Blaze Advertising Pty Ltd v Momentum Accounting Pty Ltd

Consideration

1. Blaze appeared at the hearing but neither Cardinal House nor Mr Carroll did so. Blaze sues for a liquidated sum calculated by reference to invoices raised for work done by it for Cardinal House. I am satisfied that neither Cardinal House nor Mr Carroll has paid any part of the amount claimed. Mr Carroll is liable for the same liquidated amount upon proof that Cardinal House has defaulted on a claim made by Blaze for payment of the sum claimed. I am satisfied on the evidence that the amount due to Blaze is $719,943.97, being the amount due to it in respect of the cause of action for which the proceedings were commenced, less the sum of $275,000 paid by the first and third defendants. Mr Carroll is liable to Blaze for the same sum in accordance with the terms of his guarantee.

Interest

1. Blaze also seeks interest upon the principal amount claimed up to and including 29 July 2019. As already noted, that principal sum has been reduced by $275,000 on account of a payment by the first and third defendants in settlement of Blaze's claim against them. That sum was paid on 6 July 2018 so that receipt of the sum of $275,000 on that day has been taken into account in the interest calculations upon which Blaze relies. Blaze therefore claims interest upon the balance of $719,943.97.
2. In support of the claim for interest, Blaze reads the affidavit of Lucy Tindal affirmed on 29 July 2019. The total amount of interest claimed is $127,123.52. Ms Tindal has set out her workings in the body of her affidavit and has exhibited a copy of the print outs of her calculations between pages 54 and 82 of the exhibit LT-1 to her affidavit.
3. Blaze is entitled to interest in the amount claimed in the sum of $127,123.52.

Costs

1. Blaze seeks costs up to and including 1 July 2019 on an ordinary basis and thereafter on an indemnity basis. The latter claim is based upon a letter dated 1 July 2019 from Blaze's solicitor to Nino Odorisio at Hopwood Ganim, the former solicitors for Cardinal House and Mr Carroll. That letter is in these terms: "Dear Mr Odorisio Re: Blaze Advertising Pty Ltd v Cardinal House Pty Ltd & Carroll Supreme Court of New South Wales proceedings 2017/139068 We refer to the abovementioned and the impending hearing of this matter. Your clients have failed to adduce any expert evidence in support of their claim against our client. Your clients assert the lottery had to be terminated as a result of our client's breach of duties it owed your clients. However, your clients have not adduced any expert evidence to establish causation. Further, your clients claim $2.3 million in expenses, but fail to provide a single piece of documentary evidence to support this claim. We are of the view that these failures are fatal to your clients' claim. Similarly, your clients' defence attempts to limit its liability by alleging the lottery failed as a result of the ASB complaint about the television advertisement. Again, your client has failed to adduce any compelling evidence in support of the defence. In light of the above, our client believes its prospects of success on its claim and in defending the cross-claim are strong and should the matter proceed to final hearing we are of the view that the Court will find for the plaintiff for the full amount of the outstanding invoices plus costs and interest. We confirm the sum of $275,000.00 was paid to our client by the first and third defendants following the mediation in June 2018. Therefore, the sum claimed against your client, excluding costs and interest, is $719,943.97. As you are aware, the plaintiff's claim includes interest to be calculated from the date the invoices the subject of the dispute were due. Interest accrued to date is approximately $123,000.00. Should the matter proceed to hearing a final interest calculation will be undertaken. In the interests of avoiding further costs of litigating this matter our client is willing to make a commercial offer as set out in the attached Offer of Compromise. For the avoidance of doubt, this offer is to be read as $770,000.00 plus the plaintiff's costs as agreed or assessed and is made up as follows: 1. Invoice claim: $647,000.00; 2. Interest: $123,000.00; and 3. Plaintiff's costs as agreed or assessed. If for any reason this offer is found not to comply with the rules, it is to be read as an offer in accordance with Calderbank v Calderbank [1975] 3 All ER 333. In the event that this matter proceeds to a final hearing and our client receives a judgment in its favour for more than the amount of the offer, we will rely on this letter in an argument for costs. Given the hearing of this matter is listed to commence on 29 July 2019, and significant costs will soon be incurred in preparing the matter for hearing this offer is open for acceptance for a period of fourteen days, to 15 July 2019. Yours faithfully, Somerville Legal"
2. The Offer of Compromise to which that letter referred is in these terms: "OFFER OF COMPROMISE The plaintiff/cross-defendant offers to settle all claims between the plaintiff/cross-defendant and the second and fourth defendants/cross-claimants on the following terms: 1. Judgment for the plaintiff/cross-defendant in the sum of $770,000.00. 2. The defendants/cross-claimants to pay the plaintiff/cross-defendant's costs as agreed or assessed. 3. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules. 4. This offer shall be open for a period of 15 July 2019."
3. Neither Cardinal House nor Mr Carroll responded to that letter.
4. In accordance with the evidence in Ms Tindal's affidavit, and taking account of the further submissions of Mr Knowles updating the relevant calculations, the total costs and disbursements claimed by Blaze up to and including 29 July 2019 are said to be $103,383.20. Of that sum, $77,646 was incurred prior to 1 July 2019. Blaze claims two thirds of that sum as if assessed on a party/party basis or $51,764. Costs incurred after 1 July 2019 in the sum of $25,737.19 are claimed on an indemnity basis. The total costs claimed by Blaze therefore amount to $51,764 on an ordinary basis plus $25,737.19 on an indemnity basis or the (rounded) sum of $77,500.
5. In my opinion, Blaze is entitled to recover costs incurred by it after 1 July 2019 on an indemnity basis. The letter and offer of compromise are clear. The defendants ignored the letter and Blaze was entitled to proceed to the hearing in anticipation that the matter would be defended. The costs that it incurred in doing so could have been entirely avoided if the offer had been accepted. The result achieved by Blaze is uncontroversially no less favourable than the terms of the offer. It is unnecessary to consider whether the Offer of Compromise complies with the rules as it quite plainly operated as a Calderbank offer in the circumstances.

Gross sum costs order

1. In addition to an order for the payment of its costs, Blaze seeks a gross sum costs order in accordance with s 98 of the Civil Procedure Act 2005. That section is relevantly as follows: "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. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (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. (5)…"
2. I had cause to deal with this issue in an application pursuant to s 98(4)(c) in some detail in Hamod v State of New South Wales (No 13) [2009] NSWSC 756. The principles that I discussed remain relevant for the purposes of the present proceedings: "[29] I remind myself that the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of the assessment process. The very detailed nature of the material prepared by the defendants for the present application suggests that at least as far as those parties are concerned a considerable amount of work has already been done. Accordingly, if the costs assessment process were to proceed, much of the work of preparing itemised bills of costs and marshalling documents to verify the claims could efficiently draw upon the work done so far so as to be available for immediate use without delay or the need to incur significant further costs. [30] As the plaintiffs' opposition to the defendants' applications reveals, however, the determinative issue is no more and no less than one of fairness. The plaintiffs should be ordered to pay the defendants' costs of the proceedings and the plaintiffs do not at this stage contest the inevitability of that outcome. The defendants are entitled to recover costs from the unsuccessful plaintiffs at rates that are either produced by the operation of the costs assessment procedure if it takes place, as the plaintiffs contend, or in an amount that this Court can confidently be satisfied is no greater than the amount that such a process would produce if a specified gross sum costs order is made instead, as the defendants contend. As the cases emphasise, the touchstone is one of confidence that the approach taken to estimate costs is logical, fair and reasonable. The fairness aspect of the inquiry includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available. In the present case, all of the material derives from the defendants themselves and none of that material has been challenged or cast in doubt by the plaintiffs except in the most cursory of ways. I have already observed that Ms Koch, Ms Caffrey, Mr Holmes and Mr Nicols have not been challenged upon anything that they have said or done in preparing the evidence upon which the defendants rely and that the attention to detail exhibited by all of them is most impressive. I have taken this into account in forming a view about whether or not I can confidently rely upon the material that they have presented. [31] The cases emphasise that a broad-brush approach must be taken and that a gross sum assessment by its very nature envisages that a traditional assessment process cannot take place. In the case of the first defendant it is prepared to discount the actual amount of its costs by one fifth. In the case of the second defendant that fraction is two fifths. Both defendants forsake an entitlement to interest and the right to argue for a special costs order. In this last respect I note that the weight that I can give to such a concession is small because as yet I have no material before me to suggest persuasively that the defendants or one of them might have been able to establish an entitlement to indemnity costs. General submissions to the effect that the plaintiffs' case was hopeless or doomed to fail require much closer analysis before they can be used as a basis for decisions in this regard. [32] Finally the cases remind me, if reminder were necessary, that the power to award a gross sum must be exercised judicially and after giving the parties an adequate opportunity to make submissions on the matter. All parties have made detailed submissions. Only the defendants have provided evidence in support of their positions. The evidence of Mr Stonham was in the form of submissions that for some reason were contained in an affidavit. There is no material from the plaintiffs, for example, in the nature of a costs assessor's opinion about or commentary upon anything said by the defendants' deponents that assists me to evaluate their opinions and conclusions. Mr Stonham professes no particular expertise in the area of costs assessment and his affidavit has the strong flavour of the plaintiffs' instructions about it. To that extent the defendants' evidence stands unopposed and unchallenged. I feel unable to give any weight to Mr Stonham's sworn allegations that the defendants' costs have been inflated by reason of their own inefficiencies and delays without some documented or identified examples of such conduct or other material to support them. [33] As attracted as I am to the efficient disposition of the question of costs in this long running matter, in particular having regard to what I know of its course and history in this Court, I am somewhat troubled by the tension between the essential requirement for a judicial decision on the one hand and the need for reasons of efficiency and speed to make some form of "next best guess" about what the outcome of an assessment might be on the other hand. The defendants' applications, if acceded to, would undoubtedly promote the quick and cheap disposition of the issue. I am concerned, however, that the final result will necessarily be just. The decision that the defendants ask me to make proceeds upon the assumption that the evidence should satisfy me that the costs they seek will be less than their entitlement if an assessment were to take place. I strongly suspect that that assumption is likely to be vindicated. However, in any case such as this there is always the possibility that nothing short of an independent analysis by a costs assessor can answer the question in a reliable fashion at a level higher than mere suspicion. The plaintiffs' tenacious opposition to the applications should not therefore be casually treated as little more than uninformed and obstructive opposition or unreasonable intransigence. Indeed, the plaintiffs may well be out of pocket by hundreds of thousands of dollars if the defendants' evidence is accurate and they become entitled to an order for the payment of their undiscounted costs. The plaintiffs have presumably sought and taken, and I assume also very carefully heeded, professional advice about the matter with the benefit of which they have analysed the defendants' respective positions before forming the view that they would prefer to take their chances. Interpolating from what I take to be the plaintiffs' submissions in this regard, if I am to act judicially, taking that chance is a risk of which I ought not to proceed to deprive them. The plaintiffs argue (presumably with advice) that they ought in this sense to be afforded the unfettered opportunity to assume authorship of their own misfortune. [34] However, in my opinion, the material with which I have been provided permits the making of a decision at a level far removed from mere suspicion. The evidence in favour of making specified gross sum costs orders is strong, if not overwhelming, and there is no competing evidence beyond assertion to the contrary. It would be churlish to treat the careful and detailed evidence and opinions of the defendants' deponents as unreliable or unhelpful or possibly infected with inaccuracies when the opposite is so clearly the case. There is also the real and tangible, as opposed to the hypothetical or theoretical, prospect that something in the order of a total of $350,000 may be saved by the avoidance of a costs assessment process that would in practical terms (having regard to the plaintiffs' impecuniosity) produce no different result for them, even if it were a less favourable result, but which would by way of important contrast leave the defendants actually out of pocket for that amount. The overriding purpose again comes to mind. [35] I am satisfied in all of the circumstances that on balance, the contest between depriving the plaintiffs of an opportunity to subject the defendants to the rigours of the costs assessment process on the one hand, and the avoidance of undue and unnecessary as well as unrecoverable costs on the other hand, favours the making of specified gross sum costs orders in favour of each of the defendants in the terms that they seek. I am satisfied that it is both just and fair to the plaintiffs to do so. That is so, among other reasons, because the defendants' costs appear to have been accurately calculated and do not appear to have been inflated or unreasonably incurred, so that no injustice is caused to the plaintiffs. The discounts of one fifth and two fifths respectively, which the first and second defendants contend should apply to their actual costs, also seem to me to be appropriate and based on reliable evidence, so that no injustice is caused to them either."
3. In the present case, I have not been provided with expert or other evidence deposing to the reasonableness or otherwise of the costs claimed by Blaze. I hasten to observe that in my experience, the costs calculated and claimed by Blaze appear to me to be particularly appropriate, if not in fact somewhat on the low side, having regard to litigation of this type in this Court. I am also mindful of the fact that the assessment process would itself be certain to incur further costs for which one or other of the parties would ultimately be liable, depending upon the outcome of that process. Blaze does not appear to have foreshadowed an application for a gross sums costs order in any correspondence with Cardinal House of Mr Carroll with which I have been provided.
4. However, if fairness is the touchstone of this provision, and having regard to the overriding purpose in s 58 of the Civil Procedure Act 2005, there is very little to be said for declining to make the order sought. There can be no doubt both that costs follow the event and that Blaze is entitled to a proportion of those costs on an indemnity basis. The amount claimed by Blaze for costs up to 1 July 2019 has already been discounted by one third in anticipation of such a reduction on a party/party assessment being made. In my opinion, that discount is more than reasonable.
5. Having regard to the material before me, I consider that it is not necessary further to reduce the amount of the costs claimed by Blaze. All of Blaze's solicitor's costs and disbursements are set forth in invoices attached to Ms Tindal's affidavit. As I have already indicated, the costs charged by Somerville lawyers seem to me to be entirely reasonable and appropriate.
6. In my opinion, Blaze should be entitled to a gross sum costs order in the amount of $77,500.

Orders

1. I make the following orders: 1. Judgment for Blaze Advertising Pty Ltd against Cardinal House Pty Ltd and Paul Carroll for $719,943.97 together with interest up to judgment in the amount of $127,123.52. 2. Order Cardinal House Pty Limited and Paul Carroll to pay Blaze Advertising Pty Ltd's costs of the proceedings, which I specify as a gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 in the amount of $77,500.

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: 31 July 2019