Solicitors:
Colbron & Associates (Plaintiff)
Hicksons (First and Second Defendants)
B Hocking (Applicant)
File Number(s): 2012/388476
[2]
Judgment
I gave judgment on the Applicant's Notice of Motion on 24 July 2015 (Coshott v Parker & Collins as Executors of the Estate of the late Michael Petrovic Lenin [2015] NSWSC 998). I found that the Applicant was entitled to be subrogated to the rights of the judgment creditors in respect of the payment of the judgment debt.
The Applicant now applies for costs of the Motion. The Defendants, in turn, apply for costs on an indemnity basis. Further, the Defendants submit that a lump sum costs order should be made. The Applicant agreed that a lump sum order would be appropriate in respect of whichever costs order was made by the Court.
The Applicant submitted that, although the form of relief sought by him was changed at the conclusion of the first day's argument, and although the evidence given of the request for the payment by the Applicant from the Plaintiff was adduced at a late stage, the Applicant should nevertheless have his costs of the Motion. This was because the Applicant was largely successful on the application.
Coshott v Parker & Collins as Executors of the Estate of the late Michael... [2015] NSWSC 1020 | Case summary | Zoe
Further, the Applicant should have his costs because of what was said to be the obstructive nature of the approach taken by the Defendants. A letter the Defendants' solicitors wrote to the Applicant on 3 June 2015 was highlighted as showing this obstructive approach.
The letter said this:
We refer to your letter dated 7 May 2015 enclosing proposed Consent Orders in the above Supreme Court proceedings.
In your letter you assert that the agreement on 16 April 2015 that you pay $40,000 to our clients in satisfaction of the judgment debt owed to them by Mrs Coshott resulted in an equitable assignment of that judgment debt from our clients to you.
There was no such assignment. However, in consideration of your payment, our clients withdrew as petitioning creditors in the Federal Circuit Court proceedings and acknowledged that they will not take any further steps to recover the judgment debt from Mrs Coshott.
However, there remains the issue of our clients' costs of the Federal Circuit Court proceedings. It was a term of the agreement that those costs will be paid as assessed or agreed. You did not respond to our letter dated 29 April 2015, conveying our clients' offer to accept $30,000 in satisfaction of their claim for those costs.
As the offer has now lapsed, we are proceeding with taxation (assessment) of those costs. The amount of our clients' costs ($34,229.63) will be increased by the costs incurred since the agreement, the costs of preparing the bill of costs in taxable form and the work that we will be required to carry out to pursue the taxation application for our clients.
It should be noted that the consent orders referred to in the first paragraph of the letter provided for the name of the judgment creditor on the judgment entered 14 December 2012 being amended from the Defendants to the Applicant.
The letter was said to be obstructive because in the penultimate paragraph it was endeavouring to link costs properly payable by the Plaintiff with what the Applicant was endeavouring to achieve by becoming substituted as judgment creditor.
The Defendants' application for costs was based on the approach that the Defendants took when the late evidence of the request for the payment from the Applicant and the altered claim for relief was made. That approach was not to argue against the Applicant being subrogated to the Defendants' right in respect of the judgment debt. The Defendants submitted that the relief originally sought was completely abandoned and that this abandonment justified costs on an indemnity basis.
In Sherborne Estate (No 2): Vanvalen v Neaves; Gilroy v Neaves [2005] NSWSC 1003; (2005) 65 NSWLR 268 Palmer J said at [38]:
The fundamental purpose of the power conferred by CPA s.98(4)(c) and its precursors is to enable the parties to avoid the expense, delay and aggravation involved in protracted litigation which may arise out of contested costs assessments, particularly where the costs have been incurred in lengthy or complex cases. The Court itself does not perform the assessment in the same way as would an assessor, but it arrives at an estimate of the proper costs to be allowed by examining, on the basis of particulars provided, whether the quantification put forward by the successful party is logical, fair and reasonable: Leary v Leary [1987] 1 WLR 72; Beach Petroleum NL & Claremont Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, at 120, 123; Harrison v Schipp (2002) 54 NSWLR 738, at [22].
In my opinion, the Applicant should pay the Plaintiff's costs, those costs should be not be on an indemnity basis but rather a gross sum should be ordered to be paid. My reasons are these.
First, the relief sought in the original Notice of Motion, based on the evidence served in support (excluding the affidavit adduced on the day of hearing), was always doomed to fail. Contrary to assertions in correspondence there was no evidence that the debt had been assigned and there was no basis, in the absence of evidence for a request for payment, to justify any view that subrogation operated on the payment. I discussed the authorities in my earlier judgment at [8]. Further, the fact that the Applicant might have become subrogated to the Defendants rights in respect of the judgment debt would not have justified the removal of the Defendants as judgment creditors in the proceedings and the substitution of the Applicant.
I note also that, despite the second prayer in the Notice of Motion no attempt was made to pursue that relief at the hearing nor to justify how it could ever have been made in the circumstances.
There was nothing obstructive about the letter of 3 June 2015. It was clear that some arrangement had been reached between the Plaintiff and the Applicant to avoid the Plaintiff going bankrupt. At that time both the Plaintiff and the Applicant were represented by the same solicitor who had failed to perceive the position of conflict in which he placed himself by acting for the Applicant. It was not unreasonable for the Defendants' solicitors to raise the issue of their costs in the circumstances. Certainly, if the Applicant was substituted for the Defendants and the judgment was set aside the Defendants would likely lose their rights to those costs.
Those matters mean that the Applicant is not entitled to his costs on the Motion.
Secondly, when I admitted the late served evidence of a request by the Plaintiff to the Applicant to pay the judgment debt, the Defendants ceased to argue that the Applicant had not become subrogated to the rights of the Defendants. Further, when the Applicant filed his Amended Notice of Motion on the second day of the hearing that sought only a declaration concerning the subrogation of the Applicant to the Defendants' rights in the judgment debt, the Defendants said that they neither consented to nor opposed the declarations sought. Those matters mean that the Defendants should have their costs of the Motion. The Defendants were right to resist the relief originally sought, particularly because they might have lost rights that they still have to costs arising out of the judgment, and also because the Applicant was seeking to set aside the judgment that the Defendants had. Those matters entitle the Defendants to their costs of the Motion.
Thirdly, at no stage in the correspondence did the Defendants give any indication that if all that was sought was a declaration concerning subrogation of the rights of the Applicant to the Defendants in respect of the judgment debt they would agree to such a declaration. Had they done so, and had the Applicant pursued the relief originally sought, that would have been sufficient to justify an order for indemnity costs in favour of the Defendants. There is no justification for an indemnity costs order.
Fourthly, because the Defendants seek a gross sum under s 98(4)(c) of the Civil Procedure Act 2005 (NSW) it is not appropriate to make an order for indemnity costs. The principles are discussed in Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [21]-[22]. A gross sum costs order is ordinarily discounted: Idoport Pty Lt v National Australia Bank [2007] NSWSC 23.
The evidence from the Defendants in relation to their costs is this. The costs including disbursements and counsel's fees amounts to $10,810.40 inclusive of GST. The solicitor for the Defendants has set out the rates charged being $330 per hour for the solicitor and $528 per hour inclusive of GST for the Special Counsel. Based on seeing fees charged by solicitors in affidavits these fees appear to me to be not unreasonable.
The Defendants submitted that it would be appropriate to order 80% of the total costs and disbursements and that a small allowance should be made for the appearance to argue the question of costs. The Defendants submitted, therefore, that the amount to be awarded to them should be $9,000.
The Applicant pointed to what was said by Black J in In the matter of Palladium Consulting Pty Limited [2013] NSWSC 92 where his Honour considered that two thirds of the solicitor client costs together with the full amount of counsel's fees should be allowable.
I consider that a gross sum costs order should be made. These proceedings arose out of the filing of a certificate of assessment of costs in a long running matter already incurred between the Plaintiff and the Defendants. The amount involved in the proceedings, $40,000 or thereabouts, is relatively small. It is in no party's interests to go through a further assessment exercise for the costs involved in this present matter.
I also bear in mind that the Motion was not able to be argued to conclusion on the first day it was listed. That was for two reasons. First, the Applicant had not served the Plaintiff with the Motion in circumstances where the Plaintiff's interests were most particularly affected by the orders sought. Secondly, at the conclusion of the argument on the first day, the Applicant indicated that he wished to consider the form of relief that he was seeking.
In my opinion, and taking into account further that the Applicant was unsuccessful in obtaining a costs order in his favour so that the appearance on 24 July 2015 resulted in success for the Defendants, a gross sum costs order of $8,000 is an appropriate order for the Applicant to pay to the Defendants.
In my reasons for judgment of 24 July 2015 I directed the parties to bring in Short Minutes to reflect my reasons. The parties have agreed on the declaration that ought to be made. In those circumstances I make the following declaration and order:
Declare that the Applicant, Ronald Coshott, is subrogated to the rights of the Defendants with respect to the judgment debt they have against the Plaintiff entered in these proceedings on 14 December 2012.
I order the Applicant to pay the Defendants' costs in the sum of $8,000 in respect of the Applicant's Notice of Motion.
[3]
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Decision last updated: 28 July 2015
Parties
Applicant/Plaintiff:
Coshott
Respondent/Defendant:
Parker & Collins as Executors of the Estate of the late Michael Petrovic Lenin