COSTS - indemnity basis - gross sum costs - orders
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COSTS - indemnity basis - gross sum costs - orders
Judgment (18 paragraphs)
[1]
Judgment
HIS HONOUR: By an amended statement of claim filed 11 August 2017 ("the ASOC"), Mr Barrie Goldsmith ("the plaintiff") sought final relief in the form of a freezing order against Mr Edward Kang ("the defendant") pursuant to r 25.14 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") and costs. The freezing order was sought with respect to monies owed in consequence of judgments entered in various courts. An interim freezing order was made by this Court on 8 June 2017 ("the interim freezing order"). Over the course of the proceedings all monies owning by the defendant (under the original statement of claim and the ASOC) were paid. What remains for adjudication is the question of costs and the retention of an interim freezing order.
[2]
COURSE OF THE PROCEEDINGS
These proceedings were commenced by way of statement of claim filed on 6 June 2017 ("the statement of claim").
In the statement of claim, the plaintiff pleaded:
1. As at the date thereof, the defendant was indebted to him for five amounts pursuant to judgments or orders of Courts (at para 3); and
2. There was sufficient prospect that judgments would also be registered in this Court following the issue of certificates of determination in respect of two sets of proceedings brought by the plaintiff against the defendant in the Local Court of New South Wales (at para 4).
On 8 June 2017, the plaintiff filed a notice of motion seeking an interim freezing order ("the motion"), which was before the Duty Judge, Davies J. His Honour made an interim freezing order in the following terms:
1. The plaintiff have leave to file in Court his notice of motion dated 7 June 2017 and his affidavit affirmed on 7 June 2017.
2. Until further order, the defendant must not dispose of, encumber or further encumber or diminish the value of the property commonly known as 65/3-13 Bundarra Avenue, Wahroonga and referred to in Folio 65/SP83732.
On 8 June 2017, the Court also made, inter alia, the following orders:
3. On or before 13 July 2017, the defendant file and serve:
A. Any affidavits in answer to the plaintiff's motion filed on 8 June 2017; and
B. His defence, if any.
4. On or before 3 August 2017, the plaintiff file and serve:
A. Any affidavits in reply; and
B. Any reply to defence.
5. The plaintiff's notice of motion filed on 8 June 2017 and the proceedings be listed before the Registrar at 9am on 10 August 2017.
6. Costs be reserved.
The defendant did not, on or before 13 July 2017, file and serve any affidavits in answer or any defence.
On 9 August 2017, the defendant filed in the Registry and served both an affidavit and a defence, notwithstanding that he did not have leave to do so.
On 10 August 2017, the Common Law Registrar, Registrar Bradford, made the following orders:
1. Leave to Defendant to file his Defence and Affidavit dated 9 August 2017.
2. Question of Discovery sought in proposed Order 5 stood over to 23 August 2017. Defendant to advise Plaintiff of attitude toward to proposed order 5 by close of business on 18 August 2017. Defendant to indicate what categories will discovery and what categories that dispute and the reason for that dispute.
3. Orders 2, 3, 4A, 6, 7, 8 and 10 in Short minutes of order.
SHORT MINUTES OF ORDER
2. On or before 17 August 2017, the defendant have leave to file and serve any Amended Statement of Claim
3. On or before 31 August 2017, the defendant file his Defence to the Amended Statement of Claim.
4A. On or before 31 August 2017, the defendant file and serve any further Affidavits upon which he relies in answer to the Plaintiff's Motion filed on 8 June 2017.
6. On or before 5 October 2017, the plaintiff file and serve any Affidavits in reply.
7. Subpoenas be returnable on 12 October 2017.
8. The plaintiff's notice of motion filed on 8 June 2017 and the proceedings generally be listed for final hearing before a Judge at 10am on 25 October 2017.
10. Liberty to apply on 48 hours' notice.
4. Stood over on 23 August 2017 for Directions.
5. Costs of today be costs in the cause.
On 11 August 2017, the plaintiff filed and served the ASOC. The effect of the amendments was to substitute the amounts owed as at the date thereof:
1. between 6 June and 8 August 2017, the defendant had paid the five amounts that had been pleaded in the statement of claim; and
2. to claim the costs of the first and second Local Court proceedings that had been subsequently assessed in the amounts of $30,595.47 and $8,445.50, respectively.
On 23 August 2017, there was no appearance by or on behalf of the defendant. Registrar Bradford made the following orders:
1. On or before 31 August 2017, the defendant give discovery on oath of the following categories of documents, whether such documents be in paper form or electronic form:
(A) Documents from 1 January 2016 to-date relating to any account at a financial institution in which the defendant has, legally or beneficially, had an interest or in which any company identified by the defendant pursuant to order 1B above has, legally or beneficially, had an interest.
(B) All statements of account from 1 January 2016 to date from Westpac Banking Corporation or St George Bank in relation to the mortgage on the property.
(C) Documents relating to or concerning the arrangements with Goldman Pintex Management Pty Ltd referred to in paragraph 8 of the defendant's affidavit sworn on 9 August 2017.
(D) Documents from 1 January 2016 to-date concerning or relating to the defendant's employment as a consultant.
(E) The defendant's tax returns for the financial years ended 2015 and 2016.
(F) Documents from 1 January 2016 to-date concerning the rental or tenancy of the property.
(G) Documents relating to the grant of bail in relation to offences brought by the New South Wales Department of Fair Trading against the defendant.
(H) Documents relating to the conviction and sentencing of the defendant in relation to offences brought by the New South Wales Department of Fair Trading against him.
(I) Documents from 1 January 2015 to-date concerning or relating to the ownership, control or management of Singapore Oil Pte Ltd.
2. In the event that the defendant does not comply with order 1, his defence filed herein on 9 August 2017 be struck out and the defendant be debarred from defending.
3. The defendant pay the plaintiff's costs.
4. Liberty to apply on 24 hours' notice.
The defendant did not:
1. On or before 31 August 2017, file any defence to the ASOC, notwithstanding the order made on 10 August 2017.
2. On or before 31 August 2017, file any further affidavits upon which he relied in answer to the motion, notwithstanding the order made on 10 August 2017.
3. On or before 31 August 2017, give discovery of categories of documents, notwithstanding the order made on 23 August 2017.
On 25 October 2017, the ASOC was listed for final hearing, together with the motion, before the Court as presently constituted. At the outset of the proceedings, counsel for the defendant, Mr G D McDonald, sought to make an oral application that the proceedings brought by the plaintiff, by the ASOC, were incompetent and should be struck out. The defendant, in that respect, submitted: "[t]he claim for final relief in the [amended] statement of claim is, in effect, a permanent injunction restraining my client from ever dealing with his assets". It was contended that such a result is not supported by r 25.14 of the UCPR ("the competency issue").
Prior to considering the competency issue raised by the defendant, the Court returned to the standing of the defendant in light of the orders made by Registrar Bradford on 23 August 2017. Counsel for the defendant confirmed the defendant's non-compliance with order 1 of 23 August 2017 and accepted that, in the result, by operation of order 2, a self-executing order, the defendant's defence of 9 August 2017 was struck out and the defendant was debarred from defending.
Notwithstanding the nature and effect of order 2, the defendant sought to by-pass or delay the effect of the order 2 by making two oral applications to vary the orders of Registrar Bradford made on 10 and 23 August 2017, respectively. In short, it was submitted that a variation of the due date, with respect to both the filing of a defence to the ASOC and the giving of discovery, would effectively grant the defendant an extension of time, which would enable the defendant time to comply with the orders. In that light, counsel for the defendant further submitted: "I am not asking for that decision to be challenged, I am asking for the date to be varied". Given the nature and effect of the applications sought, including with respect to the competency issue, a further oral application for an adjournment was made.
In support of the adjournment application, and in the absence of any formal application or evidence, it was contended that no prejudice would run against the plaintiff because the interim freezing order, presently in force, would continue to operate in the event that an adjournment was granted.
The plaintiff opposed the proposed variation of orders and the adjournment application.
As to circumstances in which the adjournment application was made, the plaintiff cited Aon Risk Services Limited v Australian National University [2009] HCA 27 ("Aon") and submitted that the lateness at which the application was made, given that a hearing date that had been fixed since 10 August 2018, and the absence of evidence was not tolerable or acceptable conduct and stood contrary to the principles stated in Aon.
The Court, ultimately, refused the defendant's applications with respect to the variations sought (namely, a variation of order 3 made on 10 August 2017 and a variation of order 1 made on 23 August 2017) and the adjournment application. As to the issue of competency, given the nature of the issue, the Court granted Mr McDonald leave to appear on a limited amicus curiae basis, for the purposes of putting a submission as to the competency issue, following which, counsel for the defendant would be excused from further appearance. That course was not opposed by the plaintiff.
The competency issue concerned the form and effect of the final relief sought and raised an issue as to the jurisdiction of the Court. It did not extend to the interim relief granted by Davies J; whilst similar in terms to the final relief sought, the interim nature of the order did not agitate the same issues vis-à-vis jurisdiction. No issue was raised as to the Court's jurisdiction to continue and/or extend the interim freezing order.
There was a further development bearing upon the hearing, namely, the impending completion of the related bankruptcy proceedings against the defendant. In those circumstances, the plaintiff accepted it would not be adverse to his position to await the completion of the bankruptcy proceeding prior to advancing any further submissions for a final freezing order.
It was in that light the Court made the following orders:
1. The proceedings be stood over to 5 December 2017 at 9:30am for directions.
2. Subject to any existing costs orders, the defendant pay the plaintiff's costs of the proceedings thrown away.
3. The Court reserved the right of the plaintiff to apply for:
1. An order for indemnity costs; and/or
2. An order for gross sum costs.
On 5 December 2017, the parties were in agreement that the interim freezing order should continue to run, as the related bankruptcy proceedings were yet to reach completion, and the matter be stood over. It may be noted that Mr McDonald continued his appearance on that occasion as amicus curiae and raised no objection to that course. The matter was adjourned to 28 February 2018 for further directions. The Court also made the following order:
If either party intends to rely upon material in support of a position they intend to take at the next directions hearing, then it should be served in advance of the directions hearing.
Following that direction the plaintiff filed and served a further affidavit in the proceedings. The defendant did not file or serve any evidence.
On 28 February 2018, the plaintiff confirmed that the defendant had then paid the plaintiff all amounts previously owing pursuant to orders of any court (as discussed below), and that the only outstanding issues were in relation to the various costs aspects of these proceedings. The remaining costs issues were set out as follows:
1. the reserved costs of the motion;
2. the plaintiff's application for indemnity costs; and
3. the plaintiff's application for gross costs.
As to the fate of the interim freezing order, it was agreed that would be dealt with at the same time as the resolution of costs.
It may be noted that the issue as to the nature of the appearance of the defendant was also once again agitated at this time, noting that leave extended to Mr McDonald as amicus curiae was limited to the competency issue.
On this occasion, Mr K Kelly, solicitor, sought to be heard on behalf of the defendant. Mr Kelly informed the Court that he wished to seek leave on behalf of the defendant to file and serve evidence and submissions in relation to the plaintiff's applications for cost. For the purposes of the facilitating a costs hearing without further delay, Mr Kelly accepted an appropriate course was that he be granted leave to provide submissions addressing whether he should have the right be heard on the question of costs, together with the submissions and evidence as to costs that he would advance in the event a right to be heard was established (the plaintiff also accepted that procedure). A program was fixed as to the disposition of the costs issue, which was set out in short minutes of order executed under seal on 9 March 2018 ("the 9 March order"), extracted below:
1. On or before 21 March 2018, the plaintiff file and serve any evidence and submissions in support of any applications by him for the following:
A. Any order in respect of the costs that were reserved on 8 June 2017.
B. An order that the defendant pay the plaintiff's costs of the proceedings on the indemnity basis.
C. An order that the defendant pay the plaintiff's costs of the proceedings on a gross sum basis.
2. On or before 11 April 2018, the defendant file and serve:
A. Submissions in support of any application by him for leave to be heard in respect of all or any of the matters referred to in orders 1A -1C above.
B. Any evidence upon which he would seek to rely in support of his submissions referred to in order 2A above.
C. The submissions and evidence he would intend to bring if granted leave to the application in 2A.
3. On or before 2 May 2018, the plaintiff file and serve any evidence and submissions in reply to any application by the defendant for leave in accordance with order 2A above.
4. If either party requests an oral hearing in respect of any of the matters referred to in Order 1 above, the matter to be fixed for a two hour hearing after completion of the steps referred to in orders 1, 2 and 3 above.
In accordance with order 1, the plaintiff filed written submission on 20 March 2018 and his affidavit affirmed 19 March 2018. The defendant did not file and serve material on or before 11 April 2018 in accordance with order 2.
On 13 April 2018, the defendant sent the following communication by email to Chambers:
Our client was ordered to file and serve submissions by 11 April 2018 in relation to whether our client should be granted leave to be heard and in relation to costs.
In preparing those submissions, we have formed the view that any determination of the question of the costs of the proceedings would be premature and our client seeks leave to file the attached Notice of Motion.
We ask that the matter be relisted at His Honour's earliest convenience to hear our client's Notice of Motion.
A copy of this email was provided to the Plaintiff, who neither consents nor opposes it being sent.
The attached notice of motion was dated 13 April 2018 ("the unfiled motion"). By the unfiled motion, subject to leave, the defendant sought the following orders:
1. Leave to the defendant to file this Notice of Motion and for it to be made returnable before Walton J on a date to be appointed by the Court.
2. The order of Registrar Bradford on 23 August 2017 debarring the defendant from defending the proceedings be set aside.
3. The freezing order made by Davies J on 8 June 2017 be discharged.
4. The Amended Statement of Claim be dismissed.
5. The orders entered by Walton J on 9 March 2018 be vacated.
6. Plaintiff to pay the defendant's costs of the motion.
7. Such other order as the Court thinks fit.
The defendant ultimately filed submissions late, on 16 April 2018. Those submissions made reference to the orders sought by the unfiled motion.
On 20 April 2018, the plaintiff filed submissions in reply, together with an affidavit affirmed 20 April 2018.
On 23 April 2018, the defendant requested an oral hearing with respect to matters referred to in order 1 of the 9 March order.
Due to the non-compliance of the defendant with the directions of the Court made 9 March 2018, together with the application for leave to move upon the unfiled motion, the matter was listed for directions on 31 May 2018. Following a communication advising the unavailability of the plaintiff, a new date for directions was fixed, 28 June 2018.
On 28 June 2018, following confirmation that all material required by the Court's directions of 9 March 2018 had been provided, notwithstanding their lateness, an additional consideration was now raised by the defendant filing a notice of motion on 27 June 2018 ("the defendant's motion").
The defendant's motion was next listed before Registrar Bradford on 3 July 2018. The orders sought were as follows:
1. Leave to the defendant to file this Notice of Motion and for it to be made returnable before Walton J on 9.30am on 28 June 2018.
2. Order 2 of Short Minutes of Order 1 - 4 entered by Registrar Bradford on 23 August 2017 be set aside or otherwise varied to the extent it provides for the debarring of the defendant pursuant to UCPR r 36.15(1).
3. Leave to the defendant to file and serve a Defence to the Amended Statement of Claim by 12 July 2018.
4. Costs of the motion be costs in the cause.
5. Such other order as the Court thinks fit.
It may be noted that the defendant's motion did not seek orders with respect to the interim freezing order of Davies J.
The Court confirmed the course that would be adopted, in summary, as follows:
1. as to the defendant's motion, the application would run its course, noting it was presently fixed before the Registrar, and would not be adjudicated upon by the Court as presently constituted;
2. as to the question of costs, in light of the material received, the matter would be dealt with on the papers;
3. as to the interim freezing order, a directions hearing would be fixed (in short order following the determination of costs), to determine whether the interim freezing order would be dissolved and the proceedings brought to a conclusion.
For completeness, in the intervening period, the defendant's motion was heard before R A Hulme J on 28 November 2018. His Honour made the following orders:
Debarring order made by Registrar Bradford on 23 August 2017 is varied so that it does not apply to any application the defendant might bring to vary or set aside the freezing order made by Davies J on 8 June 2017.
Defendant to pay the plaintiff's costs of the motion.
It may be noted that the scope of that order did not extend to the issue costs. The issue with respect to the right of the defendant to appear, in that respect, will be dealt with below. Further, no application, within the limits of the leave granted by R A Hulme J, was filed.
By way of summary, to date, the following cost orders have been made in these proceedings:
1. On 8 June 2017, hearing of the motion before Davies J: costs reserved.
2. On 10 August 2017, directions hearing before Registrar Bradford: costs in the cause.
3. On 23 August 2017, directions hearing before Registrar Bradford: defendant to pay the plaintiff's costs;
4. On 25 October 2017, at the hearing before the Court as presently constituted: subject to any existing costs orders, the defendant pay the plaintiff's costs of the proceedings thrown away. On that occasion the Court also reserved the right of the plaintiff to apply for an order for indemnity costs and/or gross sum costs.
5. On 28 November 2018, at the hearing of defendant's motion by R A Hulme J: defendant to pay the plaintiff's costs of the motion.
[3]
Costs
The general rule as to costs is set out in s 98 of the Civil Procedure Act 2005 (NSW) and Pt 42 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), namely, that costs follow the event.
As to the principles applicable in that respect I refer to my judgment in Moseley v AB (No 2) [2017] NSWSC 1812 at [64]-[79].
[4]
Indemnity Costs
The power to award indemnity costs is found in s 98(1)(c) of the Civil Procedure Act and r 42.5 of the UCPR. Section 98(1) is extracted below:
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.
Rule 42.5 of the UCPR is as follows:
42.5 Indemnity costs
If the court determines that costs are to be paid on an indemnity basis:
(a) in the case of costs payable out of property held or controlled by a person who is a party to the proceedings:
(i) in the capacity of trustee, executor, administrator or legal representative of a deceased estate, or
(ii) in any other fiduciary capacity,
all costs (other than those that have been incurred in breach of the person's duty in that capacity) are to be allowed, and
(b) in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed.
The overriding purpose of the Civil Procedure Act is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(1). A party to civil proceedings is under a duty to assist the Court to further the overriding purpose and, to that effect, to participate in the processes of the Court and to comply with directions and orders of the Court: s 56(3)
One of the leading authorities on indemnity costs remains Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801. In that case, Sheppard J noted some of the circumstances which have been thought to warrant the exercise of the discretion to order indemnity costs (at 233-234):
1. The problem arises in adversary litigation, ie litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.
2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of O 62, rr 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission (supra) and Handley JA in Cachia v Hanes (supra) on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (supra) at 141 said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require". Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston (supra) at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo , "The categories in which the discretion may be exercised are not closed". Davies J expressed (at p 6) similar views in Ragata (supra).
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo ); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata ) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
A summary of the relevant authority was set out by Slattery J in Ly v Dong [2018] NSWSC 122. His Honour observed (at [45]-[46]):
[45] Authority establishes that the question to be asked is whether the circumstances justify an order for indemnity costs in the particular case: Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506; Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225. The categories of case in which indemnity costs will be awarded are not closed: Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 233-234 per Sheppard J.
[46] There must be some special or unusual feature or circumstance in the case justifying an award of indemnity costs: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 ("Harrison") at [139]. Such a special or unusual circumstance must involve some relevant delinquency relating to the conduct of the proceedings themselves by the party as litigant: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 ("Oshlack"). Relevant delinquency does not mean moral delinquency but delinquency bearing a relevant relation to the conduct of the case. Although the categories of cases in which indemnity costs may be awarded is not closed, the nature of the cases which awards are made covers a wide variety of circumstances: pursuing hopeless cases, engaging in an abuse of process, unreasonable conduct in the proceedings, especially conduct prolonging the proceedings or maintaining a knowingly false case, or deliberate high handed aggressive or unco-operative behaviour, leading to delay or incurring needless cost, pursuing unfounded allegations of fraud and rejecting Calderbank letters and offers of compromise. The case law is well established and need not be covered in any further detail in these reasons.
In Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, at [44], the Court noted:
[44] It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a "solicitor and client" basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part.
[Footnotes omitted.]
An award of indemnity costs should be compensatory and not punitive: Hamod v State of NSW (2002) 188 ALR 659; [2002] FCA 424.
[5]
Gross Sum Costs
Section 98(4)(c) of the Civil Procedure Act empowers the Court to make an order for a specified gross sum instead of assessed costs. It provides that at any time before costs are referred for assessment the court may make an order for a specified gross sum instead of assessed costs.
A leading authority on gross sum costs is Idoport Pty Ltd v National Australia Bank [2007] NSWSC 23. In that decision, Einstein J provided a recitation of the principles which formed the exercise of the discretion (at [9]):
[9] For present purposes it seems convenient to commence with a recitation of the principles which inform the exercise of the discretion:
i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as " the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation " (All ER page 265)];
ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16];
iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at para [22]; [following ( Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788; [2005] FCA 228; BC200500963 at para [199];
iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at para [22];
v. the gross sum "can only be fixed broadly having regard to the information before the Court": Beach Petroleum at 124;
[In Hadid v Lenfest Communications Inc [2000] FCA 628 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".]
vi. nevertheless 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: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120";
vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at paras [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. …"
The principles regarding s 98(4) are referred to Hamod v New South Wales [2011] NSWCA 375 at [813]-[820] (per Beazley JA, with whom Giles and Whealy JJA agreed). The relevant part of that judgment is extracted below:
[813] I have already set out the relevant provisions of s 98. The discretion thereby conferred upon the court is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Harrison & Anor v Schipp [2002] NSWCA 213; 54 NSWLR 738 per Giles JA at [21]-[22]. In Harrison v Schipp, Giles JA considered that the discretion in s 98(4) may be exercised where the assessment of costs would be protracted and expensive and, in particular, if it appeared that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment. However, his Honour stated, at [22]:
"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."
[814] See also Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported). The courts have typically applied a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW , LexisNexis, Sydney, 2005 to date, " Civil Procedure Act ", at [s 98.65]; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788; Idoport Pty Ltd v National Australia Bank Ltd ; Lorenzato v Lorenzato & Anor (No 2) [ 2011] NSWSC 790 per Black J.
[815] In Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; 135 ALR 160, von Doussa J noted that the specified gross sum costs procedure was particularly useful in complex cases, that the power must be exercised judicially and only after giving the parties an adequate opportunity to make submissions, and that before exercising the power the court should be confident that the approach taken to estimate costs is fair, logical and reasonable.
…
[817] The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission ; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp ; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.
[819] … In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: Harrison v Schipp at 743; Hadid v Lenfest Communications Inc at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5; [1999] FCA 673.
[820] The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills):Beach Petroleum NL v Johnson (No 2) ; Leary v Leary ; Harrison v Schipp at 743 ; Sparnon v Apand Pty Ltd (FCA, 4 March 1998, unreported) . The approach taken to estimate the costs to be ordered must be logical, fair and reasonable: Beach Petroleum NL v Johnson at 164-165 ; Hadid v Lenfest Communications Inc at [27]; Harrison v Schipp at 743 . 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: Leary v Leary at WLR 76 per Purchas LJ; Beach Petroleum NL v Johnson (No 2) at 123; Auspine Ltd v Australian Newsprint Mills Ltd at 164-165.
[6]
Freezing Orders
For completeness, r 25.14 of the UCPR is extracted below:
25.14 Order against judgment debtor or prospective judgment debtor or third party
(1) This rule applies if:
(a) judgment has been given in favour of an applicant by:
(i) the court, or
(ii) in the case of a judgment to which subrule (2) applies - another court, or
(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in:
(i) the court, or
(ii) in the case of a cause of action to which subrule (3) applies - another court.
(2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the court.
(3) This subrule applies to a cause of action if:
(a) there is a sufficient prospect that the other court will give judgment in favour of the applicant, and
(b) there is a sufficient prospect that the judgment will be registered in or enforced by the court.
(4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:
(a) the judgment debtor, prospective judgment debtor or another person absconds,
(b) the assets of the judgment debtor, prospective judgment debtor or another person are:
(i) removed from Australia or from a place inside or outside Australia, or
(ii) disposed of, dealt with or diminished in value.
(5) The court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the court is satisfied, having regard to all the circumstances, that:
(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:
(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or
(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or
(b) a process in the court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
(6) Nothing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so.
[7]
Plaintiff's Evidence
The plaintiff has filed six affidavits affirmed by him on:
1. 6 June 2017 ("the plaintiff's first affidavit");
2. 8 August 2017 ("the plaintiff's second affidavit");
3. 23 October 2017 ("the plaintiff's third affidavit");
4. 23 February 2018 ("the plaintiff's fourth affidavit");
5. 19 March 2018 ("the plaintiff's fifth affidavit"); and
6. 20 April 2018 ("the plaintiff's sixth affidavit").
[8]
Defendant's Evidence
The defendant has filed one affidavit, sworn by him on 9 August 2017.
[9]
The Nature and Circumstances Surrounding the Payment of the Debt
By way of background, the debt owed by the defendant to the plaintiff related to payment for legal services. The following summary of the nature and circumstances surrounding the payment of the debt is derived from the submissions and evidence of the plaintiff.
In the plaintiffs first affidavit, he deposed as to the five amounts owing and the five judgments or orders that had been entered or made in his favour:
1. The first amount owed was pursuant to a judgment of the Local Court, given on 12 September 2016 in the sum of $8,505.34;
2. The second amount owed was pursuant to an order of the Local Court made on 9 February 2017 in the sum of $1,000;
3. The third amount owed was pursuant to a judgment of this Court in the sum of $32,756.25. Those proceedings were limited to the registration of certificates of determination of costs in connection with the work done by the plaintiff for and on behalf of the defendant and as a result of the non-payment of which the plaintiff commenced the first and second Local Court proceedings identified as follows:
1. In connection with the costs that were the subject of the claim in the first Local Court proceedings, certificates totalling $31,677.33 were issued; and
2. In connection with the costs that were the subject of the claim in the second Local Court proceedings, certificates with a net total of $1,078.92 were issued.
1. The fourth amount owed was pursuant to an order of the Federal Circuit Court of Australia made on 27 April 2017 in the sum of $25,000.
2. The fifth amount owed was pursuant to another order of the Federal Circuit Court of Australia made on 27 April 2017 (in separate proceedings to those referred to in (4) above) in the sum of $4,000.
In the plaintiff's second affidavit, he deposed that the defendant had since paid the amounts, listed above. However, as to monies owed with respect to the first and second Local Court proceedings, he gave the following evidence:
1. In relation to the costs of the first and second Local Court proceedings, those costs were subsequently assessed in the amounts of $30,595.47 and $8,445.50, respectively. Those amounts were registered by way of a judgment on 27 July 2017;
2. On 4 August 2017, the plaintiff caused a bankruptcy notice to be issued with respect to the judgments entered on 27 July 2017; and
3. As at 8 August 2017, those amounts remain unpaid.
In the plaintiff's third affidavit, he provided further information with respect to the nature and circumstances surrounding the outstanding debts owed by the defendant:
1. In addition to the unpaid monies, the defendant was indebted to him for a further sum of $2,665 pursuant to an order of the Federal Circuit Court of Australia made on 5 September 2017;
2. He would also be claiming from the defendant the costs of a Creditor's Petition filed by him against the defendant, being proceedings numbered SYG2825/2017; and
3. He would be claiming the costs of these proceedings which, at that time, according to the plaintiff's computerised ledger report, amounted to about $25,000, plus Court fees of about $1,500.
In the plaintiff's fourth affidavit, with respect to relevant developments since 5 December 2017, he deposed the following:
1. Subsequent to the hearing on 5 December 2017, the defendant had paid the amounts in relation to the costs of the first and second Local Court proceedings and the costs in relation to the defendant's unsuccessful application in the Federal Circuit Court, referred to above, for $2,665;
2. On 12 December 2017, the Federal Circuit Court of Australia ordered the defendant to pay to the plaintiff a sum of $7,500 in respect of the costs of a Creditor's Petition;
3. As the defendant did not pay the costs referred to in (2) above, the plaintiff caused a further bankruptcy notice to be issued to the defendant;
4. On 20 February 2018, the defendant paid the net amount due under the bankruptcy notice; and
5. Having regard to those payments, the defendant had paid to the plaintiff all amounts ordered by any Court and the only outstanding issues were in relation to the various costs aspects of these proceedings (including the question of costs in relation to the motion).
Thus, as a result, the application for final relief need not be determined. As mentioned, judgment concerns a determination of costs. The issue of the interim freezing order, which remains extant, will be returned to following a determination of costs.
[10]
Costs on the Motion
The plaintiff submitted that the costs of the hearing of the motion should follow the event, namely, the defendant should pay such costs (and, if appropriate, pay them on the indemnity basis and/or pursuant to an order for gross sum costs).
It was further submitted that it is customary for costs of an application for interim relief, at least so far as the first hearing of the application is concerned, to be reserved, so that the Court will be able to ascertain, in due course, the position of the defendant. It was contended, as no defence was heard or determined in this case, the plaintiff was justified in bringing the application for interim relief.
The defendant made not submission with respect to the costs reserved on the motion.
[11]
Costs Thrown Away
The plaintiff contended, by the defendant's submissions vis-à-vis his application for leave to be heard, that the defendant also sought to challenge the order for costs made on 25 October 2017 (albeit not in express terms), namely, that the defendant to pay the plaintiff's costs of the proceedings thrown away. As to that order, the plaintiff submitted it remained "a binding order unless or until it is set aside, otherwise discharged, or varied". It may be noted that, whilst the defendant sought to challenge the validity of the Registrar's Bradford's orders, he did not advance any submissions to challenge the validity of the costs order made on 25 October 2017. I will return to the question of indemnity costs after the summary of the parties' submissions.
[12]
Indemnity Costs
The plaintiff advanced the following submissions in support of his application for an award of indemnity costs:
1. The defendant has acted in breach of s 56(3) of the Civil Procedure Act. This was supported with reference to the examples of repeated non-compliance with the orders of the Court including, inter alia, orders with respect to filing evidence and his defence on 8 June, 10 and 23 August and 5 December 2017. Further, the defendant was not present or represented at the hearing on 23 August 2017 and no explanation was provided as to his non-attendance.
2. It was contended that the defendant had a history of not participating in the processes of the Court and of failing to comply with directions and orders of the Court - he has had proceedings both in this Court and in the District Court of New South Wales dismissed for those very reasons (see paras 9 and 12 of the plaintiff's first affidavit).
3. The defendant had further acted in a delinquent manner by:
1. filing his affidavit and defence on 9 August 2017 which were not only unmeritorious but which were never ultimately pursued because of the defendant's failings; and
2. effectively aborting the final hearing which had been fixed more than 2 months previously to take place on 25 October 2017.
1. Reference was also made to the events and information disclosed at the hearing on 25 October 2017:
1. Mr McDonald was instructed the night before the hearing;
2. The defendant sought to contend that the proceedings were incompetent, even though such a contention had not been raised in the defence filed on 9 August 2017 or elsewhere;
3. Mr McDonald made three applications (all rejected) without any motion having been filed; and
4. This "flurry of activity" the night before and on the day of the hearing occurred notwithstanding that Mr McDonald had been previously involved months before.
1. In summary, the substantive claim in these proceedings is relatively straightforward. There was little factual contention and any legal issues involving competency and the other matters raised by Mr McDonald on 25 October 2017 are relatively narrow. The defendant has been represented by solicitors and Counsel from the outset (including Ms Obrart of counsel, who appeared 8 June 2017). The case should have been heard and determined on 25 October 2017. It was not so heard solely as a result of the defendant's conduct. Further, his failure to pursue a defence to hearing, in view of his other failings, should justify an order for indemnity costs.
The defendant advanced the following submissions in reply to the plaintiff's application for indemnity costs:
1. First, in light of the interim freezing order, dealing with the question of the costs on an indemnity basis or otherwise is premature. It was submitted that the Court should deal with the issues raised by its notice of motion emailed to Chambers on 13 April 2018. However, as previously mentioned, that motion was not before the Court. (As earlier mentioned, notwithstanding the orders of R A Hulme J, no further motion regarding the interim freezing order has been filed).
2. Second, the defendant contended that there is an absence of "relevant delinquency" such as to engage the Court's jurisdiction, as the defendant paid the relevant debt in full and has not breached the interim freezing order. It was contended that the plaintiff acknowledged payment occurred in or about December 2017 (at para 3 of plaintiff's fourth affidavit) and that the prospective (unassessed) judgment debts too had been paid in full by 20 February 2018 (paras 5-6 of plaintiff's fourth affidavit).
3. The defendant relied upon the following authorities:
1. Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506; Colgate-Palmolive Company v Cussons Pty Ltd;
2. Ly v Dong at [46] (per Slattery J);
3. Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [136]-[139] (per Giles JA);
4. Velissaris v Fitzgerald [2008] VSCA 152 ("Velissaris") at [20] (per Maxwell P and Mandie JA)
1. It was contended that the plaintiff's submission with respect to s 53(3), mischaracterised the effect of the following orders: orders 3(A) and 3(B) made on 8 June 2017; order 4(A) made on 10 August 2017; and the direction made 5 December 2017. Each of those orders (including the direction), it was submitted in reply, did not require the defendant to take any steps and the defendant's failure to take any steps was, therefore, not a breach of the orders.
2. As to the plaintiff's reference to alleged conduct by the defendant in earlier proceedings before both the District Court and this Court, it was contended that the Court should disregard that submissions as a party's conduct prior to the proceedings is generally irrelevant.
The plaintiff advanced the following submissions in reply:
9. In reply, the plaintiff reiterates the submissions in paragraphs 25-33 of the plaintiffs submissions-in-chief. Further, the plaintiff submits that the defendant's submissions and his apparent attempt to set aside, discharge or vary orders, including 2 that were made more than 10 months ago and almost 8 months ago respectively, epitomises both his attitude to the administration of justice, being one of blatant disregard and almost contempt, and his delinquent conduct in these proceedings. As appears from the plaintiffs submissions-in-chief, this matter has been before the Court on the following occasions:
A. On 8 June 2017, when the defendant was represented by Ms Obrart of Counsel;
B. On 10 August 2017, when the defendant was represented by Mr McDonald of Counsel;
C. On 23 August 2017, when there was no appearance by the defendant;
D. On 25 October 2017, when the defendant was represented by Mr McDonald of
Counsel;
E. On 5 December 2017, when the defendant was represented by Mr McDonald of Counsel; and
F. On 28 February 2018, when the defendant was represented by Mr Kelly, Solicitor.
Prior to the receipt of the defendant's submissions, there was no allegation or suggestion by the defendant as to the absence of power on the part of the Registrar to make the order that he made on 23 August 2017, nor has any application been filed to discharge or vary the freezing order made on 8 June 2017. At the very least, the defendant has acted in flagrant breach of section 56(3) of the Civil Procedure Act 2005.
10. The defendant's belated, and arguably feeble, attempt to challenge orders made such a long time ago, and not previously challenged despite the number of acquiescences in those orders is reminiscent of the defendant's unmeritorious attempt on 25 October 2017 to challenge the competency of the proceedings upon the ground that there was no power of the Court to make an interim freezing order unless there was other substantive relief sought in the proceedings, and which claim appears not now to be pursued by the defendant's current legal advisors.
11. The fact that the defendant has chosen not to file any evidence pursuant to the Court's leave granted on 9 March 2018 is testament not only to the weakness of his arguments, but also his lack of good faith.
[13]
Gross Sum Costs
In support of its application for gross sum costs, the plaintiff set out a summary of the relevant factual circumstances:
1. To-date, the plaintiff has been required to undertake 4 costs assessments involving the defendant, even though the defendant did not make any objections or responses to the plaintiff's submissions in the assessments (see para 8 of the plaintiff's fifth affidavit). A further assessment of the costs of these proceedings will simply subject the plaintiff to further expense and also further delay in the finalisation of all matters between the parties.
2. The plaintiff has given evidence, see in particular para 7 of the plaintiff's fifth affidavit, of the considerable aggravation that he has suffered as a result of what can be described as endless litigation involving the defendant and, put simply, all caused by the defendant's failure to pay amounts that he was ordered to pay.
As to the approach to adopted, if costs are determined on a gross sum basis, the plaintiff contended the following would be considered logical, fair and reasonable in light of facts:
1. The plaintiff has provided evidence of four costs agreements entered into by his firm with the defendant in 2015 (see Annexure C of the plaintiff's fifth affidavit). Those costs agreements identify the hourly rates charged by the plaintiff and members of his firm as at the dates thereof. Paragraph 2 of the costs agreements predicts an increase in the hourly rates by 5% on 1 July in each year. As such, it was submitted, the Court should be satisfied as to the fairness and reasonableness of the hourly rates that the Court is requested to take into account in determining any gross sum costs.
2. The plaintiff has provided a copy of his firm's computerised ledger report covering work done and time spent in these proceedings from 7 April 2017 to 28 February 2018 (see Annexure B of the plaintiff's fifth affidavit). He has invited the defendant to ask any reasonable questions in relation to the items of work referred to, which he will answer.
3. In this case, the plaintiff does not have an "external" client. The nature and extent of the work carried out by the plaintiffs firm are, generally, self-evident from the documents filed in Court and any records of attendance at Court.
In summary, the plaintiff submitted that the making of a gross sum costs order would bring to a conclusion (subject to payment of the amount) over 2 years' worth of litigation between the parties. It would also result in the cessation of aggravation for the plaintiff. It was submitted that the Court should be in a position to fix an amount that is logical, fair and reasonable.
The defendant advanced the following submissions in reply to the plaintiff's application for gross sum costs:
1. The defendant repeated his submission that no costs order in relation to the proceedings generally should be made until final orders are made (referencing the extant interim freezing order) and the evidence of the plaintiff be proven to the requisite standard required for final relief.
2. The defendant placed emphasis upon the following legal principles:
1. A gross sum costs order may be appropriate where the assessment of costs would be protracted and relatively expensive, having regard to what is at stake: Harrison v Schipp at [21]-[22]; Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 ("Zepinic") at [29].
2. The assessment of a gross sum costs order is made by reference to the successful party's conduct of the litigation including the complexity of the pleadings, number and duration of interlocutory applications and effort required in preparation for and conduct of the final hearing: Smoothpool v Pickering [2001] SASC 131.
3. The power may be exercised where the additional costs of a formal assessment would disadvantage the successful party because of the real prospect that the unsuccessful party is unable to discharge the cost liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788; [2005] FCA 228 at [90], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.
4. The costs of the proceedings must be proportionate to the importance and complexity of the subject matter in dispute: s 60 of the Civil Procedure Act. The entitlement of parties to justice is not unconditional and must have regard to a number of factors, including the proportionality of the costs involved to the amount in dispute: Council of the City of Botany Bay v Michos [2013] NSWCA 244 at [31]; Zepinic at [33].
1. Those legal principles are particularly relevant, in the current matter, in that:
1. There is no material before the Court to suggest that an assessment of costs would be protracted or expensive and the plaintiff concedes previous assessments have not been opposed;
2. the pleadings are not complex and there have been few interlocutory applications; and
3. there is no material before the Court to suggest that formal assessment would disadvantage the plaintiff because of the real prospect that the defendant would be unable to discharge a cost liability.
1. The evidence and submissions of the plaintiff are largely irrelevant to the considerations of the Court in relation to the making of a gross sum costs order. It was contended that the plaintiff's evidence and submissions do not address the matters required to be considered whether determining whether a gross sum costs order should be made and the quantum of any such order.
2. The defendant submitted that the plaintiff's reliance upon earlier agreement with the defendant, as relevant to the Court's determination, is contrary to the authorities.
3. Finally, as to the plaintiff's submissions with respect to the "computerised ledger report", it was submitted that the onus lies with the plaintiff to justify the reasonableness of his claimed costs and to specify which were incurred as a witness and which were incurred in his professional capacity: Lawrence v Nikolaidis (2003) 57 NSWLR 355; [2003] NSWCA 129 at [61]. Further, that in the absence of that sufficient proof, it would not be appropriate (even if the Court was minded to make final costs orders despite the defendant's submission that such a course would be premature) for the Court to order a gross sums costs order. Indeed, the plaintiff has failed to specify the specific sum sought pursuant to the sought gross sum costs order and, for that additional reason alone, it was further contended that such an order ought not be made.
The plaintiff advanced the following submissions in reply:
1. It was contended that the defendant's opposition to a gross sum costs order is consistent with his objective of causing further expense and delay in the finalisation of all matters between the parties and in subjecting the plaintiff to further considerable aggravation.
2. As to the defendant's contention that the plaintiff has failed to specify the specific sum sought, the plaintiff submitted it is unnecessary for him to specify a specific sum sought and "that the Court, based upon the material before it, is in a position to adopt an approach that will be logical, fair and reasonable".
3. Turning to the "computerised ledger", it was submitted that "no reasons have been advanced by the defendant as to why the plaintiff should not be awarded all costs as recorded in his firm's computerised reports and the plaintiff submits that such an amount should be duly fixed". Reference was made the plaintiff's sixth affidavit as evidence that the hourly rates charged by the plaintiff and his firm were clearly reasonable, particularly when compared to the hourly rates agreed to by the defendant in 2015 (see para 12 of the plaintiff's fifth affidavit).
[14]
Defendant's Application for Leave to be Heard
The defendant made a number of arguments as to why leave should be given to receive his submissions on cost, central to those submissions was that the debarring order should be set-aside on the basis that it was either beyond the Registrar's power or, alternatively, not warranted in the circumstances. The practical question of the Court as to costs has been that the substance of the defendant's contentions as to costs have been considered by the Court but rejected. As a practical matter, leave is given, in that respect, but orders for costs will be made in favour of the plaintiff.
[15]
CONSIDERATION
It is apparent from the written submissions on costs, that the parties' submissions, in that respect, were directed at not only costs of the motion but costs of the ASOC; at least insofar as orders for costs thrown away were made in the context of a final hearing of the ASOC with an express reservation that the questions of indemnity and gross lump sum costs would be dealt with in that respect.
A further introductory consideration, raised in the defendant's written submission, was that the determination of costs should await the final adjudication of the interim freezing order. That proposition should be rejected for two reasons:
1. First, there is no remainder of issue as to the final orders sought on ASOC and, further, the plaintiff has not pressed for those orders since 25 October 2017. The only remaining question, in that respect, since that time, has been the application for indemnity and gross lump sum costs.
2. Second, as to the defendant's contention that the determination of costs should await the final adjudication of interim freezing order, that submission has some greater force. However, it should not be accepted for two reasons:
1. First, it is premised upon the determination of the interim freezing order at a later time. It appears to me that, whilst I will give the plaintiff further opportunity to argue for retention of the interim freezing order, there is prima facie a substantial basis for dissolving those orders at the same time as making orders for costs. Hence, the defendant's argument, in substance, falls away.
2. Secondly, there are reasons to reject the contention as a matter of merit, which will be discussed below in relation to indemnity costs.
Noting my earlier summary of costs orders made in the proceedings (see at [41]) and observing that there should properly be made costs orders against the defendant with respect to the hearing of the motion by Davies J and the hearing before Registrar Bradford on 10 August 2017, the balance of cost considerations arising from the parties' submissions concern indemnity costs and gross sum costs (save for those considerations and any residue of the concurring interim freezing order discussed above, the plaintiff would have costs of the proceedings ).
In my view, there is ample basis to make an award of costs in favour of the plaintiff on an indemnity basis with respect to the ASOC and the motion for the following reasons:
1. On 25 October 2017, the proceedings were listed for final hearing and the plaintiff was ready to proceed. The date had been fixed for more than 2 months. The matter, at that stage, had already been the subject of an interlocutory application for interim relief and two directions hearings before Registrar Bradford. The case should have been heard and determined on 25 October 2017.
2. The loss of the hearing, for which an order of costs thrown away was made, is entirely attributable to the delinquent conduct of the defendant. Notwithstanding earlier orders of the Court on both 10 and 23 August 2017, granting liberty to apply, and the direction to file a defence to the ASOC by 31 August 2017 (which was never, ultimately, filed), the defendant utilised the listing for final hearing to agitate three unsuccessful applications, notwithstanding an extant barring order made by Registrar Bradford, without filing a notice of motion or evidence, and ultimately sought to adjourn the proceedings. It is clear that prior to that listing, it was completely within the capacity of the defendant to file his defence to the ASOC and to apply to vary (or challenge the validity of) the orders the Registrar in advance of the final hearing but he did not do so. The defendant caused unnecessary delay and expense by his conduct in these proceedings.
3. Further, it should be emphasised, as to the competency issue raised by counsel on an amicus basis, the contention was not pleaded on the defence filed on 9 August 2017. An explanation for the lateness was provided by Mr McDonald (the defendant's then counsel), whom advised that he acted upon instructions received the night before the final hearing. That explanation by the defendant is not satisfactory, particularly in circumstances in which Mr McDonald had previously appeared in this matter on 10 August 2017. For the reasons set out above, it was completely within the capacity of the defendant to challenge the competency of the proceedings upon the ground that there was no power of the Court to make a final freezing order, in advance of the final hearing. The final hearing was not so heard as a direct result of the defendant's conduct. It may also be noted, that at the listing for the final hearing and the subsequent directions hearing on 5 December 2017, no issue was raised by counsel to the defendant as to the continuance of the interim freezing order.
4. As to the defence filed on 9 August 2017, that defence was ultimately never pursued. This failure to pursue a defence to the hearing, particularly in view of his other failings, further indicates that the defendant had not intended to commence final argument on 25 October 2017 and by his conduct wasted the Court's time, all of which weighs in favour of an order for indemnity costs.
5. To that may be added that the bar to defending the proceedings, made by Registrar Bradford, was entirely available to the Registrar. On 23 August 2017, the defendant failed to enter an appearance or to provide explanation as his non-attendance. This disregard for a fixture by the Court, specifically for the purposes of ensuring the just, quick and cheap resolution of case management issues in the proceedings prior to the final hearing, is amplified in its significance because:
1. an earlier (and relatively recent) disregard for the order of Davies J, with respect to the filing of a defence by 13 July 2017, and subsequently seeking leave to file that defence a month later (which leave was granted by Registrar Bradford on 10 August 2017); and
2. an absence of any steps responsive to the Registrar's direction of 10 August 2017 to file a defence to the ASOC.
1. As to the interim relief, there was also ample basis, with respect, to grant that order, particularly in circumstances where a defence was not ultimately pursued. It should also be noted that the defendant has since objectively failed to take the steps available to him to dissolve that order prior to the belated submissions (advanced in the absence of any formal application) as to costs, notwithstanding the direction to provide evidence in reply to the motion by 13 July 2017 and the liberty to apply granted on 10 and 23 August 2017, respectively.
2. Further, the defendant's approach to challenging the interim freezing order was introduced in a manner entirely inconsistent with s 56 of the Civil Procedure Act. First, no application has been filed to discharge or vary the freezing order made on 8 June 2017 since the making of the interim freezing order. Secondly, the issue was introduced by two undeveloped and inappropriate means, namely, inclusion within an unfiled motion and written submissions as to costs, in the context of a final determination of the costs on the motion and ASOC. The "application" was improperly brought both in terms of form and with respect to the timing, having been introduced very late in the proceedings on 13 April 2018. The conduct of the defendant, particularly in light of the final issues remaining for determination being costs (and not a contested hearing for final relief), were in flagrant breach of the defendant's duty to assist the Court in the facilitation of the just, quick and cheap resolution of the real issues in the proceeding (namely, costs) with appropriate participation in the process of the Court and compliance with its directions: s 56(3) of the Civil Procedure Act.
3. For similar reasons set out above, I also find the defendant's submissions as to the validity of Registrar Bradford's orders advanced in submissions as to costs to have been introduced far too late in the proceeding and by improper means, namely, within submissions as to costs, wherein that contention was advanced for the first time, and without notice. Interlocutory applications should be made and dealt with in a timely manner by both the parties and the practice and procedure implemented by the Court: ss 56 and 59 of the Civil Procedure Act. Registrar Bradford had made provision for liberty to apply on both 10 and 23 August 2017, respectively. A direction that provided a mechanism for the parties to make an application to the Court vis-à-vis the orders of Registrar Bradford in advance of the final hearing and, by doing so, encouraged the elimination of unnecessary delay once the final hearing commenced: ss 56 and 59 of the Civil Procedure Act (see also, Abigroup v Abignano (1992) 112 ALR 497 at 509). The defendant's conduct worked against the timely disposal of issues and undermined the case management of Registrar Bradford, such that not only has the defendant acquiesced in his right to bring such an application, the defendant was entirely not ready to proceed on the date fixed for final hearing.
4. I reject (as the second reason (see at [77(2)(b)]above)) the contention of the defendant that in light of the interim freezing order, dealing with the question of the costs on an indemnity basis or otherwise is premature. That contention was first put before the Court via an unfiled motion and then partially developed in written submissions. It was never formally put before the Court for adjudication (including proceedings before R A Hulme J). Further, the consideration of the operation of the interim freezing order was squarely put to the defendant at the listing for final hearing, when submissions vis-à-vis competency were introduced (as to final orders), at which time the defendant confirmed its submissions did not cavil with the orders of Davies J granted on an interim basis. It should also be noted, R A Hulme J gave the defendant the opportunity to formally make an application to vary or set-aside the interim freezing order, but the defendant never took it. That failure is underlined by the fact that the defendant seeks the reverse by means of submissions on costs.
In addition to the foregoing reasons, I now turn to deal with some specific contentions raised by the defendant against an award of costs on an indemnity basis:
1. The defendant contended that the plaintiff's submissions as to the defendant's non-compliance with orders in these proceedings mischaracterised the effect of the orders. Even if some of the orders identified did not strictly require the defendant to take any steps, the defendant was debarred from defending this matter on the basis of his failure to act upon the directions of Registrar Bradford on 10 August 2017, which failure set the foundation for several unsuccessful interlocutory steps by the defendant to attempt to reverse the effect of the self-executing debarring order of Registrar Bradford.
2. It was also contended that the defendant's compliance with the interim freezing order was a relevant factor with respect to indemnity costs. Such a submission has no basis, particularly in circumstances where interim relief was granted to ensure that final relief was not compromised.
3. The defendant contended that consideration should be given to the fact he had paid the amount owing, but the fact is he did not. It is true, partial repayment of the debt followed the commencement of the proceedings in this Court. However, final payment of the debt only occurred following the matter being listed for final hearing, the filing of the ASOC, the commencement of bankruptcy proceedings and several directions hearings before both the Court as presently constituted and Registrar Bradford. The strained circumstances in which payment was made, which may be briefly stated:
1. Following the commencement of proceedings on 6 June 2017 by statement of claim, the defendant paid the five amounts owing as pleaded at para 3 of the statement of claim.
2. Further debt was accrued following the completion of a costs assessment with respect to the first and second Local Court proceedings, which were registered by way of judgment, respectively, on 27 July 2017.
3. As a result of the debt remaining unpaid, the plaintiff commenced bankruptcy proceeding on 4 August 2017 and filed an amended statement of claim on 11 August 2017, which included the outstanding sums relating to the first and second Local Court proceedings.
4. It may also be noted, whilst not formally introduced into pleadings, following the commencement of proceedings at this Court in June 2017, further debt was accrued by order of the Federal Circuit Court on 5 September and 12 December 2017.
5. It was the evidence of the ongoing bankruptcy proceedings which resulted in the hearing for final relief being stood over and the proceedings fixed for 5 December 2017 for further directions. That course was considered appropriate as it was anticipated that the payment of the debt would be facilitated through the related bankruptcy proceedings and negate the need to pursue final relief. However, as at 5 December 2017, the debt remained unpaid and the bankruptcy proceedings were ongoing. As a result, the parties agreed that the proceedings should await the completion of the bankruptcy proceedings, with the interim freezing order continuing, and the proceedings were fixed for further directions on 28 February 2018.
6. On 28 February 2018, the plaintiff confirmed that the defendant had then paid the plaintiff all amounts previously owing pursuant to orders of any court, and that the only outstanding issues were in relation to the various costs aspects of these proceedings. The Court returned to what was identified as the remaining issues in the proceedings, namely, the extant interim freezing order and costs. A program was fixed for the disposition of the costs issue.
7. Thus, the issue of non-payment of debt remained unresolved up until February 2018, it carried over several directions hearings between June 2017 through to February 2018 (which listings included a listing for final hearing, which due to the delinquency of the defendant, as mentioned above, was adjourned and the plaintiff awarded costs thrown away (there was no opposition by counsel for the defendant to the making of those orders)).
8. However, it was at that late stage, the defendant sought leave to commence further interlocutory proceedings to, inter alia, discharge the interim freezing order and set aside the orders of Registrar Bradford via the unfiled motion and advancing arguments in support of the unfiled motion within the context of submissions as to costs.
1. Reliance was also placed upon the plaintiff's acknowledgement that payment of the debt occurred in or about December 2017 and that the prospective (unassessed) judgment debts too had been paid in full by 20 February 2018. The payment of the debt does not negate the initial basis for proceedings, being the non-compliance with costs order by various courts, nor does it undermine the proper basis, as I will find, to award of indemnity costs. As stated above, following the commencement of proceedings in this Court, payment of the debt occurred in instalments both before and after the date fixed for final hearing. Further, the final determination of the appropriate course forward, with respect to both the interim and final relief, was stagnated by the outstanding debt and related bankruptcy proceedings.
2. As to the plaintiff's reference to alleged conduct by the defendant in earlier proceedings before both the District Court and this Court, however, I agree with the submission of the defendant that the Court should disregard those submissions as a party's conduct prior to the proceedings is generally irrelevant.
In all the circumstances I find it is appropriate that costs are awarded in favour of the plaintiff and on an indemnity basis.
Finally, turning to the application for a gross sum costs order, in my view, it should not be made in the present matter for the following reasons:
1. The material before the Court to make an assessment as to costs at an appropriate sum which is fair to the respective parties is, in my view, insufficient, even if the kind of detailed examination that would be appropriate on taxation or a formal assessment of costs is not required: Harrison v Schipp (2003) 54 NSWLR 738 at [22].
2. There is insufficient evidence to suggest that any assessment process would be unduly protracted or result in significant unrecoverable costs. Nor do I consider the past experience and conduct of the defendant, as cited by the plaintiff, should dictate that a conclusion of that kind should be made: Harrison v Schipp at [21]-[22]; Zepinic at [29].
Accordingly, costs will be as agreed or, in default of agreement, as assessed on an indemnity basis.
[16]
CONCLUSION
Whilst acknowledging the plaintiff's appropriate cause for concern, as to the implications for the recovery of costs if the interim freezing order is dissolved, there appears to be much in favour of dissolving the interim freezing order, having regard to both the principle of finality and the considerations arising earlier in this judgment. Notwithstanding those considerations, the Court intimated at an earlier time that it would hear the plaintiff and the defendant as to that question. Accordingly, an opportunity will be provided for the parties to do so in short compass, with the plaintiff having leave to make submissions as to the disposition of the interim freezing order, if he chooses to do so, within 7 days of the publication of this judgment, and the defendant having the opportunity to make submissions in reply, within 7 days thereafter. If an oral hearing is sought, that should be indicated in the submissions filed in relation to that question.
If the plaintiff does not make submissions to retain the interim freezing order, then short minutes of order should be provided by the plaintiff as to the final disposition of these proceedings in the light of this judgment within 7 days, namely, an order for costs in favour of the plaintiff on an indemnity basis.
[17]
ORDERS AND DIRECTIONS
The Court makes the following orders and directions:
1. Leave is granted to the parties to provide submissions as to the disposition of the interim freezing order as follows:
1. The plaintiff is to file written submissions by 4pm on Friday, 9 August 2019; and
2. The defendant is to file written submissions in reply by 4pm on Friday, 16 August 2019.
1. In the event the plaintiff does not wish to be heard as to the continuation of the interim freezing order, the plaintiff is to file short minutes of order as to the final disposition of these proceedings, in the light of this judgment, by 4pm on Friday, 9 August 2019. The Court will make orders administratively in Chambers.
[18]
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: 08 August 2019