Ahern & Anor v Aon Risk Services Australia Limited

District Court of NSW|2020-05-26|Before: Ms J

INTRODUCTION

On 1 May 2020, I published reasons [1] for dismissing an appeal against a decision by a Costs Review Panel following determinations of a costs assessor. That decision was issued in September 2018. As is apparent from My Earlier Reasons, the parties' disputation about costs arises out of settlement of litigation commenced in the Supreme Court of New South Wales (Common Law Division), with the settlement occurring in February 2015. By the terms of the final orders disposing of that litigation, the defendant was ordered to pay the plaintiff's costs of that proceeding, as agreed or assessed. Since then, the parties have engaged in a long, drawn-out battle as to how much the plaintiffs should recover for costs from the assessment process.
In this Court, the plaintiffs appealed under s 384 of the Legal Profession Act 2004 (NSW), as that provision was relevantly applicable, on a decision in relation to a matter of law. The appeal failed.
The defendant, as the successful party, sought opportunity to be heard to vary the costs order that the Court made on 1 May 2020, which was made in accordance with the usual order, that the plaintiffs pay the defendant's costs of the proceeding on the ordinary basis.
The defendant now seeks variations to that order, in two principal respects.
First, it seeks a partial order for indemnity costs on the basis of the plaintiffs' refusal of two offers of compromise made respectively on 21 August 2019 and 20 April 2020. Both of those offers were, in substance 'walk away' offers.
Secondly, the defendant seeks an order by the Court to fix a specified gross sum for costs, under s 98(4) of the Civil Procedure Act 2005 (NSW), to reflect costs orders made by the Court on 20 and 22 April 2020 and 1 May 2020.

Principles

Section 98(1) of the Civil Procedure Act emphasises that costs are in the discretion of the Court. Section 98(4)(c) specifically authorises the Court, in its discretion, to order that the party to whom costs should be paid is entitled to a specified gross sum, instead of assessed costs: Hamod v New South Wales and Anor [2011] NSWCA 375.
The authorities indicate a range of considerations that the Court may take into account when making such order. These generally include the complexity of the proceeding in relation to cost; the degree of any disproportion between the issues litigated and the costs; the relative responsibility of the parties for the costs incurred and the capacity of an unsuccessful party to satisfy any costs liability. The principal purpose of this order is to avoid the expense, delay and aggravation of further protracted litigation arising from the assessment process: Hamod v State of New South Wales and Anor at [816]-[817].
The defendant (applicant) also cites the line of authority that holds that such order may be particularly apt where the Court forms a view, based upon the prior experience, that any further costs assessment is likely to be unduly protracted and add to costs unnecessarily: Harvey v Barton (No. 4) [2015] NSWSC 809; Coshott v Parker (No 3) [2015] NSWSC 1195 and Russo & Ors v Russo & Ors (No 4) [2016] NSWSC 1133.
But the Court must be cautious about making such order: it must be satisfied that making the order will be fair to the unsuccessful party: Harrison v Schipp [2002] NSWCA 213 and [22]. It must have a measure of confidence in arriving at an appropriate sum in making such order and, even then, it is common for the Court to impose a discount: Hamod at [81]-[814]. A merely estimated or general total or claimed costs may not be sufficient in providing a proper basis for such order: Colquohoun v District Court of New South Wales (No. 2) [2015] NSWCA 54 at [7]. In Tim Barr Pty ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11, Barrett J (as his Honour then was) emphasised that although the Court, when asked to make a fixed order is not emulating a costs assessor, but is making a 'broad brush' estimate, there must still be enough before the Court to form some kind of view as to what might be recovered on an assessment ([21]), and that involved the Court being informed by the criteria for costs assessment ([44]), as well as by the pleadings, the complexity of the issues raised on the pleadings, interlocutory processes, preparation for hearing and attending the hearing ([45]).
In SAB Closed 1 Pty Ltd v Bees & Honey Pty Ltd; Bees & Honey Pty Ltd v SAB Closed 1 Pty Ltd [2015] NSWSC 1162, Stevenson J rejected this type of application on the basis of the absence of an arm's length objective assessment from an independent costs assessor.

Whether a fixed sum order should be made

Since February 2015, the parties have fought tooth and nail over the costs consequences of the Supreme Court litigation, following settlement. Unusually, they agree, in principle, to the desirability of the Court making a lump sum order for costs of this proceeding. But they have very different views as to what that amount should be.
I am also attracted, in principle, for a gross fixed sum to be ordered in this case. There has been protracted disputation over costs for many years since the settlement of the substantive dispute in 2015. Even during the pendency of this proceeding, a very considerable outlay of costs has been incurred by the parties in the exchange of correspondence over interlocutory skirmishes, including a dispute about the competency of the appeal (having regard to rules of service) culminating in late applications for the adjournment of the hearing concluded earlier this month. The Court is informed that considerable resources were outlaid to prepare appeal books - the plaintiff had prepared three lever arch folders - and extensive written submissions before the hearing; notwithstanding that the nature of the appeal was confined to correction of alleged decisions relating to matters of law. It is not insignificant in this regard, that as I found in My Earlier Reasons, to a not insubstantial degree, at least some of the grounds for appeal agitated by the plaintiff were, in substance, attacks on the merit of the determination of the costs review panel [2] . Inherently, that involves additional cost.

Difficulties in the quantification of fixed sum order

Attracted as I am to making a definitive order putting an end to the issue, regrettably, I do not consider that the Court has been furnished with sufficient information to enable it to quantify the order with a measure of confidence; even on a broad-brush approach, and to do so in a way that is fair to the plaintiffs.
This is because even when the nature of the proceeding is taken into account - essentially a legal review of the decisions appealed from - the parties significantly diverge on the question of the reasonable costs incurred by the defendant in the different stages of the proceeding. This includes even the costs of the interlocutory motions. Further, as the plaintiffs point out, no proposed draft itemised bill has been prepared on the defendant's behalf (it might be added, by someone independently from the defendant [3] ) that would enable the Court to deduct for unreasonable actual costs which, the plaintiffs contend, the authorities [4] recognise as the appropriate first step that a Court should embark upon in a lump sum assessment of party and party costs. Thus, the Court has no means of evaluating the reasonableness, for example, of the time spent by solicitors and Counsel respectively, in working on the appeal. No tax invoices from the solicitor or Counsel have been appended.
Although there is, in Ms Scott's affidavit, a general itemisation of the work performed in relation to the interlocutory arguments in this proceeding, this information was relied upon to support the application for indemnity costs; with a view to proving that much cost had been incurred up to the time of the offers. There is also a table in Ms Scott's affidavit (in paragraph 19), that itemises the actual costs incurred by the defendant's team of lawyers, on the motions, and the proceeding generally. In the absence of supporting material, there is nothing to corroborate what, to take one example, work was done by Ms Scott, the partner of the firm representing the defendant, in the course of the 85.3 hours she deposed to having worked on the appeal proceeding up to judgment (as distinct from her work on the motions).
There are also not insubstantial differences in the appropriate level of discounts between two experienced solicitors.
In the circumstances, the principled approach to these issues is not for the Court, on the basis of the information presently before it, to pluck a figure somewhere between the positions respectively advanced by the parties. The issues should, in other words, be considered by technically proficient and experienced costs assessors in the event that the parties, despite all that has gone before, are still unable to resolve the matter in a commercially sensible way.

ORDER

In the result, the Court refuses the defendant's application to vary the costs order made on 1 May 2020, with the qualification that that general costs order should be varied so as to make it clear that the defendant should pay the plaintiffs' costs of this application to vary the order for costs.

Endnotes

Ahern & Anor v Aon Risk Services Australia Limited [2020] NSWDC 159 ('My Earlier Reasons').
For example, see [79] and [89] of My Earlier Reasons.
Tim Barr Pty Ltd at [26], SAB Closed 1 Pty Ltd at [10].
Rubino v Pineview Properties Pty Ltd (No 7) [2019] NSWSC 1031. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 May 2020

Legal Profession Act 2004(NSW)

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