SULLIVAN v KREPP

Supreme Court of South Australia
(Civil)
SULLIVAN v KREPP
[2023] SASC 4
Reasons of Auxiliary Judge Norman a Master of the Supreme Court
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT
Indemnity costs assessed on a Lump Sum basis.
Uniform Civil Rules 2020 (SA), referred to.
Viscariello v Macks (No 4) [2022] SASC 30; Blyth & Fanshawe, In re; Ex parte Wells (1882) 52 LJQB 186; Turter AO v Connor (No 2) [2021] SADC 151; Jones v Sutton (No 2) [2005] NSWCA 203; Auspine Ltd v Australian Newsprint Mills Ltd [1999] FCA 673; Leary v Lea [1987] 1 WLR 72; Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051, considered.

SULLIVAN v KREPP
[2023] SASC 4
In the Supreme Court of South Australia – Civil

This is a lump sum taxation of costs of the applicant pursuant to the order of Judge Bochner made on 9 September 2022. Following that order, and in support of his application for lump sum costs, the applicant filed an affidavit of his solicitor Mr Ibrahim dated 2 March 2022 exhibiting the costs then claimed, and in an affidavit dated 28 September 2022 of his solicitor Mr McGrath this claim was supplemented with updated figures for the period between 8 February 2022 and 20 September 2022 and providing an estimate that a further $1,000 would be incurred from then until the hearing. No materials have been filed by the respondent in response to the applicant’s claim.
Background
The proceedings were commenced on 29 June 2018. The applicant’s claim was for equitable relief, misappropriation, detinue and damages for conversion. Prior to September 2007, having been convicted of criminal offences, he was on bail pending sentencing and had arranged for the respondent, a friend, to assist him in storing his personal belongings and finalising the settlement of a property he owned in New South Wales. Shortly afterwards he was sentenced to a period of imprisonment and when he was released on 31 January 2013 he ascertained that the net proceeds of sale of his property, which were in the order of $300,000, were not in his account. Further, his items of personal property including his motor vehicle had not been returned to him. He commenced proceedings in an attempt to recover his money and his property.
The proceedings were characterised by delays and failures of the respondent to comply with Court orders. On 25 October 2019 the respondent applied to set aside the proceedings or alternatively a stay and this application was opposed and argued. On 31 January 2020 Judge Bochner dismissed the application, providing reasons on 5 March 2020. The respondent issued and proceeded with an appeal against these orders which was heard by Peek J, who on 11 June 2020 dismissed the appeal and awarded to the applicant his costs of the appeal on the ordinary basis. On 28 August 2020 the applicant issued an application, seeking judgment and an assessment of damages. That argument was heard by Judge Bochner on 17 November 2020 who struck out the defence but gave the respondent an opportunity to apply to file a further pleading, which opportunity was not taken up by the respondent. At a further hearing on 16 December 2020 Judge Bochner awarded judgment for the applicant for damages to be assessed, fixed a program to assess those damages, and awarded costs to the applicant of his successful application and certified the hearing as fit for counsel.
Subsequently, an assessment of damages was undertaken on 15 February 2021 and Judge Bochner awarded damages in the applicant’s favour in the sum of $463,017.60. An order was also made for the respondent to pay the applicant’s costs of the whole of the proceedings on an indemnity basis. On 2 March 2022 the applicant applied for his costs to be fixed on a lump sum basis and filed the affidavit of Mr Ibrahim’s affidavit, exhibited a detailed breakdown of these costs, including the solicitor’s charges of the principal proceedings, counsel fees and disbursements, and of the costs of the appeal including solicitor’s charges, counsel fees and disbursements.
On 30 June 2022 Judge Bochner considered the matter further. An adjournment was sought on behalf of the respondent for health reasons. Judge Bochner vacated the directions hearing, adjourned the matter to a further hearing on 28 July 2022, and indicated that any further request for an adjournment was to be supported by an affidavit exhibiting appropriate medical evidence in the event that the request was on the ground of ill health.
On 28 July 2022 Judge Bochner made an order for the costs to be assessed as a lump sum. The respondent was given a further 21 days to file responding material on which he sought to rely.
At a further hearing on 9 September 2022, Judge Bochner observed that given that the applicant’s application for costs had been filed 6 months previously, and that there had been numerous adjournments to allow the respondent to file his responding material, there would be no further extension of time for him to do so, and that if he had not filed his responding material in time for the hearing fixed for 10 October 2022, the hearing would proceed regardless. Her Honour then made orders extending the time for the respondent to file and serve his responding material to 23 September 2022, and that within 7 days thereafter the applicant was to file and serve any material in reply, if so advised. The costs lump sum assessment hearing was fixed for 10 October 2022.
On 28 September 2022 the applicant filed Mr McGrath’s affidavit updating the applicant’s costs claim by a further $6967.40 and anticipating a further $1000 for costs relating to the preparation and hearing of the lump sum claim. The costs claim accordingly now stands in the total sum of $165,198.58.
The 10 October 2022 hearing was before me. I noted that the respondent was not then in attendance, so I arranged for the Court to telephone him. He spoke and said that he had thought that the hearing was listed for the following day, and that he was unable to attend by telephone today. I informed him that he had clearly been aware of the hearing because he had been present by telephone during the 9 September 2022 hearing. I indicated that in the circumstances I proposed to proceed to hear submissions from the applicant in support of his application, However, (the applicant not opposing) I said that I would provide to the respondent a short opportunity to file any written submissions on which he sought to rely.
I thereupon heard submissions from Mr McGrath, then ordered that if the respondent wished to present any submissions in response, these were to be filed and served by the close of business on Monday, 17 October 2022, and that any responding submissions of the applicant were to be filed and served by close of business on 18 of October 2022.
Notwithstanding this, no submissions have been received from the respondent, so the matter can now be determined.
Principles
Lump sum costs orders
The principles relating to lump sum costs and how they are to be assessed were discussed in detail in my reasons in Viscariello v Macks (No 4).[1] A lump sum taxation is appropriate when the litigation between the parties has already consumed excessive and disproportionate resources, or where full recovery of taxed costs is not anticipated or is questionable. The Court can be flexible in how it conducts an enquiry, and it is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable. It should be astute to avoid overestimating the recoverable costs and underestimating the appropriate amount such as by applying an arbitrary discount, but should not cause an injustice to the claiming party by an arbitrary “fail safe” discount on the costs estimate submitted to the Court. The party seeking the lump sum assessment bears the onus of satisfying the Court that there is sufficient information before it to enable it to make a “logical fair, fair and reasonable” estimate of the costs. This does not require the applicant to produce the same evidence that would be required in an item-by-item taxation. Relevant factors include whether the claimant has prepared a work in progress or billing guide and has provided copies of invoices for counsel fees and for other disbursements. The task is one of estimation or assessment rather than arithmetic, and it does not envisage any process similar to that involved in an item‑by-item taxation, applying a much broader brush to fix the costs.
[1] [2022] SASC 30.
Indemnity Costs
Under UCR 191.1 the term “indemnity basis” means a basis on which costs are a complete indemnity against the costs incurred by the person entitled to payment of costs in the proceeding (or the relevant part of the proceeding), except to the extent that the costs are shown by the liable party to have been unreasonably incurred. Reasonableness primarily involved the dual questions of whether it was reasonable to do the work claimed, namely the scope of work to be allowed, and whether the fee charged is reasonable: Blyth & Fanshawe, In re; Ex parte Wells[2] at 212 where Lindley J observed: “Of course, what is reasonable between party and party must be reasonable between solicitor and client, but the converse is not true in opposition to the applicant’s claim”.
[2] (1882) 52 LJQB 186.
As summarised above, it is clear that in assessing a party’s claim for costs on an indemnity basis pursuant to the indemnity costs rule defined in UCR 191.1, the obligation is on the party liable to pay the costs (in this case the respondent) to show that the costs have been unreasonably incurred.
The rule is quite clear in its terms and effect.
Consideration
No submissions on lump sum costs received from the respondent.
As set out above, the Court has not had the benefit of any submissions from the respondent in relation to the applicant’s costs claim.
He has accordingly failed to comply with the onus upon him required by UCR 191.1 to show that the costs claimed were unreasonably incurred, so I have formed the view that in these circumstances the applicant is entitled to the costs he has claimed.
In case for any reason, I am in error in coming to the above conclusion, I have independently considered the applicant’s claim for indemnity costs on its merits.
In this regard I take into account various considerations. First, an apparent conflict between the costs order made by Peek J in relation to the respondent’s interlocutory appeal and the final costs order made by Judge Bochner. Secondly, the charge out rates claimed by the applicant’s solicitors as compared with the court scales for the applicable periods. Thirdly, the concept of proportionality. And finally, a consideration of the details provided with respect to the individual items, counsel fees and disbursements as set out in the schedule of costs and in Mr McGrath’s affidavit of 28 September 2022.
Conflicting costs orders
It appears from the costs orders made in these proceedings that there is an apparent conflict between the costs order made in favour of the applicant by Peek J on 11 June 2020 following dismissal of the respondent’s interlocutory appeal, namely that the applicant have the costs of the appeal on the ordinary basis (presumably this means the standard costs basis as defined in UCR 191.1), and the costs order made by Judge Bochner on awarding final judgment in the applicant’s favour on 15 February 2021, namely that the respondent pay the applicant’s costs of the proceedings (presumably the whole of the proceedings) on an indemnity basis.
However, neither the respondent nor the applicant have raised this issue with the court, in either written or oral submissions.
In any event, in the context of the claim as a whole, the appeal costs sought by the applicant of $19,670.48 are in the order of only 12.5% of the costs as a whole, and if they were to be assessed on the standard basis as opposed to an indemnity basis, the overall difference between the standard costs and indemnity costs with respect to the appeal would not seem to be significant.
Charge out rates of the applicant’s solicitors
The charge out rates of the applicant’s solicitors are set out in the schedule exhibited to Mr Ibrahim’s affidavit. It appears from this schedule that they span four separate time periods from the commencement of the proceedings, namely from 9 January 2018 to 12 September 2018, then from that date to 10 July 2019, then from that date to 2 July 2020, and finally from that date to the conclusion of the matter on 12 February 2021.
The solicitors working on the file were charging at the following hourly rates:
Ms Alexopoulos     $375, $380, $395 (no claim after 2 July 2020)
Mr Fabbro              $425, $440, $460, $480
Mr Ibrahim             $330, $330, $345, $370
Mr McGrath           $440, $440, $460, $475
The Court scales of costs for this period (fixed by the 2006 Rules and after 18 May 2020 by the UCR) do not exactly correspond with the above time periods but they provide hourly rates for matters of skill, and not involving skill, for the following time periods:
9/1/18 to 30/11/18   $377.50 ($226.50)
1/12/18 to 30/10/19 $386.10 ($231.70)
1/1/19 to 31/12/20   $393.80 ($236.30)
1/1/21 to 2/1/23      $408.00 ($256.60)
It is not uncommon for solicitors and counsel to charge more to their clients than the scale rates set out in the rules and in the Indicator on Counsel fees. I have come to the conclusion that on an hourly rate basis, having regard to the Court scale rates, the claims of the applicant for the work undertaken by his solicitors and counsel do not appear to have been unreasonably incurred.
Proportionality
As discussed above, under UCR 191.1 the term “indemnity basis”, which is the costs order held by the applicant here, means a complete indemnity against the costs incurred by the person entitled to payment of costs in the proceeding except to the extent that the costs are shown by the liable party to have been unreasonably incurred.
The costs claimed by the applicant in his Schedule total $157,231.18. In Mr McGrath’s affidavit of 28 September 2022 an amount to that date of $6967.40 is also sought, together with an anticipated further amount of $1000 for the attendance on 10 October 2022 and preparatory work related thereto. The total claim sought for costs is accordingly $165,198.58. The applicant’s damages award is $463,017.66. It is clear from the schedule of costs claimed that a large amount of work was necessarily undertaken by the applicant’s solicitors and counsel.
Pursuant to UCR 194.6(2)(b), the Court in exercising its discretion as to costs, may have regard to any breach by a party of overarching obligations, which are outlined in UCR 3.1 as including an obligation to use reasonable endeavours to ensure that the time and costs incurred are reasonable and proportionate to inter alia the importance and value of the subject matter of the proceeding. The concept of proportionality in relation to costs was considered in Turter AO v Connor (No 2),[3] Schammer DCJ, especially at [117]-[124] and in Jones v Sutton (No 2)[4] at [48]-[53].
[3] [2021] SADC 151.
[4] [2005] NSWCA 203.
I do not, however, consider that in this instance the costs sought are disproportionate to the amount in dispute such that the court should have regard to this in its assessment of the lump sum costs.
Analysis of the applicant’s costs claim
I have generally considered the items claimed by the applicant as set out in detail in the exhibit to Mr Ibrahim’s affidavit, In accordance with the principles set out in Leary v Leary;[5] Auspine Ltd v Australian Newsprint Mills Ltd[6] at 21‑22 (O’Loughlin J) and Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd[7] (Finn J), I have not, however, undertaken the detailed scrutiny normally reserved for formal taxations, and have instead adopted a broad brush approach rather than one of arithmetic calculation or precision.
[5] [1987] 1 WLR 72.
[6] [1999] FCA 673.
[7] [2008] FCA 1051.
I have regard to the fact that on a lump sum assessment, courts usually apply a discount to the amounts claimed, although this rests on the particular circumstances and on the evidence adduced. In this instance, however, I have not had the advantage of receiving any submissions from the respondent as to the costs claim being unreasonable.
It is obvious from the applicant’s schedule that a very large amount of work was required to be undertaken by his solicitors to pursue the claim. This work extended over 5 years, from early January 2018 when instructions were first received, to late October 2022, when final submissions were presented on the lump sum costs claim.
The work involved a detailed consideration of the circumstances leading to a claim being made against the respondent, considering time limitation issues, the preparation of a formulated claim involving allegations of fraud (which must be very carefully pleaded), the briefing of and conferences with counsel, the drafting of the summons and its issue, together with the associated Rule 33 form, the engagement of a process server and associated work relating to service (including the obtaining of an order for substituted service), attendances to correspond with the respondent and his solicitors following service, attendances relating to superannuation considerations, preparing and issuing requests for summary and default judgment, the consideration of the quantum of the claim, attendances on counsel and at court on numerous occasions, reviewing the defence, drafting and filing a list of documents, perusing the respondent’s list and documents, collating discovered documents, reporting to the applicant throughout the proceedings and taking his instructions as required, undertaking property searches, preparing position papers and attending on a mediation, considering and drafting a filed offer, attendances regarding a second defence, considering the respondent’s application to set aside orders and for a strike out and a stay and successfully opposing same, numerous attendances relating to an appeal by the respondent against Judge Bochner’s refusal of those orders (which appeal was dismissed), attendances to obtain further orders from Judge Bochner relating to an amended defence, pursuing failures of the respondent to comply with court orders and preparing affidavits and submissions relating to these, responding to the respondent’s applications and related matters concerning Covid issues referred to by him, applying for and obtaining both judgment and assessment of damages orders from Judge Bochner, attendances relating to the assessment of damages which order was made on 16 December 2020, attendances in relation to the making of an order for the assessment to lump sum costs, and the formulation and presentation of that claim.
Counsel fees and other disbursements have also been claimed and these are set out in detail in Mr Ibrahim’s affidavit. A final claim and anticipated further costs are set out in Mr McGrath’s affidavit dated 28 September 2022.
In the circumstances, I do not propose to undertake any further detailed analysis of the breakdown of the costs as itemised in the Schedule. On the basis of an indemnity costs award, the claim in all respects is not unreasonable.
In the result, I assess the applicant’s costs overall in the sum claimed of $165,198.58 and make an order in those terms.
Orders
1.The costs awarded to the applicant are assessed in the sum of $165,198.58.

[2023] SASC 4

24 January 2023