Abed v State of New South Wales & Ors

Judgment 1This motion on notice concerns costs. I have been observing now for nineteen years and six days that nothing excites the zeal, the ardour and the passion of members of the legal profession more than an argument about costs. 2To understand the nature of the relief sought, it is necessary to consider certain past events. The plaintiff and the second and third defendants used to live on a market garden property at Austral. The plaintiff is the former wife of the third defendant. She lived in one dwelling on that market garden property. The third defendant and his new wife, the second defendant, lived on a separate dwelling on that same property. 3In late 2006, the second defendant called the police and informed them that the plaintiff had broken into the dwelling house occupied by the second and third defendants, carrying a knife. That led to the plaintiff's being arrested and charged with a serious offence, namely breaking and entering the dwelling house of the second and third defendants with intent to commit a serious indictable offence, namely, murder. 4The plaintiff, as a result of the allegation made against her, was incarcerated for six months and seventeen days before the charge was withdrawn. The plaintiff has brought an action against the first defendant, the State of New South Wales, and the second and third defendants, alleging, as I understand it, wrongful arrest, false imprisonment and malicious prosecution. 5The substantive proceedings have been heard by my colleague, Judge Sorby, but his Honour has reserved his decision. In the meantime, on 6 July 2009 the Court then known as the Federal Magistrates Court, exercising jurisdiction under the Family Law Act 1975, ordered that the market garden property be sold with forty percent of the proceeds of sale being distributed to the plaintiff and thirty percent to each of the second and third defendants. 6These proceedings were commenced in 2009. On 12 November 2010, my colleague Judge Levy ordered that the second and third defendants to pay into Court their share of the proceeds of sale of the market garden property, namely, $437,154.54. 7On 12 April 2013, the second and third defendants filed a notice of motion seeking the release of $95,000 from the monies paid into Court to pay for the second and third defendants' costs and disbursements in defending this action. That relief was granted by my colleague Judge Balla on 3 May 2013. 8The hearing of the substantive proceedings commenced before Judge Sorby on 13 May 2013. The hearing proceeded over eleven days but the final day, the twelfth day, occurred on 21 June 2013. In the interim, the second and third defendants filed a second notice of motion seeking the release of an additional $45,000 for further costs and disbursements incurred in defending the proceedings. That motion came on for hearing before my colleague Judge Lakatos on 20 June 2013. The transcript of proceedings before his Honour is before me as exhibit 4-4. 9As I understand it, his Honour dismissed the notice of motion mainly on the basis that the application was "premature" in that the plaintiff was relying on an estimate of the costs when the costs had actually been incurred but not formally assessed. 10The second and third defendants then, on 12 July 2013, filed a further notice of motion again seeking that a sum of $45,000 be released from the funds held on trust by the Registrar in order that outstanding costs and disbursements of the second and third defendants in defending the proceedings could be paid. It is that notice of motion which is before me. 11There are number of legal principles to be considered. The first authority to which I have been referred is Frigo v Culhaci [1998] NSWCA 88. That case concerned a granting of a Mareva injunction against the defendants in those proceedings. The joint judgment of Mason P, Sheller JA and Sheppard AJA, made the point that provision should be made for the defendant to have access to his or her own assets for living expenses and payment of debts and legal expenses. Their Honours pointed out that ideally such a provision should be included in the injunction from the outset. If that had not been done, it should be done at the earliest appropriate time. Their Honours relied on Clark Equipment Credit of Australia Limited v Como Factors Pty Limited (1988) 14 NSWLR 552, Glenwood Management Group Pty Limited v Mayo [1991] 2 VR 49 and Polly Peck International plc v Nadir (No.2) [1992] 4 All E.R. 769. 12I have also been referred to the decision of Neuberger J in Anglo-Eastern Trust Limited v Kermanshahchi [2002] EWHC 3152, a decision of the Chancery Division of the High Court of Justice. That case concerned a freezing order. His Honour said this: "7 It seems to me as a matter of principle, as a matter of the wording of the order, and in light of the authorities which I referred to last time, that the normal course in a case such as this, where a freezing order of a non-proprietary nature has been obtained in favour of the claimant, is to permit the defendant, without any express limitation, to spend a reasonable sum on his legal costs and, at least, in relation to the litigation which has given rise to the freezing order, without any substantial strings, save that the defendant's solicitors have to provide what is being called, in Halifax PLC v Chandler [2001] EWCA Civ 1752 para. 9, 'a self-certificate of their reasonable costs'. Such self-certification was adopted by Park J in that case, was not challenged on appeal, and appears to have been, at the very least, not disapproved of by the Court of Appeal. 8 It was the course adopted by Ferris J in Cala Crystal SA v Alborno, T.L.R. [Times Law Reports] 6th May 1994. In the Times Law Reports Ferris J is quoted a holding: 'Prima facie a defendant ought to be allowed to choose the legal representatives he thought both qualified to present his case and to pay them such ... charges as may be properly payable as a matter of contract ... As to future costs, the proper course is for the defendants to pay them at the expiration of seven days' notice in writing to the plaintiffs, thus giving them an opportunity for challenge. It would be wrong to give the plaintiffs the standing to require taxation or to attend upon such taxation ... A requirement for taxation would only be imposed in the event of the plaintiff seeking, in a proprietary claim, assets which had been used to meet these costs.' 9 In my view, it is important, as a matter of principle, to bear in mind that a freezing order in a non-proprietary case is merely to prevent dissipation of assets. It is not intended to give the claimants the special and privileged status of a secured creditor. They can only achieve that status after judgment, if they obtain a charging order absolute. It is certainly not normally even the indirect purpose of a freezing order to prevent a defendant from defending himself in the very proceedings in which the freezing order is made. 10 It is undesirable for the claimant or the court, in the course of hostile litigation, to take up time and to invade the relationship between the defendant and his solicitor, by enquiring about, or challenging, save where it is necessary, the costs that the defendant is incurring. It would be unfair on the defendant to put him in the position of having a solicitor who is looking over his shoulder and worrying all the time about how much is being spent. Furthermore, the solicitor is an officer of the court, and would know that the defendant can only be required to pay reasonable costs, and any such order made today will reflect that. Indeed, Mr Richard Slade of Bracher Rawlins, the defendant's solicitors, accepts that. 11 If a solicitor, acting for a defendant who is subject to a freezing order which only allows him to spend money on 'reasonable' legal costs, can be shown knowingly to have permitted his client to pay costs which were plainly not reasonable, then it seems to me that as a matter of principle the solicitor would probably be in contempt of court. It would have been a party, and knowingly a party, to an arrangement with his client which has put his client in breech of the court order." The most recent decision to which I have been referred is that of Barrett J in Westpac Banking Corporation v McArthur [2007] NSWSC 1347. Again, that case dealt with a freezing order. His Honour said this: "51 In relation to all these matters, it is necessary to remember that a freezing order of this kind is not meant to operate as a form of de facto security for any judgment that the plaintiff may ultimately recover. The sole concern is with reasonable measures to ensure that the processes of the court are not frustrated by a removal or dissipation of assets that will in the ordinary course be available to answer the judgment. 52 I shall come to the particular items in contention presently. First, it is appropriate to make some general observations. When it comes to specifying monetary limits for legal expenses and accountancy expenses, the court necessarily enters upon a difficult terrain. I note, in that respect, that the draft form of order suggested by the majority in Cardile v LED Builders Pty Limited (1997) 198 CLR 380 at p 410 does not contemplate any monetary limit. There is reference only to 'the reasonable legal expenses of defending these proceedings and any appeal therefrom' and 'their normal accountancy fees'. This, it seems to me, indicates the desirability of allowing expenditure on 'reasonable and proper' legal and accountancy expenses incurred and to be incurred by the person concerned. It would be wrong to think that a client subject to a freezing order and incurring such legal and accounting expenses will somehow be more profligate and less vigilant than a client not subject to such an order. The money is, after all, his own money and expenditure of it by way of payments to lawyers and accountants for services rendered cannot be seen as presenting some opportunity for indirect and improper dissipation in the face of the possibility of a future judgment. As a check, however, it is desirable that provision be made for what was called, in Halifax plc v Charlton [2001] EWCA Civ 1750, 'self-certification', that is periodic written certification by Mr McArthur's lawyers as to the amount of the reasonable and proper legal expenses incurred. The lawyers, as officers of the court, would have obvious responsibilities in that regard." 13The plaintiff summed up the first of her submissions thus, in Mr Del Monte's written submissions: "(a) The Application has inappropriately been brought at the conclusion of the matter and in circumstances in which the Plaintiff has good prospects in a claim against the Second and Third Defendants. The application ought to be dismissed, or at the very least stayed until judgment is handed down; (b) Alternatively, the Second and Third Defendants' legal costs, beyond the $95,000 already released, can not be determined to be reasonable, particularly in the context of the undisclosed 'oral lump sum agreements'. The application ought to be dismissed accordingly." The thrust of the first submission is essentially that the plaintiff, if successful, is likely to recover damages limited only by the jurisdictional limit of this Court. Indeed, it has been pointed out that the schedule of damages submitted to Judge Sorby assesses the plaintiff's damages at well beyond the jurisdictional limit of this Court. 14Mr Del Monte, therefore, says that the granting of the relief sought by the defendants would amount to a "preference", as that word is understood in bankruptcy law. The monies held by the Registrar in trust, the subject of the freezing order, are the only substantial assets of the second and third defendants and, if any judgment given against them exceeds the amount held by the Registrar on trust, it is possible and indeed probable, that the second and third defendants might apply for bankruptcy or indeed be bankrupted at the suit of either the current plaintiff or perhaps the first defendant if the State's cross-claim against the second and third defendants be successful. 15However, consonant with the authorities I have quoted, the money remains, until judgment is given by Judge Sorby, the second and third defendants' money and the freezing order does not amount, in any way, to some form of quasi security. I must, accordingly, completely ignore the prospects of the plaintiff's being successful and the possible inability of the second and third defendants to satisfy a judgment that might be recovered by the plaintiff. 16The plaintiff also opposes the relief sought because, initially, the plaintiff's solicitor, who has thirty-three years experience as a litigator, estimated in his affidavit of 12 April 2013 that the costs of preparing the matter for hearing and of defending the matter at trial, as well as costs already incurred, would amount to $95,000. However, the second and third defendants now seek a further $45,000. 17Initially, the second and third defendants' solicitor estimated that the additional costs might amount to $20,000. That is contained in par 13 of Mr Stojanovic's affidavit of 14 June 2013 and is contained in annexure J to that affidavit, which was a letter sent by Mr Stojanovic to the plaintiffs' solicitor dated 27 May 2013. However, in the notice of motion filed on 14 June 2013, the amount of additional costs sought was $45,000, which is the same as the amount sought in the notice of motion before me. 18However, in his affidavit of 12 July 2013, after itemising work actually done and disbursements actually incurred, Mr Stojanovic said that the outstanding fees to date amounted to $42,064.86. However, there was a mathematical error which needed to be corrected and the amount actually outstanding is $42,072.86. 19The defendants say, essentially, that the additional costs are because the case ran in Court for two days longer than estimated, that is for twelve days rather than ten, and because his Honour ordered that written submissions be prepared and because the costs of obtaining transcripts and providing interpreters also blew out. I shall refrain from making a quip that that would entitle Mr Stojanovic to occupy the office of Treasurer of the Commonwealth of Australia. 20The simple fact is that lawyers often underestimate the amount of time that a Court case will take. Lawyers often forget to take into account time spent by the presiding judge reading documents tendered to him, and fail to take into account the time that will be spent in submissions. In my experience of nineteen years and six days, lawyers' estimates of the length of a trial are notoriously inaccurate, usually understated. When the length of time is underestimated, it follows logically that the costs incurred will be actually greater than the costs initially estimated. 21Prima facie, the amount actually outstanding of $42,064.86 ought to be paid out of the monies held in trust by the Registrar. However, one problem emerged from a perusal of the evidence put before me. Counsel for the second and third defendants disclosed his scale of costs and proposed a costs agreement dated 20 July 2010. In that document, he proposed to charge $220 per hour for preparation, conferences, other attendances and for drafting and settling documents and for research and reading time. He also agreed to appear in Court for $1,700 per day. 22Applying that scale of costs to work actually done by counsel, it appears to me that there was an overpayment to him of some $11,000. It would appear that the original written costs agreement was overridden by some oral agreement or arrangement between Mr Stojanovic and his counsel. Yesterday afternoon, shortly before 5pm, I pointed out that the courses of action open to me were to permit the payment of $42,072.86 less the $11,000 overpayment, or for the defendants' solicitor to put before me this morning evidence on a more formal basis than the oral evidence given before Judge Lakatos of the agreement or arrangement that he reached with counsel and evidence that this had been drawn to the attention of the second and third defendants and that they consented to that change in the arrangement between their solicitor and their counsel. 23Mr McGrath, of counsel, who appeared for the second and third defendants on this notice of motion but is not the counsel who appeared for the second and third defendants in the substantive proceedings, elected to proceed along the first course of action that I proposed, rather than the second. It appeared to me, and still appears to me, that absent the evidence to which I have referred, it could not be said that the "overcharging" of counsel vis-à-vis what he quoted in the costs agreement could be seen as being reasonable and therefore outside the parameters of the authorities to which I have referred. 24For those reasons I order that the sum of $31,072.86, being part of the funds held in an interest bearing account by the Registrar, be paid forthwith to the trust account of Stojanovic Solicitors on account of the second and third defendants' further costs of the substantive proceedings. I order that the funds paid to the said trust account be applied only to the legal costs and disbursements of the second and third defendants in these proceedings. 25The remaining question is that of the costs of the notice of motion. This was argued shortly after 5 yesterday afternoon. It appears to me, and I understood Mr McGrath to accept the proposition, that the reason for this notice of motion had nothing to do with the plaintiff in the sense that the notice of motion would have to be made even if it was not opposed by the plaintiff, just as it was not opposed by the first defendant. 26The plaintiff would have to establish that the costs actually incurred to date were reasonable and that is what, in essence, took up most of the time of the Court yesterday. Accordingly, I order that each party pay her/his or its own costs of the notice of motion filed on 12 July 2013. I direct that the exhibits be returned on the receipt of the solicitors for the second and third defendants and for the plaintiff.