WLD Practice Holdings Pty Limited v Sara Stockham

Case •

[2020] NSWSC 1354

•

08 October 2020

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: WLD Practice Holdings Pty Limited v Sara Stockham [2020] NSWSC 1354
Hearing dates: 21 September 2020
Decision date: 08 October 2020
Jurisdiction:Equity - Expedition List
Before: Sackar J
Decision:

See paras 73-74

Catchwords:

COSTS – Lump sum or gross costs orders – Whether lump sum costs order should be made – Appropriate discount to costs actually incurred – Where costs previously ordered to be paid forthwith

Legislation Cited:

Civil Procedure Act 2005 (NSW) s 98(4)

Evidence Act 1995 (NSW) s 136

Cases Cited:

Bechara (T/as Bechara and Co) v Bates [2016] NSWCA 294

Berry Rural Co Operative Society Ltd v Sepak Industries Pty Ltd (No 4) [2018] NSWSC 1902

Edward Ted Lakis and Anor v Michael Victor Lardis and Anor (No 3) [2018] NSWSC 1296

Fisher-Pollard by her tutor Fisher-Pollard v Fisher-Pollard [2018] NSWSC 807

Griffiths v TUI UK Ltd [2020] EWHC 2268 (QB) (20 August 2020)

Hamod v New South Wales [2011] NSWCA 375

Harrison v Schipp (2002) 54 NSWLR 738

In the matter of Beverage Freight Services Pty Ltd [2020] NSWSC 797

Kennedy v Cordia (Services) LLP [2016] 1WLR 597

Lawcover Insurance Pty Ltd v Muriniti and Newell [2018] NSWSC 558

Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705

Ross v Padget [2016] NSWSC 1851

Wilkie v Brown [2016] NSWCA 128

WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust v Sara Stockham and Anor [2020] NSWSC 395

WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust v Sara Stockham and Anor [2020] NSWSC 464

WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust v Sara Stockham and Anor [2020] NSWSC 576

Texts Cited:

n/a

Category:Costs
Parties: WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust (plaintiff)
Sara Stockham (first defendant)
Sara Stockham Pty Ltd (second defendant)
Representation:

Counsel:
C Bova SC, D Reynolds (plaintiff)
V Grey, Ms Castle (defendants)

Solicitors:
Russell Kennedy Aitken Lawyers (plaintiff)
Tony Gye Law (defendants)
File Number(s): 2020/72732

Judgment

  1. I gave judgment on 15 April 2020 as to whether I should stay an application for judicial advice brought by the plaintiffs (see [2020] NSWSC 395). The defendants failed in that application.

  2. On 29 April I gave judicial advice on a number of the questions posed (see [2020] NSWSC 464).

  3. On 15 May I gave judgment on the question of the costs of those two proceedings and I ordered that the defendants personally pay costs in both cases on an ordinary basis and that those costs be paid forthwith (see [2020] NSWSC 576). One reason I determined the costs of those matters at that point was the view I took that the two proceedings although separate were related. I also took the view that the issues raised were discrete and threshold.

  4. By Notice of Motion filed 21 July the plaintiff seeks a lump sum costs order in relation to those proceedings and a claim is also made for interest. The amount claimed is $66,235 or such other amount as the court may determine. The plaintiff also seeks the costs of this motion, but this for the time being has been deferred.

  5. The plaintiff relied upon five affidavits from the plaintiff’s solicitor, Mr Walter MacCallum dated 21 July, 31 July, 4 August, 7 August and 18 September 2020. In addition the plaintiff filed an expert report from a Mr Ross Nicholas, a legal costs expert and solicitor, dated 4 August 2020.

  6. The defendants filed an affidavit from their solicitor, Mr Clement Anthony Gye, dated 15 September 2020.

  7. No witness was cross examined but there were minor objections taken by both sides to aspects of the evidence to which I will briefly refer below.

The Legal Principles

  1. The Court has a discretion to order costs in a lump or gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW). Beazley P set out the principles relevant to the exercise of that discretion in Hamod v New South Wales [2011] NSWCA 375 at [813]-[820] (and again in Wilkie v Brown [2016] NSWCA 128 at [50]-[51]):

I have already set out the relevant provisions of s 98. The discretion thereby conferred upon the court is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Harrison & Anor v Schipp [2002] NSWCA 213; 54 NSWLR 738 per Giles JA at [21]-[22]. In Harrison v Schipp, Giles JA considered that the discretion in s 98(4) may be exercised where the assessment of costs would be protracted and expensive and, in particular, if it appeared that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment. However, his Honour stated, at [22]:

“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.”

See also Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported). The courts have typically applied a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW , LexisNexis, Sydney, 2005 to date, " Civil Procedure Act ", at [s 98.65]; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788; Idoport Pty Ltd v National Australia Bank Ltd; Lorenzato v Lorenzato & Anor (No 2) [2011] NSWSC 790 per Black J.

In Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; 135 ALR 160, von Doussa J noted that the specified gross sum costs procedure was particularly useful in complex cases, that the power must be exercised judicially and only after giving the parties an adequate opportunity to make submissions, and that before exercising the power the court should be confident that the approach taken to estimate costs is fair, logical and reasonable.

The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp ); 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: Ritchie's Uniform Civil Procedure NSW at [s 98.45].

The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.

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: Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261; Sony Entertainment (Aust) Ltd v Smith; Microsoft v Jiang (2003) 58 IPR 445; [2003] FCA 101; Ritchie's Uniform Civil Procedure NSW at [s 98.60]).

The assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing: Smoothpool v Pickering [2001] SASC 131. In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: Harrison v Schipp at 743; Hadid v Lenfest Communications Inc at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5; [1999] FCA 673.

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): Beach Petroleum NL v Johnson (No 2); Leary v Leary; Harrison v Schipp at 743; Sparnon v Apand Pty Ltd (FCA, 4 March 1998, unreported). The approach taken to estimate the costs to be ordered must be logical, fair and reasonable: Beach Petroleum NL v Johnson at 164-165; Hadid v Lenfest Communications Inc at [27]; Harrison v Schipp at 743. 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: Leary v Leary at WLR 76 per Purchas LJ; Beach Petroleum NL v Johnson (No 2) at 123; Auspine Ltd v Australian Newsprint Mills Ltd at 164-165.

  1. I have said previously that finality to litigation is essential in everyone’s interest, and that in many cases that factor alone will weigh heavily on whether a Court should exercise discretion to order a lump sum costs order (see Edward Ted Lakis and Anor v Michael Victor Lardis and Anor (No 3) [2018] NSWSC 1296 at [57]; Lawcover Insurance Pty Ltd v Muriniti and Newell [2018] NSWSC 558 at [10]).

  2. In cases where a lump sum costs order is appropriate, the Court takes a “broad brush” approach to determining the lump sum (Harrison v Schipp (2002) 54 NSWLR 738 at [22] (Giles JA)). As the Court of Appeal (Beazley P, Meagher and Payne JJA) said in Bechara (T/as Bechara and Co) v Bates [2016] NSWCA 294 at [14], “[t]o require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order.”

  3. I have commented previously that experience, I think, has shown that a discount of 10-30% is typically appropriate (see Ross v Padget [2016] NSWSC 1851 at [16] and [21]; Fisher-Pollard by her tutor Fisher-Pollard v Fisher-Pollard [2018] NSWSC 807 at [38]). Stevenson J adopted this approach in Berry Rural Co Operative Society Ltd v Sepak Industries Pty Ltd (No 4) [2018] NSWSC 1902 at [6]. However, the appropriate order in each case will turn upon the evidence (Hamod at [819]-[820]).

The Evidence

  1. Mr MacCallum in his first affidavit (21 July) stated that he was admitted as a solicitor on 9 October 1998 and has practised as a commercial litigator since then. He is a partner of his firm.

  2. In that affidavit he attached the client services agreement between his firm and the plaintiff dated 18 February 2020. As the scope of the work makes clear it was in relation to an application for judicial advice where it was assumed at least initially the defendant would not contest such application.

  3. In the balance of the affidavit he set out the hourly rates for himself and counsel. Attached were costs agreements for Mr Bova SC and Mr Reynolds. In the case of Mr Bova the retainer agreement is dated 28 June 2019 and it may be inferred at that point the retainer was broader in scope. Mr Bova was appointed senior counsel in late 2019 and Mr Reynolds was it seems then retained on 27 February 2020.

  4. Mr MacCallum charged $600 per hour and his assistant, a Mr Denina, charged $455 per hour. A paralegal employed by Mr MacCallum, Ms Kailee Shurmer, was charged out at $255 per hour. Mr Bova’s hourly rate was $550 per hour and Mr Reynolds $250 ([12]-[15]).

  5. Mr MacCallum expressed the view that the hourly rates charged by counsel are, based on his experience and knowledge, reasonable in the circumstances ([17]).

  6. Three invoices were rendered by his firm for 31 March, 28 April and 29 May 2020.

  7. The first of those invoices covers the period from 17 February to 31 March and totals $20,254 and involved 35.10 billed hours. Mr Bova’s account covers the period from 4 March to 30 March 2020 and totals $11,733.32 (excluding GST) at his hourly rate. Mr Reynolds on the other hand first charged for work on 5 March but he did not render his account until 7 April which covered the period from 5 March to 3 April and totals $13,625 (excluding GST). Mr Bova sent another account on 14 April for $4,950 (again excluding GST) covering the period 31 March to 7 April.

  8. The invoice from Mr MacCallum’s firm of 28 April is for $23,595 and was for 37.10 billable hours. His invoice of 29 May was for $14,400 for 24.70 billable hours. In the meantime Mr Bova sent another account on 27 May for $5,912.50 (excluding GST) for work covering the period 14 April to 8 May. Mr Reynolds sent an account on 15 May for $4,000 covering the period 15 April to 8 May.

  9. In this affidavit Mr MacCallum made a number of adjustments for incorrectly charged hourly rates and other items explained to ensure he only charged for the two matters which had been heard, excluding items of work referable, for example, to the Cross Summons ([23]). At [24] he set out in tabular form his calculations based on the adjustments.

  10. He stated at [25] that as the plaintiff is able to claim GST input tax credits the plaintiff would not be claiming the GST component of its costs. At this stage he made a total claim for $88,317.28 (excluding GST but including counsels’ fees).

  11. In his affidavit of 31 July he sought to explain further adjustments relating to certain notices issued by the defendants for which fees were no longer claimed and that he had omitted an invoice for Mr Reynolds of 5 March. He made adjustments accordingly. This had the effect of reducing his firm’s and counsels’ fees to $84,954.78 (excluding GST but including counsels’ fees). He again attached invoices identifying the particular adjustments.

  12. In his 4 August affidavit he again made adjustments due to some miscalculations bringing the total to $84,892 (again excluding GST but including counsels’ fees).

  13. On 4 August Mr Nicholas prepared his expert report. He was asked (on 24 July), on a short set of assumptions, three questions. First, what costs and time would usually be involved if the plaintiff’s costs assessment was sent to an assessment? Next, what amount would the plaintiff recover, and last, what interest would be claimable? He was admitted as a solicitor in 1983 and practised privately for five years. He has however ever since been involved as a legal costs consultant. He has given evidence on numerous occasions on costs matters and lectures in the topic at the College of Law.

  14. His view on the first question was $12,000 to $18,000. He also thought it could take between 7.5 and 11.5 months.

  15. He was provided with access to the correspondence files and certain documents, including the then three affidavits and attachments of Mr MacCallum, which included the relevant invoices and costs agreements.

  16. As examples in [4.9] and [4.18] he clearly brought to bear his experience of the legal market and profession and the general range of fees in such circumstances. He also thought some work should have been delegated to lower charging earners ([4.12]).

  17. He also reviewed and sampled the solicitors’ tax invoices in conjunction with the solicitors’ file and as a result concluded that there would likely be a reduction of 15% of the time charged as not being relevant to the litigation ([4.13]). I should note in passing objection was taken to certain aspects of Mr Nicholas’ report, including as an example this paragraph ([4.13]) as not sufficiently explaining his reasoning process. I overruled the objections for several reasons. First, costs assessments in my view do to some extent turn on objective materials, for example, what the issues are in the litigation. But it is not an exact science and impressions, instinct, and of course professional experience, often play a very significant role in such an assessment. In many such applications no expert evidence is called at all and the trial judge along with submissions from counsel and with the benefit of invoices for professional services often determines in a broad brush way what is fair and reasonable. Objections such as those raised here go more appropriately to weight, which was my view here (see discussion of this general topic of expert evidence in Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; Kennedy v Cordia (Services) LLP [2016] 1 WLR 597 at [48]; for a recent discussion see Griffiths v TUI UK Ltd [2020] EWHC 2268 (QB) (20 August 2020) at [29] and onwards).

  18. Mr Nicholas thought (after adjustment) about 80% of the costs and disbursements would likely be recovered ([4.23]).

  19. He then expressed his view on the amount of interest he thought would be recovered, namely $1127.30 ([5.1]-[5.2]). He thought $69,168.09 would be recovered in total.

  20. Mr MacCallum prepared another affidavit of 7 August. That affidavit attaches an ASIC search and the fact that he has now been informed by Dr Williams that the plaintiff is not registered for GST. That leads to the plaintiff claiming that GST should be added to the total. Hence a new total of $92,973.01. Mr Nicholas performed the calculation and set out the effect of that in an email to Mr MacCallum of 7 August. Mr Nicholas’ revised estimate as to the total amount likely to be recovered on assessment was $75,670.06.

  21. Mr MacCallum’s final affidavit was dated 18 September. It was filed in answer to Mr Gye’s affidavit. He dealt with the criticisms (detailed below) of the source documents used by Mr MacCallum for the purposes of his calculations. Mr MacCallum annexed an email from the accountant for the plaintiff and its subsidiaries, Mr Ma, of 18 September in which Mr Ma expressed the view that Mr Gye’s views on GST are incorrect.

  22. The only evidence for the defendant was that of Mr Gye in an affidavit of 15 September. Objection was taken to a portion of that affidavit. In particular [13] and [14] in which he expresses views about GST. I allowed the paragraphs pursuant to s 136 of the Evidence Act 1995 (NSW), on the basis of his conclusion or belief only, but not as that of an expert.

  23. Mr Gye, a solicitor of 40 years standing and he stated significant experience in costs disputes, was critical of the documents which Mr MacCallum relied upon for the purposes of his calculations. He said they were deficient in that they did not provide adequate detail and that a costs assessor would be unable to make a proper assessment as a result ([9]). Indeed he went as far as to suggest the “costs” are largely devoid of detail ([11]).

  24. With the benefit of a selection of financial records of the plaintiff he then went on to assert the plaintiff is arguably insolvent. This assertion was developed in argument as going to the question of whether the Court should entertain a lump sum costs order.

The Parties’ Submissions

The Plaintiff’s Submissions

  1. The plaintiff submits that it is in everyone’s interests that the costs of the Summons be finalised rather than contested through a protracted and expensive costs assessment process. As noted above, the plaintiff’s expert Mr Nicholas opined that a costs assessment could cost $12,000 to $18,000 and take up to 11.5 months. The plaintiff submits quantum is an issue, and given the small amount of costs on the Summons overall (approximately $85,000) and the amount claimed (approximately $75,000), it is appropriate to have those costs quantified now on a lump sum basis.

  2. The plaintiff further submits that resolving the issue of costs on the Summons in an expeditious way is consistent with my previous decision where I ordered costs should be payable forthwith on the basis that the issues so far determined are discrete and threshold and this litigation is far from over ([2020] NSWSC 576 at [26]).

  1. In terms of the amount that should be awarded, the plaintiff contended in written submissions and at the hearing that it should be paid $75,670.06, which is Mr Nicholas’s revised estimate. The plaintiff relies on Mr Nicholas’s report and submits it is “methodical and robust… contains thorough reasoning … [and] makes appropriate allowances and deductions as against the actual costs paid.” The total actual costs incurred by the plaintiff were $93,381.51 (inclusive of GST). The plaintiff submits that the $75,670.06 estimate sits right in the middle of the range of what would be awarded if a discount of 10-30% was applied and therefore accords with what judicial experience would otherwise commend.

The Defendants’ Submissions and Plaintiff’s Responses

  1. The defendants raised several objections to the plaintiff’s application to which the plaintiff responded in turn.

  2. First, the defendants submit that while I have given a judgment on costs no order has been entered. They submit the scope of the costs allowed is therefore unclear and it is not appropriate for a lump sum costs order to be made. They submit there is a difference between the parties as to whether my costs judgment covers all of the costs of the Summons to date or only the costs of the issues of my 15 April and 29 April judgments. The defendants submit my costs judgment only covers those issues but the plaintiff appears to claim their costs of the proceedings generally. They also submit there are numerous items claimed by the plaintiff which may relate to the defendants’ Cross-Summons but have not been excluded.

  3. In response, the plaintiff submits the lack of formal costs order appears to be an oversight and an order can now be made fixing those costs, alternatively, the oversight is a reason to make an order now. It submits no power is necessary but to the extent one is sought to be relied upon UCPR 36.17 (the slip rule) is available. In response to the defendants’ submission regarding the scope of my costs judgment, the plaintiff submits that my first (15 April) and second (29 April) judgments jointly constitute the whole controversy that arose on the Summons, which has been fully and finally resolved, and thus those judgments cover the whole universe of costs incurred on the Summons. It submits there is nothing in my costs judgment to suggest some category of costs were to be immunised, and the defendants do not attempt to define what that category should be.

  4. Next, the defendants submit that the costs orders are interlocutory and contend that “a lump sum order for costs will not ordinarily be made in respect of an interlocutory costs (sic) but in appropriate cases can be, where the costs are discrete from the general costs of the proceedings: In the matter of Beverage Freight Services Pty Ltd [2020] NSWSC 797.” Although, Ms Castles for the defendants did accept the characterisation of my costs judgment as final during the course of the hearing (T8.16-17).

  5. The plaintiff submits the costs were not interlocutory; rather, the costs orders followed the determination of the whole of the relief sought on the Summons and followed a final judgment. It submits the fact a party chooses to file a Cross-Summons the day before delivery of a judgment granting final relief does not convert it to a judgment delivering interlocutory relief only.

  6. The defendants submit that due to the way in which the matter has run to date, and in particular the bifurcation of the plaintiff’s case in relation to the “Bad Leaver” issues, which are yet to be determined, the final order for costs may affect what is recoverable under the interlocutory order. Here, the defendants submit that many items claimed by the plaintiff were incurred in the pursuit of the separately determined questions as well as the plaintiff’s fundamental assertion that Sarstock was a “Bad Leaver” but there has been no attempt to apportion “common costs”, which is ideally suited to the costs assessment process.

  7. The plaintiff responds that whether Dr Sarstock was a “Bad Leaver” was not an issue that fell to be determined in order to obtain the judicial advice sought; that issue was hived off for another day (if any) and the plaintiff addressed no argument on the question. The plaintiff submits a review of the itemised invoices demonstrates that the whole of the plaintiff’s efforts were directed to the issues that were resolved. The plaintiff further submits the defendants have not included any prayer referable to the Bad Leaver issue in their proposed Amended Summons and the issue appears to have died.

  8. Next, the defendants submit there is inadequate evidence before the Court on which to determine a lump sum. In particular, they submit that each of Mr MacCallum’s subsequent affidavits either corrected or altered the claim made by the evidence of previous affidavits, demonstrating a lack of care and a likelihood that work extraneous to the proceedings was undertaken (and included in the amount claimed by the plaintiff). They also submit there are in effect anomalies in the names of clients to whom Mr MacCallum, Mr Bova SC and Mr Reynolds have issued costs agreements and/or invoices. They submit any work done for Oorang Pty Ltd and Scott Williams should be excluded. They further submit that there is a lack of particularity in the invoices before they Court.

  9. In relation to the corrections made by Mr MacCallum, the plaintiff submits the fact those corrections were made, and that many of the corrections decreased the costs sought, suggests they were made to ensure the greatest accuracy possible in the materials before the Court. The plaintiff also submits that the defendants do not suggest there are any specific errors in Mr MacCallum’s evidence; rather, they simply point to the fact of past corrections and ask the Court to infer there must be more errors. As to the alleged anomalies in the names of the parties to the costs agreements, the plaintiff submits that says nothing about who incurred the costs. The plaintiff Trustee was a party to the proceedings and all the items in the various invoices issued in respect of the Summons relate to work done in that connection. The plaintiff submits that Mr Reynolds’ costs agreement is with Russell Kennedy Aitken Lawyers and makes clear at A.2 that the ultimate client was the plaintiff Trustee. Mr Bova SC’s costs agreement is also with Russell Kennedy Aitken Lawyers and Mr MacCallum’s invoices are all clearly issued to the plaintiff Trustee alone.

  10. The defendants assert it is likely that work outside of the proceedings was being done in the relevant period on the basis of the number of hours charged.

  11. The plaintiff submits there is no basis for this speculation and the defendants have not put on any expert evidence and therefore it is not open to them to submit the time spent was excessive. The plaintiff further submits that the defendants’ submissions, drafted by newly retained counsel, overlook what I previously described as the “hard fought way in which the proceedings have been conducted to do” (see [2020] NSWSC 576 at [21]) and that it was the defendants’ conduct that made the proceedings so time consuming and costly.

  12. The defendants also submit that it is not reasonable to have two counsel in proceedings of this nature and therefore Mr Reynolds fees should not be allowed or significantly reduced. They submit the total hours spent were excessive and should be reduced.

  13. In response, the plaintiff submits again that the defendants have adduced no expert evidence. It also submits that at the time of the Summons Mr Reynolds was a reader whose rates were on the lower end of the scale for junior counsel. It submits there is nothing unreasonable about an arrangement where Mr Bova, who took silk before the Summons was filed, would work with a low cost junior; the arrangement is likely to produce cost savings. It also submits that it is entirely reasonable for the party seeking to save his business to engage a team of two counsel.

  14. Next, the defendants object to the claim for GST on the basis that if GST is paid by the defendants to the plaintiff and then GST is claimed by an associated entity (which the defendants do not specify but is likely intended to mean the plaintiff’s trading subsidiaries), GST will be both claimed and received, resulting in a profit on GST and therefore offend the “indemnity” rule.

  15. The plaintiff responds that this argument is speculation with no evidentiary basis, and that the email from the accountant annexed to Mr MacCallum’s 18 September affidavit (see above) demonstrates the claim is untrue.

  16. The defendants further submit that I should decline to determine a lump sum because the plaintiff appears insolvent and therefore any costs ordered against them in the future are unlikely to be recoverable. Alternatively, the defendants submit the payment of any lump sum costs order should be stayed until further order, on the basis of the solvency concerns which arise on the evidence, noting that interlocutory costs orders do not become payable until the conclusion of the proceedings (UCPR 42.7(2)). The defendants submit there is no evidence that the plaintiff has paid any of the invoices and that an inference that the lump sum costs order is being sought to fund the litigation is open.

  17. The plaintiff responds that there is no basis to assert insolvency. It further submits that the assumption that the defendants will have future costs orders made in their favour should not be made nor erected as a barrier to the plaintiff being paid costs. The plaintiff submits that the submission by the defendants that if a gross sum costs order is made payment should be stayed flies directly in the face of my previous decision that the plaintiff’s costs should be payable forthwith and wrongly assumes the costs are interlocutory.

Consideration

  1. The defendant opposed a lump sum determination. It put forward numerous reasons.

  2. In my judgment of 15 May I ordered that the costs be paid forthwith. There are at least three ways for that to occur. First, an agreement as to quantum. In this case that is at the moment not possible given the general attitude taken by the parties to the litigation. The second is for a traditional costs assessment to take place. On the evidence of the expert called by the plaintiff, Mr Nicholas, the time for such an assessment would range from 7.5 to 11.5 months and cost between $12,000 and $18,000. The other alternative is a lump sum determination.

  3. In my view I regard the amount of time and cost to be incurred in the event of a traditional assessment to be entirely disproportionate to the amount ultimately in issue. Therefore in my view a lump sum costs assessment is the more appropriate course if adequate material is before the court.

  4. I gave both relevant judgments and I have determined the appropriate order for costs. I have affidavits from the solicitor for the plaintiff annexing all relevant invoices. I have an expert costs consultant report from the plaintiff and I have an affidavit from the defendant’s solicitor. In my view that is more than adequate and subject to the other arguments of the defendant I am in my view amply armed with relevant materials. I also have the benefit of experienced counsel who appeared at all stages of the proceedings (with the exception of Ms Castle who appeared for the defendants on the costs questions only). I am satisfied that I should proceed in the interests of justice with a lump sum assessment.

  5. The first argument put forward was the uncertain scope of the relevant costs order. That is a point without in my view any substance. No order had been entered on JusticeLink following my 15 May judgment. That was immediately rectified and I facilitated the entry of an appropriate order to make clear that the costs were entirely confined to the two points I had previously decided.

  6. Next the submission was made that the orders were interlocutory and that it was not usual to make orders for costs orders at this stage. Again I am not satisfied there is any substance in the argument. The two points so far argued are in my view interrelated but discrete. No appeal has been lodged from either decision. Those parts of the proceedings have been finalised. As a matter of discretion and in the interests of finality it is clearly desirable that the final aspect of those matters be brought to an end.

  7. Further it was submitted that an aspect of the judicial advice matter, namely whether defendant is a “Bad Leaver”, is yet to be determined and therefore costs should not be determined at this stage. Again I do not regard the matter as one of substance. On any view that aspect of the case was carved out and played no part in the decision.

  8. The defendants next submitted that there is inadequate evidence before the court to determine a lump sum. I do not agree. I have already outlined the materials before the court. Here unlike many lump sum costs assessments the court has an expert report at the least from the plaintiff.

  9. Mr MacCallum’s affidavits came in for particular criticism because of his corrections, and as a result alterations in the amount claimed, as demonstrating a lack of care. Further it was submitted that there is a likelihood that work extraneous to the proceedings had been undertaken. I cannot accept that these criticisms are of any real weight. After all Mr MacCallum in making corrections has in my mind demonstrated that he has taken considerable care to ensure that only that which appropriately relates to the relevant issues is identified and charged accordingly. The defendants pointed to anomalies in the names of clients to whom Mr Bova SC and/or Mr Reynolds issued their invoices. I presume this is to somehow insinuate that they were charging for work unrelated to the issues before the court. In particular the defendants submitted the work for Oorang Pty Ltd and Scott Williams should be excluded. The simple answer to these submissions is that the Trustee was a party to the proceedings and the invoices in any event make clear what was done in relation to the Summons. Again I regard the arguments as lacking substance.

  10. It should be noted that the defendants did not seek access to any materials or files beyond the invoices and other documents disclosed in the affidavits. They did not seek to cross examine Mr MacCallum nor the expert, Mr Nicholas. They did not seek to file their own expert report.

  11. I have already observed that these proceedings have been hard fought. From the very outset the defendants have sought to agitate any number of issues. Indeed rightly or wrongly it is they who have broadened the dispute if I may say so.

  12. Further there was criticism of the fact that two counsel were briefed and it was asserted that junior counsel’s fees should be disallowed or reduced. First, the expert made no adverse comment about two counsel, nor was an opportunity taken to ask the expert about that matter. Even Mr Gye who is critical of certain aspects of the plaintiff’s position made no point about two counsel and from my point of view given some of the complexities that the case has thrown up (as an example, the question of whether a Trustee could ever agree not to apply for judicial advice) and the fact it has been given an accelerated time table make it entirely reasonable in my view that Mr Bova SC have a junior. I should without wishing to be unkind point out that the defendants briefed two counsel to argue the two separate motions recently before the court.

  13. The next point taken was that GST was not properly claimed. On that point the defendants put forward the lay opinion of Mr Gye. I describe it as such because he clearly is not an expert in GST and although a very experienced solicitor never sought to purport to embrace the Expert Code of Conduct which he clearly would have had great difficulty doing given his background and expertise.

  14. He expressed a view in his affidavit that while the plaintiff is a non-trading entity and therefore not registered for GST, its subsidiaries are trading entities and registered for GST, and therefore the plaintiff could debit the costs of these proceedings to its subsidiaries and claim GST input credits for GST paid on those costs ([13]). That view is rebutted by the plaintiff’s accountant, Mr Ma, in an email of 18 September 2020. Mr Ma states that the plaintiff and its subsidiaries are not part of a GST group and he is “not aware of any legislative instrument that allows for the GST charged on a supply that is made to one entity to be claimed in a different entity that is not part of a GST group”.

  15. Mr Gye’s view would appear to be based upon a factual misconception. His thesis was that if the defendants pay a sum to the plaintiff which incorporates an amount for GST and then the GST is claimed back by an associated entity of the plaintiff, then the plaintiff makes a windfall profit.

  16. Last, Mr Gye annexed certain financial information to his affidavit in order to support an argument that the plaintiff appears to be insolvent. As best I understand the argument, the court should not make a lump sum order because if the defendants are ultimately successful in the remainder of the litigation their costs would unlikely be recoverable. In the alternative the order should be stayed pending further order because of the possible insolvency of the plaintiff.

  17. There are a number of underlying assumptions in the above, all of which are either yet to be determined or have simply not been aired adequately or at all. I have ruled on costs and that they be paid forthwith. Further delay in finalising these aspects of the matter will in my mind serve no good purpose. There is no legitimate reason in my mind why the defendants should not do what I have ordered and I do not consider a stay as matter of discretion in all of the circumstances is warranted.

  18. The question therefore is what amount should be fixed by way of a lump sum. I have considered Mr MacCallum’s evidence and the invoices against my knowledge of the proceedings, including the issues and the manner in which the proceedings have been conducted. I am satisfied with Mr Nicholas’ recalculations and I am of the view GST should be added. Mr Nicholas calculated an ultimate figure of $75,670.06, applying a discount of approximately 20% (specifically, 18.97%) to the total costs actually incurred by the plaintiff ($93,381.51). However notwithstanding his evidence I consider a further 10% should be deducted from the ultimate figure calculated by Mr Nicholas to allow for contingencies and in line with the broad brush approach. I would therefore fix the sum of $68,103.05 ($75,670.06 x 90%) as the appropriate sum in these matters. I also agree that interest should be calculated and paid in accordance with the method proposed in the 21 July Notice of Motion.

  19. I would invite the parties to bring in short minutes to reflect these reasons and if needed I will also decide the costs of this motion.

Decision last updated: 08 October 2020

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