HER HONOUR: On 22 December 2021, I dismissed an application by the plaintiff (the company) to set aside a statutory demand served by Holding Redlich Lawyers: In the matter of Horizons (Asia) Pty Ltd [2021] NSWSC 1690. The application largely turned upon whether there was a genuine dispute as to Holding Redlich's unpaid fees where the company had requested itemised invoices, said not to have been provided, or, as Holding Redlich contended, itemised bills had been provided - without a shadow of doubt - long ago in answer to the company's request, attached to an email from Holding Redlich on 11 March 2020 (the Email) and the company's Senior Administrator, Lee Ng, had repeatedly perjured herself by suggesting otherwise. I concluded at [50]:
It is clear beyond argument that the Email was in the form exhibited to Mr Beven's affidavit. There can be no serious suggestion that the Email and its attachments were in the form exhibited to Ms Ng's first or second affidavits. Ms Ng's evidence to the contrary is unbelievable. The asserted ground of the genuine dispute - that the company cannot assess whether Holding Redlich's fees are fair and reasonable in the absence of an itemised bill - lacks the necessary qualities of plausibility or good faith.
I ordered the company to pay Holding Redlich's costs of the proceedings and also ordered:
(3) If either party seeks a variation of [the costs order]:
(a) Direct the party seeking the variation to serve any submissions (limited to three pages) and affidavits by 15 January 2022.
(b) Direct the other party to serve any submissions (limited to three pages) and affidavits by 31 January 2022.
(c) Any such application to be determined on the papers.
Holding Redlich seeks a variation of the costs order such that the company pays its costs of the proceedings on the ordinary basis up to and including 8 October 2021 and on the indemnity basis thereafter, including the costs of the application for an indemnity costs order. In support of such an order, Holding Redlich relied on its letter to the company of 8 October 2021, by which Holding Redlich noted that the company's application was premised on the company not having received itemised invoices where, for reasons already set out in an email from Holding Redlich on 1 October 2021, such itemised invoices had been provided. To avoid the parties incurring unnecessary costs, Holding Redlich invited the company to withdraw its application, and, if it did so before the next court listing at 9 am on 11 October 2021, Holding Redlich would not press for its costs. Holding Redlich notified the company that, if it failed to withdraw its application, Holding Redlich would rely on the letter in seeking indemnity costs.
Holding Redlich submitted that the offer was a genuine compromise under which Holding Redlich offered to forgo a substantial costs entitlement: Realm Resources Ltd v Aurora Place Investments Pty Ltd (No 2) [2020] NSWSC 153 at [18]. In particular, Holding Redlich had yet to incur the costs of preparing Mr Bevan's affidavit and for the hearing of the application.
The company did not accept the offer but entrenched its position by Ms Ng affirming affidavits on 24 November 2021 and 8 December 2021, maintaining that the company had not received itemised invoices. Holding Redlich submitted that the company thereby caused Holding Redlich to incur significant, unnecessary costs. The company did so by rejecting Holding Redlich's offer, serving further evidence in support of its false contention that it had not received itemised invoices and persisting with the application. The position the company took was said to be wholly unreasonable and indemnity costs from the date of the 8 October 2021 offer ought follow.
I have not had the benefit of any submissions by the company.
[3]
Consideration
The applicable principles were summarised by Black J in In the matter of Indoor Climate Technologies Pty Ltd [2019] NSWSC 356 at [8]:
The principles on which an order for indemnity costs may be made are also well established. Section 98(1)(c) of the Civil Procedure Act 2005 (NSW) permits the Court to order costs on an ordinary or indemnity basis. Rule 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, unless the Court otherwise orders or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 of the Uniform Civil Procedure Rules deals with an order for costs on an indemnity basis. Costs are awarded on the ordinary basis unless there are exceptional circumstances: Leichhardt Municipal Council v Green [2004] NSWCA 341. An order for indemnity costs is not made to punish an unsuccessful party for persisting with a case that fails, but to compensate a successful party fully for costs incurred, when the Court takes the view that it was unreasonable for the other party to have subjected the successful party to the expenditure of costs: Hamod v New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20]. Whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24]; Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6]. That is to be determined by reference to the conduct of the proceedings, not the conduct that is the subject of the substantive dispute.
Conduct which will ground an order for indemnity costs includes misbehaviour of a serious nature in the course of a proceedings, such as fraud (Gate v Sun Alliance Insurance Ltd (1995) 8 ANZ Ins Cas 61-251 at 75,817-75,818), perjury or contempt (Berkeley Administration Inc v McClelland [1990] FSR 565 at 568-569; Ivory v Telstra Corporation Ltd [2001] QSC 102) and dishonest conduct (Vance v Vance (1981) 128 DLR (3d) 109 at 122). As noted in G E Dal Pont, Law of Costs (4th ed, 2018) at [16.71], "… where the fabrication of evidence, or other misleading conduct, has a direct correlation with unnecessarily exposing the successful party to the incurrence of costs, an indemnity costs order is appropriate", citing Barrett Property Group Ltd v Metricon Homes Pty Ltd (No 2) [2007] FCA 1823 at [16] per Gilmour J; Sande v Medsara Pty Ltd (No 2) [2004] NSWSC 262 at [8]; Stemson v AMP General Insurance (NZ) Ltd [2007] 1 NZLR 289; [2006] UKPC 30 at [28]; Leary v NSW Trustee & Guardian (No 2) [2017] NSWSC 1226.
For example, in Barrett Property Group Ltd v Metricon Homes Pty Ltd (No 2), Gilmour J relevantly noted when making an order for indemnity costs in favour of the applicants:
[14] These illustrate a determined effort on the part of the respondents and their witnesses to establish a defence on one of the central issues in the case which they knew to be false. It was left to the forensic efforts of the applicants' solicitors and counsel and some belated and limited concessions made by Popple and Bugeja during their oral evidence, which led to these attempts to mislead the Court being exposed.
[15] The result of this was that very significant costs have been incurred by the applicants both in preparation for and the conduct of the trial which ought never to have been required. Had this not been done then only those issues legitimately before the Court involving both questions of fact and law would have been tried.
[16] The question then is whether the respondents' conduct in relation to its defence on the issues of derivation and copying constitutes a sufficient reason to take this case, in that respect, out of the ordinary, so far as concerns the exercise of my discretion on the question of costs. I am persuaded that it does. This is not a case where merely arguments 'attended by uncertainty' were before the Court as in Hamod. It is not a case involving witnesses who gave evidence believing it to be true but as to which they were mistaken. It is not a case where judgment depended essentially upon the inherent probabilities of one version of events against another but not involving questions of credit. It is not even a case, such as Walker, where one witness gave fabricated evidence as to part of a case. This matter involved a concerted effort on the part of four key witnesses to present a false defence which has led to the applicants incurring very considerable costs over a long period in meeting and overcoming that defence. …
An order that costs be paid on an indemnity basis may be made if a party has persevered with a hopeless or futile case: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4].
As detailed in my primary judgment, it was plain beyond argument that Holding Redlich sent its itemised invoices by the Email to the company, copied to a "service" email address which, historically, had been an email address used by Ms Ng: at [25], [50]. The company thereafter blocked emails from Holding Redlich, seeking payment of outstanding fees: at [28]. On service of the statutory demand sometime later, the company maintained that it had not been provided with itemised bills as requested and was promptly provided with the itemised bills again (and again after the proceedings were commenced): at [29].
On 8 October 2021, Holding Redlich sent the letter on which it now relies, inviting the company to withdraw its application to set aside the statutory demand as the company had, in fact, been provided with the itemised invoices long ago. Rather than withdraw the application, on 22 November 2021, Ms Ng signed a costs assessment application on behalf of the company and served a draft affidavit, asserting that the Email did not attach the itemised invoices as exhibited to an affidavit sworn by a partner of Holding Redlich, Blair Beven. On 23 November 2021, Holding Redlich wrote to the company's solicitor suggesting that Ms Ng's unsworn affidavit contained false statements but Ms Ng nonetheless proceeded to affirm the affidavit on 24 November 2021. To meet this affidavit, another partner of Holding Redlich, Gregory Wrobel, swore an affidavit deposing that he had inspected the original electronic version of the Email and had satisfied himself that the Email exhibited to Mr Beven's affidavit was correct. Mr Wrobel exhibited a USB stick containing the electronic version of the Email.
The company was given leave to file further evidence to address Holding Redlich's assertion that Ms Ng's evidence was false. On 8 December 2021, Ms Ng affirmed a second affidavit maintaining her position and annexing documents said to have been obtained from the company's external IT hosting company which were said to confirm the position. These documents were most mysterious: at [40].
Holding Redlich issued a Notice to Produce to the company, seeking an electronic copy of the Email annexed to Ms Ng's first affidavit, together with communications between the company and its external IT hosting company. In answer to the Notice to Produce, the company did not produce an electronic copy of the Email. The fact that the company did not produce the electronic version of the Email, notwithstanding Ms Ng's evidence in her second affidavit that the company had gone to some effort to obtain precisely that from the company's external IT hosting company, was most telling. The communications between the company and the external IT hosting company raised more questions than were answered: at [39]-[40].
The hearing of the company's application was prolonged by Ms Ng's steadfast insistence that the Email had not attached the firm's itemised invoices. Holding Redlich cross-examined Ms Ng - to great effect - and her various explanations of contradictions between her affidavits and the overwhelming evidence put forward by Holding Redlich was, in short, a complete waste of the Court's time brought about by the company's unbelievable position.
I have no hesitation making an order in the form sought by Holding Redlich. The offer made by Holding Redlich in its letter of 8 October 2021 presented a reasonable compromise as the firm had already incurred legal costs in defending the application, which the company must have appreciated was without merit. The company's maintenance of its absurd position led to Holding Redlich incurring additional legal costs in combating that position. The hearing took longer than would otherwise have been the case.
For these reasons I make the following orders:
1. Vary Order 2 made on 22 December 2021 by adding "on a party and party basis until 7 October 2021 and thereafter on an indemnity basis, including in respect of the defendants' costs of seeking a variation of Order 2.
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Decision last updated: 04 February 2022