The Berry Rural Co Operative Society Ltd v Sepak Industries Pty Ltd (No 4)

[2018] NSWSC 1902

Supreme Court

New South Wales

Medium Neutral Citation:	The Berry Rural Co Operative Society Ltd v Sepak Industries Pty Ltd (No 4) [2018] NSWSC 1902
Hearing dates:	On the papers
Decision date:	10 December 2018
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	(1) Order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) that the costs of the defendants preparing the evidence served on 3 October 2018 be specified at $70,000.  (2) Order that the costs of the plaintiff’s notice of motion of 12 October 2018 be the defendants’ costs in the cause.
Catchwords:	COSTS — Party/party — Bases of quantification — Indemnity basis — specification as a gross sum
Legislation Cited:	Civil Procedure Act 2005 (NSW)
Cases Cited:	Ross v Padget [2016] NSWSC 1851 Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 Fisher-Pollard by her tutor Fisher-Pollard v Fisher-Pollard [2018] NSWSC 807 Hamod v State of New South Wales [2011] NSWCA 375 Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 The Berry Rural Co Operative Society Ltd v Sepak Industries Pty Ltd (No 3) [2018] NSWSC 1751 Young v Hones (No 3) [2014] NSWSC 499
Category:	Costs
Parties:	The Berry Rural Co Operative Society Ltd (Plaintiff/Applicant) Sepak Industries Pty Ltd (First Defendant/Respondent) Henry Kong (Second Defendant/Respondent)
Representation:	Counsel: J P Knackstredt (Plaintiff/Applicant)   Solicitors: Resolve Litigation Lawyers (Plaintiff/Applicant) Somerville Legal (Defendants/Respondents)
File Number(s):	SC 2016/281883

Judgment

1. On 15 November 2018 I granted Berry Rural Co Operative Society Ltd leave to rely on further evidence served during October 2018: The Berry Rural Co Operative Society Ltd v Sepak Industries Pty Ltd (No 3) [2018] NSWSC 1751.

2. I will use the same abbreviations here as in that judgment.

3. I made that order on a number of conditions, including that the Co Operative pay all of the costs that Sepak incurred in preparing the evidence it served on 3 October 2018, and that those costs be paid on an indemnity basis and be specified as a gross sum under s 98(4) of the Civil Procedure Act 2005 (NSW).

4. I have now received evidence and submissions concerning that matter.

5. Sepak’s solicitor has also pointed out that I did not, on 15 November 2018, make any order in relation to the costs of the Co Operative’s notice of motion of 12 October 2018 seeking the relief that I granted.

Gross sum costs order

6. The principles to be applied when making a gross sum fixed costs order are:

1. the Court is to take a broad-brush approach in determining the amount of a gross sum fixed costs order: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213, [52] (Giles JA). The approach is to achieve the policy outcome sought by the imposition of an order for costs, namely compensation of the party in whose favour the order is made, rather than penalisation of the party being ordered to make the payment;

2. the Court is not required to conduct a detailed examination such as is required on an assessment: Young v Hones (No 3) [2014] NSWSC 499, [28] (Garling J); see also Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121, [7] (Campbell AJA);

3. the Court ought only act where the party seeking costs has furnished the Court with sufficient evidence to permit the Court to have confidence that the gross sum costs proposed are an appropriate sum and reflect a methodology that is logical, fair and reasonable: Beach Petroleum NL v Johnson(No 2) (1995) 57 FCR 119, 123 (von Doussa J); Young v Hones [29]; Harrison v Schipp [22] and [52]; Hamod v State of New South Wales [2011] NSWCA 375, [820] (Beazley, Giles, Whealy JJA); and

4. the Court has routinely applied a discount to the lump sum figure so as to allow for contingencies. This can typically be in a range of a discount of 10-30 per cent: Hamod v The State of New South Wales [820]; Ross v Padget [2016] NSWSC 1851, [16] and [21] (Sackar J); Fisher-Pollard by her tutor Fisher-Pollard v Fisher-Pollard [2018] NSWSC 807, [38], [44] and [49] (Sackar J).

7. Sepak’s solicitor, Mr Hemsworth, swore an affidavit which establishes that the costs that Sepak actually incurred preparing the evidence served on 3 October 2018 was in the order of $84,000.

8. Mr Knackstredt, who appears for the Co Operative, submitted that some of those costs have not been wasted. Some of those costs relate to site visits and inspections of the equipment in question which will be of ongoing value. Other costs relate to evidence prepared in response to earlier served evidence of the Co Operative which Mr Knackstredt says will be read in its entirety.

9. It may be that some of Sepak’s evidence is not “wasted”. However, the order I made was that the Co Operative pay all of the costs incurred by Sepak in preparing the evidence it served on 3 October 2018; whether or not that evidence will be of ongoing utility.

10. I did not order that the Co Operative merely pay Sepak’s costs thrown away.

11. Mr Hemsworth’s affidavit annexes each invoice that his firm has sent Sepak. Those invoices set out disbursements and line items for each matter incurring professional fees. Mr Hemsworth’s affidavit also includes the time entry ledgers that form the basis of the invoice. Those ledgers give details of the hours worked and the hourly rates charged.

12. It is true, as Mr Knackstredt has pointed out, that the invoices annexed to Mr Hemsworth’s affidavit contain narrative entries which are generic.

13. In that regard, the Co Operative’s solicitor Mr Michael Daniel caused a detailed schedule to be prepared which he contended contains items which do not, on their face, indicate whether they comprised work done to prepare the affidavit served on 3 October 2018. Mr Daniel deposed that this raised “doubts about generic entries referring to ‘preparing affidavits’ without knowing the deponents and without identifying whether the particular affidavit referred to was one of the affidavits served on 3 October 2018”.

14. However, Mr Hemsworth has submitted, and I accept that:

“Between 1 April 2018 and 3 October 2018, the defendant was doing one thing, and one thing only, preparing its evidence. There was nothing else going on at the time and the plaintiff has not identified any other task that was being performed during that period. All costs incurred during this period were in relation to the preparation of evidence.”

15. Mr Hemsworth’s affidavit analyses each of the tax invoices sent by his firm to Sepak during the relevant time. He identifies particular items that, for reasons he explained, did not relate to the preparation of the affidavit served on 3 October 2018. The detail set out in Mr Hemsworth’s affidavit, and the evident care he has taken to exclude items which, from his knowledge of the file, he knew did not relate to the cost of preparation of the affidavits, makes me confident that the figure he has nominated is in the range of a fair estimate of the costs that Sepak has actually incurred to prepare the affidavits served on 3 October 2018.

16. Some discount from that figure is required to reflect the fact that, were Sepak’s costs to be assessed on an indemnity basis, a figure less than the actual costs rendered is likely to result. There is evidence of a court appointed costs assessor, Ms Kerrie Rosati, who opined that “a typical recovery on an indemnity basis is in the vicinity of 90 per cent of total costs incurred”.

17. A further discount for “contingencies” should also be applied to recognise the possibility that, despite the care that Mr Hemsworth has undertaken in his analysis, some costs are to have been included that do not directly relate to the preparation of the 3 October 2018 affidavits.

18. A broad brush approach is required. The process of specifying a gross sum costs order under s 98(4) is intended to be a substitute for, and not an analogue of, a formal costs assessment process.

19. In those circumstances, I propose to order that Sepak’s costs of preparing the affidavits served on 3 October 2018 to be $70,000.

Costs of the notice of motion

20. On 15 November 2018 I overlooked making a costs order in respect of the Co Operative’s motion to seek leave to rely upon the affidavits it served in October 2018.

21. In a sense, the Co Operative was successful on the motion in that it obtained the leave it sought. However, the granting of that leave was an indulgence. In no real sense was the Co Operative a victor on the motion.

22. The gross sum costs order that I propose to make gives Sepak significant compensation for the position in which it was placed as a result of the matters referred to in my 15 November 2018 judgment.

23. In those circumstances, my conclusion is that the appropriate order to make in relation to the Co Operative’s motion seeking leave is that the costs of that motion be Sepak’s costs in the cause.

Orders

24. I make the following orders:

1. Order pursuant to s 98(4) of the Civil Procedure Act that the costs of the defendants preparing the evidence served on 3 October 2018 be specified at $70,000.

2. Order that the costs of the plaintiff’s notice of motion of 12 October 2018 be the defendants’ costs in the cause.

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Decision last updated: 10 December 2018