SR Legal Pty Limited v The Spanish Club Ltd

[2018] NSWSC 1546

Supreme Court

New South Wales

Medium Neutral Citation:	SR Legal Pty Limited v The Spanish Club Ltd [2018] NSWSC 1546
Hearing dates:	12 October 2018
Date of orders:	12 October 2018
Decision date:	12 October 2018
Jurisdiction:	Equity
Before:	Kunc J
Decision:	Notice of Motion dismissed with costs
Catchwords:	COSTS — Costs assessment — Application for assessment — Application to stay costs assessment pending determination of related proceedings — No issue of principle
Category:	Procedural and other rulings
Parties:	SR Legal Pty Limited ACN 124 047 285 (Plaintiff) The Spanish Club Limited ACN 001 059 187 (Defendant)
Representation:	Counsel: V R Gray (Plaintiff) C S Ward SC and P F Santucci (Defendant)   Solicitors: Somerset Ryckmans (Plaintiff) Navarro & Associates (Defendant)
File Number(s):	2018/128309
Publication restriction:	No

EX TEMPORE Judgment (REVISED)

1. By notice of motion filed on 16 July 2018, the plaintiff (the "Solicitors") seeks this order:

“1. Pursuant to section 67 of the Civil Procedure Act 2005 and the Court’s inherent power, an order that Costs Assessment proceeding no. 2017/213522 be stayed until these proceedings are heard and determined.”

2. The relevant background may be shortly stated.

3. The Solicitors were formerly the Solicitors for the defendant (the “Club"). The litigation in which the Solicitors were retained for the Club was settled. At the time of the settlement, the Solicitors say that they were owed a great deal of money by the Club in unpaid legal fees.

4. The Solicitors have commenced proceedings in this Court. They allege that, as part of the settlement, the Club agreed that the balance of the settlement funds (after deduction of an amount of $800,000 for the Club) would be applied by the Solicitors to their outstanding fees, and that this arrangement was in full and final satisfaction of the costs arrangements between the Solicitors and the Club. They submit this was an accord and satisfaction. The Solicitors also allege that it was an implied term of the agreement that the Club gave up its rights to an assessment of their costs. The parties accept there is a triable issue on the question of the alleged accord and satisfaction.

5. The present proceedings were filed on 1 June 2018. At least in part they appear to be defensive to an application for assessment of costs that is currently on foot before a costs assessor. That costs assessment was commenced by the Club on 13 July 2017.

6. A number of steps have been taken by the Club and the Solicitors in connection with that costs assessment in connection with a preliminary dispute as to what bills were assessable. That issue was resolved by an interim determination by the costs assessor on 2 March 2018. Further submissions have been filed by both parties before the costs assessor.

7. I was informed by Counsel for the Club that because of the commencement these proceedings, the costs assessor has, for reasons best known to himself, taken no further steps in the costs assessment. If the costs assessment is to proceed to its conclusion, I have been informed by counsel for the Solicitors that what remains to be done is a long and detailed response to the various objections raised by the Club. Nevertheless, it seems to be the case that, one way or another, the costs assessment is well advanced.

8. The primary basis on which the Solicitors submitted that the costs assessment should stayed was that the costs assessment had reached the point where it would be necessary for them to spend considerable time, effort, and if not expenditure on experts, then suffer income foregone by reason of their own time being directed to the matter, in circumstances where their primary case in this Court is that the Club had given up its right to a costs assessment. For reasons which I will briefly explain, I have come to the view that, one way or another, the Solicitors are going to have to come to grips with the question of how much they might have been entitled to on an assessment and that the best way to proceed (having regard to the overriding purpose of the just, quick and cheap resolution of the real issues in dispute) is for the costs assessment to be completed.

9. To understand why I have reached that view, it is necessary to have regard to the pleadings. Paragraphs 31, 32 and 33 of the Solicitors’ statement of claim aver:

“31.   In the period from about May 2015 until 10 February 2016, the Plaintiff advised the Club to consider settling with Mr Whittingham because it was concerned the Club would be unsuccessful at a final hearing.

32.   As at August 2015, the costs and disbursements that had been incurred and charged by the Plaintiff to the Club totalled about $1.143 million. In addition, a large amount of legal work had been performed by the Plaintiff since 24 December 2013 and a further estimated $1.5 million of costs had been incurred. The Plaintiff was aware that if the Club was successful in the proceedings, it would likely be unpaid as to more than $2.5 million.

33.   On or about 20 January 2016, it was agreed by and between the Plaintiff and the Club (“the Contract”) that:

(a)   a settlement with Mr Whittingham was in the best interests of the Club;

(b)   the Club required at least $800,000 from any settlement;

(c)   Mr Whittingham was unlikely to settle the proceedings for a sum sufficient to pay both the Club $800,000 and the Plaintiff’s outstanding fees and disbursements;

(d)   the Plaintiff would compromise the amount of legal costs to be paid by the Club to facilitate a settlement with Mr Whittingham.”

10. Paragraphs 31, 32 and 33 of the Club's defence respond to those allegations (emphasis added):

“31.   The Defendant admits that the Plaintiff provided advice to the Defendant in the period alleged as to the merits of the litigation with Mr Whittingham, and otherwise denies paragraph 31 of the Statement of Claim.

32.   The Defendant denies paragraph 32 of the Statement of Claim and says further than the allegation could only be proven at the conclusion of the Costs Assessment proceeding 2017/213522.

33.   The Defendant denies paragraph 33 of the Statement of Claim.

11. Counsel for the Solicitors submitted that they would be entitled to strike out the words which I have emphasised in paragraph 32 of the Club's defence. That may or may not be right. However, even if those words were struck out, I have come to the clear conclusion that, one way or another, the amount, if any, to which the Solicitors would have been entitled after an assessment will be an issue in these proceedings.

12. This is because a fundamental element of the Club's defence to the claim of accord and satisfaction is that the Solicitors would have been entitled on assessment to a lesser amount of fees than they received under the agreement. In those circumstances, the Club wishes to argue that there was in fact no accord and satisfaction because there was no consideration given by the Club. Putting it simply, there was nothing for the Club to give up because it did not owe the Solicitors anywhere near the amount which the Solicitors claimed.

13. When that point is understood, it remains clears that, whether or not the costs assessment is brought to a conclusion, the Club will adduce evidence as to what it says the amount owing on an assessed basis was. That evidence will have to be met by the Solicitors.

14. From a case management point of view, that leads to one of two possibilities. The question could be dealt with on an adjectival basis, by which I mean expert evidence in the proceedings from each side as to what the likely assessable figure was (assuming that the Court does not refer the question out to an expert costs assessor in any event). Alternatively, if the assessment is allowed to proceed, then there will be what I have called a "real world" answer to that question, rather than a determination in the context of the proceedings themselves.

15. In my view, in litigation the real is always better than the hypothetical. The costs assessment is well advanced. The Club has expended significant money in relation to it. Whether it is through the means of the costs assessment or what I have referred to as the adjectival determination in the proceedings, the Solicitors are going to have to address the question of the assessable value of their bills.

16. The present proceedings are not ready for hearing. The evidence is almost all on, but the Club says, for good reason, that it will require to know the outcome of the costs assessment before it can finally determine what, if any, other evidence it wishes to file.

17. Having regard to the overriding purpose of the just, cheap and quick resolution of the real issues in dispute between the parties, I have come to the firm view that the costs assessment ought to be allowed to proceed to its conclusion with all possible expedition. Once that is done, the parties will be able to assess their respective positions in these proceedings.

18. I make three final observations.

19. First, the Club submitted that, if it fails in these proceedings, then insofar as the Solicitors will now be put to the costs of attending to the assessment, those costs could be recouped by the Solicitors as damages for breach of the alleged agreement whereby the Club is said to have given up its rights to a costs assessment. I do not express any view as to whether that submission is right or wrong, but have been asked by Counsel for the Solicitors that the submission be noted in these reasons.

20. Second, in reaching my conclusion I have relied upon the fact that the Club has proffered an undertaking that, pending the determination of these proceedings, it will not enforce any costs certificate that might be issued by the costs assessor. Obviously enough, the parties must be given an opportunity to resolve their larger differences by the resolution of these proceedings. That would be undermined if, having the benefit of a costs certificate, the Club sought to enforce it against the Solicitors.

21. Third, I have noted from the Solicitors' responses in the costs assessment that they have raised many of the factual and legal matters which will be the subject of these proceedings e.g. the allegation that by reason of the accord and satisfaction the Club gave up its right to a costs assessment. Given these proceedings are now on foot, those are not matters for the costs assessor. I have indicated to the parties that they should confine their debate in front of the costs assessor to the basic question of what the assessable costs are. Insofar as, for example, the Solicitors wish to rely on their argument of accord and satisfaction, or other technical defences to the claim, those are matters which the parties should leave for determination in these proceedings. I do not propose to make any direction about this. However, should there be some departure from it, I will give the parties liberty to apply in connection with the question of what should or should not be dealt with by the costs assessor.

22. The orders of the Court are:

Upon the undertaking of the defendant by its Senior Counsel not to enforce any costs certificate issued in costs assessment 2017/213522 pending the determination of these proceedings or further order of the Court:

1. The plaintiff's notice of motion filed 16 July 2018 is dismissed.

2. The plaintiff is to pay the defendant's costs of that notice of motion.

3. The parties are directed to co-operate to facilitate the expeditious determination of costs assessment 2017/213522.

4. The plaintiff is directed to comply with the defendant's notice to produce dated 7 August 2018 on or before 9 November 2018 or such other date as the Court may order if the plaintiff files a motion before 9 November 2018 in relation to the notice to produce.

5. Grant leave to the parties to apply in the first instance to the Registrar on three days’ notice in relation to the conduct of costs assessment 2017/213522.

6. The proceedings are stood over to the registrar for directions on 10 December 2018.

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Decision last updated: 12 October 2018