Young v Hones (No 3)
[2014] NSWSC 499
•01 May 2014
Supreme Court
New South Wales
Medium Neutral Citation: Young v Hones (No 3) [2014] NSWSC 499 Hearing dates: 12/12/2013,14/02/2014 (Written submissions) Decision date: 01 May 2014 Before: Garling J Decision: (1) Vacate Order 3 made on 27 September 2013 and all previous costs orders made in favour of each defendant.
(2) Order the plaintiff to pay the costs of the first and second defendants including reserved costs, in the sum of $190,000.
(3) Order the plaintiff to pay the costs of the third defendant, including reserved costs in the sum of $200,000.
(4) Order the plaintiff to pay the costs of the fourth and fifth defendants, including reserved costs, in the sum of $110,000.
(5) Order that pursuant to s 101(4) of the Civil Procedure Act 2005, the plaintiff pay interest on each of the sums specified in Orders 2, 3 and 4 on and from 1 July 2013.
(6) Order until further order, that Orders 2, 3 and 4 be stayed.
(7) Motions of each defendant of 4 November 2013, and 14 November 2013, and of the plaintiff of 14 November 2013, are otherwise dismissed.
(8) Order that the plaintiff and each defendant pay their own costs of the Motions of the defendant of 4 November 2013 and 14 November 2013, and of the plaintiff of 14 November 2013.
Catchwords: COSTS - indemnity costs; applications for - Calderbank letters; whether - unreasonable rejection - whether letters contained a real element of compromise - whether durations of offers were reasonable - COSTS - gross sum costs; applications for - Civil Procedure Act, s 98 - discretion to make a gross sum costs order - whether costs assessment process would be protracted and unduly complex - whether plaintiff would be able to discharge costs liability - whether order would achieve finality in proceedings - whether sufficient evidence to support application - whether in the interests of justice - COSTS - interest on costs orders; applications for - Civil Procedure Act, s 101 - whether would further the overriding purpose of the Civil Procedure Act Legislation Cited: Civil Procedure Act 2005
Legal Profession Act 2004
Uniform Civil Procedure Rules 2005Cases Cited: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1
Calderbank v Calderbank [1975] 3 LL ER 333; [1976] Fam 93
Hadid v Lenfest Communications Inc [2000] FCA 628
Hamod v State of NSW [2011] NSWCA 375
Hancock v Arnold (No 2) [2009] NSWCA 19
Harrison & Anor v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738
Hazeldene's Chicken Farm Pty Ltd v Victoria WorkCover Authority (No 2) [2005] VSC 298; (2005) 13 VR 435
Idoport Pty Ltd v National Australia Bank Ltd & Ors [2007] NSWSC 23
Leary v Leary [1987] 1 All ER 261
Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344
Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368
Savage v Australian Unity Fund Management Ltd [2011] NSWCA 270
The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; (2006) 67 NSWLR 706
Young v Hones [2013] NSWSC 580
Young v Hones (No.2) [2013] NSWSC 1429
Young v King [2004] NSWLEC 93
Young v King (No 4) [2012] NSWLEC 236Category: Interlocutory applications Parties: Margo Young (P)
Keith Brian Hones (D1)
Jason Hones (D2)
Ian Hemmings (D3)
Hughes Trueman Pty Ltd (D4)
Stephen Perrens (D5)Representation: Counsel:
R Newell (P)
J Kelly SC (D1 & D2)
D Miller SC / Ms Horvath (D3)
S Gray (D4 & D5)
Solicitors:
L C Muriniti & Associates (P)
Colin Biggers & Paisley (D1 & D2)
Moray & Agnew (D3)
Kennedys (D4 & D5)
File Number(s): 2010/41007
Judgment ON COSTS
On 27 September 2013, for the reasons which were then published, the proceedings brought by the plaintiff, Ms Margo Young, were dismissed: Young v Hones (No.2) [2013] NSWSC 1429 ("the principal judgment").
The following orders with respect to costs were made:
"(3) Plaintiff to pay the defendants' costs.
(4) Reserve liberty to the defendants to apply within 28 days for any different order as to costs."
Each of the defendants has by Notice of Motion, sought different orders for costs. Those orders for costs are opposed by the plaintiff.
After a hearing, including the taking of evidence that occurred on 12 December 2013, the parties have made further written submissions. The written submissions were made by the end of February 2014.
This judgment deals with the Motions brought by the defendants with respect to costs, and also a Motion brought by the plaintiff with respect to a stay of any order for costs.
The principal judgment was delivered on 27 September 2013. On 9 October 2013, the plaintiff, as appellant, filed and served a Notice of Intention to Appeal against the dismissal of the proceedings and the orders that were made.
An Application for Leave to Appeal and a Notice of Appeal have been filed and are fixed for concurrent hearing in May 2014.
Notices of Motion
On 4 November 2013, the first and second defendants, who were the partners of Hones Lawyers, filed a Notice of Motion in which they sought the following orders:
"(1) Vacate Order 3 made on 27 September 2013 insofar as it relates to the first and second defendant.
(2)The plaintiff pay the first and second defendants' costs:
(a) on an ordinary basis for the period up to 11 June 2013;
(b) on an indemnity basis from 12 June 2013.
(3) Pursuant to s 101(4) of the Civil Procedure Act 2005, the plaintiff pay interest on the first and second defendants' costs of the proceedings from the date such costs were paid.
(4) Pursuant to s 98 of the Civil Procedure Act 2005, the first and second defendants' costs be awarded in a gross lump sum fixed at $190,000."
On 4 November 2013, the third defendant, Mr Hemmings, a barrister, filed a Notice of Motion which sought the following relief:
"(1) Vary Order 3 made 27 September 2013 in the following terms:
(a) the defendant to pay the third defendant's costs of the proceedings on the ordinary basis for the period to 30 October 2010; and
(b) the plaintiff to pay the third defendant's costs of the proceedings on an indemnity basis for the period from 31 October 2010.
(2) Pursuant to s 101(4) of the Civil Procedure Act 2005, the plaintiff pay interest on the third defendant's costs of the proceedings from the date such costs were paid.
(3) Pursuant to s 98(4)(c) of the Civil Procedure Act 2005, the costs and interest the subject of Orders 1 and 2 above, are specified in the gross sum of $200,000."
On 14 November 2013, the fourth and fifth defendants, Hughes Trueman Pty Ltd and Mr Perrens, filed a Notice of Motion in which the following relief was sought:
"(1) Vary Order 3 made 27 September 2013 in the following terms:
(a) the plaintiff to pay the fourth and fifth defendants' costs of the proceedings on an ordinary basis;
(b) pursuant to s 98(4)(c) of the Civil Procedure Act 2005, the costs the subject of Order 1(a) above are specified in a gross sum of $110,289.41."
The Principal Judgment
The principal judgment to which the Motions relate was a judgment which heard and determined a number of identified separate questions in advance of all other questions in the proceedings.
Those questions concerned whether the defence of "advocate's immunity" was, insofar as the plaintiff's claim related to the first three defendants, the solicitors and barrister, a complete answer to the plaintiff's claim, or any part of it. The separate questions also asked whether the defence of "witness immunity" was a complete answer to the plaintiff's claim against the fourth and fifth defendants, who were consulting engineers retained by the plaintiff.
The principal judgment found that in respect of each of the defendants, the defence of either "advocate's immunity" or "witness immunity", was a complete defence to the whole of the claim. Accordingly, it followed from that conclusion that the proceedings should be dismissed.
The proceedings themselves were claims against the solicitors and barrister, and the consulting engineers, for negligence and breach of contract arising out of their conduct in proceedings in the Land and Environment Court of NSW which were ultimately determined on 19 February 2004: Young v King [2004] NSWLEC 93.
The Land and Environment Court proceedings were proceedings between the plaintiff, Ms Young, and her neighbours, Mr and Mrs King, which were intended to deal with building and drainage issues relating to the respective properties of Mr and Mrs King, and Ms Young in Forestville.
As the previous judgments in this matter show, Ms Young achieved what appeared to be a measure of success in the Land and Environment Court in 2004, when the first three defendants acted for her, but which she has since contended were resolved on terms most disadvantageous to her.
It is unnecessary for the purpose of dealing with these Motions, to set out in detail the factual issues which arose in the Land and Environment Court proceedings, nor the history of the present proceedings which can be found in Young v Hones [2013] NSWSC 580, a judgment delivered on 17 May 2013, and also in the principal judgment.
Further history can also be obtained in a judgment of Sheehan J in Young v King (No 4) [2012] NSWLEC 236.
These judgments extensively canvass and describe all of the principal issues which have arisen between the neighbours, Ms Young and Mr and Mrs King.
The earlier judgments in this Court describe adequately the facts, matters and circumstances surrounding the litigation which Ms Young has brought against her former lawyers, and the consulting engineers.
As the Notices of Motion deal with similar, but not identical, claims for special orders with respect to costs, it will be convenient to describe at the outset the legal principles which are applicable to awards of costs, awards of indemnity costs, and the circumstances in which it is appropriate for a court to make a gross sum costs order. Insofar as these legal principles are concerned, there is no reason to differentiate between any of the Notices of Motion.
Applicable Legal Principles
Section 98 of the Civil Procedure Act 2005, provides that:
"(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the Court; and
(b) the Court has full power to determine by whom, to whom and to what extent costs are to be paid; and
(c) the Court may order the costs are to be awarded on the ordinary basis or an indemnity basis.
...
(3)In particular, at any time before costs are referred for assessment, the Court may make an order to the effect that the parties to whom costs are to be paid is to be entitled to:
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs; or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount."
Part 42 of the Uniform Civil Procedure Rules 2005 ("UCPR") also deals with questions of costs. Rule 42.5 provides that if the Court orders the costs to be paid on an indemnity basis, then all costs are to be allowed other than those that have been unreasonably incurred, or appear to be of an unreasonable amount.
Of particular importance in this case are the provisions which relate to offers of compromise. They are to be found in Div 3 of Pt 42. Rule 42.15A is in the following form:
"42.15A Where offer not accepted and judgment no less favourable to defendant
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.
(2) Unless the court orders otherwise:
(a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
The provisions of s 98 of the Civil Procedure Act, which are set out above, demonstrate that the Court has an ample discretion to award costs which is not confined and which may be exercised whenever the circumstances warrant it: Harrison & Anor v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [21]-[22]. In particular, the power to make a gross sum order may be exercised where the assessment of costs would be protracted and expensive, and as well, if it appears 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, as Giles JA noted in Harrison at [22], the power to make a gross sum order should only be exercised if a court can do so fairly, and in particular, if the Court has sufficient confidence having regard to the materials available, that an appropriate sum can be reached.
When dealing with gross sum costs orders, in Hamod v State of NSW [2011] NSWCA 375, Beazley JA, with whom Giles and Whealy JJA agreed, said at [816]:
"The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act ..., suggest that 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 costs; and the capacity of the unsuccessful party to satisfy any costs liability ..."
The exercise of the power under s 98(4) of the Civil Procedure Act may be appropriate where the Court considers that it is desirable to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment. This may arise from the likely length and complexity of the assessment process, 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: see Hamod at [817].
In making a gross sum costs order, the Court is not required to undertake a detailed examination of the kind that would be appropriate to a taxation or a formal costs assessment: Harrison at [39]; Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (199p) 93 FCR 1 at [16], [49], [79] and [84; Hamod at [819].
The approach to a gross costs order must be, although an estimate, a process which is logical, fair and reasonable, and 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: Hamod at [820].
In exercising the power to award a gross sum for costs, the Court needs to be astute to prevent prejudice to the respondent on the one hand, by over-estimating the costs, and on the other hand, not to cause an injustice to the successful party by applying some form of failsafe discount on the costs estimate submitted: Leary v Leary [1987] 1 All ER 261 at 265; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]; Savage v Australian Unity Fund Management Ltd [2011] NSWCA 270 at [31]-[33]; Hamod at [794].
Insofar as the claims for indemnity costs are grounded in a notice of offer of compromise served in accordance with Pt 20 of the UCPR, then it is necessary that the notice comply with r 20.26 of the UCPR.
Further, the offer must be a real and genuine offer, if an order for indemnity costs is to be made: The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120 at [8]; (2006) 67 NSWLR 706 at [8]; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [25]-[33].
In a case such as the present, where the issue presented results in "all or nothing" outcome, an offer which is in substance an invitation to surrender, that is, to accept one or other of the "all or nothing" options, can but does not necessarily result in the successful triggering of the indemnity costs mechanisms under the UCPR. However, the position needs to be a clear and certain one.
As the Court of Appeal said in Hancock v Arnold (No 2) [2009] NSWCA 19 at [17]:
"No doubt there are cases where an offer permitting the other party to abandon its case without bearing responsibility for the offeror's costs may constitute a basis for indemnity costs, the offer not having been accepted. In other cases, a mere invitation to 'capitulation' may involve no real element of compromise: see Townsend v Townsend (No 2) [2001] NSWCA 145 at [5]. Whether there was a real element of compromise ... will be judged according to the circumstances of the particular case."
Where an offer is not made in accordance with the UCPR, but is an informal offer, made on a without prejudice basis, and is expressed to be made pursuant to Calderbank v Calderbank [1975] 3 LL ER 333;[1976] Fam 93, with the intention that it would be relied upon to support an order for indemnity costs if the offeror is successful ("a Calderbank offer"), the Court looks essentially at two questions:
(a) whether there was a genuine offer of compromise; and
(b) whether it was unreasonable for the offeree not to accept it.
See Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8].
In considering whether it was unreasonable for the offeree not to accept the offer, a number of considerations will be relevant. The first will be timing, that is, that the conduct of the offeree must be assessed at the time it was made, and not with the benefit of hindsight resulting from a known outcome. Other considerations include the stage of the proceedings at which the offer was made and received, the time allowed to the offeree to consider the offer; the extent of the compromise offered, the offeree's prospects of success, assessed at the date of the offer, the clarity with which the terms of the offer were expressed, and whether the offeree foreshadowed an application for indemnity costs in the event that the offer was not accepted. These are all considerations to which the Court may have regard. See Miwa at [12]; Hazeldene's Chicken Farm Pty Ltd v Victoria WorkCover Authority (No 2) [2005] VSC 8298; (2005) 13 VR 435.
Claim by First and Second Defendants
Indemnity Costs
On 12 June 2013, the solicitors for the first and second defendants sent to the solicitors for the plaintiff a letter by way of a Calderbank offer.
That letter first set out a background factual summary. It then included a number of paragraphs dealing with liability. Those paragraphs were in the following form:
"Liability
15. The plaintiff's claim is doomed to fail by way of, inter alia, advocate's immunity.
16. We refer to the principles laid down in D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 and Donnellan v Woodland [2012] NSWCA 433, specifically that advocate's immunity extends to solicitors acting in litigation into the solicitor's negligent conduct (negligence is not admitted by the defendants) falls within the scope of the immunity, namely, whether the work out of court leads to a decision affecting the conduct of the case in court [D'Orta Ekenaike at 90-91; Donnellan at 172].
17. We further refer you to the judgment of Garling J on 17 May 2013 in the current proceedings by your client against the defendants. At [149] his Honour expresses the view that 'It is not easy to see the basis upon which Mr Newell would be entitled, on behalf of Ms Young, to plead such causes of action with the reasonable expectation that thereby, the advocate's immunity would be avoided'. "
Having set out these views on liability, an offer was made in the following terms:
"Offer
18. For the purpose of resolving the dispute on a commercial basis, and in an attempt to limit future costs, our clients make the following offer to your client:
(a) a consent verdict and judgment to be entered for the first and second defendants.
19.The offer is conditional on the following terms:
(a) both the plaintiff and first and second defendants each bears their own costs."
The Offer was allowed to remain open for seven days. It also noted that if the Offer were not accepted, an application for indemnity costs would be made.
On 17 May 2013, which was a little under a month before the Offer was made, a judgment in the proceedings was delivered: Young v Hones [2013] NSWSC 580. That was a judgment which dealt with the question of whether or not the plaintiff ought have leave to file and serve a further Amended Statement of Claim. The Motion seeking to file a particular proposed Amended Statement of Claim was dismissed. Equally, Motions by the defendants for summary judgment were also dismissed. Directions had been given which required Ms Young as plaintiff to identify whether she intended to rely upon a pleading, which had been filed some time earlier, which was the extant pleading.
The arguments, which resulted in that judgment, did not include the proposition that the defendants were entitled to summary judgment on the basis that the plaintiff could not succeed against them, because each of them were entitled to immunity either as an advocate or as a witness.
In the absence of full submissions on the question, the May 2013 judgment did not express any concluded view on the submissions, which mentioned, but did not fully articulate, the question of advocate's immunity, nor did it consider the existence of the advocate's immunity as a basis for summary judgment. The judgment did include, however, these cautionary words:
"149. However, having regard to the reasoning of the High Court of Australia in D'Orta-Ekenaike and in particular, the plurality judgment at [31]-[36], in respect of lawyers, and [38]-[42] in respect of witnesses, it is not easy to see the basis upon which Mr Newell would be entitled, on behalf of Ms Young, to plead such causes of action with the reasonable expectation that thereby the advocates immunity would be avoided."
The defendants submit that it was unreasonable for the plaintiff not to accept their Calderbank offer. They point to the fact that, although the proceedings had been on foot for over three years, the plaintiff had had difficulty in pleading an acceptable Statement of Claim, and the fact of the first and second defendants raising the advocate's immunity defence had first been pleaded over two years prior to the making of the offer, and hence the vulnerability of the plaintiff's case to that defence was well known.
The defendants also submit that the extent of the compromise in respect of costs contained in the Calderbank offer was substantial, and that the plaintiff's claim was doomed to fail by reason of the advocate's immunity defence.
There is no doubt that the offer proposed by the first and second defendants, in effect, required complete capitulation with respect to the plaintiff's claim, but contained a reasonable element of compromise with respect to costs. That is because there had been significant interlocutory proceedings for which either the plaintiff had been ordered to pay costs or, alternatively, where costs had been reserved, and the issue of whom was to pay the costs remained open.
Whilst it is unnecessary to come to a firm conclusion as to whether, overall, this was a genuine offer of compromise, in the particular circumstances of this case, I would tend to the view that it was.
However, the real difficulty with the claim by the first and second defendants to indemnity costs is that I am wholly unpersuaded that a period of seven days was, in the circumstances, a reasonable period for the plaintiff to consider her position, which involved giving up her claim and consenting to judgment in favour of the first and second defendants.
It is necessary to recall that judgment was delivered by the Court on 17 May 2013. Further interlocutory steps needed to be taken as a consequence of that judgment. Insofar as the plaintiff was concerned, she was required by 1 June 2013, to identify whether she wished to proceed on the Statement of Claim filed on 11 November 2010, or whether she wished to propose a further amended statement of claim.
As well, the defendants had leave to file further Notices of Motion seeking that the Court deal with the advocate's immunity issue as a separate question.
As the decision of this Court in Young v Hones (No.2) [2013] NSWSC 1429 notes, on 5 July 2013, which was the first directions date after delivery of the judgment on 17 May 2013, the plaintiff's counsel indicated that his client wished to seek leave to file a further Amended Statement of Claim.
I infer from what the Court was told on 5 July 2013, having regard to the contents of that judgment, that the period between the delivery of the Court's judgment on 17 May 2013, and the directions hearing in July was occupied by consideration of the judgment and reasons of the Court, together with consideration being given to whether or not a further pleading ought be drafted, and, if so, whether leave to rely upon it ought be sought.
For the plaintiff, in the course of considering those matters and giving instructions with respect to those matters, to be required to respond to an offer of compromise which required complete capitulation on her part with respect to her claim, which had been on foot for some years, on the basis that she would bear her own costs of the proceedings, and to respond within seven days, was not reasonable. The period of time was far too short.
In those circumstances, I am unable to find that the plaintiff acted unreasonably in declining to accept the Calderbank offer, and so I am not persuaded that the Court should make an order for indemnity costs, in favour of the first and second defendants.
Gross Sum Costs Order
The evidence for the first and second defendants is that in defence of the proceedings, their solicitors had billed their client and been paid a sum a little over $194,000 for their fees. The disbursements which had been billed, not including counsel's fees, totalled a little under $14,000, and counsel's fees total a little over $67,000. In rounded terms, the total of all of the solicitor's costs and disbursements was $275,000.
The first and second defendants claimed a sum of $190,000 from the plaintiff by way of a gross sum costs order, which represented about 70 per cent of the total of the costs and disbursements.
As well, the first and second defendants pointed out that these figures did not include the costs of appearing on, and arguing, the Motion with which this judgment deals.
Ms Melissa Fenton, a solicitor acting for the first and second defendants, gave evidence that were a formal costs assessment to be undertaken, the process would be time consuming and costly. She said that assessments of costs took, commonly, between five and ten months to complete. The costs of such an assessment process was usually in the order of 7.5 to 12 per cent plus GST of the sum of costs allowed, so far as each party's expert costs consultants were concerned. She also deposed that, in her experience, where a Costs Assessor was awarding costs on the ordinary basis, typically, the Costs Assessor would award between 70 and 80 per cent of the actual costs incurred by the lawyers for their fees, and 100 per cent of disbursements.
Ms Fenton was cross-examined. I found her evidence to be logical and acceptable. In short, notwithstanding that counsel for the plaintiff sought to challenge her with respect to the recoverability and appropriateness of particular items, she maintained her position, which was that the total of costs set out in her evidence comprised everything which her client had expended in respect of the proceedings, and that the sum now claimed in the Motion provided a more than adequate discount to take account of the fact that costs were recoverable on a party/party basis and that there may be some items which were not recoverable at all.
It was made plain in the course of Ms Fenton's evidence, even though the Motion was not specific on this point, that it was intended by the claim of the first and second defendants for the gross sum costs order to include a sum sufficient to incorporate all previous costs orders which had been made in their favour.
The effect of the cross-examination was not to persuade me that Ms Fenton had overstated the position, nor that the first and second defendants were claiming an excessive amount. If anything, the effect of the cross-examination was to show that the discount which the first and second defendants had allowed on the total sums which had been claimed was, if anything, a generous one in favour of the plaintiff.
The evidence in support of the gross sum costs claim consists of the provision of all of the accounts rendered with respect to the legal services itemised to reflect by whom the services were provided, the charge levied for each service, what the service consisted of, and the requisite total. Although this is not identical to a bill of costs, which would be drawn up, it contains much of the same information, and can properly be regarded as more than adequate support for the sum claimed.
The plaintiff opposes the orders sought by the first and second defendants. She submits that the first and second defendants have failed to demonstrate any basis for a lump sum costs order, and she disputes that any assessment of costs would involve expense, delay or aggravation, and further disputes that she is unable to meet a costs order in any event.
Finally, the plaintiff submits that the evidence in support of the first and second defendant's claim does not provide a satisfactory basis to assess the costs. As well, the plaintiff submits that by approaching the question of the sums outstanding in this way, it is possible that non-compensable items will be concealed, such as issues relating to the provision of indemnity, or issues relating to conferring and deciding upon a common tactical approach amongst parties of similar interest.
Discernment
This litigation has been protracted and, to this stage, unduly complex. As the previous judgments of this Court show, the plaintiff has had significant difficulties in identifying the facts, matters and circumstances upon which she wishes to rely as constituting a cause of action against the first and second defendants, and has then had considerable difficulty in pleading that cause of action in a way which complies with the UCPR. As well, there have been a significant number of case management directions and appearances, and the plaintiff has often been in default of court orders with respect to the timely compliance with the Court's orders.
If the cross-examination of Ms Fenton, the solicitor for the defendants, is any indication, the likely objections to any bill of costs of the first and second defendants which would need to be dealt with on any assessment, will be characterised by generality, lack of focus, irrelevancies and a lack of understanding of the expense required to properly prepare a matter. I have no doubt that the assessment process will be protracted, likely to be characterised by the delays already seen in these proceedings, lack of timeliness on the part of the plaintiff, and undue complexity and irrelevance.
In those circumstances, it is in the interests of justice that a lump sum costs order be made so that the parties are not required to incur far greater expense than is necessary in all the circumstances.
Although the defendants have submitted that the plaintiff would be unlikely to be able to afford any costs order, the evidence is insufficient to enable me to draw such a conclusion positively. It is true that the plaintiff describes herself as a pensioner in her affidavit, and it is true that the only property which she owns, so far as the evidence reveals, is subject to a mortgage.
However, there is no reason to think that a sale of the property would not result in sufficient money being available to the defendants to remedy any costs order. I do not proceed to make a lump sum costs order on the basis of impecuniosity.
Finally, the submissions of the plaintiff about the lack of adequate evidence to support the claim made, are unpersuasive. As I have earlier said, if anything, the claim for costs by the first and second defendants is significantly understated.
There will be a gross sum costs order for $190,000 as the first and second defendants claim in their Motion.
Claim by the Third Defendant
Indemnity Costs
On 29 October 2010, the solicitors for the third defendant served on the plaintiff an Offer of Compromise pursuant to r 20.26 of the UCPR.
That Offer of Compromise provided for a verdict in favour of the third defendant, and an order that each of the plaintiff and the third defendant pay her and his own costs of the proceedings. The Offer was open for 28 days.
On 26 October 2010, the plaintiff filed a Notice of Motion seeking leave to file and serve an amended Statement of Claim. The third defendant had by that time provided to the plaintiff a draft Notice of Motion seeking to have the original Statement of Claim struck out.
Accompanying the Notice of Offer of Comprise was a lengthy letter of 29 October 2010, in which the solicitors for the third defendant set out their views as to the likely outcome of the proceedings. The basis for the contention that the Offer of Compromise ought be accepted, seems to have been encapsulated in the final paragraphs of the letter of 29 October 2010. Those paragraphs were in the following terms:
"21. With respect, we fail to see any complexity in the matters beyond that created by your client since 2004. Your client has been contemplating legal proceedings against our client since February 2005. She has had enough time to work out or address any 'complexity' in her case, and to plead it properly.
22. Having regard to the above matters, it is our client's position that your client's proceedings against him are vexatious and an abuse of process, and that the Statement of Claim insofar as it makes allegations against our client, ought to be struck out, or alternatively, dismissed."
On 23 March 2012, the solicitors for the third defendant made a further offer to resolve the proceedings. This offer was made without prejudice in accordance with Calderbank principles.
The letter of 23 March 2012 drew attention to the fact that, at that time, the interlocutory proceedings, relating to the Statement of Claim which the plaintiff proposed to file, were ongoing. It pointed to the fact that even if leave to replead were granted by the Court, the plaintiff would be ordered to pay the costs of the third defendant thrown away by virtue of the amendments. The letter went on to say:
"These costs would include the very substantial legal costs undertaken by Mr Hemmings legal advisers in considering the multitude of versions of the proposed amended Statement of Claim which have been circulated.
Moreover, there is an extremely strong likelihood that your client will be ordered to pay Mr Hemmings' costs of the motions, given that even if your client is finally allowed to replead, there has been overwhelming success on the defendant's part in the Motion.
If this outcome, which is the best possible outcome for your client, is achieved on the Motions, then her liability to Mr Hemmings for costs would likely be in the order of $80,000 - the amount which we estimate has been incurred in the consideration of the multiple proposed pleadings and in these Motions on behalf of Mr Hemmings.
Of course there are far worse potential outcomes than the Motion. If Mr Hemmings is entirely successful in his applications, then the entirety of the pleading will be struck out, no leave granted to replead, with the inevitable outcome that your client will be ordered to pay Mr Hemmings' costs of the entire proceedings. Mr Hemmings costs of the proceedings entirely are in the order of $130,000.
...
Accordingly, whichever the outcome of the Motions, your client will be significantly indebted to Mr Hemmings. This can be avoided if your client chooses to accept the offer which is made below."
The Calderbank offer was for a verdict in favour of the third defendant, all previous costs orders being vacated, and each of the plaintiff and third defendant paying their own costs. The letter, which was dated 23 March 2012, gave the plaintiff a little over a week to consider it, and accept it, because the offer made expired at 4pm on 2 April 2012.
Finally, on 24 May 2013, the solicitors for the third defendant made a further offer to the plaintiff to resolve the proceedings, but on the basis that there be a verdict for the third defendant and that the plaintiff pay the third defendant's costs of the proceedings as agreed in the sum of $5,000. The offer remained open for six days, and was made in accordance with the principles in Calderbank.
Relevantly, however, this letter contained the following:
"In light of the decision of the NSW Court of Appeal in Donnellan v Woodlands [2012] NSWCA 433, we consider we have very strong prospects of having the allegations against our client summarily dismissed on the basis of the advocate's immunity defence.
We are also confident that we will obtain an order for costs, either in respect of the proceedings in their entirety, or at least in respect of the Motions which were determined by Justice Garling. To date our client has expended in excess of $200,000 in his defence of these proceedings.
On two occasions previously our client has offered to resolve the proceedings on the basis of a verdict in his favour, with each of our client and the plaintiff to pay his and her costs of the proceedings. Neither of those offers met with a response."
Prima facie, having regard to the formal Offer of Compromise made in October 2010, by application of r 42.15A of the UCPR, the third defendant is entitled to an order for his costs on the ordinary basis up to and including 29 October 2010, and on an indemnity basis thereafter. The Court has a discretion to order otherwise, and the third defendant submits that there is no reason why the Court would so order.
The plaintiff submits that the Court would "otherwise order" for two reasons. First, the plaintiff submits that the offer is not an offer which contains any element of compromise, but rather requires total capitulation by her. Secondly, the plaintiff submits that, having regard to the fact that the offer related to the pleadings, as they then stood, and that there have been significant further pleadings since that time, it is inappropriate to regard the offer as relating to the final outcome of the principal judgment, and hence the proceedings as a whole, which involved entirely different pleadings.
The letter which was sent at the time the Notice of Offer of Compromise was served, relied upon the two-fold proposition namely, first, the pleading which was then in existence, was accepted by the plaintiff to be an inappropriate one and therefore would be likely to be struck out, and secondly, that the proceedings were vexatious and an abuse of process.
The contention that the proceedings were an abuse of process seems to relate to the delay in commencement of the proceedings, the failure to comply in a timely manner with Court directions, and the inadequacy of the pleadings. There is no mention in the letter of 29 October 2010, of any reliance by the third defendant upon the existence of advocate's immunity as being a complete answer to the proceedings. Additionally, the letter seems to rely upon a contention that no loss ensued by reason of the absence of Warringah Council from the original Land and Environment Court proceedings.
The only evidence about the extent of the costs and disbursements which existed at about the time the Notice of Offer of Compromise was served, is that contained in the two tax invoices dated 9 November 2010, and 15 November 2010, sent by the solicitors for the third defendant to the relevant professional indemnity insurer of their client. The total of those legal costs and disbursements, including GST, is a little over $18,000.
Accordingly, the compromise being offered amounted to a very modest one. That is to say, that the plaintiff ceased her litigation for which she would obtain the benefit of not having to pay the third defendant's party/party costs which, on any view, would have only been a proportion of the sum of $18,000.
The offer of compromise was made at a very early stage of the proceedings, the basis of it was said to be that the proceedings were an abuse of process and vexatious, no mention was made of advocate's immunity, and the compromise offered was modest and did not reflect a true compromise but, rather, an offer to capitulate.
In all of those circumstances, this is an appropriate matter in which the Court should "otherwise order", with the result that I am not prepared to order, that insofar as the third defendant relies upon the Offer of Compromise, the third defendant should have anything more than ordinary party/party costs.
The next two offers were made by letter. Both letters called up the principles in Calderbank. The principal issue is therefore whether the refusal by the plaintiff to accept either of the offers which were made was unreasonable. No evidence has been led by the plaintiff to address any aspect of these offers.
The first letter of March 2012 sent by the solicitors for the third defendant, which contained the first offer, drew attention to the fact that the history of the proceedings at that time, including the number of versions of the proposed Amended Statement of Claim which had been provided, indicated that there was an extremely strong likelihood that the third defendant would be entitled to his costs of their existing motions for amendment, and previous notices.
The letter outlined the fact that the costs of the entire proceedings incurred by the third defendant at that time, was $130,000, of which $80,000 was properly attributable to the various amendment motions.
The letter concluded by drawing attention to the offer, the benefit of which was said to be that the plaintiff would no longer be "significantly indebted" to the third defendant. The offer required a complete capitulation in favour of the third defendant. The offer allowed a period of a little over seven days to consider and respond to it.
There was a real element of compromise contained in this offer. The third defendant was offering to forego an amount that he estimated to be $80,000, in return for the plaintiff giving up her claim.
The provision of nine days or so was not an adequate time in the context of this case. It was too short.
It is to be recalled that at this stage of the proceedings, the plaintiff was attempting to formulate a pleadable claim and to articulate a cause of action, which the plaintiff's counsel, at least, regarded as very complex. The plaintiff's counsel had made a number of attempts to draft a pleading which complied with the UCPR, and which adequately set out the cause of action which it was sought to bring. Those attempts have largely been unsuccessful. The plaintiff's counsel contended in Court that the true factual construct of the matter was particularly complex, and all of those facts were not easily capable of discovery.
Whether or not that is actually so is beside the point. What is in issue is whether the plaintiff's conduct in failing to accept this offer is unreasonable. Although there is no direct evidence on this point, I have not the slightest doubt that the plaintiff's counsel would have informed his client just how complex he regarded the matter as being. Equally, I have no doubt that the plaintiff's counsel would have kept the plaintiff appraised of attempts being made by counsel to ascertain the true facts and circumstances of what occurred, and to produce a proper pleading.
In light of the fact that the claim was not, at that time, clearly formulated for the plaintiff, an offer to capitulate on the basis that costs which had already been incurred would be waived, was quite a complex offer to consider. The benefits and disadvantages of such an offer would have taken some time to weigh up, and I am not persuaded that in all of the circumstances the plaintiff's failure to accept the offer within the time available was unreasonable.
The third offer was made on 24 May 2013, shortly after the Court delivered its judgment of 17 May 2013. The offer, which drew attention to the provisions of Calderbank, was expressed to remain open until 5pm 30 May 2013.
The letter drew attention to the fact that, by this stage of the proceedings, the plaintiff did not have a statement of claim upon which she wished to proceed, because her counsel had indicated repeatedly that the November 2010 pleading was not one upon which she wished proceed. It also drew attention to the advocate's immunity contention being raised by the third defendant, and drew attention to the strength of the third defendant's case based upon that immunity.
It also drew attention to the fact that a considerable sum of money, $200,000, had been incurred with respect to costs. The offer required the plaintiff to give up on her claim, but did provide for the payment of a small sum of money for her costs, which also meant that she was not at risk of paying the third defendant's costs.
That offer was not a derisory offer. The third defendant was giving up a claim for costs which he had estimated to be very significant, and was offering to pay a small sum towards to the plaintiff's costs. The offer contains a real element of compromise.
The significance of the date and time upon which the offer expired, was that, in the judgment of 17 May 2013, the Court had made an order that by 1 June 2013, the plaintiff was to notify the defendants of her intention with respect to proceed on the Statement of Claim filed on 11 November 2010 (or some other pleading), which notification may well have given rise to further interlocutory proceedings.
Again, the real question is whether the plaintiff's conduct in declining to accept the offer was unreasonable. I am not satisfied that it was unreasonable. Whilst the offer was a proper offer, the period allowed of about six days was, in the circumstances where other activity was necessary in the course of the litigation, one which was simply too short.
The plaintiff, at that time, was confronted with deciding what to do about the course of her litigation. She had to decide whether she intended to proceed on a Statement of Claim which her counsel had already indicated to the Court, was not one which she wished to proceed upon. She had to contemplate whether the advocate's immunity would or would not succeed, and she had to be in a position to give instructions, if that was what she intended to do, to counsel to seek leave once again to file an amended pleading.
No doubt the third defendant thought that the making of an offer which expired immediately prior to a time at which the plaintiff had to make a decision about what pleading, if any, to proceed upon - was an appropriate time having regard to its own interests. The difficulty, which I see, is that the offer is made for a short period at a time when the plaintiff's attention was properly directed to considering matters arising from the judgment of 17 May 2013, and obtaining advice on those matters.
In all of the circumstances, I am not prepared to hold that the plaintiff's conduct was unreasonable. It follows that I am not prepared to order that the plaintiff pay the third defendant's costs on an indemnity basis.
Gross Sum
The third defendant also seeks a gross sum costs order, on a party/party basis, for an amount between about $190,000 and $215,000.
The evidence in support of this order, which I accept, is that the assessment process, which would take many, many months to complete, and would be at an additional cost to the third defendant of between $20,000 and $25,000. No doubt, the costs to the plaintiff would be something of the same order.
The files of the solicitors for the third defendant include 17 lever arch folders that consist of correspondence, the pleadings - including numerous versions of the plaintiff's Statements of Claim, the interlocutory applications and associated documentation.
I have little doubt that, having regard to the history of the matter, that the assessment of costs would be contentious, would take some period of time, and would be expensive. The third defendant has provided evidence of precisely what has been billed by its solicitors. However, that evidence does not include itemised bills of costs.
The plaintiff disputes that the assessment process would be unduly lengthy, or unduly contentious. She submits that there is no reason for the Court to conclude that she would be unable to meet any likely liability, and that in the circumstances, it is inappropriate for the Court to make a gross sum costs order.
The third defendant submits that the benefit of a gross sum costs order would be to achieve finality in a contentious and long-running piece of litigation, that the costs of the assessment are significant, and that there is more than sufficient evidence to support the claim for the costs. In other words, the third defendant submits that the Court can have sufficient confidence that it can fairly arrive at an appropriate sum on the materials available before it.
As I have earlier said, it is clear that the plaintiff, who describes herself as a pensioner, and who gives no evidence of her financial position, may not be able to afford from her income and readily available assets, to pay the costs of the third defendant. Equally, there is no evidence that her total asset position would not be sufficient to enable the costs order to be paid. In those circumstances, I do not have regard to the suggested likely inability of the plaintiff to pay the costs.
However, it does seem to me that having regard to the history of the matter, the nature of the litigation between the parties, the costs and expense of assessment, the adequacy of the material put before the Court on the question of the costs of the third defendant, and the benefit to be achieved by the Court making a gross sum costs order in terms of saving of time and saving of expense to the parties, that it is appropriate for a gross sum costs order to be made with respect to the costs of the third defendant.
Having regard to the evidence, I am satisfied that it is appropriate that there ought be a gross sum costs order in the sum of $200,000 with respect to the third defendant's costs.
Claim by the Fourth and Fifth Defendants
The fourth and fifth defendants do not make any claim for costs on any basis other than a party/party basis.
However, the fourth and fifth defendants do claim a gross sum costs order in the sum of $110,289.41.
The evidence in support of this claim is that it is likely that the fourth and fifth defendants would incur costs of about $20,000 for the costs assessment process. It is also the evidence that the fourth and fifth defendants expect that the process of costs assessment would take about 10 months from the service of a bill of costs in assessable form, and that the preparation and service of a bill of costs in assessable form would take about 12 weeks.
The evidence led by the fourth and fifth defendants also includes a detailed description of the work which was undertaken and copies of each of the accounts provided by the solicitors for the fourth and fifth defendants to their client.
I am satisfied, for the reasons that I have earlier expressed with respect to the first and second defendants, and the third defendant, that it is appropriate in the case of the fourth and fifth defendants, for a gross sum costs order to be made.
I am also satisfied that the Court has more than adequate information about the costs which are billed to enable it to come to a reasonable conclusion.
Having regard to the evidence, which I accept, of Ms Hartwell, which adopted the affidavit evidence of Ms Armstrong, and having regard to Ms Hartwell's undoubted experience and qualifications in assessing reasonable recovery, I am satisfied that a gross sum costs order in the sum of $110,000 ought be made.
Interest on Costs
In each Motion, there is a claim for interest on the sum ordered to be paid, except for the Motion of the fourth and fifth defendants. The claim is based upon the provisions of s 101(4) of the Civil Procedure Act.
That provision empowers the Court to order that interest is to be paid on any amount payable under an order for costs. Section 101 generally deals with interest which may be payable after judgment.
Ordinarily, if a typical costs assessment process is followed, the Costs Assessor will issue a Certificate which records the amount of costs assessed. That Certificate is, upon filing in a court of appropriate jurisdiction, registered as a judgment of that court, and thereby becomes enforceable. It would also carry interest under s 101 of the Civil Procedure Act until paid. See generally, Part 3.2, Division 11 of the Legal Profession Act 2004, and in particular s 368(5).
The claims for lump sum costs were calculated by reference to costs incurred, and which had been paid by the parties or their insurer, up to 12 December 2013. As the evidence made clear, none of the sums claimed included any amounts relating to their Motions.
Interest is payable on court judgments, not as a penalty, but rather to recompense the party to whom the money is owed, for the fact that they have paid money out themselves, but have wanted to be reimbursed those funds. Ordinarily, a payment of interest is ordered because it is just and equitable so to do.
Here, if the costs assessment process was followed, and a Certificate issued, then upon the Certificate becoming a judgment of the Court, the effect of s 101 of the Civil Procedure Act is that interest would be payable.
I see no reason why a similar approach ought not be followed where a gross sum costs order is made. However, here the claim is for interest from the date costs were actually paid. This form of order is specifically permitted by s 101(5) of the Civil Procedure Act.
However, as is clear from this judgment, I have not allowed costs on an indemnity basis, and I have allowed a proportion only of the costs incurred and paid. To make an order of the kind sought is likely to result in confusion and complexity in the calculation of the interest. For example, is interest calculated on all of the monies paid, from when they were paid, and then reduced by the percentage that, broadly, I have applied? Or does one calculate interest on monies paid until the lump sum ordered is reached? And why does one logically do so on the longer paid costs and not the most recent amounts? These issues confirm my view that making an order in the terms sought would not fulfil the overriding purpose of the Civil Procedure Act, which mandates the just, quick and cheap resolution of the real issues in the proceedings.
I accept that most of the costs were incurred well before 2013, particularly as the plaintiff produced a number of versions of the proposed pleadings. However, a significant proportion of the costs are likely to have been incurred between delivery of the judgment of the Court on 17 May 2013, and the delivery of the principal judgment.
It is necessary to adopt a somewhat broad brush approach to the determination of a date for the commencement of the running of interest. It seems to me that a fair date, taking into account the respective position of the parties to order that interest be calculated from 1 July 2013 in respect of the gross sum costs orders.
This date is, so it seems to me, a date by which each defendant will have incurred payments equal to, or in excess of the amount ordered to be paid by gross lump sum. A significant proportion of those costs will have been paid in the years prior to that date.
Some costs were undoubtedly incurred after that date, but they are likely to be a relatively small proportion of the overall costs incurred and paid. There is no element of profit or unearned benefit in fixing the date chosen by reason of those costs paid after that date. To the extent there is any unearned benefit, it is more than offset by the selection of a date that is, in respect of these payments, more than two years after they were paid.
Although the fourth and fifth defendants did not make any specific claims for interest, the submissions of the plaintiff opposing interest were generic, and not individualised to each defendant. There is no procedural unfairness to the plaintiff in making an order for interest on the costs claimed by the fourth and fifth defendants. It is in the interests of justice to do so.
Accordingly, in respect to each gross sum costs order, I will order that interest be payable pursuant to s 101 of the Civil Procedure Act from 1 July 2013.
Conclusion
In summary, I have declined to order indemnity costs in each case. But, in each case, I have found it appropriate to make a gross sum costs order in the various sums which I have earlier indicated, each of which will carry interest under s 101 of the Civil Procedure Act from 1 July 2013.
Plaintiff's Notice of Motion
On 14 November 2013, the plaintiff filed a Notice of Motion in which she sought a stay of any costs order pending the hearing and determination of her appeal.
Her application for leave to appeal, and her appeal, are listed for concurrent hearing in May 2014. I can see no prejudice to the defendants in the grant of a stay pending the outcome of the hearing and determination of that appeal.
Accordingly, the plaintiff's application for a stay on the gross sum costs order will be granted.
Costs of the Motions
Each party has had a measure of success. No party has been completely successful. It is appropriate that each party bear their own costs of the motions.
Orders
I make the following orders:
(1) Vacate Order 3 made on 27 September 2013 and all previous costs orders made in favour of each defendant.
(2) Order the plaintiff to pay the costs of the first and second defendants including reserved costs, in the sum of $190,000.
(3) Order the plaintiff to pay the costs of the third defendant, including reserved costs in the sum of $200,000.
(4) Order the plaintiff to pay the costs of the fourth and fifth defendants, including reserved costs, in the sum of $110,000.
(5) Order that pursuant to s 101(4) of the Civil Procedure Act 2005, the plaintiff pay interest on each of the sums specified in Orders 2, 3 and 4 on and from 1 July 2013.
(6) Order until further order, that Orders 2, 3 and 4 be stayed.
(7) Motions of each defendant of 4 November 2013, and 14 November 2013, and of the plaintiff of 14 November 2013, are otherwise dismissed.
(8) Order that the plaintiff and each defendant pay their own costs of the Motions of the defendant of 4 November 2013 and 14 November 2013, and of the plaintiff of 14 November 2013.
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Decision last updated: 06 May 2014
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