Appellants v Respondent

Supreme Court of Victoria|2016-03-18|Before: WOOD AsJ

APPLICATION FOR GROSS COSTS - Rule 63.07 Supreme Court (General Civil Procedure ) Rules 2015.

For the Appellants in S APCI 2013 0093 and First and Second Respondents in S APCI 2013 0110

Interveners Mr Gray and Mr Henderson in both proceedings

1 On 10 March 2016 I reserved my decision and now publish the decision and reasons. On 16 November 2015 the Court of Appeal constituted by Beach JA made an order in each of these appeals that the applications for gross costs by Messrs Wieland and Goldberger ('the applicants'), filed in both matters on 30 July 2015, be referred to the Costs Court for determination. On the same day leave was given to Messrs Gray and Henderson ('the interveners') to intervene in the applications.

2 At that stage three affidavits had already been filed on behalf of the applicants, namely one by Debra Michelle Paver sworn 19 June 2015 ('first report') and two by Robert John Heathcote sworn 7 July 2015 and 30 July 2015. The applicants had also filed written submissions dated 30 July 2015. The interveners had only filed an affidavit of Richard Alan Mereine sworn 9 September 2015 at that point.

3 Nominexx Pty Ltd and Texxcon Pty Ltd ('the respondents') had not filed and served any material in opposition when the matter came on for hearing before Beach JA. Presumably they were merely going to make oral submissions in opposition. It was only on the day of the hearing that the parties became aware that Beach JA declined to deal with the applications and would refer them to the Costs Court for hearing and determination.

4 The applications were listed for mention before me on 23 November 2015 and directions were given for material in opposition to the applicants' affidavits to be filed by the interveners only. This was on the basis that the respondents had already had ample opportunity to file material between July 2015 and the hearing before Beach JA on 16 November 2015 and elected not to do so. Further, because both the respondents and the interveners flagged they were opposing the applications, and they conceded their interests at this point were aligned in relation to the applications for a gross sum, the Court was reluctant to unnecessarily add to costs.

5 The interveners were ordered to file any affidavit by 1 February 2016. In compliance they filed an affidavit of Ariel Weingart sworn 1 February 2016. The applicants had the option to file and serve any affidavit in reply by 26 February 2016. In compliance a further affidavit of Debra Paver sworn 25 February 2016 was filed ('second report'). The interveners filed written submissions on the day of the hearing (dated 10 March 2016).

6 The applicants' entitlement to any legal costs arises from the order of the Court of Appeal made on 5 September 2014. The entitlement covers these two appeals and the trial proceedings.[1] Special leave to appeal to the High Court was refused on 13 February 2015.

7 The applicants now seek a gross sum (in lieu of taxed costs) to be assessed pursuant to Rule 63.07(2)(c) of the Supreme Court (General Civil Procedure) Rules 2015 ('the Rules').

63.07 Taxed or other costs provision

(1) Subject to this Order, where by or under these Rules or any order of the Court costs are to be paid to a party, that party shall be entitled to taxed costs.

(2) Where the Court orders that costs be paid to a party, the Court may then or thereafter order that as to the whole or any part of the costs specified in the order, instead of taxed costs, that party shall be entitled to -

(a) a portion specified in the order of taxed costs;

(b) taxed costs from or up to a stage of the proceeding specified in the order;

(c) a gross sum specified in the order instead of taxed costs;

(d) a sum in respect of costs to be determined in such manner as the Court directs.

9 In Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3)[2] Croft J stated:

The clear object of rule 63.07 of the Rules is, in my view, similar to the object of the corresponding Federal Court rule, as discussed by Sackville J in Seven Network Limited v News Limited, as follows:[3]

"(i) The purpose of the subrule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum v Johnson (No 2), at 120, per von Doussa J, applying Leary v Leary [1987] 1 All ER 261; Harrison v Schipp [200] NSWCA 213; [2002] NSWCA 213; (2002) 54 NSWLR 738, at 742 [21] per Giles JA.

(ii) An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62: Beach Petroleum v Johnson (No 2), at 120, 124, per Doussa J; Harrison v Schipp, at 743 [22], per Giles JA.

(iii) The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed: Beach Petroleum v Johnson (No 2), at 123, per von Doussa J.

(iv) Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the 'necessary or proper' test) and those stated in Stanley v Phillips [1966] HCA 24; ) [1966] HCA 24; (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause): Auspine Ltd v Australian Newsprint Mills Ltd [199] FCA 673; [1999] FCA 673; (1999) 93 FCR 1, at 4-5 [12]-[15], per O'Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J.

(v) Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Sch 2 provide assistance in fixing an appropriate gross sum: Charlick Trading Pty Ltd v ANRC, at [10], per Mansfield J.

10 Complex cases are especially suitable for granting a gross sum. In Leary v Leary it was stated that:[4]

The purpose of this rule is to achieve.............the avoidance of expense, delay and aggravation involved in a protracted litigation arising out of taxation. This would be achieved especially in complex cases. The order, therefore, does not envisage that any process similar to that involved in 'taxation' should take place.

11 The financial position of the party liable can be a factor to take into account. In Hadid v Lenfest Communications Inc it was stated that:[5]

To those considerations another should be added, relating to the applicant's financial situation. In a judgment delivered on 14 April 2000 I held, in considering a motion for an order that the applicant produce documents in accordance with the notice to produce served by Mr Price, that the applicant's financial position was relevant to an application for an order for payment of a gross sum instead of total costs. The view which I had formed, and to which I adhere, was stated at para 14 as follows:

How, then, does evidence of the financial position of a party liable under a costs order fit into that picture? In my view it does so substantially in the way suggested by the sixth respondent. Where the amount of costs likely to be payable is very substantial and where, in any event, taxation is likely to be drawn-out, burdensome and expensive, the burden borne by the successful party is aggravated if it appears that, in any event, the party obliged to pay costs may not be able to meet liability of the order likely to be involved. For that reason, in my view, in a case where the liability for costs may be expected to be large and a taxation complex and expensive the financial position of the party liable is a matter relevant to be taken into account in exercising the discretion.

12 As discussed in ACN 074 971 109 (as trustee of the Argot Trust) & Pegela Pty Ltd v The National Mutual Life Association Australasia Limited ('Pegela')[6] the amendments to the Civil Procedure Act 2010 that commenced on 24 December 2012 are also relevant. These include the insertion of section 65C(2)(c) that a court can award costs for a specific amount to further the overarching purposes of the Act.

13 The amendments also included the insertion of section 1(2)(b) which provides that the purpose of the Act is to expand the powers of the courts in relation to costs in civil proceedings. The overarching purpose is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute (see section 7(1) of the Act). Aon Risk Services Australia Limited v Australian National University[7] dealt, in part, with the impact of delay and costs in case management by courts. French CJ observed 'the courts are concerned not only with justice between the parties, which remains their priority, but also with the public interest in the proper and efficient use of public resources.'[8]

14 Dixon J in Sheehan v Brett-Young & Ors (No 4)[9] included the burden on Court resources in that particular case to also be a factor for consideration when considering gross costs.

15 In Pegela there is also reference to the cases of Sony Entertainment v Smith,[10] Playcorp Group of Companies Pty Ltd v Peter Bodum A/S (No 2),[11] Julien v Secretary, Department of Employment and Workplace Relations (No 2 ),[12] and Nine Films & Television Pty Limited v Ninox Television Limited.[13] These make reference to the actions and financial state of the party liable being relevant considerations, in particular the prospects of recovery. In a more recent case in Carey v Freehills[14] Kenny J also referred to capacity to pay as being one, but still a significant factor.

16 In oral submissions to the Court of Appeal[15] on 16 November 2015, counsel for the applicants posited that the method proposed by Ms Paver was the only one available.[16] In my view there is no one option in terms of methodology in a gross sum exercise. It will depend on the basis for costs recovery ordered in favour of the recovering party.

17 As discussed in Pegela,[17] there are several options available in relation to methodology. One option is the 'analogy' method to 'review previous gross sum cases to identify what the percentage reduction on costs was in those cases and adopt an appropriate reduction by reference to previous practice'. This is not an attractive option having regard to the wide range of percentages of recovery across a number of example cases referred to by Sackville J in the Seven Network Limited v New Limited.[18]

18 A second option has been referred to as the 'adjusted fees' methodology. This is a possible option where costs are recoverable on scale. It involves taking the base hours from time records and multiplying them by the scale rate, adjusting it to account for the different scale rates applicable for particular types of work and then applying a loading for general care. This is closest to the one proposed by the applicants and said in argument to Beach JA in this matter to be the only option.[19]

19 A third option is the 'Ausmaq' method. This can be favoured where costs are to be assessed on hourly rates. This involves actual costs incurred, identifying work that falls outside the scope of the costs order, and then breaking the figure down to costs and disbursements. As a next step appropriate hourly rates are determined and then a final calculation is made on the basis of the hourly rate options, the cost reduction for unreasonable work and the addition of disbursements.

20 Other methodologies have been referred to in case law.[20]

21 The first affidavit of Mr Heathcote deals with the history of the litigation, including the number of amendments to pleadings, length of trial, extent of hard copy and electronic documents[21] and history in the Court of Appeal. None of this evidence appears to be in dispute and there is a concession by the interveners that the litigation was complex.[22]

22 The second affidavit of Mr Heathcote deals with the four orders that required the second respondent (Texxcon Pty Ltd) to provide security for costs during the trial and the financial state of that company which is said to have paid up capital of $2 and no assets. The affidavit also deals with the financial state and real property holdings of the interveners who are shareholders in Texxcon Pty Ltd.

23 It should be said at this stage that a foreshadowed application for costs to be paid by the interveners has not occurred at this point. The applicants conceded at the hearing that on the current material available they would not be making a non-party costs application. This is said by the interveners to be the same position put to Beach JA.[23] The interveners rely on a letter from the applicants' solicitors dated 28 May 2013 (exhibited to the affidavit of Richard Mereine) as being the first indication that the applicants were contemplating such an application. Delay is said to be a factor in the likelihood of success if such an application was pursued. The letter states ''The purpose of my letter is to formally give notice to your clients that if they do not succeed at trial, my clients will seek their costs over and above the security provided from those persons who have funded, and stood to benefit from, this litigation'.[24] The applicants failed at trial so there was presumably no justification or utility to bring any such application until they succeeded on appeal and special leave was refused in February 2015.

24 The more important affidavits in relation to the application for a gross sum are those of the two costs experts, Ms Paver and Mr Weingart.

25 In summary, Ms Paver estimates the costs of full taxation for the applicants to be $230,660 to $365,960. She estimates the opposing parties' costs to be $64,970 to $110,600. She estimates the preparation time for the trial bill to be 6 to 8 months and 6 weeks to 2 months to prepare the appeal bill. A taxation would take 8 to 15 days. She posits the view that no complex taxation issues arising from the proceedings that may result in a gross sum exercise being too inaccurate. From the letter of instruction from the applicants' solicitors (attached to her first report) the total billed to the applicants is stated to be $3,897,389.70.[25]

26 Taking the information from the affidavit of Mr Heathcote, Ms Paver estimated a total of 262,760 pages of documents being part of the trial and appeals. Her analysis of the time frame from the start of preparation of the trial bill until the completion of taxation is up to 18 months.

27 In relation to a taxation, Ms Paver's opinion is that although the litigation was complex, this would not flow through to the taxation itself - 'the costs orders are not complex; the orders do not involve apportionment of liability for costs or costs of issues, costs of counterclaims or competing costs orders which would involve substantial preliminary issues as to the proportion of liability for costs; there are no difficult questions as to the extent and type of pre-commencement costs that are claimable, or in relation to costs incurred in different jurisdictions so that "interstate" costs are to be allowed in an amount appropriate to the place where the work was done'.[26] The presence of these issues in a matter is said to render it more likely that the result of a gross sum exercise would be inaccurate and arbitrary. These were some of the problems identified in Pegela.

28 The methodology proposed by Ms Paver is to exclude any work outside the scope of the orders. Next, reduce the time spent by lawyers and non-lawyers by a percentage to take into account the relevant test of recovery (base hours). Next, multiply these base hours for lawyer and non-lawyer attendances by the relevant hourly rates in the applicable scale at the time the work was done and adjust the base hours to reflect the different scale rates applicable to different types of work. Finally apply a percentage loading based on the factors in Rule 63.48.[27]

29 The methodology was said to be largely consistent with several methodologies utilised in other cases. It was said to be similar to the Ausmaq method utilised in the New South Wales Supreme Court and the one utilised in a Federal Court case.[28] The Victorian case of Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors (No 4)[29] was referred to, however the assessment in that case was specifically ordered by the trial judge to be on the solicitor's own hourly rates as opposed to scale, and on an indemnity basis rather than standard basis.

30 Ms Paver states[30] that the method proposed is 'nearly identical to the adjusted fees methodology that was accepted by French J in University of Western Australia v Gray (No 25)'.[31] To be accurate that case was a decision of Barker J where he makes reference to the acceptance of a definition posed by a witness (Ms Harris) on a prior occasion before French J who accepted that methodology. The quotation in paragraph 37 of Ms Paver's first report is from the affidavit of Ms Harris. The method was described as taking the solicitors' time records and adjusting them to an hourly rate that would be recoverable on a party/party basis and then making a second adjustment '...to accommodate the different scale rates applicable to different types of work ('the adjusted fees')'.[32] There is no discussion (or detail) in that case by Barker J (or anything attributable to French J) that descends to a practical level to indicate how this second adjustment would be undertaken. A critical element to this method is the fact that the entitlement of the applicants to costs is on the Supreme Court scale.[33] The scale has some items assessed on hourly rates (attendances) but recovery of costs for correspondence (emails and letters), drafting documents and considering/perusing/scanning documents are calculated on the length of the documents - not based on time. A considerable amount of the assessment of costs would require 'adjustment'. Ms Paver's first report is silent as to how this adjustment would be done. It is developed a little more in her second report ( see paragraph 37 below).

31 Taking a step further back, a significant issue is the primary material identified as the base documentation which will be utilised in order to come up with the 'base hourly rate' that would constitute the figure upon which the adjustment would apply - namely to 'take into account the different scale rates applicable to different types of work'.

32 Ms Paver outlines the 'instructions and material' she was provided with by the applicants' solicitors in order to form her opinion. In terms of time records she was only provided with 'excel spreadsheets setting out billing summaries.'[34] When dealing with her proposed 'appropriate methodology' she details the documents she would look at to perform the quantification and again the only documents that she proposes to utilise that would be relevant to time are 'internal billing guides and the billing summaries'. It is not clear if this is the primary and best evidence available and whether billing summaries are the actual time sheets completed by the file operators when recording the tasks undertaken and time taken. In all likelihood, based on experience of the Costs Court, clients are charged on time so blocks of time spent working on files recorded in the actual time sheets will be 'mixed' in that they will include attendances, drafting letters and other documents, reviewing and considering documents, etc., without differentiating between these activities in terms of time taken for each activity which are each differently remunerated on scale, and often not even identifying which documents are being reviewed and considered. The length of a document is not traditionally recorded in time records.

33 The interveners rely on the affidavit of Mr Weingart. His opinion does not support a gross sum scenario. He does not accept that the taxation would be complex or difficult. He makes the point that Federal Court cases are more prevalent as their scale is more closely aligned to hourly rates. It is also worth noting here that the New South Wales Supreme Court does not have a scale and costs are assessed on the basis of Costs Agreements usually calculated on hourly rates and assessed on a 'reasonable' basis.

34 In contrast to the opinion of Ms Paver, Mr Weingart estimates the applicants' costs of taxation to be no more than $183,814. In relation to the volume of documents he queries the inconsistent evidence about hard copy folders in the trial (409 v 554) and appeal (39 v 56), assumptions about the number of pages of electronic discovery, gross numbers of pages without allowance for duplication across three solicitors, and duplication of pages and attachments in emails.

35 The disagreement in relation to bill preparation is considerable. Mr Weingart estimates 1.5 months as opposed to 6 to 8 months. Costs to the end of taxation are estimated at $162,170 as opposed to $196,000 to $300,960 for the applicants. Costs to oppose are put at $55,500 as opposed to $74,970 to $110,600. In relation to time lines from start to finish of a taxation he deposes to 7 to 8 months as opposed to 14 to 18 months estimated by Ms Paver. There is agreement between the experts in relation to some of the less significant estimates.

36 In the second report Ms Paver responds to the report of Mr Weingart. Her opinion does not alter as a result. For example, the difference in opinion in relation to bill preparation time (and therefore by extension, the entire time of the taxation process) is explained on the basis of the real work demands of a costs lawyer who would not be able to devote all their time to the preparation of one bill from start to finish.

37 In relation to the methodology comments at paragraph 30 above, the second report[35] contains a little more information as to the process to arrive at claimable base hours multiplied by relevant scale rates. The different scale allowances for correspondence (said to be low under the old scale in terms of time spent) and perusing documents (said to be high under the old and new scales in terms of time spent) are identified. It is stated that 'the competing factors in respect of the different scale rates are taken into account to determine an appropriate reduction to apply' to the claimable base hours. How this is adjustment is to be done is not outlined. For example, if 5 hours is spent to prepare one 'special letter' and the work is buried in a number of time entries across several individuals in the base hours and cannot be identified how would this be adjusted for? These types of comments were made in the interveners written submissions in relation to preparing, amending and settling a document.[36] Lawyers working in teams where delegation, supervision and duplication are prevalent adds to the difficulty.[37]

38 As noted in paragraph 6 above special leave was refused in the High Court on 13 February 2015. By way of comment, taking the outer estimates of Ms Paver, the bills of costs would have been prepared by December 2015 had work commenced once the High Court special leave application was determined. The matter would then have been ripe for mediation or assessment on the papers under the Rules (Alternative Assessment Procedure).[38]

39 History has shown that estimates between experts in this area can vary considerably. Variables can include the other workload and availability of costs lawyers, workload of the Court at the time the parties are ready for hearing, and more particularly the degree to which parties opposing wish to take every point. The manner in which the substantive litigation is conducted is often a good guide to the manner in which quantification of costs are conducted (irrespective of mode) and the extent the parties are willing to narrow issues or engage in meaningful negotiation or make offers of compromise. Estimates given in support or opposition to gross sum applications can be inaccurate.[39] The cross examination of experts in a gross sum exercise can potentially erode the time and costs savings originally and theoretically identified when that method is favoured over a taxation.

40 It should be noted that the recoverable legal costs in this matter span two regimes. For work prior to 1 April 2013 the scale and test for recovery was on a 'necessary or proper' basis. After that date the scale and test for recovery for work claimed changed to the more generous standard or 'reasonable' basis.[40] This dividing line falls neatly within a major milestone in the history of the litigation. The work caught by the trial costs order commences in 2010 when the proceedings were initiated. Conveniently the scale and test changed for work after 1 April 2013 and the trial ran for nineteen days commencing on 29 April 2013, with the first trial judgment on 20 June 2013 and the second trial judgment on 2 July 2013. The appeals were obviously conducted thereafter.

41 Most of the work in the trial would be assessed on a necessary or proper basis, that is the lower level of recovery. The accuracy of a gross sum exercise is largely dependent on the accuracy of the description of work in the time recording. Ms Paver has not looked at a sample of those to ascertain the extent to which different types of work are broken up or readily discernible, or the degree of mixing of tasks. That is, the amount of time that could be represented by work recoverable on scale under hourly rates, or tasks that are recoverable on scale by length of document (drawing documents, perusing, or scanning documents).

42 A note of caution along these lines appears in Idoport Pty Ltd v National Australia Bank Limited & Ors.[41] The case is cited and relied upon by Mr Weingart but the quote is not actually from the presiding Judge (Einstein J). This was identified by Ms Paver in her second report.[42] The quote is from a report of a witness (Ms Castle) but is worth repeating anyway - 'A methodology that relies upon computerised time records and internal file notes frequently do not capture exactly what happened, and the amount of time taken but, rather provide some (or in some cases nil) record of that'.[43] This view was not adopted by the Judge but it accords with the general thrust of my comments at paragraph 32 above.

43 In Pegela[44] an application for gross costs was refused. In that case there were complicating factors arising from the quantification of costs that would have arisen in a gross sum exercise. For example, apportionment issues as multiple parties were involved and they were not all involved at the same time. Further, some work was performed in New South Wales which would be assessed by a different methodology to the Victorian work. Analysis would have been required as to how much work fell into either category. An arbitrary decision would have been made without the benefit of considerable scrutiny and ideally, something close to an itemised bill. In other words, the foundation would have involved considerable guesswork.

44 Ms Paver points out the absence of such factors in the case at hand. However, at the present time there appears to be a level of uncertainty around the proposed methodology. I would need to be satisfied, in spite of this uncertainty, that the process identified would be sufficiently fair or accurate in relation to the professional costs for the whole of the trial and appeals in order for a decision to be made in favour of the applicants at this time.

45 In oral argument the interveners placed particular reliance on parts of Pegela, references to it in Carey v Freehills[45] and comments about the Costs Court processes in Thomas v Powercorp (No 9).[46] In their written submissions they make the point that in this court there are only two cases where a two-stage process has been adopted.[47] In most cases where a court is asked to make an order for gross costs the judge most familiar with the matter deals with it. The methodology and a justified figure is put to the court in a one step process and an order made or declined. Where the process is split and no figure quantified at the time of the application it is more important that the methodology and process is fleshed out before embarking on the exercise.

46 I need to be satisfied with the appropriateness of the methodology proposed as part of the decision to approve a gross sum exercise because I need to be satisfied the result will be accurate and fair. It is undesirable to order a gross sum exercise and leave the methodology and process to be refined, considered and potentially wrestled with later.

47 In Pegela it was stated that 'as a general proposition a gross sum order is appropriate in complex litigation where the taxation would be relatively simple but lengthy, aggravating and expensive. Here the issues would make for a taxation that was more complex than a simple case, but the issues would be extremely difficult to address with sufficient precision to give justice to the parties in a gross sum exercise in line with the authorities.'[48]

48 In the current matters there are no complicating factors (like in Pegela) that would militate against a gross sum exercise, however, the uncertainty identified in paragraphs 32 and 37 above and the concerns about precision and fairness expressed above tips the scales against making a final determination at this time to make an order in the terms sought.

49 In oral submissions the applicants argued it was open to the court to impose its own methodology if there were concerns about what was proposed. The party seeking the gross sum order carries the burden of proof. They are in the best position to propose a method and process as they have access to the file and aware of the state of the primary documentation. In oral submission the respondents raised the issue of whether the respondents/interveners would have access to the file as part of the quantification process if a gross sum was to be ordered. The level of detail and specificity in bills and invoices were also unknowns.[49] The state of time sheets has already been referred to above at paragraphs 32 and 37. In answer to a question from the bench the applicants had no instructions as to whether legal professional privilege would be waived. This would be relevant to the issue of access to the file by the respondents or interveners representatives.

50 In oral submission the applicants were critical of Mr Weingart for disputing Ms Paver's methodology but not proposing what the methodology should be adopted if there was an order for gross sum assessment. It is noted that Mr Weingart was asked by the solicitors for the interveners to address the issue[50] when he was engaged but did not do so.

51 The second respondent appears to be a $2 company with no assets. On four occasions in the trial proceedings orders were made for security for costs and bank guarantees were provided for the sum of $497,713.08[51] by the second respondent. At the trial, judgment was in favour of the respondents and an order was made by the trial Judge for the guarantees to be returned. The applicants currently hold no security for payment of their costs.

52 In oral submission the applicants pointed out that the evidence as to solvency was 'one sided'. The presence of the interveners arises from their concern that they may be liable if an application for non-party costs is made and successful. The unlikelihood of recovery from the respondents was said to be an overwhelmingly powerful reason to make the order for a gross sum. The respondents counsel did not concede insolvency. The interveners conceded that on the state of the evidence the court could reach the conclusion of insolvency. No security has been offered.

53 The interveners appear to own properties. The applicants have foreshadowed, but not made, an application to make them liable at this stage. This is an option they have not yet pursued. Financial circumstances of those liable and the chances of recovery are but one factor to be considered.

54 At this time I am not convinced to a requisite level of the justification for tipping the balance in favour of a gross sum exercise for all the costs. However, under rule 63.07(2)(c) and (d) the Court can 'order that as to the whole or any part of the costs...instead of taxed costs, that the party shall be entitled to a gross sum specified in the order instead of taxed costs'. Or a 'sum in respect of costs to be determined in such a manner as the Court directs'. The definition of 'costs' includes disbursements.[52]

55 It emerges from the second report that the applicants' disbursements total $1,281,630.70.[53] In the present case I have not reached a concluded view that a gross sum exercise in the manner proposed is appropriate for all the costs at this stage. However, having regard to the convenient point within the trial litigation where the change of scale, and therefore test for recovery altered to a more generous level, I am satisfied that disbursements can be assessed in both the trial and the appeals as a gross sum in a fair manner and on a sufficiently accurate basis. I expect the majority of the disbursements would be counsel fees. All the trial and appeals occurred after April 2013 so they would all be assessed on a 'reasonable' basis. It should be relatively easy to identify fees for which there is no entitlement either from court orders or in relation to amendments or where interlocutory costs orders have been settled.

56 Once that exercise has been completed (and the sum paid or not paid), the applicants still have the option to make application for a non-party costs order at that point, and then a final determination can occur in relation to the appropriateness of a gross sum order in relation to professional costs.

57 The applicants are entitled to a gross sum pursuant to Rule 63.07(2)(c) in relation to claimable disbursements in both the trial proceedings and the appeals. Directions and timetables are required for a written submission by the applicants (supported by copy invoices, fee slips and receipts), written submissions in response and a hearing date. Liberty to apply can also be reserved.

[1] Texxcon Pty Ltd v Austlexx Corporation Pty Ltd & Ors (2013) VSC 327.

[4] [1987] 1 All ER 261 at 265 a to d.

[6] (2013) VSC 137 at [7] and [9].

[10] (2005] [2005] FCA 228; 215 ALR 788 [194] - "based on the conduct of the respondents to date".

[12] [2009] FCA 1259 [10 to 12] - "having regard to the financial capacity of the appellant".

[13] [2006] FCA 1046 [6] - "some evidence to suggest that the respondents may not be in a position to meet the costs order".

[20] See Idoport v National Australia Bank Ltd & Ors (2007) NSWSC 23 at [63] to [65].

[21] Eg. in relation to hard copy documents - 554 folders in the trial and 56 folders in the three Appeals. In relation to electronic documents - 6,731 electronic discovery documents, 6.39 gigabytes of data in emails from the trial and appeals for other solicitors involved and 102.8 megabytes for Mr Heathcote (paragraphs 17,19 and 21 of the first affidavit).

[22] Paragraph 16 to Exhibit AW1 to the affidavit of Mr Weingart.

[23] Paragraph 4 of the written submissions dated 10 March 2016.

[25] Paragraphs 25(k) and (p) in the letter dated 12 November 2014. See also paragraph 55 of these reasons.

[26] Paragraph 28 of the affidavit of Debra Paver.

[27] Supreme Court (General Civil Procedure) Rules 2015.

[28] Idoport Pty Ltd v National Australia Bank & Ors [2007] NSWSC 23 and Hadid v Lenfest Communications Inc [2000]FCA 628.

[30] Paragraph 37 of her report (Exhibit 'DMP 1').

[35] Paragraphs 19 and 21 on page 10 of the second report.

[36] See paragraph 33 of the written submissions, and in particular 33(e).

[37] Paragraph 33(d) of the written submission.

[39] See my comments in Sunland (No 4) in relation to the accuracy of estimates and conduct of a gross sum exercise in that particular matter - (2013) VSC 669 at [14] to [17].

[40] See Jane v Bob Jane Corporation Pty Limited & Anor (2013) VSC 467.

[42] Paragraph 25 on page 11 of the second report.

[44] ACN 074 971 109 (As Trustee for the Argo Unit Trust) & Pegela Pty Ltd v National Mutual Life Association of Australasia Limited (2013) VSC 137.

[47] Paragraph 35 of the submission - Sunland and Love.

[49] This point was made by counsel for the interveners in oral submission.

[50] Paragraph 5(d) in the letter of engagement dated 23 December 2015 - exhibit 'AW 1'.

[51] Affidavit of Robert Heathcote sworn 30 July 2015 at paragraphs 6 & 7.

[53] Paragraph 8 on page 7 states that applicants' total costs and disbursements to 31 October 2014 were $3,544,189.78 (exclusive of GST) with professional costs at $2,262,559.

Supreme Court (General Civil Procedure) Rules 2015

At a glance

Court

Decision date

Before

Source

Judgment (110 paragraphs)

Legislation Cited (2)

Cases Cited (3)