those authorities the costs are only to be fixed at a lump sum if that would be fair to all parties: Smoothpool v Pickering [2001] SASC 131, Lander J, 19 April 2001; Cornwall v Rowan (No 4) (2006) 244 LSJS 183; Australian Securities and Investments Commission v Atlantic 3 Financial Aust Pty Ltd (No 3) [2008] 2 Qd R 298; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123. In the circumstances of this matter I am not satisfied that such a lump sum fixation of the costs would be fair to the plaintiff. As the plaintiff was legally unrepresented I have not had the benefit of proper submissions from him on the point. However, he was legally represented when the short form claims for costs were rejected and I presume that he took that step upon proper legal advice and with knowledge of the likely consequences of doing so.
There is little doubt that a formal adjudication of the costs payable to the third and fourth defendants under the Order of the Chief Justice will be a protracted and very expensive exercise. Whichever party is ultimately ordered to pay the costs of the itemised schedule and the formal adjudication is likely to be out of pocket for some tens of thousands of dollars. On other evidence before me on the taking of the account between the plaintiff and the first and second defendants there is evidence that the plaintiff may well have difficulties in paying the costs, but that in itself is not a reason to resort to the lump sum process.
The crux of the potential unfairness to the plaintiff on the third and fourth defendants’ application to have their costs fixed as a lump sum is in the interaction of the different costs orders made in favour of the first and second defendants on the one hand and the third and fourth defendants on the other. The short form claims show that there is very substantial duplication in the amounts claimed by the two sets of defendants respectively. The defendants quite properly concede that they cannot recover for the same work twice. Their counsel submitted that in respect of the party and party components of the duplicated items it was appropriate to allow half to the first and second defendants and the other half to the third and fourth defendants. He said at paragraph 6.5 of his report that he had “formed the opinion that there no costs claimable on the party and party basis which were uniquely referable to a particular defendant”. For the reasons given, I cannot accept that as being established. There may good reason why more than half of the costs for particular items of work should be attributable to one set of defendants rather than the other. This will only become apparent after an itemised schedule of the costs is before the Court and the plaintiff has raised such issues by his notice of dispute. I am not sure whether the defendants collectively may have an incentive to attribute particular costs under the Order to the first and second defendants, where half of indemnity costs will be recovered, rather than to party and party costs for the third and fourth defendants which are recoverable in full. There is also the additional factor that the costs properly allowable to the first and second defendants are likely to be secured by the mortgage given by the plaintiff to the first and second defendants, whereas it is arguable that such costs may not be secured by that mortgage if they are attributed to the third and fourth defendants. In this intricate and difficult situation I do not consider that I can fairly fix a lump sum of the costs payable to the third and fourth defendants on an assumption that overall half of the total party and party costs are properly payable to the third and fourth defendants. Accordingly I refuse to make any order for a lump sum for costs under 6R 271(6)(c).
Under 6R 274(2)(b)(ii) the Court on a preliminary assessment of costs under 6R 271 can make interim orders. Although there is no direct authority on the point, I consider this justifies the Court, where there is likely to be a substantial delay in adjudicating on the costs, making an order for the immediate payment of such an amount on account of the costs payable under the order for costs which appears to be beyond any reasonable dispute.
While there is doubt about the exact amount properly payable to the third and fourth defendants, there can be no doubt that a substantial amount is properly payable. Counsel for the defendants properly conceded that there is an argument about whether costs incurred from 25 October 2006 are properly payable and whether as between party and party fees should be allowable to Mr Rowley as junior counsel. I accept the submissions of the defendants’ counsel that at least 50% of the amount claimable for half of the balance of the party and party costs and disbursements must ultimately be recoverable by the third and fourth defendants on the Order for costs in their favour. This totals $54,152. There is no evidence that GST input credits can be claimed for this amount and thus $5,415 for GST is to be added. The third and fourth defendants should not be deprived of the benefits of their costs Order for the further substantial time which will be needed for the preparation of an itemised schedule and its adjudication. An interim costs order for $59,567 is to be issued in their favour.
The plaintiff made submissions about offers which he had previously made, but there was no evidence about them. In any event, they were apparently offers made before 6 May 2007. They were apparently asserted to show that he should not have to pay any costs to the defendants, but I ruled that this submission was an attempt to go behind the judgment of the Chief Justice and I could not entertain it.
The plaintiff’s further submission was that he would be claiming all of the costs in this action in the earlier action, 654/04, which is not yet finalised. It is not necessary for me to deal with that submission as it does not affect the quantification of the costs ordered by the Chief Justice.
I have today made the following orders:
1Application for the appointment of a representative for the deceased first defendant under 87R 30.03 is refused.
2Applications for fixing the costs payable to the first and second defendants under the order of 6 May 2007, and the issuing of any interim allocaturs for those costs, are refused.
3Application to fix the costs of the third and fourth defendants under the order of 6 May 2007 at a lump sum is refused.
4Interim order for payment is to issue in favour of the third and fourth defendants against the plaintiff on account of the costs payable to them under the order of 6 May 2007 in the sum of $59,567 inclusive of GST.
5Costs reserved.
6Further directions hearing set for Tuesday 9 March 2010 at 9.15 am.