Ahern v Aon Risk Services Australia Ltd

Procedural history

1. The background to this dispute was summarised at JA [6]-[9]. However, it is necessary briefly to outline the history of litigation between the parties, insofar as this history is relevant to the grounds for Aon's present application.
2. Mr Ahern brought a claim for professional negligence against Aon in the Common Law Division in or around June 2012. A settlement was reached, and a consent order was made on 10 February 2015 that Aon pay Mr Ahern's costs of the proceeding as agreed or assessed. Having failed to agree as to costs, the parties applied for assessment by a costs assessor under Legal Profession Act, ss 353, 357 on 6 October 2016. By a certificate of determination dated 7 April 2017, the costs assessor determined the fair and reasonable amount of costs payable to be $1,280,079.52 (including an amount for Mr Ahern's costs of the costs assessment process and the filing fee).
3. On 16 June 2017, both parties sought review of the costs assessor's determinations under Legal Profession Act, s 373. By a certificate dated 26 September 2018 (and subsequently amended on three occasions), the review panel set aside the costs determination and assessed the costs payable to be $1,178,551.62 (again including an amount for Mr Ahern's costs of the costs assessment process and the filing fee). Aon's evidence, not challenged by Mr Ahern, is that it has satisfied this judgment in full, with the third and final instalment having been paid on 21 January 2019.
4. By summons filed on 19 December 2018, Mr Ahern then appealed against the panel's determination to the District Court under Legal Profession Act, s 384. That appeal was limited to questions of law. After a series of unsuccessful interlocutory motions challenging late service of the summons and seeking adjournments, Mr Ahern's summons was dismissed with costs by Abadee DCJ on 1 May 2020: Ahern v Aon Risk Services Australia Pty Ltd [2020] NSWDC 159. Aon (being the successful party) then applied to vary the costs orders made by Abadee DCJ, seeking both a partial order for indemnity costs on the basis of Mr Ahern's refusal of two offers of compromise, and a gross sum costs order. The application was rejected on both grounds, and his Honour ordered that the original costs order be varied to provide that Aon should pay Mr Ahern's costs of the variation application: Ahern v Aon Risk Services Australia Pty Ltd (No 2), District Court (NSW), Abadee DCJ, 26 May 2020, unrep. In respect of the application for a gross sum costs order, his Honour was not satisfied that "the Court has been furnished with sufficient information to enable it to quantify the order with a measure of confidence… and to do so in a way that is fair to [Mr Ahern]": at [25]. In particular, Aon had not provided a draft itemised bill to enable the Court to make reductions for costs unreasonably incurred. The parties subsequently settled their costs of the District Court proceeding for $32,000.
5. By summons filed on 3 August 2020, Mr Ahern sought judicial review of Abadee DCJ's decision of 1 May 2020. (An earlier summons had been incorrectly filed in the Common Law Division on 31 July 2020.) At the first return date on 17 August 2020, the Registrar ordered Mr Ahern to file and serve a white folder and submissions by 7 September 2020; he served the former on 8 September 2020 and the latter on 15 September 2020. Aon's submissions followed on 30 October 2020, and Mr Ahern's reply on 1 December 2020. At a further directions hearing on 30 September 2020, at which there was no appearance for Mr Ahern, a hearing was fixed for 27 November 2020. It was relisted at Mr Ahern's request for 3 March 2021, when it was heard by this Court.
6. On 3 June 2021, while judgment was reserved and over the objection of Aon, Mr Ahern emailed the Registrar seeking to file further written submissions in this Court. The Registrar made directions on 4 June 2021 for both parties to file and serve further written submissions by 5pm that day; Mr Ahern served those submissions late, at 6:03pm. Upon receiving Aon's submissions, on 9 June 2021 Mr Ahern then sought and was granted leave to file a reply which was proposed to be 2 pages in length. The Registrar having agreed by email dated 15 July 2021 that the Court would receive that proposed reply, on 31 July 2021 Mr Ahern proceeded to file a reply of 8 pages and annexing a further 9 pages of submissions. The Registrar advised Mr Ahern by email dated 2 August 2021 that the Court would not have regard to that document (JA [49]). Judgment was handed down on 6 August.
7. Finally, it should be noted that Mr Ahern filed an application in the High Court for special leave to appeal against this Court's decision dismissing his summons. That was dismissed with costs on 10 February 2022. He has also filed a summons in the Supreme Court, significantly out of time on the face of it, seeking leave to appeal against the costs review panel's determination in November 2018.

Principles governing specified gross sum costs orders

1. Section 98 relevantly provides: 98 Courts powers as to costs … (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party 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.
2. The principles relevant to the Court's exercise of discretion under s 98 were set out in Hamod v New South Wales [2011] NSWCA 375 at [813]-[820] (Beazley JA) (Hamod). Her Honour noted at [813]: [813] 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."
3. The principal purpose of a specified gross sum costs order under s 98(4)(c) is to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment process: Hamod at [816]-[817]. As Basten JA noted in James v Australia and New Zealand Banking Group Ltd [2017] NSWCA 84 at [3]: The power to make such an order is governed by the obligation of the court to give effect to the overriding purpose of the Act, as identified in Pt 6 of the Civil Procedure Act. The court is to ensure that the issues between the parties are resolved "in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute" (Civil Procedure Act, s 60); that obligation extends to the disposal of disputes as to costs. Although questions of costs undoubtedly play an important practical role in commercial litigation, disputes as to quantification are ancillary to the primary issues in dispute and consequential upon the resolution of the primary issues. Costs provide an opportunity for ongoing litigation about "non-essential issues" which should be resolved with as little technicality and expense as reasonably practicable. [footnotes omitted]
4. Primary considerations relevant to the exercise of the s 98(4)(c) discretion 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 cost; and the capacity of the unsuccessful party to satisfy any costs liability": Hamod at [816]; see also Kostov v Zhang (No 2) [2016] NSWCA 279 at [22]; eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [30].
5. The power to award a gross sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schipp (2002) 54 NSWLR 734 at 743; [2002] NSWCA 213 at [22]. The power may be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod at [818].
6. If it considers it appropriate to make the order, the Court may adopt a "broad brush" approach to quantification, as to require the Court to undertake a detailed examination of the kind carried out in a formal costs assessment would defeat the purpose of the order: Harrison v Schipp at 743; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. 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)": Hamod at [820]. Courts have typically applied a discount when assessing costs on a gross sum basis, though the aptness of a discount primarily depends on the accuracy and reliability of the costs evidence available to the Court: Hamod at [814].

Nature of the application

1. There is conflicting authority in this Court as to whether an application for a gross sum costs order is an application to vary the costs order originally made, so as to enliven the requirements of UCPR r 36.16: see Riva NSW Pty Ltd v Mark A Fraser and Christopher P Clancy t/as Fraser Clancy Lawyers (No 4) [2018] NSWCA 327 at [59]-[62] (Leeming JA) (taking the view that it is); cf Short v Crawley (No 45) [2013] NSWSC 1541 at [27] (White J), followed in Livers v Legal Services Commissioner (No 2) [2021] NSWCA 164 at [5]-[8] (White JA); Eliezer v The Council of St Andrew's Cathedral School (No 2) [2021] NSWCA 227 at [44]-[45] (White JA) (Eliezer (No 2)).
2. It is unnecessary here to resolve this difference in views, as the power to make the order lies on either view. On the one hand, if this application were to be treated as one to vary the order made on 6 August 2021, then the power in r 36.16(1) as extended by r 36.16(3A) has plainly been enlivened, as Aon's notice of motion was filed within 14 days of the order being entered. This also renders it unnecessary to consider whether, if the application is one to vary, it may be dealt with under r 36.16(3) as an alternative to 36.16(3A): see Eliezer (No 2) at [18]; Rodi v Gelonesi [2016] NSWCA 348 at [33]-[36].
3. Alternatively, on the view that r 36.16 is inapplicable, then the Court's power to make the order sought has been identified as Civil Procedure Act, s 98(3), which, as White JA explained in Eliezer (No 2) at [45], "provides a statutory qualification to the rule as to finality of judgments to permit the making of an order 'as to costs' after the conclusion of proceedings". Thus it is also unnecessary to address Aon's alternative submission, relying on the authority of Darke J in Bailey v O'Dea [2021] NSWSC 1420 at [5], that the power to make the order arises under s 98(4)(c) which, it contends, provides for "the quantification of the costs order previously made rather than a variation of it".

Aon's submissions

1. Aon's principal ground for seeking a specified gross sum order is to "avoid the expense, delay and aggravation that may reasonably be anticipated to arise out of costs assessment". In this regard, it relies on the evidence of Ms Joanne Scott, which draws the Court's attention to various "defaults and delays on the part of [Mr Ahern]" in the course of litigation which have "increased costs and protracted proceedings".
2. Aon seeks a sum of $99,120 in total, comprising the specified gross sum in respect of its costs of the judicial review proceeding ($90,000), as well as costs of this motion ($9,120).
3. The evidence of Ms Scott is that Aon incurred $104,489.84 (incorrectly recorded as $104,498.84 in Aon's written submissions) in defending these proceedings up to the date of judgment. The evidence of Aon's costs expert Ms Solomon is that the amount Aon would likely recover if its costs were assessed would be $92,660.34 (ex GST), and $9,120 (ex GST) for the costs of this motion (being 80% of the $11,400 that would have been incurred in a costs assessment process). Aon notes correctly that Mr Ahern has not filed any competing expert evidence.

Mr Ahern's submissions

1. Mr Ahern opposes the motion on the following bases: 1. That Aon was primarily responsible for the protraction of the dispute in this Court and through the earlier costs assessment process; 2. The costs of obtaining the gross sum order would exceed the costs of costs assessment; 3. Aon failed to warn Mr Ahern of this motion; and 4. Aon acted unreasonably in defending the application for judicial review, as its submissions were of "no assistance to the Court" and it ought to have filed a submitting appearance.
2. Mr Ahern also submits that it is not possible for this Court to arrive at a fair, logical and reasonable sum on the available evidence. He contends that the Court cannot have confidence in the expert report of Ms Solomon because it "fails to show her workings or logic and lacks rigour", and is "unreasonably favourable to Aon". In this regard, he more specifically contends that the report fails to show her workings as required by the Expert Code; assumes the correctness of work and calculations without checking them; fails to set out the case law, comparable market rates, or quantum to which she says she had regard; fails to make reductions, itemised or otherwise, with respect to various items, including reductions for travel time, for solicitor/client work, for unreasonable or unchargeable time claimed.
3. He also submits that a gross sum assessment should be no more than two-thirds of Aon's costs as claimed, that having been the proportion determined and used by the costs review panel in the proceedings which were the subject of the judicial review application.
4. Finally, he submits that the fees of Aon's counsel (calculated by Ms Solomon at $69,000) were excessive, and that it was unreasonable to have retained senior counsel in circumstances where the matter lacked sufficient complexity to justify it, being "an application for judicial review as to the adequacy of reasons of two discrete issues".
5. Mr Ahern seeks indemnity costs of this motion.

Appropriateness of an order under s 98(4)(c)

1. Turning to consider the relevant factors set out at [16] above, there is no evidence that Mr Ahern cannot satisfy a costs liability. Nor were the judicial review proceedings overly straightforward. Rather, the primary ground for Aon's application turns on Mr Ahern's conduct in the prosecution of the judicial review proceeding against the background of delay and acrimony between the parties.
2. There has indeed been a protracted dispute between the parties. It is particularly significant that difficulties and delays have arisen in past attempts at costs assessment. It is not necessary to attribute fault to either party for these past delays (as each has sought to do), as the discretion under 98(4)(c) directs attention only at the relative responsibility of the parties for costs incurred in the proceeding in which the costs order is sought. That the parties have tried to do so tells of the animosity which the parties might bring to bear on a further costs assessment process.
3. It is, however, significant that Mr Ahern is responsible for at least some of the delay to the judicial review proceeding, including by late service of his submissions in chief on 15 September 2020 and in reply on 1 December 2020; by his request to vacate the hearing on 27 November 2020, having not appeared or been contactable during the directions hearing at which that date was fixed; and by his seeking to file further submissions in June 2021 while judgment in this Court was reserved.
4. For these reasons, and subject to consideration below as to whether a fair, logical and reasonable sum can be determined, the Court considers that it would be appropriate, and consistent with Civil Procedure Act, s 56, that a gross sum costs order be made. We acknowledge that, given Mr Ahern's pending summons filed in the Supreme Court, such an order would not end the dispute between the parties; but it would foreclose one avenue for further expense, delay and aggravation.
5. None of Mr Ahern's submissions alters this position. It is true that Aon suggests that it will expend more on this application ($24,129-$25,579 if heard on the papers) than it would have in a costs assessment process ($11,400), and that each would take around the same time (25 weeks). However, this comparison assumes that if there were a costs assessment, it would not be the subject of challenge; indeed, Ms Solomon's report (at [52]) expressly excluded the costs of any review of a costs assessor's determination or subsequent appeal. The purpose for an order here, which this submission overlooks, would be to avoid the possibility - a real one given the history between the parties - of a contested costs assessment process which snowballs into further litigation. It also assumes that Aon might recover costs in the order of $24,000 on this application.
6. Nor is Aon's failure to warn Mr Ahern of this motion a valid basis for refusing a gross sum costs order. There is no such notice requirement, and no doubt (and no submission to the contrary) that Mr Ahern has had a fair opportunity to be heard in respect of this motion.
7. Further, the contentions that Aon acted unreasonably in defending the application for judicial review, that its submissions were of "no assistance to the Court", and that it ought to have filed a submitting appearance, are manifestly without merit. Aon had obvious interests in defending the proceedings, namely in avoiding the risk of a less favourable assessment if the matter were remitted, and more generally in ensuring the finality of proceedings, in circumstances where it had already paid in full the costs as assessed by the panel and it was only Mr Ahern continuing to challenge the panel's assessment. Indeed, Aon's success in this Court is a complete answer to this submission.
8. Finally, there was no unreasonableness in Aon filing this motion, or in taking 8 days after filing to serve evidence. Indeed, it is Mr Ahern who has prolonged the resolution of this motion by failing to comply with the procedural timetable, i.e. in failing (as directed on 2 September 2021) to file his evidence by 8 October 2021.
9. There being valid reasons for the making of the order sought, including to avoid further delay and acrimony between the parties in circumstances where there is a demonstrated history of both, the final hurdle to the grant of the order sought is whether the Court can, on the available evidence, arrive at a quantification which is "fair, logical and reasonable": Hamod at [815], citing Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123 (von Doussa J).

Quantification

1. Ms Scott's evidence is that Aon incurred $104,489 (omitting cents) in defending these proceedings up to the date of judgment. The breakdown of costs is set out in the table below, and the relevant itemised invoices for those costs are annexed to Ms Scott's first affidavit sworn on 27 August 2021.
2. Mr Ahern does not challenge this evidence as to the actual costs incurred by Aon. Mr Ahern's challenge is to the reasonableness of the sum arrived at by Ms Solomon in her expert evidence. Her evidence was that Aon would recover $92,660.34 if its costs of the judicial review proceeding were assessed. That represents 88.7% of actual costs incurred, and comprises: Item Actual costs incurred Solomon estimate of recoverable ordinary costs Solicitor fees $34,737.00 $28,876.50 Senior counsel's fees $39,885.00 $36,000.00 Junior counsel's fees $29,140.02 $27,056.02 Photocopying $696 $696 Courier fee $31.82 $31.82 TOTAL $104,489.84 $92,660.34

1. Ms Solomon reaches the figure of $92,660.34 by applying the following reductions: 1. To the solicitors' fees, a reduction of $5,860.50 comprising: 1. An unspecified reduction for the "small number of tasks" which would ordinarily be undertaken by a more junior solicitor or paralegal; 2. An unspecified reduction to account for the fact that "travel time" should be charged at half the hourly rate of a solicitor; and 3. Unspecified reductions to account for "work of a solicitor/client nature", "unreasonable time claimed", "costs charged to peruse Court rules", and "costs charged for administrative attendances". 1. To senior counsel's fees, a reduction of $3,885.00 comprising: 1. A reduction of "no more than 3-4 hours" from the 18 hours' preparation for the hearing. 1. To junior counsel's fees, a reduction of $2,084.00 comprising: 1. A reduction for "some of the time claimed for the work concerned and in relation to the claims for research re court rules and procedures". 1. No reduction to photocopying or courier fees.
2. In making a gross sum costs order, the Court is entitled to take into account that if assessed on the ordinary basis, the usual outcome is that the costs recovered represent a proportion in the range of 60 to 85% of the total costs incurred (Bechara v Bates [2016] NSWCA 294 at [69]). Accordingly, in assessing the gross sum costs order, the Court should apply an "impressionistic" or "broad brush" approach in applying a discount to reflect that reality: Hamod at [820]; Bechara at [14].
3. That approach has resulted in discounts ranging between 10% and 30% being applied, although the ultimate discount or deduction applied must take into account the evidence and circumstances of the particular case. For examples of such cases, see Eliezer (No 2) at [30] (20%); and Penson v Titan (No 3) at [24] (30%).
4. In this case, Ms Solomon's report does not exclude the likelihood that on an assessment, Aon would be likely to recover a lesser proportion of its incurred costs than 88.7%. Taking into account the certainty which the gross sum costs order provides, the fact that the judicial review application involved a one-day hearing, and the significant amounts claimed for Aon's solicitors' and senior and junior counsel's fees, the Court considers that a discount of approximately 30% of the actual costs incurred should be made, yielding a rounded-up figure of $75,000.
5. That figure accommodates the contingencies which would arise in a formal costs assessment process. It accounts for the areas in respect of which Ms Solomon expressly declined to make reductions, although another costs assessor's opinion might reasonably differ. Those include: 1. the $9,500 charged by senior counsel for the brief on hearing, which Ms Solomon acknowledged was in excess of the 2016 CARC Guideline; 2. the allowance of 14-15 hours for senior counsel's preparation for the hearing, which she found to have involved "substantial additional preparation work which would not ordinarily have been required"; and 3. the solicitors' "top heavy staffing" of the matter (98% of the work having been billed by a partner in circumstances where it would ordinarily be 25-30%), in respect of which she made no reduction on the basis that the partner's charge rate of $425 per hour "already [fell] within the CARC Guideline range for a senior associate".
6. Aon also seeks $9,120 for the costs of this motion. While its notice of motion does not in terms seek an order that costs of the motion be paid as a gross sum, its submissions proceed on that basis. Moreover, it would defeat the purpose of making a gross sum costs order in respect of the substantive proceeding if the costs of the motion were to be as agreed or assessed.
7. Aon seeks 80% of the $11,400 that Ms Solomon estimates would have been incurred in a costs assessment process. This claim is said to be supported by Ms Scott's evidence that, as a "general rule of thumb" in her 22 years' experience of insurance litigation, "the costs which our clients are awarded [in a costs assessment process following judgment in their favour] on a party/party (ordinary) basis is generally around 80% of the costs claimed on assessment".
8. This is considerably less than 70% of the costs which Aon expects have been incurred in making this application. This notwithstanding, Aon does not press for payment of an amount greater than that which it could reasonably have expected to recover for the costs of quantifying its costs via the costs assessment process.
9. Absent any specific challenge by Mr Ahern to Ms Solomon's estimate, it may be adopted as a starting point. However, this Court must allow for contingencies and a potential margin of difference in the costs assessment process. Accordingly, the Court considers it appropriate to apply a 30% rather than a 20% discount to Ms Solomon's estimate of $11,400, rounded up to $8,000.

Conclusion and orders

1. The orders of the Court are: 1. Pursuant to Civil Procedure Act 2005 (NSW), s 98(4)(c), Mr Ahern pay Aon's costs of the summons filed on 3 August 2020 in the gross sum of $75,000. 2. Pursuant to Civil Procedure Act 2005 (NSW), s 98(4)(c), Mr Ahern pay Aon's costs of this motion filed on 19 August 2021 in the gross sum of $8,000.

Amendments 18 March 2022 - [11], 3rd sentence - "were' to "was" 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: 18 March 2022