Beach Petroleum NL & Anor v Johnson & Ors

Supreme Court of NSW|2014-08-15|Before: Garling J

Judgment 1On 13 June 2014, for the reasons which I then delivered, I ordered that the Further Amended Summons filed by Mr Bar-Mordecai on 24 March 2014, in which he sought leave pursuant to the Vexatious Proceedings Act 2008, to commence proceedings against Ms Daych should be dismissed: see Michael Bar-Mordecai - Application - Ms Daych (No.2) [2014] NSWSC 766. 2I ordered that Mr Bar-Mordecai was to pay the costs of Ms Daych of the whole of the application, and reserved leave to Ms Daych to apply for any different order. 3Ms Daych has applied for a gross sum costs order. Her application is opposed by Mr Bar-Mordecai. 4For the reasons that appear in this judgment, I propose to make such an order.

Notice of Motion 5On 27 June 2014, Ms Daych filed a Notice of Motion which sought the following order: "That, pursuant to s 98(4)(c) Civil Procedure Act 2005, Michael Bar-Mordecai pay the costs of these proceedings incurred by Tatiana Daych in the sum of $15,000 or such other specified gross sum as the Court may order."

Evidence 6Ms Daych relied upon the affidavit of her solicitor, Mr Stephen Keith Mullette sworn 27 June 2014. 7Mr Mullette is an experienced litigator and has, for over 15 years, worked solely in the area of commercial litigation and insolvency related matters. 8Mr Mullette's evidence was that the whole of the costs billed by his practice, Matthews Folbigg, Solicitors, to Ms Daych in respect of these proceedings, totalled $40,207.21. Of this total, the costs of the firm, namely Mr Mullette, a solicitor and a secretary, totalled $28,452.97, and disbursements totalled $11,754.24. The principal disbursements are the fees billed by Mr Heath of counsel, totalling $11, 335. 9Mr Mullette was not cross-examined upon the contents of his affidavit and I accept his evidence. 10Mr Mullette says that in his experience, he would expect that approximately two thirds of all of Ms Daych's costs of the proceedings would be allowed on any assessment of party and party costs, and further, that he would expect that all of the disbursements would be allowed as party and party costs. Accordingly, he concludes, on the basis set out in his affidavit, that he would expect Ms Daych to recover a sum of a little over $30,000 if a full costs assessment process was undertaken. 11Mr Mullette deposes to the fact that he would expect to be charged a sum of about $3,700 by a costs consultant to prepare an itemised bill of costs and that in addition, he would expect to be charged at a rate of about $200 to $250 per hour for the costs consultant to deal with responses to objections in respect of any bill of costs which had been prepared, served and filed. 12Finally, Mr Mulette deposed to the following: "I believe that a fair and reasonable amount in respect of a gross sum for the costs of Ms Daych, taking a broad brush approach to costs incurred by her, would be $15,000." 13Mr Bar-Mordecai relies upon an affidavit of himself, which was filed in Court on 10 July 2014. 14The affidavit consists of certain statements of fact, and a good deal of submission and argument. Although counsel for Ms Daych objected to the affidavit, I ruled that I would accept it, and deal with it on the basis that, unless it set out facts within the knowledge of Mr Bar-Mordecai, I would treat the contents as submissions. 15It is clear from the evidence of Mr Bar-Mordecai that he is impecunious as a consequence of "... numerous and onerous litigations ..." and further, that he is in debt to the Attorney-General and others for a large sum of money for legal costs, that remain outstanding. Mr Bar-Mordecai says that he presently owes over $1 M in legal costs to various parties, and that he does not have the funds presently to discharge these obligations. 16He includes with his affidavit, a copy of a Statement of his Financial Circumstances, which he has filed. In that document he declares that he owns no assets, he resides with his parents and his only income is from Centrelink payments each fortnight, which are fully expended on normal household expenses. He further discloses that he has debts for legal costs in the following sums: (a)$800,000 to the Attorney General of NSW; (b)$40,000 to T Schwarz; (c)$320,000 to E Hillston Estate. 17I accept that this Statement accurately sets out Mr Bar-Mordecai's current financial circumstances.

Legal Principles 18Section 98 of the Civil Procedure Act 2005, provides that: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. ... (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.. ... " 19As is apparent from the terms of s 98 of the Civil Procedure Act, the Court has an ample discretion to award costs which is not confined, and which may be exercised whenever the circumstances warrant it: Harrison & Anor v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [21]-[22]. 20At [22] in Harrison, Giles JA said of the power to make a gross sum costs order, this: "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 (CA, 21 February 1996, unreported, per Clarke JA)." 21More recently, the Court of Appeal considered the principles upon which the exercise of the power is based in Hamod v State of New South Wales and Anor [2011] NSWCA 375. At [816] Beazley JA, with whom Giles and Whealy JJA agreed, said: "The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act ..., suggest the factors that merit particular consideration 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 ..." 22It is open to the Court to exercise the power under s 98(4) of the Civil Procedure Act where it is desirable to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment, and also where the incurring of additional costs generated by a formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: see Hamod at [817]. 23It is clear that in making a gross sum costs order, the Court is not required to undertake a detailed examination of the kind that would be appropriate to a taxation of costs or a formal costs assessment: Harrison at [39]; Hamod at [819]; Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; 24However, the Court is required to approach the making of a gross costs order in a way which is logical, fair and reasonable. This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment: Hamod at [820]. 25In Hamod at [794] Beazley JA approved this statement of principle of von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No.2) [1995] 57 FCR 119 at [16]: "On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary 'fail safe' discount on the cost estimates submitted to the Court: Leary v Leary at 265." 26I will keep these principles in mind together with those generally referred to in Hamod, and in a previous decision of mine: Young v Hones (No.3) [2014] NSWSC 499, in approaching the determination of this Notice of Motion.

Submissions 27Ms Daych submits that there is adequate information before the Court to enable the Court to properly and fairly to make an assessment of the costs that have been incurred, and to proceed properly and fairly to fix a gross sum costs order. 28Ms Daych submits that in circumstances where Mr Bar-Mordecai is already a declared vexatious litigant, the Court ought make a gross sum costs order to avoid any expense, delay and aggravation involved in the resolution of the costs assessment process. She submits that it is likely that the costs assessment process would be protracted. 29In particular, Ms Daych submits that having regard to Mr Bar-Mordecai's financial position, and the high likelihood that he will not be in a position to meet any order for costs let alone the costs incurred in preparing a Bill of Costs for an assessment, and engaging in the assessment process, there is good reason for the Court to exercise its discretion to award a gross sum costs order so as to protect Ms Daych from incurring additional costs which are likely to be unrecoverable. 30On the other hand, Mr Bar-Mordecai submits that it is inappropriate for the Court to make a gross sum costs order because the costs which have been incurred by Ms Daych, have been incurred by her solicitor and barrister negligently, and that the time which they have spent on the matter is grossly excessive, having regard to the issues raised by his application for leave. 31In particular Mr Bar-Mordecai argues that, having regard to the basis upon which the Court decided that it would not grant him leave to proceed, namely that he had not disclosed in his proposed pleadings a reasonably arguable case, there was no need for Ms Daych's lawyers to provide evidence of the kind which they did; nor was there any need for them to have made submissions of the kind they did, and accordingly the claim for costs is manifestly overstated. 32Mr Bar-Mordecai submits that no more than five per cent of the costs actually charged ought be allowed on a gross sum costs order. 33Encapsulating his approach, in paragraph 9 of his affidavit, Mr Bar-Mordecai argues: "... the plaintiff believes that a fair and reasonable cost amount in respect of the gross sum of costs of Ms Daych, taking a broad brush approach to costs and negligence of the solicitor and barrister in failing to determine that there was no cause of action in the pleading, that Ms Daych be not entitled to claim any costs but ought to sue her solicitor and barrister for negligence." 34As well, Mr Bar-Mordecai seeks to argue that a gross sum costs order is inappropriate in circumstances where he has lodged a Notice of Intention to Appeal against my earlier decision, and in circumstances where he has also made a further application to commence proceedings against Ms Daych. 35Mr Bar-Mordecai submits that in those circumstances the Court ought make no order as to costs.

Discernment 36The only issue properly before the Court is whether the Court should exercise its discretion pursuant to s 98(4) of the Civil Procedure Act to make a gross sum costs order, and if it does, in what amount that order should be. 37It is clear from the evidence that Mr Bar-Mordecai is impecunious and is likely to be unable to pay any sum which is assessed for costs after a costs assessment process. He already owes over $1 M in legal costs and, according to his evidence, he does not have any assets which can be realised to discharge those debts. His income, which consists entirely of Centrelink payments, does not allow him to repay those debts. Thus, whether costs are assessed by the costs assessment process, or else fixed by a gross sum costs order, this is a largely theoretical, but I do not suggest unimportant, exercise. 38Nevertheless, saving Ms Daych from incurring the costs of engaging a costs consultant to prepare a bill of costs and then engaging in a defended costs assessment process, constitutes a real and not theoretical saving. 39I conclude, upon the basis of the submissions made by Mr Bar-Mordecai to this Court with respect to the reasonableness of the costs incurred by Ms Daych's solicitor and barrister, that there is likely to be significant objection to the costs claimed in a costs assessment process, and that the process is likely to be an extended one characterised by numerous objections, and not one which is likely to proceed expeditiously. It is likely to be protracted. 40The exercise of the power to make a gross sum costs order is ultimately one which calls for consideration of what the interests of justice require. One has to look at the fairness of the exercise of the power having regard to the positions respectively of Ms Daych and Mr Bar-Mordecai. 41I am satisfied that this is an appropriate matter in which the Court ought proceed to make a gross sum costs order. I do so because I am satisfied that the costs assessment process is likely to be, in the context of these proceedings, protracted and characterised by lack of focus and irrelevancies. I am also satisfied, having regard to the impecuniosity of Mr Bar-Mordecai, that it is appropriate to order a gross sum costs order so that Ms Daych is not put to the actual expense likely to be incurred in engaging in a formal costs assessment process. 42This is important because in the context of these proceedings, the total sum claimed for costs and likely to be awarded whilst, no doubt, of significance to both parties, is not of a sufficient size likely to justify the expense to be incurred in a formal costs assessment process. 43The issue then becomes whether, on the evidence before me, I can make an estimate of costs that is logical, fair and reasonable. 44The principal proceedings were argued over a period of two days in Court. Mr Bar-Mordecai amended his proposed pleadings on more than one occasion, including orally, in the course of the proceedings. 45The Attorney-General did not oppose leave being granted to Mr Bar-Mordecai to institute proceedings, but Ms Daych did, and did so successfully. She was the only contradictor to Mr Bar-Mordecai's application. She thus was responsible for the work to oppose, successfully, his application. 46There was no challenge to the evidence of Mr Mullette as to his litigation and professional experience, the costs that had actually been incurred, and the approximate sum which he would anticipate, based upon his experience, that Ms Daych would be likely to recover at the end of a costs assessment process. 47The sum claimed represents less than 40 per cent of the total amount incurred. Even allowing for any criticism of the costs charged, whether such criticism is soundly based or not, including that not all costs would be allowed on a party and party basis, I am well satisfied that the sum claimed represents a genuine and fair estimate of the minimum likely to be awarded by a process of costs assessment. 48If anything, the sum claimed is generous in favour of Mr Bar-Mordecai upon the basis of the evidence before the Court.

Conclusion 49In all of those circumstances, this is matter in which it is appropriate to make a gross sum costs in the sum claimed, and I will do so.

Orders 50I make the following order: (1)Pursuant to s 98(4) of the Civil Procedure Act 2005, Mr Bar-Mordecai pay the costs of these proceedings incurred by Ms Tatiana Daych in the sum of $15,000.

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 August 2014

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