The Estate of Frances Kedesch Michell (No 2)

[2020] NSWSC 1513

Supreme Court

New South Wales

Medium Neutral Citation:

The Estate of Frances Kedesch Michell (No 2) [2020] NSWSC 1513

Hearing dates:

In Chambers and on the papers

Date of orders:

29 October 2020

Decision date:

29 October 2020

Jurisdiction:

Equity

Before:

Hallen J

Decision:

The Court:

(1) Orders that the Administrators pay the second Respondent’s costs of the notice of motion filed on 26 June 2020, and the costs of the gross sum costs application, quantified on a gross lump sum basis under s 98(4)(c) of the Civil Procedure Act2005 (NSW) as $13,000, inclusive of GST.

(2) Orders that the costs, calculated on the indemnity basis, of the second Respondent, of the passing of the accounts, the notice of motion filed on 26 June 2020, and the costs of the gross sum costs application, be quantified on a gross lump sum basis under s 98(4)(c) of the Civil Procedure Act 2005 (NSW), as $22,000, inclusive of GST.

(3) Orders that the difference between the second Respondent’s costs, calculated on the ordinary basis, and his costs calculated on the indemnity basis, being $9,000, be paid out of the estate of the deceased, and from the amount repaid to the estate ($37,133.69).

(4) Orders, in the event that RMG Law & Associates is registered for GST and claims an input credit for any GST which it pays, then the amount of GST received should be refunded to the Administrators (or if the costs are paid by their solicitors, to those solicitors).

(5) Makes no order as to the cost of the first Respondent, to the intent that he will bear his own costs, if any.

Catchwords:

SUCCESSION – COSTS – Costs of unsuccessful notice of motion to review Senior Deputy Registrar’s moderation of legal costs and disbursements paid to Administrators’ solicitors out of the deceased’s estate in circumstances where order for costs, calculated on indemnity basis, of proceedings made – Gross sum costs order sought and not opposed other than as to quantum of costs sought – Whether global reduction in costs should be made – Usual practice of court to apply discount to lump sum costs orders –Determination of how costs not recovered should be paid and whether other beneficiary, who did not participate in the hearings, and who will benefit by the orders made should contribute to costs to be borne by the party who defended the Administrators’ application and who sought the gross sum costs order – Principle of equity that he who derives the advantage ought to sustain the burden applicable – General principles of justice applied

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 98

Goods and Services Tax Ruling 2001/4.

Legal Profession Uniform Law 2014 (NSW), ss 181, 182

Uniform Civil Procedure Rules 2005 (NSW), rr 42.7, 49.19

Cases Cited:

Andy Vuong Duc Pham v Enterprise ICT Pty Ltd [2020] NSWSC 1089

Baychek v Baychek [2010] NSWSC 987

Bechara v Bates [2016] NSWCA 294

Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863

Bonner v Tottenham & Edmonton Permanent Investment Building Society [1899] 1 QB 161

Coshott v Parker (No 3) [2015] NSWSC 1195

Day v Perpetual Trustee (Supreme Court (NSW), Macready M, 3 August 2001, unrep)

Guha v Guha [2020] NSWSC 1337

Hamod v New South Wales [2011] NSWCA 375

Hancock v Rinehart (Lump sum costs) [2015] NSWSC 164

Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213

Harvey v Barton (No. 4) [2015] NSWSC 809

Idoport Pty Ltd v National Australia Bank Ltd

In the matter of Optimisation Australia Pty Ltd (Costs)

National Australia Bank Limited v Sayed [2020] NSWSC 1316

Re Beverage Freight Services Pty Ltd [2020] NSWSC 797

Re Estate Ford; Application for Executor’s Commission [2016] NSWSC 6

Re Palladium Consulting Pty Ltd [2013] NSWSC 92

Russo v Russo (No 4) [2016] NSWSC 1133

Starr-Diamond v Diamond (No 4) [2013] NSWSC 811

Stoddart (NSW) Pty Ltd v Kellyville Building Pty Ltd [2019] NSWSC 1480

Stojanovski v Stojovski [2016] NSWSC 976

The Estate of Frances Kedesch Michell [2020] NSWSC 1300

Wentworth v Wentworth (Court of Appeal (NSW), Clarke JA, 21 February 1996, unrep)

Texts Cited:

G E Dal Pont, Law of Costs, (3rd ed, 2013, LexisNexis)

Guideline For Costs Payable Between Parties Under Court Orders (16 March 2019, Supreme Court of New South Wales)

Category:

Costs

Parties:

Martha Pietor and Benjamin Pietor (first and second Applicants)
Robert Christie (first Respondent)
Sasha Freeman (second Respondent)

Representation:

Solicitors:
Piper Alderman (first and second Applicants)
RMG Law & Associates (second Respondent)

File Number(s):

2017/337686

Judgment

1. This Court delivered reasons for judgment on 24 September 2020 in respect of the hearing of a notice of motion filed, on 26 June 2020, by Martha Rose Pietor and Benjamin Francis Anthony Pietor (the Administrators), in which they sought a review, by the Court, under r 49.19 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), of the decision of Senior Deputy Registrar in Probate Hoskinson and that certain orders, made on 29 May 2020, by her, be set aside; or alternatively, that the accounts of the estate of Frances Kedesch Michell (the deceased) be passed: see The Estate of Frances Kedesch Michell [2020] NSWSC 1300 (the principal judgment).

2. There were two respondents (described as Defendants) named in the notice of motion, being Robert George Christie and Sasha Ralph Freeman. It was, however, only the second Respondent, Mr Freeman, who played an active part in the hearing. He was legally represented at the hearing of the notice of motion.

3. The Administrators failed in that application and the following orders were made by the Court:

“The notice of motion be dismissed.

The Administrators pay the second Respondent’s costs of the notice of motion.

In the event that the second Respondent seeks a specified gross sum, instead of assessed costs, the evidence in support of the application, together with any submissions, be served within 7 days of the date of the making of these orders.

The Administrators serve any evidence in opposition to the application for a specified gross sum, together with any submissions, within 7 days thereafter.

The issue of costs be determined in Chambers on the papers.”

The application for a gross sum costs order

4. Mr Freeman, now, seeks a gross sum costs order, pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW), requiring the Administrators to pay to him his legal costs of the proceedings in an amount of $21,705.52 (inclusive of GST) or alternatively, costs of the notice of motion in the sum of $15,088 (inclusive of GST).

5. There had been prior proceedings, brought by Mr Freeman (numbered 2019/246755), which had been resolved by orders, made consensually, which required the Administrators to file, and pass, accounts of the estate, with no order as to costs, to the intent that, each party bear their own costs of the proceedings.

6. It was clear from the orders that I made on delivering the principal judgment, that Mr Freeman’s entitlement to costs was limited to the costs of the notice of motion and not to the costs of the proceedings which had given rise to the notice of motion.

Preliminary Matter

7. Before turning to the evidence on the costs application, I should mention, briefly, the principles relating to the costs of passing accounts, which was not the subject of debate in these proceedings and which costs are not part of the costs orders that I previously made.

8. In this regard, I can do no better than refer to the decision of Lindsay J in Re Estate Ford; Application for Executor’s Commission [2016] NSWSC 6 at [66]:

“An award of costs on an executor’s passing of accounts and application for commission does not lend itself, simply, to an order that “costs follow the event” (to paraphrase UCPR rule 42.1) as if the application for accounts to be passed and commission to be allowed is an adversarial proceeding in which all affected interests are parties to a contest in the nature of a trial. An award of costs in favour of an executor generally takes the form of a specified gross sum instead of assessed costs (CPA section 98(4)(c), providing a contribution towards costs incurred, not necessarily an indemnity for them. In the context of a small estate, in which special attention needs to be given to the proportionality of costs, the jurisdiction to award costs may take colour from the nature of the jurisdiction for which PAA section 86 provides. In such a case, what is, or may be, required is a summary assessment of what is just and reasonable in the particular circumstances.”

9. I shall deal with Mr Freeman’s costs of the passing of accounts later in these reasons. I do so in order to save the further delay that would occur if those costs were made the subject of separate proceedings for assessment, especially since the costs should not be substantial.

10. I should also note, at this point, that any gross lump sum for costs recovered by Mr Freeman from the Administrators will not provide a complete indemnity in respect of the actual costs incurred by him of the notice of motion.

11. Mr Freeman, not unnaturally, has sought an order that any shortfall should be met by requiring Ms Berntsson, who is the only other residuary beneficiary, from her share of the amount that has been recovered for the benefit of the deceased’s estate as a result of the passing of the accounts and the defence of the notice of motion, to bear one half of the difference.

12. By email sent on 25 September 2020 (a copy of which is annexed to Mr Morris’ affidavit), Ms Golovina gave notice to Mr P Comerford (Ms Berntsson’s solicitor, in the employ of Parker and Kissane Solictors) of Mr Freeman’s intention to seek from Ms Berntsson, half of any costs not recovered, presumably out of her share of the amount refunded to the estate.

13. There has been no appearance by, or on behalf of, Ms Berntsson and so far as I am aware, no response to the letter. I turn, now, to the role played by Ms Berntsson in these proceedings.

Involvement of Ms Berntsson

14. In her affidavit in reply Ms Golovina stated (at pars 2–4), sworn on 8 October 2020) that:

“On 24 September 2020, after hearing the administrator’s Notice of Motion, His Honour said words to the effect that Ms Lynette Berntsson should pay half of Mr Freeman’s costs.

I stand by my recollection that His Honour did not make the comments that ‘the Court would consider any application made by Mr Freeman to recover any shortfall from the Estate by way of a corresponding reduction in the further distribution to be made to Ms Berntsson out of the Estate’.

This has never been said contrary to the assertions of Mr Matthew Mennilli and Mr Simon Morris at paragraphs 33 & 34 of Mr Morris’ affidavit dated 7 October 2020.”

15. Ms Golovina’s statement is not entirely accurate. The discussion referred to by her was as follows (Tcpt, 24 September 2020, p 3(09–25)):

“[HIS HONOUR]: And presumably there may be a question on the issue of costs before the administrators can distribute the amount, depending upon whether you and Mr Mennelli can reach some agreement on the issue of costs. Because it would not be fair, it seems to me, to make the second respondent bear a burden for the difference between costs on the ordinary basis and costs on the indemnity basis without reference to Ms Berntsson

GOLOVINA: Sorry, I didn't ‑ I didn't hear what you say about Ms Berntsson.

HIS HONOUR: I said it would not be fair, bearing in mind she is getting, now she says she is getting ‑ she wants half of the amount of amounts recovered. Bearing in mind that all of this has been at the cost of the second respondent it may not be fair. Notice will have to be given to her if you are seeking any part of [Mr Freeman’s] costs to be borne by Ms Berntsson. Do you understand?

GOLOVINA: Yes, your Honour.”

16. That conversation was prompted by the following finding in the principal judgment at pars [76] and [77]):

“… Initially, Ms Berntsson, the other beneficiary entitled to receive half of the estate, had stated ‘that she had no objection to Piper Alderman’s fees and she wished to take no active part at any step in this review process in the application to pass the accounts’.

However, at the hearing, Ms Golovina, without objection, referred me to a letter, dated 8 July 2020, included as part of an annexure to the Administrator’s submissions in respect of an application for a stay of the Registrar’s orders, a copy of which was sent with an email dated 15 July 2020 to my Associate. In that letter, Ms Berntsson, by her solicitors, made it clear that ‘she wishe[d] to be involved [in the proceedings] to the extent that should there any further distributions then it should be equally distributed between herself and Mr Sasha Freeman’: Tcpt, 15 September 2020, p 31(34) – p 33(14).”

17. It appears, as it were, that on the prospect of receiving a further distribution from the deceased’s estate having crystallised, by orders made by the Registrar on 29 May 2020, Ms Berntsson’s interest was piqued.

18. It seems to me that for her to share, equally, in the benefit brought about following the steps taken by Mr Freeman, she must accept, equally, her share of the burden of the costs that were reasonably incurred in obtaining the benefit. In taking the steps that he did, Mr Freeman appears to have been acting reasonably, and in the interests of himself and Ms Berntsson, in reducing the amount of costs payable out of the estate. It would provide Ms Berntsson with an enrichment to not make an order. In fairness, equity cannot countenance such a result.

The making of a specified gross sum costs order

19. UCPR, r 42.7, relevantly, provides as follows:

Interlocutory applications and reserved costs

… (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:

(a) costs that are reserved, and

(b) costs in respect of any such application or step in respect of which no order as to costs is made,

are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.

(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.

20. The general costs of proceedings, as referred to in UCPR, r 42.7, are those costs of proceedings which are not the subject of a special costs order. Costs of an application include both costs of, and costs incidental to, the application: Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640 at [14] (Brereton J, as his Honour then was) citing Wentworth v Wentworth (Court of Appeal (NSW), Clarke JA, with whom Priestley JA and Grove AJA agreed, 21 February 1996, unrep) at 17.

21. Section 98(4)(c) of the Civil Procedure Act provides that, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to a specified gross sum instead of assessed costs. Section 98(6)(a) provides that in this section, costs include “the costs of the administration of any estate or trust”.

22. In Harrison v Schipp (2002) 54 NSWLR 738 at 742; [2002] NSWCA 213 Giles JA noted, at [21]:

“The power … of [section 98(4)] is not confined, and may be exercised whenever the circumstances warrant its exercise. It may appropriately be exercised where the assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment.” (citations omitted).

23. The principal purpose of this type of order is to avoid the expense, delay and aggravation of further protracted litigation arising from the assessment process: Hamod v New South Wales [2011] NSWCA 375 at [816]–[817] (Beazley JA, as Her Excellency then was and with whom Giles and Whealy JJA agreed).

24. Based upon prior experience, and the evidence read on the costs application, it is probable that any further costs assessment is likely to be unduly protracted and add to costs unnecessarily: Harvey v Barton (No. 4) [2015] NSWSC 809 at [44] (Slattery J); Coshott v Parker (No 3) [2015] NSWSC 1195 at [73] (Hall J); Russo v Russo (No 4) [2016] NSWSC 1133 at [4] (Slattery J).

25. The additional costs of assessment would also impose a significant financial and other burden on the respective parties, and the only other beneficiary, as well as aggravation in carrying out the assessment, which is likely to be out of proportion to the amount in issue.

26. This view is supported by evidence given by Ms Golovina, which is to the effect that the award of a gross sum costs would substantially save further costs, and time, and that based upon her enquires, additional costs of 9.5 per cent of the total professional fees (plus GST) would be incurred as a result of any assessment, (estimated to be $2,000 (plus GST), in addition to which, she will incur expenses in respect of instructing said consultant, in the order of $550 (plus GST)). Further unquantified costs, are said to flow from any assessment, including in relation to the costs of preparing an application; the objections and responses; the filing fee; the assessor’s fee; and the parties’ costs in conducting the assessment. As to the duration of the costs assessment process, Ms Golovina states that given “the likely size of itemisation in this matter” an assessment would take approximately 4 months from the appointment of an assessor. That estimate, she says excludes, any time involved if any assessment were the subject of an appeal. She did not, however, refer to the “Guideline For Costs Payable Between Parties Under Court Orders” issued by the Supreme Court of New South Wales on 16 March 2019.

27. Avoiding further delay is particularly important in the present case, as there has already been a significant delay in the completion of the administration of the deceased’s estate because of the different proceedings to which I have referred in the principal judgment. Making the orders will, undoubtedly, assist in bringing finality to the litigation involving the deceased’s estate and avoid the further delay in the completion of that administration, including the distribution of the balance of the estate.

28. In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23, Einstein J summarised the principles which inform the exercise of the discretion to specify a gross sum, at [9]:

“…

ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum [NL v Johnson (1995) 57 FCR 119] at [16];

iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp … at [22] …;

iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at [22];

v. the gross sum ‘can only be fixed broadly having regard to the information before the Court’: Beach Petroleum at 124;

[In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum ‘only if I apply a much broader brush than would be applied on taxation, but that … is what the rule contemplates’.]

vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120;

vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at [16]:

‘On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary ‘fail safe’ discount on the cost estimates submitted to the Court: Leary v Leary at 265 …’”

29. His Honour’s summary was cited, with approval, in Hamod v New South Wales by Beazley JA, with whom Giles and Whealy JJA agreed, at [793]. Her Honour continued, at [816]:

“… the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred … the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability …”

30. And at [820]:

“The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills). The approach taken to estimate the costs to be ordered must be logical, fair and reasonable. This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment.” (citations omitted).

31. Ball J wrote in Baychek v Baychek [2010] NSWSC 987 at [11]:

“… Implicit in this principle is that the gross sum bear a reasonable relationship to the actual costs of the party making the application, and to the costs that that party might reasonably be expected to recover on assessment. That means, among other things, that there must be a reasonable evidentiary basis for the order the court makes. That evidentiary basis is normally provided by the costs applicant in the form of an affidavit setting out the actual costs incurred and how they were calculated. Often, the evidence also includes evidence of the amount that is likely to be recovered on assessment.”

32. As Black J, more recently, wrote in Re Beverage Freight Services Pty Ltd [2020] NSWSC 797 at [19]:

“… the power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court typically applies a discount in assessing costs on a gross sum basis: Ritchie’s Uniform Civil Procedure NSW [s 98.65]; Idoport Pty Ltd v National Australia Bank Ltd …”

33. For other recent summaries of principles, also see National Australia Bank Limited v Sayed [2020] NSWSC 1316 at [9]–[15] (Ward CJ in Eq).

34. Generally, the making of a gross sum costs order involves a two-stage process, the first stage being that the Court must be satisfied that the circumstances of the case warrant the making of a gross sum costs order, and, the second being to determine the quantum of the costs.

35. In relation to the second stage, although the usual practice of the Court, when making a lump sum costs order, is to apply a discount that does not mean that the Court must apply a percentage discount to the sum sought by the successful party: Bechara v Bates [2016] NSWCA 294 at [15] (Beazley P, Meagher JA and Payne JA).

36. Generally, the range of discounts that may be applied is between 10 per cent and 30 per cent: Guha v Guha [2020] NSWSC 1337 at [73] (Ward CJ in Eq); Re Palladium Consulting Pty Ltd [2013] NSWSC 92 at [14] (Black J); Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863 at [11] (Beech-Jones J); Starr-Diamond v Diamond (No 4) [2013] NSWSC 811 at [22]–[23] (Slattery J); Andy Vuong Duc Pham v Enterprise ICT Pty Ltd [2020] NSWSC 1089 at [72] (Sackar J).

37. In determining the specified gross sum, the Court takes a broad brush approach, exercising its discretion with fairness, reasonableness, proportionality, doing justice to both parties, and not in any scientific or formulaic manner. The process, self-evidently, does not envisage that something similar to that involved in a traditional taxation or assessment of costs should take place: Bechara v Bates at [14].

38. The Administrators, as the party liable to pay the costs, bear the onus of showing that any costs claimed were unreasonably incurred, or unreasonable in amount: Hancock v Rinehart at [61] (Brereton J, as his Honour then was).

39. Any reluctance by the Court to make a gross sum costs order has increasingly dissipated over the last decade or so: In the matter of Optimisation Australia Pty Ltd (Costs) [2018] NSWSC 280 at [29] (Brereton J).

40. In the circumstances, I have little hesitation in dealing with the costs issue on the basis of a gross sum costs order. The circumstances of the case clearly warrant the making of such an order.

The evidence and the submissions

41. In support of his application, Mr Freeman relied on an affidavit of his solicitor, Ms Rada Golovina, sworn on 30 September 2020. Ms Golovina had appeared at the hearing of the notice of motion, without counsel.

42. In her affidavit in support, Ms Golovina stated that she was admitted as a solicitor of this Court in 2012 and had practised as a solicitor since then, acting for parties to proceedings in various courts in New South Wales. She is the principal of her firm, RMG Law & Associates. She then went on to set out, in a list, the types of work she, and one would think most, lawyers, perform on a day to day basis.

43. The purpose of the affidavit, so Ms Golovina stated, was to detail:

1. the work performed by her, and costs incurred, in these proceedings;

2. the manner in which the assessment of costs is to be undertaken by a costs assessor;

3. an estimate as to the time and expense involved in the assessment of her costs;

4. an opinion as to whether the costs incurred by Mr Freeman in these proceedings are reasonable having regard to the conduct, content and context of these proceedings;

5. estimates of the costs and disbursements likely to be awarded to Mr Freeman on assessment of his costs.

44. She stated that any opinions expressed were based on her training, study and experience, such expertise, she qualified as having been acquired from “reading the determinations by costs assessors and a review panel and reading the Law Society Costs Guide, 7^th Edition for Chapter 4 of the Uniform Law and Costs Assessments”.

45. To her affidavit she annexed a copy of her conditional costs agreement with Mr Freeman dated 1 July 2019. The scope of work provided that it was in relation to the application by the Administrators seeking an order to have accounts passed by the Registrar. After the filing of the Administrators’ notice of motion, Ms Golovina, by letter to Mr Freeman dated 28 June 2020, provided an updated estimate of costs as being between $12,000 and $15,000 (plus GST) and 25 per cent uplift fee, which she estimated to be between $3,000 and $3,750.

46. Ms Golovina stated that since being retained, the work she had done included, but was not limited to:

“… obtaining instructions from Mr Freeman in relation to the action to compel the administrators of the Estate to file the accounts, reading documents, reviewing correspondence drafting affidavits of Mr Freeman, preparing the objections to the Bill of Costs, reviewing the Senior Deputy Registrar’s Reasons of the Decision, preparation of submissions for the hearing and appearing at the hearing of the Notice of Motion …”

47. Her hourly rate has been $275 (plus GST). Based upon a comparison with, for example, the hourly rate of Mr Toltz (the consultant of Piper Alderman and the solicitor on record for the Administrators, which was between $590 (plus GST) and $580 (plus GST), and which upon moderation by the Registrar was reduced to the “commercial rate” of $470 (plus GST) and $440 (plus GST), respectively, Ms Golovina’s hourly rate was quite modest.

48. On 28 September 2020, Ms Golovina rendered an invoice to Mr Freeman in the amount of $25,769.05. An itemised bill of costs attached to the invoice revealed charges for the period 27 June 2019 and 28 September 2020, inclusive, in the amount of $17,449.50 to which a 25 per cent uplift fee ($4,362.37) was added bringing the sub-total to $21,811.87. To that amount, GST ($2,181.18) and disbursements ($1,776) were also added.

49. She stated, by submission rather than direct evidence, that, by reference to the Costs Assessment Rules Committee guidelines, on assessment of costs, an assessor would allow the rates she has charged.

50. As noted above, in broad terms, as the amount that it was submitted should be ordered to be paid by way of a gross sum costs order, Ms Golovina estimated the sum of $21,705.52 (inclusive of GST), being such costs “of and incidental to the proceedings from 1 July 2019 until 28 September 2020”; or alternatively, the sum of $15,088.00 (inclusive of GST) for costs on the notice of motion. Those amounts, she concluded, were fair and reasonable, given:

“… the nature of these proceedings, the legal work completed on behalf of [Mr Freeman] was predominantly on a party/party basis rather than a solicitor/client basis and to review the pleadings and correspondence with the other party’s solicitors. Under the circumstances, I applied the higher percentage of 80% in calculating the … costs.”

51. At par 44 of her affidavit, Ms Golovina included a breakdown of the estimated total costs of Mr Freeman. By cross-referencing those amounts to the itemised bill of costs rendered to him, to which reference has already been made, Mr Freeman’s costs (inclusive of GST) may be summarised as follows:

Fees relating to:	Date	Amount ($)
Proceedings before the Registrar	27 June 19 – 26 June 2020	5,882.25
Subtotal	5,882.25
Notice of Motion	26 June 20 – 24 September 2020	10,438.45
Gross sum costs application	23 Sept 20 – 28 September 2020	2,873.75
Disbursements	1,776.00
Subtotal	15,088.20 (inclusive of $1,975.44 GST)
Total (ordinary basis)	20,970.45
25 per cent uplift fee	4,798.61
Total (indemnity basis)	25,769.07

52. As I have stated, whilst the Administrators did not oppose the making of a gross sum costs order, they did not accept the quantum of the amounts claimed by way of Mr Freeman’s costs and disbursements.

53. In opposition to the quantum of costs, the Administrators relied upon an affidavit, sworn on 7 October 2020, from Mr Simon Jacob Morris, a solicitor in the employ of their solicitors, Piper Alderman.

54. It was the contention of the Administrators that the costs sought did not constitute Mr Freeman’s costs of the notice of motion, but rather that, at least in part, they related to the preparation, and service, of Ms Golovina’s initial affidavit and accompanying submissions on the costs application, which were unnecessarily incurred due to Mr Freeman’s failure to meaningfully engage, and resolve the issue of costs, with the Administrators. They also submitted that the amounts claimed did not constitute the ordinary costs which, without more, would be payable under the costs order.

55. The evidence of the Administrators included a reference to correspondence from their solicitors, with a view to resolving the application for a gross sum costs order. There was reference to a letter emailed to Ms Golovina on 2 October 2020, in which an offer was made to pay the sum of $8,526.76 to Mr Freeman, calculated as 100% of the property search fees stated in the invoice ($176 (inclusive of GST); and 80% of the fees which appeared to have been invoiced to Mr Freeman in relation to the notice of motion (but not including any fees referable to the preparation and service of Ms Golovina’s affidavit and submissions in support, being 80% of the total amount of $10,438.45 (inclusive of GST).

56. Although the offer had been rejected by Mr Freeman, the Administrators indicated that they would consent to the making of a gross sum costs order against them in favour of Mr Freeman in the sum of $8,526.76.

57. The Administrators’ solicitors, also acknowledged, as they had done at the hearing of the notice of motion, that any costs ordered to be paid to Mr Freeman, would be borne by the Administrators’ solicitors, Piper Alderman.

58. Ms Golovina replied to Mr Morris’ affidavit, in an affidavit sworn on 8 October 2020. She disputed matters pertaining to her apparent lack of efforts to come to a resolution of the proceedings and in particular, pars 33 and 34 of Mr Morris’ affidavit which related to Mr Freeman’s recovery of costs out of any further distribution to Ms Berntsson.

59. Neither of the deponents was cross-examined, so I am unable to determine where the truth of the matter lies.

60. Pausing there, I turn, now, to consider each of the bases upon which the Administrators dispute the quantum of the amounts sought to be recovered by Mr Freeman.

61. First, they submitted that, in addition to his costs of the motion, Mr Freeman has sought to recover amounts (solicitor fees and disbursements) invoiced by Ms Golovina in respect of proceedings numbered 2019/246755 commenced by Mr Freeman against the Administrators, on 8 August 2019, seeking orders to require the Administrators to pass accounts of the estate of the deceased and a notice of motion filed by the Administrators on 22 November 2019 to seek to pass the accounts of the deceased’s estate, in these proceedings. As identified in the table above, the amount said to constitute the costs, on the ordinary basis, of those proceedings, was $5,882.25 (inclusive of GST).

62. Turning to the recovery of the costs of the preparation, and service of Ms Golovina’s affidavit and submissions in support, on the application for a gross sum costs order, the Administrator’s submitted those amounts were not recoverable, as they were unnecessary due what they state was an “[inability] to meaningfully engage with Mr Freeman to seek to resolve the issue of costs”.

63. The factual basis of that assertion was the number of attempts (on 15, 17 and 18 September 2020) made by the Administrators, through Piper Alderman to Ms Golovina, to ascertain Mr Freeman’s recoverable costs of the motion and Ms Golovina’s refusal, or failure, to provide any information going to the quantification of those costs: Affidavit, Simon Jacob Morris, 7 October 2020 at pars 17, 20, 23.

64. Those communications occurred after the conclusion of the hearing of the notice of motion and appear to have been precipitated by the following notations and directions, of the Court, upon reserving judgment:

“Notes that the Applicants have stated that in the event the notice of motion is successful, they do not seek any order for costs as against the second Respondent or Ms Berntsson.

Directs that each party’s legal representatives is to inform the Court by 4:00 p.m. on 18 September 2020 of the form of costs order to be sought in the event that the notice of motion is dismissed.

…”

65. Although Ms Golovina did not respond to the issues raised in pars 17, 20 and 23 of Mr Morris’ affidavit, she did aver to a letter emailed to Piper Alderman on 17 September 2020 (a copy of which she annexed to her affidavit), in which an offer was made to settle the proceedings for $12,000, to which she received no reply. Of course, this letter was emailed prior to the date of the principal reasons for judgment being delivered.

66. (On 24 September 2020, upon delivering judgment, the parties were encouraged to speak with another about the issue of costs so as to avoid the burden of further, and unnecessary, costs being incurred (Tcpt, 24 September 2020, p 1(41) – p 2(01); p 2(44–45).)

67. The Administrators submitted that Ms Golovina failed to comply with the Court’s encouragement and that she did not confer, meaningfully, with Piper Alderman after the reasons for judgment were delivered. Instead, she simply proceeded to serve Mr Freeman’s application for a gross sums costs order.

68. (Although it would be an error to characterise the course Ms Golovina took as a failure to comply with a “direction” of the Court, because no such direction was made, if she did, in fact, refuse to provide Piper Alderman with information necessary to identify, and substantiate, the recoverable costs of the unsuccessful notice of motion, this refusal might, nevertheless, be considered to be other than in accordance with a legal representative’s obligation to facilitate the just, quick and cheap resolution of the real issues in the proceedings as required by s 56 of the Civil Procedure Act.)

69. Bearing in mind the nature of the submissions advanced, it is of little surprise that agreement on the quantum of Mr Freeman’s costs could not be reached.

70. Despite Mr Freeman having earlier articulated a view that so far as the Administrators’ costs were concerned they had appeared excessive and disproportionate to the value of the net distributable estate, it seems he was, nonetheless, still prepared to incur further costs in arguing the issue of the quantum of costs.

71. Turning then to the costs that it was submitted should not be payable under the order for Mr Freeman’s costs, on the ordinary basis. As earlier stated, Mr Freeman’s conditional costs agreement with Ms Golovina includes an uplift fee of 25 per cent. The Administrator’s submitted that they should not be required to pay any uplift fee in circumstances where the fee does not constitute a cost that is payable on an ordinary, as distinct from the indemnity, basis.

72. Further the Administrators submitted that they should not be required to pay printing and photocopying charges totalling $440 (inclusive of GST) invoiced to Mr Freeman. Although those charges have not been itemised, in their submission there was no reasonable basis upon which Mr Freeman could contend that those charges constituted costs referable to the notice of motion given the limited use of hard copy documents and given that counsel was not briefed to advise, or appear on the notice of motion, there would have been limited, if any real, necessity for the photocopying of documents.

73. I do not know why the costs of photocopying were incurred, but, based upon the evidence, I am unable to conclude that they had not been, or that they were unreasonable.

Determination

74. As stated, there was really no dispute that Mr Freeman should be awarded his costs of the notice of motion, by way of a gross sum. The only question is the quantum of those costs.

75. In my opinion, the Court is well placed to make a broad brush determination of Mr Freeman’s costs of the notice of motion, both on the ordinary basis, and on the indemnity basis. In determining what amount should be fixed by way of a lump sum, I have had regard to the affidavit evidence of each of the parties, their submissions, and the manner in which the notice of motion was conducted.

76. Section 181 of the Legal Profession Uniform Law 2015 (NSW) (LPUL) deals with “conditional costs agreements” and states at sub-section (1) that such an agreement may provide that the payment of some, or all, of the legal costs is conditional on the successful outcome of the matter to which those costs relate. Section 182(1) of the LPUL provides that a conditional costs agreement may provide for the payment of an uplift fee.

77. Section 182(2)(b) of the LPUL provides the uplift fee must not exceed 25 per cent of the legal costs (excluding disbursements) otherwise payable.

78. An “uplift fee” is not part of the ordinary costs of the Plaintiff: G E Dal Pont Law of Costs, (3rd ed, 2013, LexisNexis) at [17.55]; Stojanovski v Stojovski [2016] NSWSC 976 at [41]–[52]. (Also see, Day v Perpetual Trustee (Supreme Court (NSW), Macready M, 3 August 2001, unrep) in which the Court dealt, at length, with the reasons for not usually allowing the charge of an uplift factor. It is regarded as a financing cost which should not be passed on to the losing party.)

79. It follows that Mr Freeman is not entitled to the uplift factor in determining the ordinary costs that are to be paid by the Administrators. Accordingly, I omit from the quantum of costs, calculated on the ordinary basis, the estimate of the uplift fee identified by Ms Golovina.

80. Taking into account all of the matters, I fix the amount of Mr Freeman’s costs, at $13,000, inclusive of GST, as the gross amount that ought to be paid by the Administrators to Mr Freeman in respect of his costs, calculated on the ordinary basis, of the notice of motion. As he has succeeded in obtaining more than the amount that was offered on behalf of the Administrators, I have also included, in this amount, an amount for the costs of the argument on costs. (I have not included any amount as claimed as to the costs of the argument before the Senior Deputy Registrar in Probate.)

74. I am of the view that this sum is sufficiently conservative such that it will not overcompensate Mr Freeman for the costs and disbursements, calculated on the ordinary basis, of the notice of motion and the costs of the argument on costs with which I have dealt.

75. The amount reached includes an amount for GST. In the event that RMG Law & Associates is registered for GST and claims an input credit for that GST, which it pays, then the amount of GST received should be refunded to the Administrators (or if the costs are paid by their solicitors, to those solicitors): see Goods and Services Tax Ruling 2001/4.

76. In relation to the indemnity costs, doing the best I can, I assess the gross sum, calculated on the indemnity basis, to be $22,000, including the costs of the passing of accounts which should be borne by the estate, as well as the costs of the gross sum costs application. Since Mr Freeman will recover $13,000 from the Administrators, the remaining amount to be paid, out of the amount recovered for estate will be $9,000.

77. In reaching my conclusion that Ms Berntsson should bear her share of those costs, I refer to the remarks of Vaughan Williams LJ in Bonner v Tottenham & Edmonton Permanent Investment Building Society [1899] 1 QB 161 at 176:

“But the plaintiff may be entitled to recover within the equitable principle, if he has been compelled to pay or bear the burden, and can establish that the defendant has such an interest or benefit as to make the maxim apply ‘Qui sentit commodum, sentire debet et onus’ … The equitable principle seems to me based upon natural justice requiring that equity should neutralise ‘inter se’ the accident that the burden had been borne by one for the benefit of others associated with him in interest, whether such incidence of burden is the result of election of a plaintiff who might have sued all those interested, or whether it is the result of the requirements of the law as to the parties to actions, or whether it is the result of what may be more properly called ‘accident’ like the ‘jettison’ of a part of a cargo severally owned, or the seizure of wines on behalf of the Crown in right of prisage. In each of these cases the application of the equitable principle depends on community of interest in something in respect of which one has borne a burden for the benefit of another or others.”

85. Since both Mr Freeman and Ms Berntsson share the residue of the estate equally, each should bear one-half of that remaining amount (being, at least in part, the difference between costs calculated on the ordinary basis, and in part the costs calculated on the indemnity basis).

86. The consequence of this conclusion is that each will bear, out of his and her share of the remaining estate of the deceased, $4,500. This will leave about $28,000 to be distributed equally between them.

87. Naturally, I have considered whether to delay the determination of this aspect to enable Ms Berntsson to be heard. However, I remember that her solicitors were informed of the proceedings by Ms Golovina. As Ms Berntsson has left it to Mr Freeman to fight the battles in regard to the nature and value of the deceased’s estate, and bearing in mind the amounts involved, it would not be in the just, cheap and quick determination of these proceedings, to delay the making of orders on that basis.

88. The Court:

1. Orders that the Administrators pay the second Respondent’s costs of the notice of motion filed on 26 June 2020, and the costs of the gross sum costs application, quantified on a gross lump sum basis under s 98(4)(c) of the Civil Procedure Act2005 (NSW) as $13,000, inclusive of GST.

2. Orders that the costs, calculated on the indemnity basis, of the second Respondent, of the passing of the accounts, the notice of motion filed on 26 June 2020, and the costs of the gross sum costs application, be quantified on a gross lump sum basis under s 98(4)(c) of the Civil Procedure Act 2005 (NSW), as $22,000, inclusive of GST.

3. Orders that the difference between the second Respondent’s costs, calculated on the ordinary basis, and his costs calculated on the indemnity basis, being $9,000, be paid out of the estate of the deceased, and from the amount repaid to the estate ($37,133.69).

4. Orders, in the event that RMG Law & Associates is registered for GST and claims an input credit for any GST which it pays, then the amount of GST received should be refunded to the Administrators (or if the costs are paid by their solicitors, to those solicitors).

5. Makes no order as to the cost of the first Respondent, to the intent that he will bear his own costs, if any.

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Decision last updated: 02 November 2020