Webster v Super Smart Strategies Pty Ltd (No 4)

[2017] NSWSC 1416

Supreme Court

New South Wales

Medium Neutral Citation:	Webster v Super Smart Strategies Pty Ltd (No 4) [2017] NSWSC 1416
Hearing dates:	On the papers
Date of orders:	17 October 2017
Decision date:	17 October 2017
Jurisdiction:	Common Law
Before:	Adamson J
Decision:	(1) In respect of the costs payable pursuant to order (1)(b) of the orders made on 4 May 2017, order the first and second cross-claimants, pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW), to pay to the first cross-defendant the amount of $200,000 within 28 days of the date of this order.  (2) Order the first and second cross-claimants to pay the first cross-defendant’s costs of its application for a gross sum costs order.
Catchwords:	COSTS – application for gross sum order under s 98(4) Civil Procedure Act 2005 (NSW) – sufficient material provided to determine an appropriate sum ­– where cross-claimants unnecessarily contributed to the costs of the proceedings by filing cross-claims which they decided ultimately not to pursue – HELD – gross sum order made
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 98 Uniform Civil Procedure Rules 2005 (NSW), r 20.26
Cases Cited:	Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 Bechara (t/as Bechara and Co) v Bates [2016] NSWCA 294 Webster v Super Smart Strategies Pty Ltd [2017] NSWSC 531
Category:	Costs
Parties:	Richard Webster (Plaintiff) Loris Webster (Second Plaintiff) Webster Superannuation Fund (Third Plaintiff) Super Smart Strategies Pty Limited ACN 098 688 085 (now ACN 098 688 085 Pty Ltd (in liq)) (First Defendant) Rick Frank Alfred Manietta (Second Defendant) Rick Manietta Investments Pty Limited ACN 080 851 207 (Third Defendant)   Super Smart Strategies Pty Ltd ACN 098 688 085 (now ACN 098 688 085 Pty Ltd (in liq)) (First Cross-Claimant) Rick Frank Alfred Manietta (Second Cross-Claimant) Rick Manietta Investments Pty Limited ACN 080 851 207) (Third Cross-Claimant) Finn Foster APB Pty Limited ACN 113 527 496 (First Cross-Defendant) Juan Martinez and the partners of HWL Ebsworth Lawyers (2nd Cross- Defendant and 4th to 113th Cross-Defendants) ABCD Pty Limited (Third Cross-Defendant)
Representation:	Counsel: C Carroll (Plaintiffs) E Hyde (1st Cross-Defendant) DA Lloyd (2nd -113th Cross-Defendants)   Solicitors: McCabes Lawyers (1st Cross-Defendant) Gilchrist Connell (2nd and 4th - 113th Cross- Defendants) Meridian Lawyers (3rd Cross-Defendant)
File Number(s):	2013/78666

Judgment

Introduction

1. On 4 May 2017 I dismissed the first cross-claim against the first cross-defendant (Finn Foster) and made costs orders against the cross-claimants.

2. The orders referred to above are set out in my reasons: Webster v Super Smart Strategies Pty Ltd [2017] NSWSC 531. My orders also included the grant of leave to Finn Foster to make an application for a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act 2005(NSW): [96(1)(c)] of the reasons.

3. Finn Foster has applied for gross sum costs orders against the first and second cross-claimants: ACN 098 688 085 Pty Ltd (in liquidation), formerly known as Super Smart Strategies Pty Ltd (the first cross claimant); and Rick Manietta, a bankrupt (the second cross-claimant). It does not seek an order against Rick Manietta Investments Pty Ltd (the third cross-claimant).

Evidence in support of application

4. In support of its application for a gross sum costs order in the sum of $223,326.45 (excluding GST), Finn Foster relied on the affidavit of Andrew Sharpe sworn 5 September 2017 as to substantive matters and the further affidavit of Mr Sharpe sworn 29 September 2017 (as to service). Mr Sharpe, a partner at McCabes (and formerly at DLA Piper, also known as Phillips Fox), has been the solicitor on the record for Finn Foster, instructed by its insurer, Swiss Reinsurance Company (Steadfast). On the basis of this evidence I am satisfied of the following.

5. The second cross-claimant was declared bankrupt on 8 May 2017 on the filing of his own petition. His trustee in bankruptcy is Steven Nicols of Nicols & O’Brien. The making of a gross sum costs order will enable Finn Foster to submit a proof of debt in Mr Manietta’s bankruptcy. I note the unchallenged evidence referred to in [39] of my judgment of 4 May 2017 that Mr Manietta had told Mr Vardy (one of the first cross-claimant’s liquidators) that he intended to go bankrupt and put Rick Manietta Investments Pty Ltd (the third cross-claimant) into liquidation the following week (being the week commencing 1 May 2017).

6. The cross-claimants have been served with the affidavit of Mr Sharpe sworn 5 September 2017. Neither has sought to be heard in opposition to the present application for a gross sum costs order.

7. As at 4 May 2017 McCabes (and DLA Piper and Phillips Fox) had rendered invoices that totalled $262,737 (excluding GST), which comprised professional costs and disbursements; and counsel’s fees and other disbursements incurred in defence of the cross-claim brought against Finn Foster in these proceedings. The hourly rates for professional costs were, in respect of a principal such as Mr Sharpe, $420-$450; a senior associate $310; an associate $260; and a solicitor $150-$225. Each invoice contained a detailed description of each task for which a fee has been charged, the time spent on the task and the relevant hourly rate of the person who performed that task.

8. Mr Sharpe’s unchallenged opinion was that 85% of the total costs “is a reasonable award and within the range of what may be awarded on assessment.” This percentage is the basis for the figure of $223,326.45 (excluding GST) sought by Finn Foster.

Consideration

9. The relevant principles that apply to the consideration whether it is appropriate to make a gross sum costs order were set out by Giles JA in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 (which applied to the statutory predecessor to s 98(4)) in the following terms:

“[21] The power conferred by Pt 52A, r 6(2) 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 (Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261; Sparnon v Apand Pty Ltd (Federal Court of Australia, von Doussa J, 4 March 1998, unreported); Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; Hadid v Lenfest Communications Inc [2000] FCA 628).

[22] Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson (at 124), the gross sum “can only be fixed broadly having regard to the information before the Court”; in Hadid v Lenfest Communications Inc (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”. The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson (at 123); Hadid v Lenfest Communications Inc (at [27])). The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available (Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported) per Clarke JA).”

10. The Court of Appeal (Beazley P, Meagher and Payne JJA) has recently re-affirmed the correctness of this approach in the context of an application under s 98(4) of the Civil Procedure Act in Bechara (t/as Bechara and Co) v Bates [2016] NSWCA 294 in the following passage:

“[12] The power to award a lump-sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at 742–723 [21]–[22]; Beach Petroleum NL v Johnson (No 2)(1995) 57 FCR 119 at 123.

[13] The power may also be exercised where a party’s conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod v New South Wales [2011] NSWCA 375 at [818] per Beazley JA (Giles and Whealy JJA agreeing).

[14] A “broad brush” approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1999] FCA 673 at 5 [16]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7].

[15] The courts have typically applied a discount in assessing costs on a gross sum basis:Hamod v New South Walesat [814].

. . .

[18] The Court is satisfied that the total costs of this litigation will become even more disproportionate if the costs are referred for assessment and a lump-sum costs order is not made. The reasoning inHamodv New South Wales at [816]–[817] is apposite.”

11. I am satisfied that the detail in the invoices themselves as well as the opinions and estimates given by Mr Sharpe in his affidavit provide sufficient material to determine an appropriate sum. For the reasons given in Webster v Super Smart Strategies Pty Ltd [2017] NSWSC 531, I am satisfied that the cross-claimants unnecessarily contributed to the costs of the proceedings both by filing cross-claims (which caused significant delay and added unwarranted complexity) which they decided ultimately not to pursue and by adopting unproductive, unmeritorious and inefficient forensic positions and tactics throughout the litigation.

12. The liquidation of the first cross-claimant and the bankruptcy of the second cross-claimant provide the basis for an inference that it is unlikely that the costs orders, much less the judgment sums ordered in favour of the plaintiffs, will be paid in full. In these circumstances, it would be unjust to require Finn Foster to spend further money on a costs assessment.

13. I note that Finn Foster relied on an offer of compromise which was purported to be made in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) on 17 July 2015. On 26 April 2017 at the hearing of Finn Foster’s application for dismissal of the first cross-claim, Finn Foster did not press its application for indemnity costs. In these circumstances I do not consider that it would be appropriate for me to take into account the offer of compromise in determining the amount of the gross sum to be paid pursuant to the costs order. I confirm that I have not taken this into account in assessing the gross sum.

14. It is also of significance that the first and second cross-claimants have not sought to be heard against the applications for gross sum costs orders. In all the circumstances I am persuaded that it is appropriate to make gross sum costs orders as sought. While, as Mr Sharpe opined, the figure may be “within the range”, this is not determinative of what amount should be allowed on a gross sum costs order. The amount is usually reduced to take account of the “broad-brush” approach to be taken. I have rounded down the amount sought to a figure which is less than that claimed and which I consider to be reasonable in all the circumstances. The figure awarded is in the order of 75% of the total fees rendered.

15. I am satisfied that it is appropriate that the costs of these applications for gross sum costs orders ought follow the event.

Orders

16. I make the following orders:

1. In respect of the costs payable pursuant to order (1)(b) of the orders made on 4 May 2017, order the first and second cross-claimants, pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW), to pay to the first cross-defendant the amount of $200,000 within 28 days of the date of this order.

2. Order the first and second cross-claimants to pay the first cross-defendant’s costs of its application for a gross sum costs order.

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Decision last updated: 18 October 2017