Edward Ted Lakis and Anor v Michael Victor Lardis and Anor

Supreme Court of NSW|2018-09-28|Before: Sackar J

Procedural history

The parties in this matter are Edward Ted Lakis (First Plaintiff), Amazon Pest Control Pty Ltd (in liq) ACN 092 833 531 (Second Plaintiff), Michael Victor Lardis (First Defendant) and Athena Lardis (Second Defendant). Although in this judgment I will refer to the Plaintiffs (plural) it is uncontroversial that the crux of the dispute is between that of the First Plaintiff and the Second Defendant.
I handed down my reasons for judgment on 31 March 2017: Edward Ted Lakis v Michael Victor Lardis [2017] NSWSC 321 (principal judgment).
On 24 May 2018 the New South Wales Court of Appeal (Macfarlan, Meagher and White JJA) handed down judgment on the outcome of the appeal to my principal judgment: Lardis v Lakis [2018] NSWCA 113 (appeal judgment). The appeal was dismissed with costs (appeal judgment [61], [72]-[73]).
The Plaintiffs applied for costs on an indemnity basis and an order that the Second Defendant pay the First and Second Defendants' costs. The application was heard on 5 May 2017 and I delivered my reasons on 10 May 2017: Edward Ted Lakis v Michael Victor Lardis [2017] NSWSC 561 (ordinary costs judgment). I found that the circumstances of the case did not merit costs on an indemnity basis (ordinary costs judgment [28]-[29], [37]).
The Plaintiffs filed a Notice of Motion on 3 May 2018 seeking an order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) that the Second Defendant pay the Plaintiffs' costs of the proceedings (plus interest) at first instance against the First and Second Defendants as a gross sum. The Plaintiffs also sought an order that the Second Defendant pay the Plaintiffs' costs in relation to that Notice of Motion.

Background facts

I will not rehearse in detail the background facts to this dispute as they have been canvassed previously (gross sum costs judgment [1]-[30]).
Suffice it to say briefly that the principal judgment concerned whether the transfer of the First Defendant's almost full one-half interest in his family property at 4 Skinners Avenue Dolls Point NSW (Dolls Point Property) to his wife the Second Defendant was with the intent to defraud creditors and should therefore be voided pursuant to s 37A of the Conveyancing Act 1919 (NSW) (principal judgment [1]-[3]).
I was satisfied the transfer was made with an intent to defraud, hinder or delay prospective creditors of the Second Plaintiff Amazon including the First Plaintiff and the transfer was voidable pursuant to s 37A (principal judgment [410], [416]).
On appeal the Court of Appeal held that the findings made at trial were open and dismissed the appeal with costs (appeal judgment [61], [72]-[73]).
As I have said I handed down the gross sum costs judgment on 23 August 2018. With respect to the Plaintiffs' gross sum costs application, I was of the view that a lump sum or gross sum costs order was appropriate and ordered that costs of the proceedings should be that of $540,583.65 being the lower amount provided by expert witness Ms Deborah Vine-Hall less 20% (plus interest pursuant to the prescribed rate from 26 July 2017) (gross sum costs judgment [141]-[146]).
However this left outstanding the Plaintiffs' costs of the actual gross sum costs application.
On 4 September 2018, before the issue of costs of the gross sum costs application was resolved, the Plaintiffs came before me seeking ex parte freezing orders against the Second Defendant.
I was informed by the Plaintiffs that there was concern of an imminent sale of the Dolls Point Property.
I made the orders sought entered forthwith on that date restraining the Second Defendant from dealing with the Dolls Point Property.
At the first available opportunity the Second Defendant applied for the freezing orders to be lifted.
On 28 September 2018 when the parties came before me to hear these issues I was informed that the issue of the lifting of the freezing orders had been resolved (making much of the Plaintiffs' submissions at [1]-[17] no longer strictly relevant). What remained in issue were costs of the gross sum costs application and costs of the application for the lifting of the freezing orders.

Legal principles

I have collected the authorities in previous judgments which I will not repeat here as to the principles associated with gross sum or lump sum costs orders (gross sum costs judgment [52]-[58]). What is called for is a broad brush approach: Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [116] (Einstein J). It goes without saying that costs are entirely discretionary: s 98 of the Civil Procedure Act 2005 (NSW).
The classic statement of the principles relating to obtaining ex parte relief is that of Isaacs J in Thomas A Edison Ltd v Bullock (1912) 15 CLR 679; [1912] HCA 72 (at 681-2) (citations omitted): Dalglish v Jarvie, a case of high authority, establishes that it is the duty of a party asking for an injunction ex parte to bring under the notice of the Court all facts material to the determination of his right to that injunction, and it is no excuse for him to say he was not aware of their importance. Uberrima fides is required, and the party inducing the Court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in his defence to that application. Unless that is done, the implied condition upon which the Court acts in forming its judgment is unfulfilled and the order so obtained must almost invariably fall.
Likewise in Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 Allsop J (as his Honour then was) said (at [38]): In an ex parte hearing, it is the obligation of the party seeking orders, through its representatives, to take the place of the absent party to the extent of bringing forward all the material facts which that party would have brought forward in defence of the application: Thomas A Edison Ltd v Bullock (1912) 15 CLR 678 [sic] at 681-82 per Isaacs J. That does not mean stating matters obliquely, including documents in voluminous exhibits, and merely not mis-stating the position. It means squarely putting the other side's case, if there is one, by coherently expressing the known facts in a way such that the Court can understand, in the urgent context in which the application is brought forward, what might be said against the making of the orders. It is not for the Court to search out, organise and bring together what can be said on the respondents' behalf. That is the responsibility of the applicant, through its representatives.

Consideration

Before me are therefore essentially two applications for costs.
First, the application for costs of the actual gross sum costs application heard before me on 10 August 2018 resulting in the gross sum costs judgment. Secondly, the application for costs of the lifting of the freezing orders restraining the Second Defendant.

Costs of the gross sum costs application

The Plaintiff has indicated that its costs for the gross sum costs application are $334,136.71 (CB 57). This includes solicitor costs of $295,447.26, counsel fees of $27,629 (counsel retained by the solicitors) and other disbursements of $11,060.45 (including expert Ms Vine-Hall) (Plaintiffs' supplementary submissions [6], CB 57).
The Plaintiff submits that a similar discount to these costs should be applied as were made by the expert witness Ms Vine-Hall to those costs of the principal proceedings in the gross sum costs judgment (Plaintiffs' supplementary submissions [1]-[4]).
That is, in the original gross sum costs proceedings, Ms Vine-Hall's reductions and the additional discount of 20% resulted in a gross sum costs order that reflected: 1. 53.1% of the Plaintiffs' solicitor costs allowed; 2. approximately 64% of the Plaintiffs' counsel fees allowed; and 3. 80% of the Plaintiffs' disbursements allowed.
The Plaintiffs submit the same methodology should be translated into their costs of the gross sum costs application, meaning that (Plaintiffs' supplementary submissions [5]-[6]): 1. 53.1% of the solicitor costs of $295,447.26 should be allowed resulting in $156,882.50; 2. approximately 64% of the counsel fees of $27,629 should be allowed resulting in $17,862.76; and 3. 80% of disbursements of $11,060.45 should be allowed resulting in $8,848.36.
The Plaintiffs submit the total lump sum costs for the lump sum costs application itself should therefore be $183,593.62. They contend whilst fees were high this reflects very hard-fought litigation and the above discounts are reasonable (Plaintiffs' supplementary submissions [7]-[9]).
On the other hand, the Second Defendant has offered to agree to the sum of $90,000 as the gross sum costs order of the actual gross sum costs application. She contends this amount represents a reasonable cost having regard to (Second Defendant's submissions [19]-[20]): 1. The purpose for which the application was brought by the Plaintiffs to save costs of a formal assessment process; 2. What should have reasonably been incurred in such an application; and 3. That the gross sum costs application was propounded by the Plaintiffs as a cheaper exercise for the benefit of the parties.
The Second Defendant further submits the costs incurred by the Plaintiffs in the application were "totally over the top" especially given the Plaintiff's own report of Ms Vine-Hall that suggested that a gross sum costs order would offer a substantial saving in terms of time and costs (T12/18-34).
In short, from my own experience I have difficulty in fully appreciating how the solicitors for the Plaintiffs incurred $295,447.26 of costs for what was a one day application for gross sum costs. It may be the case here, and there is evidence of this from the various accounts, that there was a substantial amount of contact between solicitor and client. The amount of contact will usually be a reflection of the factual and legal complexity of the issues in dispute. However, I have the distinct impression here that the amount of contact between solicitor and client is not a reflection of the complexity of the issues in dispute, but rather that of a potentially over-demanding client. This is not meant as a criticism, however, with orders for costs what is required is an approach based on reasonableness.
I accept that Ms Jennifer Ball Partner of Clayton Utz provided an affidavit for the application, which set out in detail what had happened in the principal proceedings.
However, given that I was the trial judge for this matter, there was little that was needed to be done to explain to me what had happened and the relative complexity of the matter.
Furthermore, it was not Ms Ball who provided the basis of the calculations of gross sum costs, but the expert report of Ms Vine-Hall for the Plaintiffs who provided the most comprehensive critique and analysis of fees incurred in the trial, to which I had regard in addition to the expert witness of the Second Defendant Ms Suzanne Maree Ward. Ms Vine-Hall's total fees for the expert report was in total as provided by the Plaintiffs $6,600 plus $2,200 plus $1,155 (CB 57, T8/49-T9/3).
As I have already said I accept that some clients can be very demanding and require a great deal of time. In the event not all of that resultant cost should in fairness or as a matter of reasonableness be visited upon a losing party. The whole process of a gross sum costs application and proceeding is to offer a great deal of time-efficiency and cost-saving as compared to costing on a standard taxation or assessment basis.
It is true that the case at trial was a complex one, as I noted previously (gross sum costs judgment [123], [126], [140]). Nevertheless I consider the costs sought to be claimed on this application are unreasonable, given the nature of the application and in particular the retainer of an expert.
I therefore do not think it is appropriate merely to apply or translate the resultant discounts that were in effect applied in the first gross sum costs judgment. Having considered the invoices for the application, and doing the best I can on the materials, but on a broad brush basis and in the light of my professional experience, I think the appropriate fee for the solicitors is $100,000 as a gross sum amount, to which a 20% should be applied leading to a figure of $80,000.00.
However I am of the view that 64% allowable of counsel fees and 80% of disbursements is appropriate.
This is $80,000, plus $17,682.56 (not $17,862.76 calculated by the Plaintiffs as I am of the view an exact 64% is appropriate) plus $8,848.36 equalling $106,530.92.

Costs of the lifting of the freezing orders

The Second Defendant referred to several letters and correspondences which in her submission were not disclosed during the ex parte application for freezing orders by the Plaintiffs and revealed a lack of candour sufficient to warrant the discharging of those freezing orders (Second Defendant's submissions [1]-[2]).
This included the written request of the Plaintiffs on 29 August 2018 by the Plaintiffs' solicitors to the trustee of the bankrupt estate of the First Defendant for an undertaking not to sell the Dolls Point Property without 7 days' written notice to the Plaintiffs' solicitors, an undertaking which was given on the Second Defendant's submission on 3 August 2018 and affirmed in correspondence between the parties (CB 51, Correspondence Bundle 42) (Second Defendant's submissions [3]).
One significant piece of correspondence however was that of 29 August 2018 between the Plaintiffs and the solicitors to the trustee of the First Defendant.
In this correspondence the trustee's solicitors stated "[o]ur client has given an undertaking not to enter into a contract of sale without first providing your client 7 days' notice. As such we are not sure what threat is being made in your communication. In any event your client's threatened injunction is manifestly hopeless, will fail and the Court would most likely award our client indemnity costs of such an application" (Correspondence Bundle 70) (Second Defendant's submissions [3]-[5]).
Despite the above undertaking, the Second Defendant submits that on the ex parte application for freezing orders the Plaintiffs' affirmed their concern was an imminent sale of the Dolls Point Property. The Second Defendant contends in the circumstances there was in fact no basis for the Plaintiff to have the concern it expressed to the Court that there would be an imminent sale of the Dolls Point Property (Second Defendant's submissions [6]-[8]).
In addition, the Second Defendant submits that the Plaintiffs are not in any event creditors of the bankrupt estate of the First Defendant. The Plaintiffs are creditors of the Second Defendant, not the trustee of the First Defendant, and this was a matter that should have been raised by the Plaintiffs in their ex parte application (Second Defendant's submissions [9]-[10]).
The Second Defendant also drew attention to the Plaintiffs' submissions during the ex parte application that the trustee had permitted the Defendants and their children to go on a European trip for 8 weeks flying business class. She submits that the trustee's report to creditors disclosed that the family was away for 26 days not 8 weeks and there was never any evidence they travelled business class (CB 34-35) (Second Defendant's submissions [11]-[13]).
The Second Defendant says she has given an undertaking and the trustee of the First Defendant has given an undertaking in relation to the Dolls Point Property. She also contends the sale of the Dolls Point Property is a matter for the trustee, and the ex parte application acted as a collateral attack on the conduct of the trustee which is a matter for the Federal Court of Australia, an abuse of process and institution of proceedings for a collateral purpose (Second Defendant's submissions [14]-[18]).
In short, the Second Defendant submits the ex parte application for freezing orders by the Plaintiffs should have been a matter of short service not ex parte motion. However as I have indicated the application for the lifting of the freezing order was resolved by the parties by consent and what remains is only the issue of costs for this application.
One of the difficulties in applications of this sort is that by reason of their resolution by consent it is difficult to determine the merits of the application and thereby costs: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 per McHugh J. As his Honour made clear in this case, where there has been no hearing on the merits, a Court is necessarily deprived of the factors that usually determine whether or how to make costs orders. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain costs. In some other cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.
In my view, given the above considerations, it seems to me that had I been aware of the undertakings given and the proper characterisation of the affairs between the parties, the freezing orders matter would arguably have been more appropriately dealt with by an order for short service, not ex parte application. However given the history of this matter and the acrimony and distrust I do not regard an ex parte application as entirely unreasonable. It is a fine balance.
If I was looking at this issue discretely (separated from the issue of the costs of the gross sum application) I would be inclined not to order costs but order each party pay their own costs.
However, as I have been invited by both parties, I will not look at this issue discretely and instead allow this issue to be absorbed into the weight or percentage discount to be applied to the costs order to be made for the Plaintiffs' costs of their gross sum application (T12/50-T13/29). I would in all the circumstances apply another, but modest, discount, to reflect the fine balance.

Conclusion

As per my reasoning above my assessment is that the Plaintiffs' costs of the gross sum costs application should be $106,530.92.
However in my view it is appropriate to incorporate into this amount the arguably unnecessary ex parte application, wherein I would add a further 5% discount to the above amount resulting in $101,204.37.
I would invite the parties to prepare short minutes to give effect to these reasons.

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: 19 October 2018

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