Arambatzis v Foundas

Legal principles

1. Section 98(4)(c) of the Civil Procedure Act 2005 (NSW) (CPA) empowers the Court to make an order that the party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. Section 98(1) CPA provides the Court with an unfettered discretion to determine by whom and to what extent costs are to be paid and whether costs are to be awarded on the ordinary or an indemnity basis.
2. The principles governing when the Court may exercise its discretion to award a gross sum costs order were recently outlined by the Court of Appeal in Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 at [14]-[18] by Meagher, White and Brereton JJA which I gratefully adopt: [14] 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." [15] 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] [16] 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]. [17] 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]. [18] 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].
3. In short, there are many reasons why the Court may exercise its discretion to make a gross sum costs order and give effect to the overriding purpose under the CPA. As the reasons below will demonstrate, the relevant factors in these proceedings in favour of the Court making such an order include the potential for the cost assessment process to incur further costs for the parties in circumstances where Ms Foundas may be unable to pay the costs order resulting from that assessment and the benefits of ensuring questions of costs are resolved with as little technicality and expense as reasonably possible given the length of these proceedings. The relatively modest amount of costs sought also points in favour of an order being made.
4. Whilst considering an equivalent provision under previous legislation, Giles JA at [22] in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 outlined how the Court should determine the costs to be ordered as a gross sum in the absence of a formal costs assessment process: [22] Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson at 124, the gross sum "can only be fixed broadly having regard to the information before the Court"; in Hadid v Lenfest Communications Inc at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates". The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson (at 123); Hadid v Lenfest Communications Inc (at [27]). 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 (Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported, per Clarke JA).
5. The discount to be applied varies from case to case depending on the available evidence as to which costs have been incurred. The Court will typically apply a discount between 10%-30% to distinguish between solicitor client costs and party/party costs. To account for the fact that the costs awarded have not been scrutinised by a costs assessment process, the Court commonly applies a further discount to any costs awarded on a gross sum to reflect that certain costs may not have been awarded if they were the subject of assessment (see Beazley JA in Hamod v New South Wales [2011] NSWCA 375 at [820]). The actual discount to be applied depends on the circumstances of the matter including the extent of the costs to be awarded in the matter and the sufficiency of the evidence supporting the applicant's claim for costs (see for example, Brereton J (as his Honour then was) in Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640 at [57]-[62]).

Mr Arambatzis' submissions

1. Mr Cutri's affidavit quantified his costs in the sum of $7,128 and Counsel's fees totalling $8,321.50. It was submitted that a 10% discount should be applied to counsel's fees to reflect the gross sum nature of the order, with the discounted amount totalling $7,489.35. It was also submitted that a discount of 40% should be applied to solicitor's fees with 30% of that discount being the discount which normally applies to reduce solicitor client costs to the ordinary basis and the extra 10% being the discount which may be applied to gross sum costs applications. Therefore, the total discounted solicitor's costs amount to $4,276.80. Accordingly, the plaintiff submitted that the appropriate gross sum to be ordered was $11,766.15.
2. The plaintiff put forward three reasons as to why the Court should exercise its discretion to award a gross sum costs order: 1. Mr Arambatzis holds concerns Ms Foundas will not have the requisite means to satisfy a costs order; 2. Mr Arambatzis had not received payment for his costs in any of the previous proceedings where costs have been awarded against Ms Foundas (including a gross sum costs order in his favour of $210,000 made by Rees J); and 3. The Court should exercise its discretion to order a gross sum costs order in circumstances where Mr Arambatzis is also of limited financial means to afford a costs assessment and there remains doubt as to whether Ms Foundas would be able to pay any costs order.
3. In support of the submission that Ms Foundas is of limited means to satisfy a gross sum costs order, Mr Arambatzis drew to attention that: 1. Ms Foundas had satisfied the criteria for pro-bono referrals on several occasions (see Foundas v Arambatzis (No 2) [2023] NSWSC 1329 at [10]-[17]). 2. Ms Foundas, in support of an application for pro bono assistance before Rees J on 26 October 2023, submitted to the Court that she had been experiencing financial hardship: ((No 2) [2023] NSWSC 1329 at [18]). 3. During the hearing of the motions before me, Ms Foundas submitted to the Court that she did not have the requisite funds to satisfy a proposed condition of a stay of the writ being imposed, namely that she pay half of the fixed amounts that she already owes to Mr Arambatzis into Court) (see [20] below).

Ms Foundas' submissions

1. In opposition to the application, Ms Foundas' submissions can be summarised as contending that it would be unfair for her to have to pay the costs of these proceedings, especially as a gross sum, for three reasons: 1. It was unnecessary for Mr Arambatzis to be represented by both a solicitor and two counsel; 2. The costs entries outlined in Mr Cutri's affidavit were inflated costs and Mr Cutri sought a gross sum costs order to avoid these costs being assessed. It was also suggested that Mr Cutri's invoice is a sham because it is not addressed personally to Mr Arambatzis; and 3. It is Mr Arambatzis' responsibility to pay for his own legal representation.
2. As part of the third reason, Ms Foundas alleges that Mr Arambatzis has not made any contribution to his legal fees, and therefore it was unfair to use this application as a means for Ms Foundas to have to pay his fees.

Consideration

1. I accept Mr Arambatzis' submission that Ms Foundas' limited financial means, the protracted history of the litigation and Ms Foundas' failure to satisfy previous costs orders against her justify exercising the Court's discretion in favour of making a gross sum costs order in this case.
2. At paragraphs [54]-[55] of the judgment I outlined the significant and numerous costs orders that Ms Foundas had accrued during these proceedings. Mr Curtri's affidavit noted that none of these costs had been paid to date (although it is not clear which of these has been assessed, other than Rees J's gross sum costs order obviating that process as to some of the costs). At [55] of the judgment I also noted that Ms Foundas had indicated that she did not have the funds to pay half of the amounts I had identified she already owed as a condition for the stay being imposed: [54] First, while there was no evidence as to the current value of the property or the Trustees' fees, given the long history of the matter the latter were likely to be significant. Furthermore, Ms Foundas was already obliged to pay $103,704.49 with interest (see [10] above), yet to be quantified occupation rent (see [10] above), other unquantified costs orders, and Rees J's gross sum costs order of $210,000 (see [24] above) all of which would come from her net share of the proceeds. I accept Mr Barlin's submission that those matters taken together mean the Court could not have any degree of comfort that any undertaking as to damages could be supported by whatever the balance (if any) may be of Ms Foundas' net share of the proceeds of sale. Ms Foundas told me her only source of income was the carer's pension she received in respect of Mr Foundas. She did not suggest she had any significant assets other than her interest in the property. [55] Second, Mr Barlin suggested that to be of any relevance on the balance of convenience given the weakness of Ms Foundas' prospects on appeal, an order requiring her to pay into Court even half the fixed amounts she already owes (resulting in a sum of about $150,000) would be warranted. I did not pursue this possibility any further, because Ms Foundas indicated she did not have the funds to satisfy such a condition of any stay.
3. Requiring the parties to undergo a costs assessment process which would incur further expense, in circumstances where the Ms Foundas may not be able to pay the costs order arising from that assessment would be a futile exercise. The potential inability for a party to be able to pay any costs order is a factor in favour of the court exercising it's discretion to make a gross sum costs order (see [10] above). The futility would be all the greater where the amount of costs sought, as here, is very modest.
4. The procedural history noted at [6] to [24] of the judgment also demonstrates that the litigation between these parties has a protracted history. As noted at [10] above, a court may make a gross sum costs order where it considers such an order will resolve costs issues more efficiently and avoid further disputes between the parties. Ms Foundas' failure to satisfy several previous costs judgments and the personal animosity between the parties indicates that the most efficient way to resolve this costs matter and avoid further disputes is for a gross sum costs order to be made.
5. I acknowledge Ms Foundas' concern that a gross sum costs order would require her to pay a portion of the plaintiff's costs which are yet to be the subject of assessment. It is because the costs associated with a gross sum costs order are not the subject of assessment that the discount applied to the amount the plaintiff is entitled to receive is greater than if costs were being formally assessed on the ordinary basis.
6. Given the costs sought in this matter are not large and the extensive material in Mr Cutri's affidavit outlining the costs incurred by solicitors and counsel, I am satisfied that a 10% discount applied to both solicitors and counsels fees is appropriate in the circumstances to reflect the gross sum nature of the order.
7. This discount is in addition to a discount of 30% which is applied to solicitors' costs to distinguish a costs order made on the ordinary basis as opposed to costs awarded on the indemnity basis. On the ordinary basis, a party is only entitled to recover a "fair and reasonable amount" for the legal costs and disbursements that were already incurred (see UCPR r 42.2). In these circumstances a 30% discount is within the usual range ordered (see Young & Young v Attorney General of New South Wales (No 2) [2024] NSWSC 705 at [12]). Therefore, the Court accepts that the 40% discount proposed by Mr Arambatzis is appropriate.
8. The Court is also required to be satisfied that the costs sought have been properly incurred. The Court accepts the costs outlined in the affidavit of Mr Cutri are fair and reasonable. I reject Ms Foundas' submission that the costs entries outlined in the affidavit have been inflated or are faked to ensure that the plaintiff is entitled to more costs than they should be. No evidence to establish such a serious accusation has been provided.
9. To the contrary, the affidavit of Mr Cutri provides an itemised schedule of his attendances and by counsel briefed in the matter. Having reviewed the schedules, I am satisfied that the costs were reasonably incurred and that the rates charged were reasonable. Ms Foundas submitted that Mr Cutri appeared to have incurred significant costs 'reviewing' correspondence and submissions. This work is a necessary part of preparation for a matter, and it does not appear that excessive time was spent on this work with most reviews taking less than 30 minutes.
10. The submission that Mr Cutri's invoice is a sham as it is not addressed to Mr Arambatzis' home address is also unsustainable. Again, there is no evidence to support such a serious allegation.
11. I also do not consider that it was excessive for Mr Arambatzis to brief Mr Barlin and Ms Harris-Roxas as counsel in this matter. Ms Harris-Roxas only appeared at directions hearings and mentions for the motions and assisted Mr Barlin to draft submissions in response to Ms Foundas' application to stay the writ of possession. Ms Harris-Roxas' rates were approximately half those of Mr Barlin and as such it was more appropriate for Ms Harris-Roxas to attend to the tasks she was instructed to undertake rather than Mr Barlin in order to limit the costs that were being incurred by Mr Arambatzis. The Court considers this to be an entirely proper way to have approached the retainer of counsel to ensure costs were kept within reasonable bounds.
12. After reviewing the costs schedules of both barristers, it appears that both counsel performed tasks efficiently and charged appropriately. Mr Arambatzis was entitled to brief counsel in this matter and I reject Ms Foundas' submission that it was unreasonable for him to do so. The Court is satisfied that the schedules of costs demonstrate that there has been no duplication of work between Mr Arambatzis' solicitor and counsel.
13. I also reject the submission by Ms Foundas that the gross sum costs order is unfair as she should not be paying Mr Arambatzis' legal costs. The principle behind the ordering of costs is that it is just and reasonable that the successful party to litigation should be reimbursed for costs incurred (see Latoudis v Casey (1990) 97 ALR 45, 50; [1990] HCA 59 (per Mason CJ). In this instance, Mr Arambatzis has been the successful party in the litigation and is entitled to be reasonably compensated for his costs.
14. It is not the case that a party the subject of a costs order is required to pay all the costs of the other party. Another reason why there is a discount applied to any gross sum costs order is because, subject to exceptions, the court does not expect a party to litigation to indemnify another party. Costs orders are intended to be compensatory, not punitive (see Latoudis at 50).

Conclusion

1. There will therefore be an order that the plaintiff is entitled to be paid costs in the specified gross sum of $11, 766.15 by Ms Foundas. It remains the case that those costs should be payable in the first instance from her share of the net proceeds of sale of the property.
2. In the absence of an application for a gross sum costs order by the Trustees, in accordance with orders already made Ms Foundas will be required to pay the Trustees' costs of the Trustees' notice of motion filed 19 January 2024 and the defendant's notice of motion filed on 5 April 2024 as agreed or assessed on the ordinary basis. Those costs will also be payable in the first instance from Ms Foundas' share of the net proceeds of sale of the property.
3. The Court's order is: 1. The plaintiff is entitled to be paid his costs referred to in order 4 made on 15 April 2024 in the specified gross sum of $11,766.15 instead of assessed costs.

Amendments 15 July 2024 - Correction to case title 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: 15 July 2024