The Lebanese Moslem Association v Dandan

[2022] NSWSC 1769

Supreme Court

New South Wales

Medium Neutral Citation:

The Lebanese Moslem Association v Dandan [2022] NSWSC 1769

Hearing dates:

On the papers; submissions ending 16 December 2022

Date of orders:

23 December 2022

Decision date:

23 December 2022

Jurisdiction:

Equity

Before:

Parker J

Decision:

See [45]

Catchwords:

COSTS – interlocutory costs order – costs thrown away by amendment – application for payment on account – claim under competition covenant no longer pursued – whether discrete issue – whether it was unreasonable to pursue the claim

Legislation Cited:

Civil Procedure Act 2005, s 56

Legal Profession Uniform Law, ss 181, 204

Cases Cited:

Fiduciary Ltd vMorningstar Research Pty Ltd (2002) 55 NSWLR 1

Moustapha v Nelson (No 3) [2020] NSWSC 1263

Royal Australian Naval Reserve Rifle Club Inc v New South Wales Rifle Association Inc [2010] NSWSC 351

Wang v Cai (No 2) [2021] NSWSC 1268

Category:

Costs

Parties:

Sahar Dandan (Applicant/First Defendant)
The Lebanese Moslem Association (Respondent/Plaintiff)

Representation:

Counsel:
M Gibian SC/A Guy (Applicant/First Defendant)
J Steele SC (Respondent/Plaintiff)

Solicitors:
Concordia Legal (Applicant/First Defendant)
Kennedys Law (Respondent/Plaintiff)

File Number(s):

2022/84934

Publication restriction:

Nil

Judgment

1. In this matter, I made an interlocutory costs order in favour of the first defendant in October 2022. The first defendant has now applied for an order for payment of a lump sum of approximately $210,000 on account of the plaintiff’s liability for costs under that order.

2. The order which is sought requires some explanation. It is not uncommon for the Court to be asked to make an order that the amount due under an interlocutory costs order be assessed, and paid, forthwith. But a separate assessment may be a distracting and expensive exercise. If the beneficiary of the order ultimately succeeds in the proceedings, and receives the benefit of an order for the costs of the proceedings generally, there may be no need for a separate assessment at all.

3. These considerations have led me, in a number of cases where the circumstances would justify the making of an order that interlocutory costs be assessed and paid forthwith, instead to make an order for payment of a lump sum on account of those costs. Such an order does not involve any final determination of the parties’ rights and obligations under the order. If, on assessment, the assessed costs exceed the lump sum, the beneficiary of the order will be entitled to the difference. If the assessed costs are less than the lump sum, then the beneficiary will need to repay, or otherwise credit, the difference. See for example: Moustapha v Nelson (No 3) [2020] NSWSC 1263 at [97].

Background and procedural history

4. The plaintiff in the proceedings, The Lebanese Moslem Association (“LMA”), is a not-for-profit organisation which was incorporated under the Companies Act 1961. It is registered as a charitable organisation with the Australian Charities and Not-for-profits Commission. Its objects are to serve the interests of Muslim members of the Lebanese community. Most of its income derives from Commonwealth Government grants.

5. The first defendant, Sahar Dandan, is a former employee of LMA. She was employed by LMA as an accountant between July 2013 and March this year. At that time, she left LMA for employment with the second defendant, Aligned Accounting Pty Limited (“AA”). AA is a company which carries on an accountancy services business.

6. LMA had employed Ms Dandan under a formal written employment contract dated 15 June 2016. The contract contained covenants in typical form against: (1) retention or misuse by Ms Dandan of LMA’s confidential information; (2) involvement by Ms Dandan in any competing business; and, (3) solicitation of customers or employees of LMA.

7. In the proceedings, LMA alleges that Ms Dandan left its employment and joined AA as part of a concerted plan to appropriate LMA’s “business” of delivering Commonwealth grant moneys to members of the Lebanese Muslim community. In particular, LMA alleges that, prior to leaving her employment, Ms Dandan downloaded contact details used for the “business”. She also allegedly deleted files from LMA’s records in any effort to interfere with LMA’s continued conduct of the “business”. LMA alleges that this conduct by Ms Dandan caused damage in the form of expense associated with retrieving the deleted information, and also loss of income from its “business”.

8. The proceedings were commenced on an urgent basis in the Duty List in April this year. Orders were made for the inspection of records by an expert retained by LMA. Interlocutory injunctions were also put in place to restrain Ms Dandan from using or disclosing any confidential records of LMA, as well as: from soliciting any employees of LMA; from interfering with any information technology services provided by third parties to LMA; and from assisting anyone applying for government funding for programs of the type provided by LMA.

9. On 2 May, the proceedings were entered in the Expedition List by consent. The proceedings were mentioned before me on a couple of occasions. On 1 July, LMA’s statement of claim was filed, which joined AA as second defendant.

10. At a hearing on 26 August, I asked junior counsel then appearing for LMA some questions about the way in which LMA’s claims in the proceedings were put. The purpose of these questions was to find out which, if any, of LMA’s claims should be the subject of an expedited hearing.

11. I first noted that LMA continued to assert that Ms Dandan held confidential information of LMA’s. I asked counsel how this was to be proved. Counsel replied that the Court would be invited to infer, if Ms Dandan were shown to have deleted records of LMA before leaving its employment, that she would likely have retained confidential information, in defiance of her obligations to LMA, as well. Counsel could not point to any direct evidence that Ms Dandan actually did retain any such information.

12. I also asked counsel about how the claim for an injunction to prevent Ms Dandan from competing against LMA’s “business” was contractually justified. The competition covenant restrained Ms Dandan from supplying or attempting to supply any product or service “the same as or similar to” those supplied in the course of LMA’s “business” to any “customer “of LMA. I observed that applying for public money and using it to fund community activities did not appear to have any commercial element to it. I also enquired of counsel what LMA’s damages would be, since LMA supposedly does not profit from the activity.

13. I asked counsel about the reasonableness of any such restraint. I observed that there seemed to be a strong public interest in taxpayers’ money being distributed in the most cost-effective way possible. It seemed unlikely, I suggested, that the Court would ever restrain anyone from competing against LMA for the right to receive and distribute Commonwealth grant moneys.

14. Counsel was not in a position to answer those questions immediately. I suggested that the claim needed reconsideration by LMA’s board, with full advice from LMA’s lawyers, and adjourned the proceedings to allow that to happen.

15. When the proceedings returned to Court on 9 September, LMA was represented by a different junior counsel. On that occasion, it appeared as if little or nothing had been done to answer the questions which I had posed at the previous hearing. I adjourned the proceedings again to enable a proper answer to be provided.

16. On the next occasion, 19 September, LMA was represented by senior counsel. Counsel indicated that LMA’s claim against Ms Dandan based on the competition covenant would be withdrawn. LMA’s main claim was the claim against Ms Dandan for damages for the losses allegedly suffered as a result of deletion of documents. The amount involved was substantial and the claim was to be pursued. LMA also maintained its claim for an injunction against Ms Dandan requiring the return of any confidential information in her possession. Counsel accepted, however, that these remaining claims did not warrant the matter remaining in the Expedition List. Following the hearing, consent orders were made for LMA to notify the proposed amendments to its statement of claim and for Ms Dandan to indicate her consent or otherwise.

17. When the proceedings returned to the Expedition List on 21 October, no objection to LMA’s amendments was pressed on Ms Dandan’s behalf. Following the hearing, on 26 October, consent orders were made. Leave was granted for the amendments to LMA’s statement of claim. LMA was ordered to pay Ms Dandan’s costs thrown away by reason of the amendment. The injunctions restraining Ms Dandan from interfering with any information technology, from assisting anyone from applying for government funding, and from soliciting LMA’s employees were discharged.

18. The proceedings have been listed for directions before the Registrar early in February 2023. The evidence before the Court indicates that a hearing is unlikely to happen before the end of 2023 and is more likely to take place in 2024.

19. Ms Dandan’s application for a lump sum order was made by a notice of motion filed on 25 November. It was supported by an affidavit from Ms Dandan.

20. Ms Dandan’s solicitor is Mr Ammar Jamal-Eddine of Concordia Legal (“Concordia”). The evidence on the application shows that, in correspondence dated 12 October, Mr Jamal-Eddine indicated to LMA’s solicitors that Ms Dandan’s costs thrown away to date were approximately $110,000. On Ms Dandan’s behalf, Mr Jamal-Eddine offered not to object to LMA amending its statement of claim if these costs were paid.

21. That proposal was not accepted by LMA, and, as I have described, unconditional leave was obtained on 26 October to make the amendments. In the present application, counsel for Ms Dandan sought an order for a payment on account of $178,000. This was calculated by reference to her costs of the proceedings as a whole, which were said to total $209,000, made up of solicitors’ fees of $149,000 (including unbilled fees of $3,000) and counsel’s fees of $60,000.

22. Ms Dandan’s affidavit included the $209,000 figure, but did not contain any supporting documents. LMA’s solicitors issued a notice to produce which resulted in the production of a fee note from Concordia fee dated 18 November. The fee note recorded solicitors’ fees of $141,000, and disbursements of $5,000. Also produced were fee notes from senior and junior counsel totalling $54,000. According to Ms Dandan’s affidavit, she has paid $48,000 towards counsel’s fees and has not been required to pay any of Concordia’s fees.

23. There is little detail about Concordia’s fees. The narrative in Concordia’s fee note merely records:

To our professional costs for acting for you in relation to the abovementioned matter. Professional costs include: opening the file, taking instructions from you, attending to enquiries, drafting, attending court listings, liaising with the other side, liaising with counsel etc.

24. LMA’s notice to produce also required the production of all retainer agreements and costs estimates between Concordia and Ms Dandan. Nothing was produced. It appears to be common ground that no such documents exist.

25. Ms Dandan’s affidavit contained a description of the course of the proceedings but neither the affidavit nor her submissions set out to identify the particular costs thrown away by reason of the amendment. As I have said, the application sought the payment of a sum on account of the whole of Ms Dandan’s costs of the proceedings.

26. In her affidavit, Ms Dandan gave evidence about her financial position. The evidence was that she is unemployed and has used all of her savings defending the proceedings. She will also need to seek the help of her friends and family to continue funding the litigation.

Application for payment on account

27. Two factors may be of particular significance in deciding whether to make an order that interlocutory costs be assessed and paid forthwith. They are that the costs in question relate to a discrete issue, and that the completion of the proceedings and the making of a final order for costs is still some distance away: Fiduciary Ltd vMorningstar Research Pty Ltd (2002) 55 NSWLR 1 at [11], [13] per Barrett J.

28. Each of these factors come into play in the present application. Counsel for LMA pointed out that, following the amendments, LMA is still pursuing a claim for damages against Ms Dandan. Counsel submitted that there had been little or no material change in LMA’s case.

29. I cannot agree. While the claim based on the confidentiality covenant arose out of the same employment agreement as the other claims by LMA, it is a claim under a different covenant which would, if pursued to hearing, give rise to different issues of construction and reasonableness. The assessment of any damages under the competition covenant would be quite a different exercise from the assessment of damages for the loss suffered by LMA from the alleged destruction of its records by Ms Dandan.

30. For these reasons, I consider that the costs thrown away by reason of the amendment are discrete costs. They will not be affected by the ultimate result in the proceedings. There does not appear to be any dispute that the completion of the proceedings is quite a long way off.

31. Counsel for LMA observed that the amendment which resulted in the costs order was the first amendment made to the plaintiff’s case since it was initially pleaded. Counsel submitted that the plaintiff did not behave unreasonably by making an amendment at what counsel characterised as an early stage of the proceedings. Counsel also submitted that LMA did not act unreasonably in bringing the claim based on the restraints.

32. Counsel for LMA contended that, in these circumstances, no order as to costs should be made. For their part, counsel for Ms Dandan contended that the bringing of the claim based on the competition covenant had been unreasonable and that this was a factor in favour of Ms Dandan’s application (cf Fiduciary Ltd v Morningstar Research Pty Ltd at [12]).

33. In my view, it is quite clear, in hindsight, that the claim based on the competition covenant should not have been brought. The questions which I posed to junior counsel on 26 August remain unanswered. By abandoning the claim, LMA has effectively conceded that it was unsustainable.

34. I must say that I find it difficult to see how, with full consideration, the claim could ever have been thought justified. This is a particular concern when the conduct of the proceedings by LMA are presumably, like its other activities, funded by public money. But it is not necessary to go into this question for the purpose of resolving the present application. The fact is that costs have been awarded against LMA, which, sooner or later, it will have to pay. Factors in favour of making the order sought have already been established and I think that the reasonableness or unreasonableness of LMA’s conduct makes little or no practical difference in the circumstances.

35. Counsel for LMA submitted that Ms Dandan’s evidence about her financial position is irrelevant for the purposes of the present application. But counsel for Ms Dandan pointed me to the decision of Biscoe AJ in Royal Australian Naval Reserve Rifle Club Inc v New South Wales Rifle Association Inc [2010] NSWSC 351, where his Honour stated at [29] that, on an application for assessment and payment of interlocutory costs forthwith, it may be relevant that an applicant has limited resources, and those resources have been depleted by the costs of the interlocutory issue in question. Ward CJ in Eq accepted this in Wang v Cai (No 2) [2021] NSWSC 1268 at [24].

36. The evidence as to Ms Dandan’s financial position is very general in nature. So, as will be seen below, is the evidence about the costs for which she is or may be liable. Certainly, there is no evidence that LMA’s abandoned claim which is the subject of this application, has made any particular difference to Ms Dandan’s ability to fund the proceedings. I think that, in the present, case Ms Dandan’s entitlement to the orders she seeks must primarily depend upon the objective circumstances. Again, I think it is unnecessary to pursue this issue any further given the established factors in favour of the application.

37. Counsel for LMA next pointed to the lack of any written retainer agreement or cost estimate between Concordia and Ms Dandan. Counsel submitted that I could not be satisfied that Ms Dandan had in fact any obligation to pay for any of the costs the subject of the order, at least at this stage of the proceedings. Counsel also suggested that the proceedings might be being conducted on a “no win no fee” basis.

38. I think these submissions go a bit too far. The absence of a written retainer agreement and a costs estimate will not prevent Concordia Legal recovering reasonable remuneration for the work done for Ms Dandan. All it means is that the costs will have to be determined by assessment, which will take place at Concordia’s expense: Legal Profession Uniform Law, s 204(2).

39. The absence of any written retainer agreement may allow me to infer that no conditional fee arrangement is in place (cf Legal Profession Uniform Law, s 181(1)) but it does not necessarily mean that the parties have agreed that costs will be only payable in the event that Ms Dandan ultimately succeeds in the proceedings. The simple explanation may be, as Ms Dandan suggests in her affidavit, that Concordia has not so far insisted on payment. And this application is only for a payment on account. The Court is not required to make any determination of the amount, if anything, recoverable under the costs order. In the circumstances, I do not see this as a factor warranting the refusal of the application.

40. But counsel for LMA was on firmer ground in attacking the evidence of quantum. Ms Dandan was plainly not entitled to a payment on account of the whole of her costs of the proceedings to date. The evidence as to the quantum of those costs was hopelessly inadequate. Counsel went so far as to submit that the pursuit of the application was a breach of Ms Dandan’s duty as a party to assist the Court in facilitating a just, quick and cheap resolution of the real issues in the proceedings (Civil Procedure Act 2005, s 56).

41. The figure for costs allegedly incurred, $209,000, seems to me extraordinarily high given the limited interlocutory steps which have so far been taken. The figure of $110,000 for costs thrown away is equally extraordinary. I agree that the application was put far too broadly and the evidence in support of it was unsatisfactory.

42. But I do not think that these are sufficient reasons to refuse the application completely. The costs attributable to LMA’s abandoned claim would at least have included the costs of the series of interlocutory hearings which arose out of the questions I raised about the claim. Indeed, had the proceedings been confined to the claims now being pursued, they would probably never have come to the Expedition List in the first place.

43. Counsel for LMA presented no evidence, and made no submissions, on what the proper level of recoverable costs would be under the order. In those circumstances, I am left to make an assessment, necessarily using the broadest of brushes, from my own observations and experience. In the exercise of my judgment, I fix the amount to be paid at $20,000.

44. The parties put competing submissions on the costs of the application. The application has succeeded, but only for a small fraction of the amount claimed. On the other hand, LMA entirely opposed the grant of any relief. In the circumstances, there will be no order as to costs.

Orders

45. The orders of the Court on the notice of motion filed 25 November 2022 are:

1. Order that within 28 days the plaintiff pay to the first defendant the sum of $20,000 on account of the plaintiff’s costs liability under the orders of the Court made on 26 October 2022.

1. No order as to the costs of the motion.

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Decision last updated: 23 December 2022