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[2026] NSWSC 216
procedural. The Court varied the principal and pre-judgment interest orders, set aside Order 4 of the Primary Orders, ordered the First Defendant to pay the Plaintiff’s remaining proceeding costs on an...
The Court decided who should pay the Plaintiff’s costs after the defendants failed to participate in the hearing. It concluded that the First Defendant’s conduct created most of the work and expense, so that company had to pay the general costs on an indemnity basis. The Second Defendant was not sufficiently active in the case to share those general costs, but had to pay the costs specifically connected with attempts to serve him and the substituted service motion. Rather than send the parties to a separate costs assessment, the Court fixed the amounts using the solicitor’s evidence. It also varied the principal and pre-judgment interest orders.
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2,518 words · generated 02/10/2026
This is a costs judgment following the Court’s earlier decision in Big Sky Capital Pty Ltd atf the Montana Investment Trust v TEB Group Management Pty Ltd [2026] NSWSC 152. Sirtes J says the earlier proceeding was determined on 2 March 2026, without trial and in circumstances where neither defendant appeared. The Court had given judgment for the Plaintiff and provisionally ordered the First Defendant, TEB Group Management Pty Ltd, to pay the Plaintiff’s costs. This judgment determines the Plaintiff’s subsequent application to vary the costs order ([1]–[3]).
4 cited instruments linked from this judgment.
The parties were Big Sky Capital Pty Ltd, suing as trustee for the Montana Investment Trust; TEB Group Management Pty Ltd, the First Defendant and Cross-Claimant; and David Cosmo Schuh, the Second Defendant. The Plaintiff asked for different costs treatment at different stages of the case, costs against both defendants after the Second Defendant’s joinder, indemnity costs, and a gross sum order rather than assessment ([2]).
The sequence of pleadings mattered. In its original Commercial List Statement, the Plaintiff claimed $3.85 million from the First Defendant and contended that a $6 million payment received from it should first be allocated to Mr Schuh’s debt. The First Defendant disputed that allocation in its Commercial List Response filed on 21 February 2025, arguing that the payment related only to its own liability. The Plaintiff then joined Mr Schuh and amended its pleadings on 2 July 2025, seeking repayment of $1.1 million from him in the alternative ([17]–[19]).
The Court distinguished the defendants’ roles. Mr Schuh filed no List Response, had not retained solicitors, did not appear, and was not shown to have caused meaningful additional expense in his personal capacity. The First Defendant, by contrast, filed a Cross-Claim, generated most of the hearing preparation, did not comply with specified orders, and ultimately failed to prosecute its Cross-Claim or appear at the hearing ([8], [14]–[15], [22], [29]–[32]).
The final orders varied the primary money orders to require the First Defendant to pay $2,750,000 plus $330,226.23 pre-judgment interest, and the Second Defendant to pay $1,100,000 plus $138,957.57 pre-judgment interest. The First Defendant was ordered to pay the remaining proceeding costs on an indemnity basis in the gross sum of $373,298. The Second Defendant was ordered to pay the costs of attempts to serve him and the substituted service motion, on the ordinary basis, in the gross sum of $14,758 ([50]).
The Court began from the ordinary costs position: costs generally follow the event, but the discretion remains with the Court under UCPR r 42.1 and s 98(1)(a) of the Civil Procedure Act 2005 (NSW) ([4]). The judgment stresses that the result depends on what is just in the particular circumstances, rather than applying a mechanical rule to every defendant named in a proceeding ([6]).
For the Second Defendant, the decisive question was not simply whether the Plaintiff succeeded against him. The Court considered his actual participation and the source of the work generated. It was not satisfied that his attendance at a private mediation was in his personal capacity, because he also attended as the First Defendant’s sole director and needed to provide instructions for the company ([8]). Two emails from him did not overcome the absence of a List Response. One appeared to indicate that he and the company could not satisfy a judgment; a later email disputing how a loan payment had been treated was sent one working day before the hearing, after the Plaintiff had prepared its evidence and submissions ([9]–[13]).
The Court also examined how Mr Schuh came to be joined. Initially, the Plaintiff’s pleaded position was aligned with his interest: it said the First Defendant’s payment should be applied first to his debt. The First Defendant disputed this and asserted that the payment was solely in satisfaction of its own liability. That dispute precipitated the Plaintiff’s decision to join Mr Schuh ([17]–[21]). The Court reasoned that, had the First Defendant not taken that position, Mr Schuh might never have been joined ([21]). It also noted that the First Defendant’s Cross-Claim was responsible for the lion’s share of the Plaintiff’s hearing evidence and for most of the Court Book ([22]). Those circumstances led the Court to place general proceeding costs on the First Defendant alone ([23]).
There was a narrow exception. The Plaintiff had attempted to serve Mr Schuh with the amended pleadings and brought a substituted service motion. Peden J had previously ordered the motion’s costs to be costs in the cause. Sirtes J considered it unjust to shift those particular costs to the First Defendant. The Second Defendant therefore bore the service-related costs, but not general proceeding costs ([24]–[25]).
The indemnity costs decision turned on the First Defendant’s conduct. The judgment adopts the formulation collected in James v Douglas: indemnity costs can be warranted by delinquency, plainly unreasonable conduct, or a special or unusual feature justifying departure from ordinary party-and-party costs ([27]). The First Defendant’s Cross-Claim was significantly more complex than the Plaintiff’s claim, generated extensive preparation, and was not prosecuted. The First Defendant also failed to respond to preparation correspondence and did not comply with a discovery-related order. It then failed to appear when its Cross-Claim was struck out and judgment entered ([29]–[31]). The Court concluded that this conduct caused unnecessary delay and expense and justified indemnity costs ([32]).
The Second Defendant’s costs basis was different. The Plaintiff argued that he had evaded service. Sirtes J considered that characterisation arguable but said the issue could not properly be determined in this costs application. The judge also found no special or unusual feature of the substituted service motion warranting indemnity costs, particularly given the earlier order that its costs be costs in the cause. The Second Defendant’s limited costs liability was therefore on the ordinary basis ([28]).
Finally, the Court considered whether to fix costs as gross sums. The judgment cites Rahman v Rahman (No 2) for the factors relevant to that decision, including responsibility for costs, proportionality, complexity and the unsuccessful party’s capacity to satisfy a costs liability. It also records that a lump sum should be fixed only if the Court can act fairly on the material, and that a broad-brush approach is appropriate ([34]). The defendants’ non-appearance, the likelihood of further expense in an assessment, and the solicitor’s detailed schedules and invoices supported making gross sum orders ([36]–[38]).
This judgment does not purport to change the governing law. It applies established costs principles to the particular allocation of responsibility between an active corporate defendant and an inactive individual defendant.
Before the decision, the relevant framework was discretionary. Costs ordinarily follow the event under UCPR r 42.1 and CPA s 98(1)(a), but the Court may account for whether a particular defendant materially contributed to the costs incurred. The judgment cites Probiotec and Highfields for the proposition that an inactive defendant who did not contribute significantly to the plaintiff’s costs should not necessarily bear the whole costs liability. It then cites The Owners – Strata Plan No 68372 v Allianz Australia Insurance Ltd (No 2) for the broader point that the discretion is ultimately guided by what is just in the circumstances ([4]–[6]).
The decision applies that approach by looking at the real causes of cost, not merely the formal outcome against each defendant. The Second Defendant was subject to judgment, but the Court found that he had not substantively participated and that his joinder flowed from the First Defendant’s pleaded position. This supported allocating general costs to the First Defendant and isolating only the service costs attributable to the Second Defendant ([14]–[25]).
For indemnity costs, the judgment applies the established threshold described in James v Douglas, including delinquency, plainly unreasonable conduct, or a special or unusual feature. The application is fact-specific: the First Defendant’s failure to comply with orders, abandonment of its Cross-Claim after requiring the Plaintiff to prepare, and non-appearance were cumulatively sufficient in this case ([27]–[32]). The decision does not state that non-appearance alone automatically warrants indemnity costs.
For gross sum orders, the judgment applies the principles set out in Rahman. The power is available before costs are referred for assessment, but should be exercised only where fairness and the available material permit a suitable figure to be fixed. A broad-brush calculation is accepted as appropriate, rather than replicating a formal assessment ([34]–[37]).
The practical contribution of the judgment is an example of how those principles can operate together: differentiated responsibility between defendants, distinct costs bases for different categories of work, and a gross sum calculation informed by detailed evidence. It does not establish a new universal rule that inactive defendants are never liable for costs or that non-participating defendants should always face gross sum orders.
At [6], Sirtes J says the costs discretion is “ultimately informed by what is just having regard to the circumstances of the case”. In plain English, the Court assesses the particular parties’ conduct and the way costs arose, rather than mechanically assigning all costs to every party against whom judgment was entered.
At [15], the judge concludes that the facts “satisfy me that the Second Defendant was not a substantively active party”. This conclusion rests on the lack of pleadings, representation, hearing attendance and meaningful additional expense attributable to Mr Schuh personally ([8]–[14]).
At [21], the judge observes that Mr Schuh’s liability was raised by the First Defendant and that he might never have been joined had the First Defendant not disputed the allocation of the payment. This explains why the First Defendant, rather than the Second Defendant, bore the general costs after joinder.
At [32], the Court says the First Defendant’s conduct “caused unnecessary delay and expense”. The reasons immediately preceding that statement identify the conduct: non-compliance with orders, failure to prosecute the Cross-Claim, and failure to attend the hearing. The Court treats the combined conduct as sufficient for indemnity costs.
At [35], the judge states that a gross sum order requires “a good reason”. The reason here was not simply convenience. The Court considered likely non-participation in assessment, possible inability to satisfy the liability, further delay and cost, and the adequacy of the evidence available to quantify costs ([36]–[38]).
At [41]–[43], the judge explains how the figures were calculated. Recoverable solicitors’ fees were discounted by 60% for ordinary-basis costs and 80% for indemnity-basis costs, rather than the higher percentages proposed by the Plaintiff’s solicitor. Counsel’s fees were reduced by 7%, and other disbursements were allowed at 100%. These figures reflect the Court’s broad-brush method and its effort to account for the savings and limitations of a gross sum approach.
The reasoning is most relevant where a plaintiff succeeds against several defendants but their participation and contribution to costs differ materially. A court considering allocation may examine whether one defendant was inactive, whether correspondence or other conduct caused meaningful additional expense, and whether the active defendant’s pleadings or positions caused the inactive defendant to be joined ([6]–[23]).
The decision is particularly relevant where the plaintiff’s case against an individual defendant is alternative or secondary, and the individual was joined because a corporate defendant disputed an allocation or issue that affected the individual’s alleged liability. The factual sequence here mattered: the Plaintiff initially advanced a position consistent with Mr Schuh’s interest, while the First Defendant pleaded a contrary position ([17]–[21]).
The indemnity costs reasoning is relevant where a party has caused substantial preparation costs through a claim or cross-claim, then does not comply with court orders, fails to prosecute that claim, and does not appear when the matter is determined. The judgment relies on the combination of those circumstances, rather than treating any single fact as automatically decisive ([29]–[32]).
The gross sum discussion may be relevant where an assessment is likely to cause further cost or delay, there is a credible concern that parties will not participate, and detailed invoices and evidence permit a fair estimate. The Court expressly considered both procedural practicality and fairness between the parties ([34]–[38]).
The decision does not establish that an inactive defendant can never be liable for general costs. Here the Second Defendant remained responsible for work specifically attributable to attempts to serve him and the substituted service motion ([24]–[25], [44]–[45]). Nor does it make a finding that Mr Schuh evaded service; the judge said the Plaintiff’s characterisation was arguable but could not properly be determined in this application ([28]).
The supplied judgment contains no decisions subsequent to this costs ruling and provides no later judicial treatment of it. It would therefore be unsupported to describe the ruling as followed, distinguished or otherwise treated by later courts.
The judgment itself relies on earlier authorities. For allocation involving inactive defendants, it cites Probiotec, Highfields and The Owners – Strata Plan No 68372 ([6]). For indemnity costs, it cites James v Douglas and refers to D’Cruz v Coutinho in relation to the expense caused where a claim is struck out and judgment entered after a party does not appear ([27], [31]). For gross sum orders, it cites Rahman v Rahman (No 2) and the authorities set out in the passage reproduced at [34]. For GST treatment of costs, it relies on Gagner ([39]).
Accordingly, the source supports describing this judgment as applying those authorities, not as having established a confirmed line of later precedent. Whether subsequent courts have adopted or limited its reasoning is not answered by the provided material.
The judgment leaves the individualised nature of the costs discretion prominent. It does not specify a general threshold for when an inactive defendant has contributed “significantly” to costs, or how courts should measure that contribution in cases with different pleadings, correspondence or hearing work. Its conclusion is tied to the evidence about this case’s allocation dispute, the timing of Mr Schuh’s communications, and the volume of work generated by the First Defendant’s Cross-Claim ([8]–[23]).
The judge did not determine whether Mr Schuh had evaded service. The issue was described as arguable but not properly determinable in the costs application ([28]). The judgment therefore should not be read as a finding on the facts or legal significance of the service attempts.
The reasons also do not provide a detailed item-by-item assessment of every cost. The Court used a broad-brush approach, made specified percentage reductions, and apportioned costs between the defendants. That method is consistent with its account of gross sum orders, but the judgment does not give a general formula for apportioning mixed work or calculating future gross sums ([34], [41]–[47]).
Finally, the Court’s observations about likely inability to pay were inferences drawn from the defendants’ non-appearance, Mr Schuh’s correspondence and the withdrawal of the First Defendant’s solicitors ([36]). The judgment does not decide any separate insolvency issue or establish that inability to pay is, by itself, sufficient to support a gross sum order.
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Big Sky Capital Pty Ltd atf the Montana Investment Trust v TEB Group Management Pty Ltd (Costs) [2026] NSWSC 216
Hearing dates: On the papers
Date of orders: 16 March 2026
Decision date: 16 March 2026
Jurisdiction: Equity - Commercial List
Before: Sirtes J
Decision: (1) Order 1 of the orders made on 2 March 2026 (the Primary Orders) is varied to read “The First Defendant is to pay the Plaintiff $2,750,000 together with pre-judgment interest of $330,226.23 calculated in accordance with s 100 of the Civil Procedure Act 2005 (NSW)”.
(2) Order 2 of the Primary Orders is varied to read “The Second Defendant is to pay the Plaintiff $1,100,000 together with pre-judgment interest of $138,957.57 calculated in accordance with s 100 of the Civil Procedure Act 2005 (NSW)”.
(3) Order 4 of the Primary Orders is set aside.
(4) The First Defendant is to pay the Plaintiff’s costs of the proceedings (other than the costs referred to in Order 5 below) on an indemnity basis in the specified gross sum of $373,298.
(5) The Second Defendant is to pay the Plaintiff’s costs of its attempts to serve him with the Amended Summons and Amended Commercial List Statement, and the substituted service motion in relation thereto, on the ordinary basis in the specified gross sum of $14,758.
Catchwords: COSTS – application to vary order – judgment given in absence of defendants – costs liability of inactive defendant – whether conduct warrants indemnity costs – whether gross sum order appropriate
Legislation Cited: Civil Procedure Act 2005 (NSW) ss 98, 100
Practice Note SC Gen 16
Uniform Civil Procedure Rules 2005 (NSW) r 42.1
Cases Cited: Big Sky Capital Pty Ltd atf the Montana Investment Trust v TEB Group Management Pty Ltd [2026] NSWSC 152
D’Cruz v Coutinho (Costs and Final Orders) [2025] NSWSC 201
Gagner Pty Ltd t/as Indochine Cafe v Canturi Corporation Pty Ltd (2009) 262 ALR 691; [2009] NSWCA 413
Highfields Australia Pty Ltd v Advanced Motor Dealers Group Pty Ltd (recs and mgrs apptd) (No 2) [2024] NSWSC 35
James v Douglas [2016] NSWCA 178
Probiotec Ltd v University of Melbourne (2008) 166 FCR 30; [2008] FCAFC 5
Rahman v Rahman (No 2) [2025] NSWCA 266
The Owners – Strata Plan No 68372 v Allianz Australia Insurance Ltd (No 2) [2015] NSWSC 729
Category: Costs
Parties: Big Sky Capital Pty Ltd as trustee for the Montana Investment Trust (Plaintiff/Cross-Defendant)
TEB Group Management Pty Ltd (First Defendant/Cross-Claimant)
David Cosmo Schuh (Second Defendant)
Representation: Solicitors:
McCullough Robertson Lawyers (Plaintiff/Cross-Defendant)
File Number(s): 2024/00406041
I heard and determined these proceedings on 2 March 2026: Big Sky Capital Pty Ltd atf the Montana Investment Trust v TEB Group Management Pty Ltd [2026] NSWSC 152. I gave judgment for the Plaintiff without trial in circumstances where the Defendants did not appear. I provisionally ordered that the First Defendant pay the Plaintiff’s costs of the proceedings. By these reasons I determine the Plaintiff’s application to vary that costs order.
The Plaintiff seeks by variation that its costs be paid:
by the First Defendant up until the Second Defendant was joined to the proceedings;
by the First and Second Defendants from when the Second Defendant was joined;
on an indemnity basis; and
in a gross sum determined by the Court pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) (CPA).
In support of its application the Plaintiff has filed brief written submissions and a supporting affidavit of its solicitor, Mr Christopher Scott Nielsen, affirmed on 5 March 2026. The Defendants did not avail themselves of the opportunity to respond to the application. They filed no submissions or evidence.
The Plaintiff was entirely successful against the Second Defendant in circumstances where he did not file a List Response and failed to appear at the hearing. The usual position is that costs follow the event albeit they remain in the discretion of the Court: Uniform Civil Procedure Rules 2005 (NSW) r 42.1; CPA s 98(1)(a).
I have already ordered that the First Defendant is liable for the Plaintiff’s costs of the proceedings. The question here is whether the Second Defendant should share that liability from 1 July 2025 being the date he was joined to the proceedings.
There is authority that where one of several defendants is not an active party to the proceedings, and cannot be said to have contributed significantly to the plaintiff’s costs, the inactive defendant should not be burdened with the whole costs liability: Probiotec Ltd v University of Melbourne (2008) 166 FCR 30; [2008] FCAFC 5 at 49 [73] (Rares J, Finn J agreeing); Highfields Australia Pty Ltd v Advanced Motor Dealers Group Pty Ltd (recs and mgrs apptd*) (No 2)* [2024] NSWSC 35 at [17] (Richmond J). However, the Court’s discretion is ultimately informed by what is just having regard to the circumstances of the case: The Owners – Strata Plan No 68372 v Allianz Australia Insurance Ltd (No 2) [2015] NSWSC 729 at [22] (Ball J, as his Honour then was).
In the circumstances of these proceedings, I have concluded that costs should not be ordered against the Second Defendant, subject to one qualification.
First, the Second Defendant did not take a substantively active part in the proceedings. He filed no appearance and did not retain solicitors. He did not plead to the claim or prepare evidence. While Mr Nielsen deposes at paragraph 39 of his affidavit that “Big Sky, TEB and Mr Schuh attended a private mediation” on 5 December 2025, it is not clear to me that Mr Schuh was attending in his personal capacity as opposed to as the sole director of the First Defendant, particularly where he had not appeared in the proceedings and he had to attend in any event to provide instructions on behalf of the First Defendant.
The Plaintiff draws my attention to two emails from Mr Schuh which are said to demonstrate that he actively disputed his liability despite not having filed a List Response. It is difficult to find that correspondence can outflank the absence of any List Response and the inference that arises in consequence.
On 25 February 2026 at 3.59 pm, Mr Schuh emailed the Plaintiff’s solicitors and relevantly said:
“The notification you have received is correct. As a company and personally there is nothing to gain from us pushing forward at this point in time. I would indicate this is also only going to result in a loss from your client’s point of view at this point in time.
However, if you are open to having a without prejudice conversation with me, I believe I can provide a path forward for both your client and myself. Rest assured the same reasons the company or myself cant perform are inline with your clients’ interests [sic].”
This email was sent in response to correspondence from the Plaintiff’s solicitors indicating that it had received Mr Hudson’s Notice of Ceasing to Act in relation to the First Defendant. While perhaps infelicitously expressed, my reading of this passage is that Mr Schuh is indicating that he and his company are not in a position to satisfy any judgment given against them, in that they “can’t perform”, such that “there is nothing to gain from us pushing forward at this point in time”.
On 27 February 2026 at 12.59 pm, Mr Schuh sent an email to the Plaintiff’s solicitors relevantly in the following terms:
“I would also suggest the funds received by your client to date have not been reconciled correctly. It was always the agreement the money would go towards my loan with him which resulted due to the drawn on nature of the transaction apposed [sic] to the proceeds coming off the purchase price. I am specifically talking about the $1,000,000.00 Loan Clayton advanced.”
Here the Second Defendant seems to dispute his liability to the Plaintiff in respect of the loan monies. However, this email was sent one working day prior to the hearing, after the Plaintiff had prepared its evidence and submissions. In its written submissions, the Plaintiff does not draw the Court’s attention to any earlier correspondence in which Mr Schuh disputes his liability to the Plaintiff (except for the email set out above). And, as I have said, he did not file a List Response.
Insofar as the Plaintiff was required to correspond with Mr Schuh in preparation for the hearing, that correspondence was either directed jointly to him and the First Defendant’s solicitors, or to him solely once the First Defendant’s solicitors purported to cease to act for the company. The Second Defendant cannot be said to have put the Plaintiff to any meaningful further expense acting in his personal capacity.
These facts, taken together, satisfy me that the Second Defendant was not a substantively active party in the proceedings.
Secondly, and relatedly, it was the First Defendant which put in issue Mr Schuh’s liability to the Plaintiff.
In its original Commercial List Statement filed on 1 November 2024 (CLS), the Plaintiff contended that the First Defendant alone was liable to the Plaintiff for $3.85 million. The Plaintiff claimed that the $6 million received from the First Defendant on 19 September 2024 was to be allocated first to Mr Schuh’s debt, with the balance received on account of the First Defendant’s liability under the Share Sale Deed: CLS at [C20]. The Plaintiff’s position was aligned with Mr Schuh’s interest.
The First Defendant disputed that claim in its Commercial List Response (CLR) filed on 21 February 2025. It argued that its $6 million payment was made solely in satisfaction of its liability and was unrelated to Mr Schuh’s loans: CLR at [C20].
This joinder of issue precipitated the Plaintiff’s joining Mr Schuh in its Amended Summons (AS) and Amended Commercial List Statement (ACLS) filed on 2 July 2025. In that amended pleading, the primary relief sought by the Plaintiff remained the payment by the First Defendant of $3.85 million. It was only in the alternative that the Plaintiff sought that the Second Defendant repay $1.1 million. Ultimately the Plaintiff sought and obtained judgment against both Defendants at the hearing, of which intention it gave due notice to the Second Defendant.
The Plaintiff submits that Mr Schuh stood to benefit personally from the First Defendant’s defence of the proceedings, because if the First Defendant’s position was that its $6 million payment was partially made in satisfaction Mr Schuh’s loan, then he would have no liability to the Plaintiff. But that was not the First Defendant’s position. The First Defendant pleaded the opposite case.
The Plaintiff seeks that its costs be paid on an indemnity basis.
In James v Douglas [2016] NSWCA 178 at [63], Meagher JA (with whom Leeming and Simpson JJA agreed) collected some of the principles informing the exercise of this discretion:
“As was noted by this Court (Meagher and Barrett JJA, and Tobias AJA) in Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6], a number of circumstances have been recognised as capable of warranting the making of an order for payment of costs on an indemnity basis. They include where the conduct of the party against whom the order is sought involves some “delinquency” or is “plainly unreasonable” or is otherwise such as to involve “some special or unusual feature” justifying the court’s departure from the position that party and party costs be assessed on the ordinary basis: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [44]; Harrison v Schipp [2001] NSWCA 13 at [139]; Sydney City Council v Geftlick [2006] NSWCA 280 at [90].”
The Second Defendant is only liable for the costs of service on him and the substituted service motion. The effect of the Plaintiff’s submission is that Second Defendant evaded service, and its costs should be awarded on an indemnity basis. While the Plaintiff’s characterisation of Mr Schuh’s conduct is arguable, I cannot properly determine that issue here. I do not consider that there is some “special or unusual feature” of that motion that would justify a departure from the usual rule, particularly in circumstances where Peden J ordered that the costs of the motion be costs in the cause. The Second Defendant is to pay those costs on the ordinary basis.
The First Defendant’s conduct is another matter. The Plaintiff’s claim was relatively straightforward. The First Defendant’s Cross-Claim was significantly more complex and was responsible for the vast majority of the Court Book. The First Defendant ultimately failed to prosecute its Cross-Claim, after putting the Plaintiff to the time and expense of preparing a response to it. It was on the basis of the Cross-Claim that the Court allocated three hearing days to the matter.
Justice Peden made the usual order for hearing on 12 December 2025. Mr Nielsen’s evidence makes plain that the First Defendant failed to respond to the Plaintiff’s attempts to prepare the documents required by that order. Moreover, the First Defendant failed to comply with the order of Rees J made on 12 September 2025 that it provide a verified list of documents in response to discovery categories.
Finally, the Cross-Claim was struck out and judgment entered in circumstances where the First Defendant did not bother to appear, putting the Plaintiff to needless expense: D*’*Cruz v Coutinho (Costs and Final Orders) [2025] NSWSC 201 at [8] (Hammerschlag CJ in Eq).
The First Defendant’s conduct of the proceedings caused unnecessary delay and expense. It failed to comply with orders of the Court and did not prosecute its Cross-Claim. It did not appear at the hearing. In accordance with settled principle, I am comfortably satisfied that the First Defendant should pay the Plaintiff’s costs on an indemnity basis.
The Plaintiff also seeks that its costs be payable in a gross sum instead of being referred for assessment.
The Court of Appeal (Payne, McHugh and Free JJA) set out the principles which may justify the making of such an order in Rahman v Rahman (No 2) [2025] NSWCA 266 at [61]–[64] as follows:
“[61] A gross sum costs order can be made any time before costs are referred for assessment. Section 98 confers a wide discretion on the Court. The principles were stated by Beazley JA (as her Excellency then was) in Hamod at [813]-[820], see also Gabrielle v Abood (No 4) [2023] NSWCA 100 at [6] per Bell CJ, Kirk JA and Adamson JA.
[62] In Hamod, Beazley JA at [813] identified some of the factors which merit particular consideration, including 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.
[63] The power to award a lump 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 [21]-[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123; [1995] FCA 350; Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [28]-[29].
[64] A “broad brush” approach is appropriate when a gross sum costs order is made. To require the same or a similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5; [1999] FCA 673 per O’Loughlin J; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7].”
The Court will only make a gross sum order where there is a good reason to do so. This is such a case.
The First Defendant in particular bears much of the responsibility for the costs incurred by its unprosecuted Cross-Claim. As neither Defendant appeared at the hearing, I have little confidence that they would participate constructively, or indeed at all, in an assessment process. Further, the inference I draw from the Defendants’ non-appearance, together with Mr Schuh’s correspondence and the reason for the withdrawal of the First Defendant’s solicitors, is that they are unlikely to be able to satisfy the judgment, let alone any costs liability. To require the Plaintiff in these circumstances to pursue an assessment of its costs is likely to cause it to suffer further delay and incur further costs which it may not recover. Finally, I am satisfied that Mr Nielsen’s evidence (addressed below) provides a sufficient basis for the Court to determine costs fairly between the parties.
These reasons provide a proper basis to exercise the Court’s discretion to make a gross sum order, and I propose to do so.
In paragraphs 68 to 95 of his affidavit, Mr Nielsen sets out the method by which he calculated the Plaintiff’s costs of the proceedings. Exhibited to his affidavit are detailed line-item records of solicitors’ fees, Counsel’s fees and disbursements. Corresponding invoices are also included. I accept that his analysis is careful and informed by his considerable experience.
A party which is registered for GST, and therefore entitled to the benefit of an input tax credit, will not be allowed to recover legal costs inclusive of GST on an assessment: Gagner Pty Ltd t/as Indochine Cafe v Canturi Corporation Pty Ltd (2009) 262 ALR 691; [2009] NSWCA 413 at 723 [152]–[153] (Campbell JA, Macfarlan JA and Sackville AJA agreeing). At paragraph 94 of his affidavit, Mr Nielsen deposes that the Montana Investment Trust, on whose behalf the Plaintiff brings these proceedings as a trustee, is not registered for GST. In those circumstances, costs should be allowed inclusive of GST, and all the amounts below are so expressed.
Mr Nielsen has removed a substantial amount of costs charged by his firm which would not be recoverable on a costs assessment. This leaves total recoverable solicitors’ fees in the sum of $389,429.70. Counsel’s fees for the proceedings come to $58,905. Other disbursements have been incurred in the amount of $24,712.18.
For his firm’s recoverable fees, Mr Nielsen proposes that 70% of those costs ought to be allowed on the ordinary basis, and 85% of those costs be allowed on an indemnity basis, based on his experience of the costs assessment process. I will allow those costs at 60% and 80% respectively, to account for the savings of time and expense of a gross sum order and to ensure that the Defendants are not prejudiced by this abbreviated approach.
Mr Nielsen proposes that Counsel’s fees be discounted by 7% to align them with the guidelines for junior counsel promulgated by the Costs Assessment Rules Committee. I agree with this course.
I will allow other disbursements at 100% in accordance with the usual method adopted on an assessment.
Given the conclusion I have reached concerning the Second Defendant’s liability, it is necessary to disaggregate from the total amounts those costs which are referable to the service of the AS and ACLS on the Second Defendant, and the costs of the substituted service motion. Having reviewed the schedules of costs myself, and doing the best I can on a broad-brush approach, those costs include the following:
recoverable solicitors’ fees of $14,900, 60% of which is $8940;
Counsel’s fees of $2475, 93% of which is $2302; and
disbursements of $3516.
Therefore, I will order that the Second Defendant pay the Plaintiff’s costs in a gross sum of $14,758.
It follows that the costs for which the First Defendant is liable are (rounding down):
recoverable solicitors’ fees of $374,529, 80% of which is $299,623;
Counsel’s fees of $56,430, 93% of which is $52,479; and
disbursements of $21,196.
The First Defendant is therefore to pay the Plaintiff’s costs in a gross sum of $373,298.
I granted leave for the Plaintiff to calculate pre-judgment interest payable on the judgment in accordance with s 100 of the CPA. Mr Nielsen sets out those calculations at paragraphs 102 to 109 of his affidavit.
That interest has been calculated in accordance with Practice Note SC Gen 16 and commences on the dates which the evidence discloses as being when the respective amounts became payable to the Plaintiff by the Defendants. I accept those calculations.
I make the following orders:
Order 1 of the orders made on 2 March 2026 (the Primary Orders) is varied to read “The First Defendant is to pay the Plaintiff $2,750,000 together with pre-judgment interest of $330,226.23 calculated in accordance with s 100 of the Civil Procedure Act 2005 (NSW)”.
Order 2 of the Primary Orders is varied to read “The Second Defendant is to pay the Plaintiff $1,100,000 together with pre-judgment interest of $138,957.57 calculated in accordance with s 100 of the Civil Procedure Act 2005 (NSW)”.
Order 4 of the Primary Orders is set aside.
The First Defendant is to pay the Plaintiff’s costs of the proceedings (other than the costs referred to in Order 5 below) on an indemnity basis in the specified gross sum of $373,298.
The Second Defendant is to pay the Plaintiff’s costs of its attempts to serve him with the Amended Summons and Amended Commercial List Statement, and the substituted service motion in relation thereto, on the ordinary basis in the specified gross sum of $14,758.
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Big Sky Capital Pty Ltd atf the Montana Investment Trust
TEB Group Management Pty Ltd
(2009) 262 ALR 691
(2008) 166 FCR 30
(2002) 54 NSWLR 734
(1995) 57 FCR 119
(1999) 93 FCR 1
The Court varied the principal and pre-judgment interest orders, set aside Order 4 of the Primary Orders, ordered the First Defendant to pay the Plaintiff’s remaining proceeding costs on an indemnity basis in a gross sum of $373,298, and ordered the Second Defendant to pay service and substituted-service-motion costs on the ordinary basis in a gross sum of $14,758.
Mr Schuh’s liability to the Plaintiff was raised by the First Defendant. Had the First Defendant not joined issue with the Plaintiff on this point, it is likely that Mr Schuh would never have been joined to the proceedings.
Thirdly, the lion’s share of the evidence prepared by the Plaintiff for the hearing was in response to the First Defendant’s Cross-Claim filed on 21 February 2025. The Court Book comprised over 15 volumes. Counsel for the Plaintiff indicated at the hearing that, where the Cross-Claim was not being prosecuted, only one folder was relevant to the Plaintiff’s claim: Tcpt, 2 March 2026, p 6(22). The Second Defendant was not a party to that Cross-Claim.
For these reasons, I consider that the First Defendant alone should bear the Plaintiff’s costs of the proceedings.
The qualification to which I adverted above is the Plaintiff’s motion for substituted service of the AS and ACLS on the Second Defendant. On 14 August 2025, Peden J determined that motion in the Plaintiff’s favour (with the consent of the First Defendant) and ordered that the Plaintiff’s costs of the motion be costs in the cause. It would be unjust to visit those costs on the First Defendant.
Accordingly, the First Defendant should pay the Plaintiff’s costs of the proceedings, except for the Plaintiff’s costs of attempting to serve Mr Schuh and of its motion filed on 4 August 2025. The costs of that motion, and the costs in relation thereto, should be payable by the Second Defendant alone.