By my Judgment delivered on 8 May 2020 in Re Beverage Freight Services Pty Ltd [2020] NSWSC 509 ("Earlier Judgment"), I held (at [71]) that a history of delay by the Plaintiffs in the conduct of these proceedings, their continuing default as to discovery, particularly in respect of financial records, and the detriment to the Defendants and the public interest in the delivery of justice to which I there referred would warrant an order dismissing the proceedings unless the Plaintiffs now make good the resulting detriment to the Defendants. I nonetheless observed (at [72]):
"It seems to me, however, an order short of dismissal of the proceedings can be made that will address the detriment to the Defendants, where the Plaintiffs have now substantially, although belatedly, complied with the discovery orders and given access to discovered documents. That can be achieved only if the Defendants are fully and promptly compensated for the costs that have been wasted throughout the several months of delay after discovery was due and the several discovery order compliance hearings, and that requires not only the making of an order as to costs but also compliance with that order. It seems to me that such compensation would require at least that costs be payable to the Defendants on an indemnity basis, in respect of the Defendants' wasted costs of the discovery process since the Plaintiffs' discovery was due to be provided on 21 December 2019 and of the several discovery order compliance hearings, and on the basis that those costs be payable forthwith and are to be determined on a gross sum costs basis (unless the Defendants do not wish to seek costs on that basis) in order to avoid the further delays which would be involved in an assessment."
I also there referred to the basis for making an indemnity costs order, a gross sum costs order and a forthwith order as to costs and to applicable case law. I referred to my summary of the applicable principles in Saba v Plumb & Anor [2017] NSWSC 955 at [23] as follows:
"Section 98(4) of the Civil Procedure Act relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. That power is commonly exercised where costs have been incurred in a lengthy or complex case although it is not in its terms limited to such a case … The power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court typically applies a discount in assessing costs on a gross sum basis." [citations omitted]
I then noted (at [75]) that:
"It seems to me that the basis for orders that costs be paid on an indemnity basis and forthwith, and for a gross sum costs order if sought by the Defendants, is established. The conduct of the discovery process by the Plaintiffs is of a nature that warrants an indemnity costs order and a forthwith order, extending to the costs of the discovery order compliance hearings that were consequential upon it. A gross sum costs order is warranted where the costs and delay of an assessment would exacerbate the prejudice to which the Defendants have already been exposed by the delays in discovery. Such an order is also, in my view, the only way in which the detriment (by way of delay and costs) to which the Defendants will have been exposed by the delays in discovery and their consequences may be minimised, although likely not extinguished, if the proceedings are not to be dismissed by reason of the matters addressed above."
I made an order ("Costs Order") that:
"The Plaintiffs pay the Defendants' wasted costs of and incidental to (1) the Plaintiffs' failure to give discovery and access to discovered documents from 21 December 2019 until 30 April 2020 and (2) the determination whether the proceedings should be dismissed, on an indemnity basis and as determined (at the Defendants' election) on a gross sum basis, such costs to be payable forthwith."
I also made an order that contemplated that, unless the Defendants elected not to pursue an application for a gross sum costs order, they should file and serve an Interlocutory Process seeking such an order, their affidavit evidence and submissions in support of that order, and further orders as to the conduct of that application. By their Interlocutory Process filed on 22 May 2020, the Defendants sought an order under s 98(4) of the Civil Procedure Act 2005 (NSW) the costs payable pursuant to the Costs Order be payable on a specified gross basis, instead of proceeding by way of assessment.
[3]
Affidavit evidence
The Defendants read the affidavit dated 25 May 2020 of their solicitor, Mr Grossman, in support of their application for a gross sum costs order. Mr Grossman set out the position in respect of orders made by the Court for discovery and inspection, to which I referred in the Earlier Judgment; to the Plaintiffs' earlier claim that their discovery was complete and to the evidence that subsequently emerged that that was not the case; to further issues that then arose as to the sufficiency of the electronic discovery that was provided by the Plaintiffs. I will refer to Mr Grossman's evidence supporting the categories of costs claimed in dealing with them below. In summary, the costs claimed in Mr Grossman's affidavit are solicitors' fees in the amount of $59,560, Counsel's fees of $39,700 and other disbursements of $7,897, totalling $107,157, exclusive of GST.
The Plaintiffs relied, in response, on the affidavit dated 12 June 2020 of a solicitor acting for them, Mr Pathinather, who indicated that he had the carriage of the proceedings under the supervision of Mr Amirbeaggi. Mr Pathinather did not say when he was admitted to practice or refer to the extent of his experience in the conduct of litigation but nonetheless expressed a range of opinions as to which of the claimed costs were reasonably incurred by the Defendants in the proceedings. Mr Fernon, who appeared for the Plaintiffs, properly did not seek to read that evidence as admissible opinion evidence, although it was admitted with a limiting order as submission under s 136 of the Evidence Act 1995 (NSW). Mr Fernon ultimately did not seek to rely on Mr Pathinather's submissions in that respect in his oral submissions.
Mr Pathinather outlined the circumstances in which the Plaintiffs' non-compliance with discovery orders had emerged, and referred to some aspects of the process which was adopted to deal with the matter which I set out at length in the Earlier Judgment. Mr Pathinather identified items which had been included in the Plaintiffs' claim for costs, prior to 21 December 2019, which it is common ground should be excluded, although they related to issues as to discovery. The amount involved in those items is not material. Mr Pathinather then advanced the proposition, in evidence read as submission only and not relied on by Mr Fernon, that only several of the costs claimed by Mr Grossman related to discovery and that it was unclear how they were wasted costs. That evidence was (reading it generously) based on a misapprehension of the order that the Court had made in the Earlier Judgment, which was not an order for the Defendants' wasted costs of discovery as a result of the Plaintiffs' non-compliance with the Court's orders as to discovery, but extended to all of the Defendants' wasted costs resulting from that non-compliance. I had set out the reasons that such an order was required to make good the detriment suffered by the Defendants arising from these matters in paragraphs 71-72 of the Earlier Judgment to which I had referred above.
Mr Fernon relied on that part of Mr Pathinather's evidence that sets out his account of events leading to the Earlier Judgment. I must therefore record that I do not accept Mr Pathinather's description of the nature of several hearings, generally in evidence admitted as submission only. For example, Mr Pathinather characterised the hearing on 25 March 2020 (to which I referred in paragraph 10 of the Earlier Judgment) as an "adjourned directions hearing". That hearing was in fact the first occasion on which the matter was listed for a substantive hearing as to whether the proceedings should be dismissed by reason of the Plaintiffs' non-compliance with the Court's orders, although that hearing was adjourned when the Plaintiffs requested the opportunity to lead evidence seeking to explain that non-compliance.
Mr Pathinather also referred to the evidence led of Mr Taylor, a costs consultant which was led by the Plaintiffs, which I address below, which assessed the amount that ought to be payable to the Defendants in respect of the costs orders as $58,212 plus GST on an indemnity basis, and suggested that a further "broad brush discount" of 30% should be applied to that figure to reduce it to $40,748.40 plus GST, and then quantified the amount to which the Defendants should be entitled, on Mr Pathinather's approach, as the lesser amount of $23,180 exclusive of GST.
The Plaintiffs also relied on the affidavit dated 12 June 2020 of Mr Taylor, a costs assessor, and his expert report annexed to that affidavit. A preliminary issue arose as to whether the Plaintiffs were entitled to rely on that report, without leave. Ms Dolenec, who appeared for the Defendants, objected to the reading of Mr Taylor's affidavit and to reliance on his report on the basis that UCPR r 31.19 required a party seeking to adduce expert evidence at a trial promptly to seek directions from the Court, and provided that expert evidence could not be adduced at the trial unless directions had been sought in accordance with that rule unless the Court otherwise ordered. Ms Dolenec recognised that a "trial" was defined in s 3 of the Civil Procedure Act 2005 (NSW) as "any hearing that is not an interlocutory hearing" and submitted that the gross sum costs application would finally dispose of the interests of the parties pursuant to their rights under the costs order and that the hearing of this application was not an interlocutory hearing. I am not persuaded that this hearing is properly characterised as a "trial" and it will plainly not dispose of all questions of costs in the proceedings so as to have a final character as to the question of costs generally, as distinct from the costs of a segment of the proceedings. While I indicated a concern, in submissions, that the Court should not have a narrower power to manage the extent to which expert evidence could be relied on in an interlocutory hearing than in a trial, it seems to me that the Court has sufficient inherent power as well as power under s 135 of the Evidence Act to address any question of inappropriate reliance on expert evidence at an interlocutory hearing.
I am not persuaded that the Plaintiffs require leave to rely on Mr Taylor's report. In any event, had leave to rely on Mr Taylor's report been necessary, I would likely have granted it, where that report seems to me to be of assistance in determining this application in a just, quick and cheap way. I bear in mind that several criticisms made by Ms Dolenec of the instructions given to Mr Taylor, of the scope of the information that was provided to Mr Taylor and that Mr Taylor's approach to whether costs were unreasonably incurred are matters that could readily be, and were, addressed in submissions. I also bear in mind that the Court may have regard to its own expertise in respect of the question of costs, so that the Plaintiffs' reliance on Mr Taylor's report does not create any real need for the Defendants to lead expert evidence in response. I do not accept Ms Dolenec's further submission that the report was not admissible as opinion evidence since the nature of the views expressed is such that Mr Taylor's reasoning adequately exposes their bases, although I have not accepted all aspects of that reasoning below. I therefore admitted that report, subject to questions of weight.
Turning now to Mr Taylor's evidence, his firm was retained pursuant to a letter of instruction dated 1 June 2020 from the Plaintiffs' solicitors. That letter initially correctly set out the terms of the Costs Order and then gave an abbreviated history of matters which I had set out at greater length in the Earlier Judgment. In a subsequent reference to the Costs Order in the section headed "Instructions", the letter incorrectly omitted reference to the part of the order that the Plaintiffs pay the Defendants' wasted costs of and incidental to the determination whether the proceedings should be dismissed, and to the fact that those costs were payable on an indemnity basis. In another reference to the Costs Order in item (i) of the "Instructions", the letter again wrongly stated that the Costs Order only applies to "the Defendants' wasted costs or and [sic] incidental to the Plaintiffs' failure to give discovery and access to discovered documents", omitting reference to the second limb of that Costs Order. However, it appears that Mr Taylor obtained a copy of the Earlier Judgment and, either by reference to the correct statement of the orders made at the commencement of the letter of instructions, or by reference to the Earlier Judgment, formed a proper understanding of the scope of the Costs Order and disregarded the narrower formulation of them in the letter of instruction. Mr Taylor was also provided with a draft of the affidavit of Mr Pathinather, which had also misapprehended the Costs Order as noted above, but again appears to have recognised and corrected for that error.
Mr Taylor noted that he had approached the matter by reference to costing law principles arising under the Legal Profession Act 2004 (NSW) for both solicitor and client assessments (although that Act had since been repealed) by reason of the date on which the proceedings had commenced and the transitional provisions in respect of the Legal Profession Uniform Law 2014 (NSW). The parties did not place any significance on that matter. Mr Taylor rightly recognised the test applicable for indemnity costs under r 42.5 of the UCPR, as all costs other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount, although he often applied a test whether particular costs were "fair and reasonable." Ms Dolenec challenged that approach on the basis that the effect of an indemnity costs order are that all costs should be allowed, other than those which had unreasonably been incurred or are unreasonable in amount: Willis v Health Communications Network Ltd (No 2) [2008] NSWCA 2. However, it seems to me that little turns on the difference in approach for present purposes.
Mr Taylor also addressed the concept of "wasted costs" at general law, and rightly recognised that that concept can relate to costs that cannot be utilised in the proceedings. In the context of this application, however, the wasted costs identified in the Earlier Judgment and the orders include unnecessary costs to which the Defendants were put by reason of a continuing discovery failure and the Plaintiffs' incorrect claims that discovery had been completed, which were only to be shown to be incorrect by the Defendants' work in assessing the adequacy of discovery. Those costs were wasted, in the sense that they were of no benefit to the conduct of the proceedings and would not have been incurred had the Plaintiffs complied with their discovery obligations. Mr Taylor did not allow "the usual inter partes costs for discovery as these in [his] opinion are not wasted costs but costs of the parties or the costs of the proceedings". It seems to me that approach was incorrect, where the Plaintiffs' failure to comply with their discovery obligations required the Defendants to take steps and incur costs to respond to that failure which they would not have incurred had the Court's discovery orders been complied with. Mr Taylor did properly recognise the wasted costs in respect of costs for correspondence or attendances in relation to discovery that would not have occurred but for the Plaintiffs' failure to give proper discovery and also properly allowed costs of Court attendances to determine the dismissal issue.
I will address several appendices to Mr Taylor's report below. Mr Taylor formed the view that the "fair and reasonable" quantum for costs thrown away pursuant to the Costs Order on an indemnity basis was the amount of $58,212 exclusive of GST. Mr Taylor's report is of assistance as an independent view that the costs that would properly be recoverable by the Defendants pursuant to the Costs Order would be at least that amount, although I take a different view as to several matters noted below.
[4]
Whether a gross sum costs order should be made
I had addressed the basis on which a gross sum costs order could be made in the Earlier Judgment. In this application, Mr Fernon referred to the applicable principles and noted that such an order is often made (although, as I note below, not only made) in a lengthy or complex case. Mr Fernon referred to the authority that power will only be exercised where the court can do justice between the parties and to the fact that a discount will often be applied in assessing costs on a gross sum basis, and he referred, inter alia, to Hamod v State of New South Wales [2011] NSWCA 375. Beazley JA (with whom Giles and Whealy JJA agreed) there summarised (at [816]-[817]) several factors relevant to the making of a gross sum costs order as follows:
"The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie's Uniform Civil Procedure NSW at [s 98.45].
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."
Ms Dolenec also referred to the applicable principles as set out by Beazley JA in Hamod v State of New South Wales above and to the reference to those principles by Kunc J in Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 12) [2019] NSWSC 916 at [158]. Ms Dolenec also submitted, and I accept that the Plaintiffs would bear the onus of establishing that any costs were unreasonable so as to be excluded from an order for indemnity costs: Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640 at [61].
I should expand upon my reference to these principles in the Earlier Judgment, since both Counsel addressed them again in submissions. As I noted in the Earlier Judgment, s 98(4) of the Civil Procedure Act 2005 (NSW) relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. As Mr Fernon pointed out, that power is commonly exercised where costs have been incurred in a lengthy or complex case, but it is not limited to such a case: Simone Starr-Diamond v Talus Diamond (No 4) [2013] NSWSC 811 at [8]. As Mr Fernon also pointed out, the power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court typically applies a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW [s 98.65]; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23. A gross sum costs order may also be made to avoid the expense, delay and aggregation involved in litigation arising out of an assessment: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738. Where a gross costs order is to be made, the Court is not required to undertake a detailed examination of the kind which would be undertaken in a cost assessment, in determining a gross sum payable, and will apply "a broad brush" approach: Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Harrison v Schipp above at [22].
Mr Fernon rightly submitted, in oral submissions, that the orders made in the Earlier Judgment contemplated that costs would be determined on a gross sum costs basis, if the Defendants elected to proceed in that manner. To that extent, those orders anticipated that the matters necessary to make such an order, as noted in paragraph 74 of the Earlier Judgment, would be satisfied, including that the Court could be satisfied that such an order could be made fairly between the parties and could determine an appropriate sum on the evidence available to it. Where both parties have advanced further submissions as to that question, I will treat it as in issue in this application.
Mr Fernon submitted, in written submissions, that the costs claimed by the Defendants are not proportionate to or within the ambit of the Costs Order. I do not accept that submission, where Mr Pathinather's evidence in support of it had misapprehended the Costs Order; that submission found little support in the expert evidence of Mr Taylor led by the Plaintiffs; and having regard to my review of those costs below. Mr Fernon also submitted that a gross sum order would be unfair and indeed "punitive" to the Plaintiffs where the costs claimed exceed the ambit of the Costs Order. I do not accept that submission since its premise was not established. I am satisfied that, particularly with the assistance of expert evidence of Mr Taylor led by the Plaintiffs, the Court can do justice between the parties in making a gross sum costs order and such an order should be made.
Mr Fernon also submits that, although the Costs Order related to, inter alia, wasted costs of and incidental to the Plaintiffs' failure to give discovery and access to discovered documents over the relevant period, the Defendants do not identify their "wasted costs", but claim the whole of the costs for the period, with some minor charges removed. I do not accept that submission. It seems to me that the description of the items claimed, to which I refer below, is sufficient to establish their character as wasted costs, so far as they were costs that addressed the Plaintiffs' failure to comply with discovery orders, and the deficiencies in the discovery given, which would not have been incurred had the Plaintiffs complied with the discovery orders.
Mr Fernon also submits the Defendants should have limited their engagement in the question whether the proceedings should be dismissed by reason of the Plaintiffs' non-compliance with the Court's orders for discovery. I do not accept that submission. Once the Court had raised that question, it was appropriate that the Defendants address it, both to ensure that it could be properly determined with the benefit of a contradictor, and because they had a plain interest in that question where the non-compliance with discovery orders had an adverse impact on the just, quick and cheap resolution of the proceedings against them. Mr Fernon submits that, for those reasons, the amount claimed by the Defendants should be "heavily discounted" beyond a broad brush discount. I do not accept that submission, where I have not accepted its premise, and for the other reasons noted below.
Ms Dolenec responds to the Plaintiffs' contention that a substantial discount should be applied by referring to Brereton J's observation in Hancock v Rinehart (Lump Sum Costs) above at [57]-[58]:
"While it is undoubtedly the usual practice of the court when making a lump sum costs order to apply a discount for the reasons mentioned, that does not mean that the Court must apply a percentage discount to the sum sought by the successful party, and the Court "must be astute not to cause an injustice to the successful party" by applying "an arbitrary 'fail safe' discount on the costs estimate submitted to the court". Thus if the court can be confident that there is little risk that the sum includes costs that might be disallowed on assessment, the case for a discount is seriously undermined.
Where a gross sum is assessed on an indemnity basis, and there is no evidence of unreasonableness, it may be inappropriate to apply any discount, although one may nevertheless be appropriate if there is evidence that the successful party "errs on the side of excessiveness [as in excessive use of legal services]"". [footnotes omitted]
Ms Dolenec also refers to his Honour's conclusion (at [59]-[60]) that the process for which the discount is ordinarily intended to provide will have taken place if unreasonable costs and out-of-scope issues have already been addressed. Ms Dolenec submitted that the Defendants claim professional fees for only one solicitor and counsel; that solicitor/client costs, as distinct from costs of conduct of the proceedings, are minimal; and that work performed is clearly identified and can clearly be related to the matters before the Court that are the subject of the Costs Order. She submitted that it is not appropriate to apply a "broad brush" discount to the gross sum costs order on that basis.
I do not accept that a substantial discount to the costs claimed is appropriate, where those costs have been closely reviewed by Mr Taylor and it would not be appropriate both to undertake a close review of the costs claimed and then to apply a substantial discount that is often applied to reflect the fact that such a review was not undertaken; Mr Taylor's evidence largely supports the reasonableness of the costs claimed; and given my review of those costs below. However, I recognise that, as Mr Fernon points out, the process adopted here falls short of a full costs assessment with access to the underlying documentation, and there is a limited risk of duplication between Counsel's and solicitors' work. It seems to me that matters are appropriately addressed by a discount of 10% to solicitors' costs only, as I have noted below.
[5]
Claim for solicitors' costs
The Defendants claim solicitors' costs as falling within the Costs Order. Mr Grossman's affidavit annexed a costs disclosure and costs agreement with the Defendants, which recorded the hourly rate applicable to his work as a solicitor, and to an invoice dated 22 May 2020 by his firm referring to work for the period from 10 December 2019 to 8 May 2020. That invoice set out professional fees charged, by date, by the staff member undertaking the attendance (generally, Mr Grossman), a description of the nature of the attendance and the number of units referable to the attendance. A comparison of the number of units and the amount charged indicates that the time was charged in 6 minute units in accordance with a common practice of solicitors. Mr Grossman's affidavit also indicates the process that he adopted to identify matters which did not relate to the Costs Order and to exclude those matters from the costs claimed, and he calculated the total costs claimed in respect of his firm's work as $59,560.
Mr Pathinather advanced several criticisms (in evidence admitted as submission on which the Plaintiffs ultimately did not rely) and Mr Fernon also advanced criticisms in submission of Mr Grossman's assessment whether solicitors' costs claimed were within the scope of the Costs Order. It seems to me that those criticisms have limited weight, where Mr Grossman gave evidence of the process he adopted to exclude work that did not relate to the Costs Order; Mr Fernon did not seek leave to cross-examine Mr Grossman as to that process, and did not put to Mr Grossman that he did not have a proper understanding of the Costs Order or that the descriptions of work in his firm's invoices were not accurate or that there was any error or methodology in the process he adopted in order to identify costs within that Costs Order; and where Mr Taylor's detailed review of the costs claimed does not support a finding of any substantial error in Mr Grossman's approach.
Mr Taylor expresses the view that Mr Grossman's hourly rate is reasonable in the circumstances, by reason of the indemnity Costs Order and where he has carriage of the matter. Mr Taylor refers to several attendances of Mr Grossman which he considers fall outside the Costs Order and summarises those items in Appendix 7 to his report, expressing the view that costs in the amount of $5,945 were not wasted or thrown away. Ms Dolenec indicated that items 1-3 and 195 referred to in Appendix 7 to Mr Taylor's report were not pressed. Those amounts should be deducted in quantifying his recoverable costs. Mr Taylor also excluded some costs which he describes as "part of the usual discovery process", which he treats as not wasted on the basis that the Plaintiffs' discovered documents would have been inspected in any event as part of the usual discovery process. That approach does not seem to me to be justified. First, the attendances in respect of discovery addressed issues in relation to its inadequacy which would not have arisen had the Court's orders as to discovery been complied with. Second, the fragmentary and disordered manner in which discovery was given by the Plaintiffs, as set out in the Earlier Judgment was hardly in the "usual" course and had the result that the inspection process could not take place by reference to a completed discovery or form the basis for any assessment of the discovered documents as a whole. A prudent legal practitioner would, in those circumstances, likely undertake a further inspection of the discovery once it was complete and could be assessed as a whole, and the costs of inspection of incomplete parts of it would be wasted.
Mr Taylor expressed the view that a reasonable estimate of costs recoverable in respect of Mr Grossman's costs, under an indemnity order, fell within the range of 80%-90% of solicitor/client costs. On the findings I have reached above, Mr Grossmann's costs (including the amounts which Mr Taylor had excluded in Appendix 7, other than items 1-3 and 195) should be quantified at the upper end of the percentage range identified by Mr Taylor and 90% of those costs should be allowed on a gross sum basis. That figure reflects a percentage discount of 10% and, while that percentage cannot be determined with mathematical accuracy, it seems to me to reflect a proper balance between the level of detail provided in respect of the costs incurred, the extent of Mr Taylor's review of those costs, and the residual risk, including any risk of duplication of Counsel's and solicitors' work that has not emerged from the evidence, arising from the absence of an assessment.
[6]
Counsel's fees
The Defendants also claim Counsel's fees as falling within the costs order. Mr Grossman's affidavit annexed a fee disclosure letter given by Counsel briefed for the Defendants, Ms Dolenec, referred to her hourly rate, and to her tax invoice dated 21 May 2020 prepared by Ms Dolenec, in response to his request that she prepare a tax invoice relating only to the Costs Order. Mr Grossman's evidence was that he had reviewed Ms Dolenec's tax invoice and checked it against his own time records and he expressed the opinion that the matters recorded in that invoice related to the Costs Order. He also observed (in evidence admitted with a limiting order under s 136 of the Evidence Act as evidence of his understanding) that a comparison with his firm's invoice indicated that Ms Dolenec had not charged for all of the work carried out in relation to the Costs Order.
Mr Pathinather, in evidence admitted as submission on which the Plaintiffs ultimately did not rely, and Mr Fernon, in submissions, made a number of criticisms of the assessment made by Mr Grossman and Ms Dolenec as to whether Counsel's fees were reasonable and within the scope of the Costs Order. Mr Fernon went so far as to submit in oral submissions that Ms Dolenec had wrongly charged a daily fee in respect of applications which proceeded for shorter periods. There were two difficulties with that submission. The first was that, on the several occasions to which I referred in the Earlier Judgment, hearings were set down with a view to finally determining the matter and would have warranted significant preparation for that reason, but were adjourned by reason of the difficulties to which I referred in that judgment. Ms Dolenec could not have known in advance, on any of the several occasions on which the matter was listed and adjourned, that that listing would also have to be adjourned or would not resolve the matter. Second, Mr Fernon also did not seek leave to cross-examine Ms Dolenec or to put to her any proposition that the time which she had spent on preparing the matter was not necessary for the preparation of the matter.
Mr Taylor fairly expressed the view that Ms Dolenec's hourly and daily rates were fair and reasonable in the circumstances of the matter and her experience and were within applicable costing guidelines, and recognised that all of the attendances claimed in respect of Ms Dolenec fell within the time frame of the Costs Order. Appendix 4 of Mr Taylor's report sets out a summary of the items included in Ms Dolenec's tax invoice and, in Appendix 5, excluded several of those attendances. As I noted above, I do not accept Mr Taylor's view that attendances are not wasted so far as they relate to discovery, for the reasons I noted above in respect of the solicitors' costs relating to discovery, and because the issues arising from the Plaintiffs' non-compliance with the discovery orders were not the usual work of Counsel in discovery, but the consequence of that non-compliance.
Mr Taylor also expressed the view that a number of Ms Dolenec's claims for preparation were not "fair and reasonable", an approach to which I referred above, and should be reduced and Appendix 6 of Mr Taylor's report identifies suggested reductions to those costs. Regrettably, Mr Taylor's wider view as to whether those costs were "fair and reasonable" was not informed by adequate instructions or by his being briefed, for example, with the relevant transcripts or the affidavit evidence led in the several hearings. In particular, it seems to me that he was led into error by the erroneous instruction given to him by the Plaintiffs' solicitors that several of the hearings which were intended to determine the matter were in the nature of "directions hearings" only, because that was all that could occur as events developed. As I have noted above, it was not possible for Ms Dolenec to know in advance whether the majority of the hearings in the application would be the final hearing, by reason of aspects of the Plaintiffs' conduct of the application to which I referred in the Earlier Judgment. It seems to me that, in those circumstances, Ms Dolenec had to prepare for each hearing as though it were the final hearing, notwithstanding the number of occasions on which that did not take place. Even if a criterion of whether costs were "fair and reasonable", as distinct from not unreasonable, were applied, it seems to me that Ms Dolenec's costs would satisfy that criterion.
In respect of one of Ms Dolenec's time charges, there appeared to be a discrepancy between the time period recorded and the costs charged, but the amount involved is $300 and, in respect of two charges in the amount of $1,800, Ms Dolenec accepted that part of those charges would not be recoverable, although it was not possible to identify the particular part given the entry related to several attendances. It seems to me that these charges should be excluded from Ms Dolenec's recoverable fees.
Mr Taylor refers to his experience that the usual range for Counsel's fees in an indemnity order is between 90% and 100% of the costs charged, and I have previously recognised that Counsel's fees are often allowed in full in a gross sum costs assessment, unless there is any reason to think those fees are not within an appropriate range: Re Ji Woo International Education Centre Pty Ltd [2019] NSWSC 338 at [29]. Mr Taylor points to the possibility of duplication of time and work between Counsel and Mr Grossman, although again on the erroneous basis that "the directions were in the nature of case management directions in the main". On that basis, Mr Taylor expresses the view that a reduction of 15% of Ms Dolenec's fees would be reasonable, and expresses the view that a fair and reasonable amount for Counsel's fees is the sum of $23,290.
It seems to me that no basis has been shown to reduce Ms Dolenec's fees, other than by excluding the three attendances noted in paragraph 35 above, and the possibility of a duplication between Counsel's and solicitors' work that has not emerged from the evidence is sufficiently addressed by the discount that I have applied to the solicitors' costs. Indemnity costs should be allowed in respect of Ms Dolenec's fees, other than the three attendances noted in paragraph 35 above.
[7]
Wasted accounting expert costs and other disbursements
The Defendants also claim wasted expert's fees as falling within the Costs Order. Mr Grossman referred to the engagement of Mr Ferrier as an accounting expert for the Defendants and to the issue of a preliminary letter of instruction to him to commence work on his report in February 2020, and to the receipt of a tax invoice from Mr Ferrier on 20 April 2020. Mr Grossman's evidence is that he then asked Mr Ferrier to provide a breakdown of the costs to allow an identification of those costs which fell within the Costs Order, and he identifies several items as relating to work carried out by Mr Ferrier that relate to the Costs Order, totalling, $6,975. Again, Mr Fernon did not seek to challenge that identification in cross-examination. Ms Dolenec submits that $5,175 of the fees charged prior to 1 April 2020 relate to the failure to give discovery, and an amount of $1,800 incurred after that date related to a failure to give access to the discovered documents.
The items of Mr Ferrier's costs that the Defendants seek to recover under the Costs Order include discussion of the information required by Mr Ferrier to prepare his report; to assessment of information that had not been provided; and to drafting a report relating to the information that was required for a second period that was potentially in issue. I also note that the amount of Mr Ferrier's costs that are claimed as falling within the Costs Order, are about a third of his costs actually incurred. Mr Taylor expresses the view that there is "insufficient evidence" to include Mr Ferrier's costs, partly because he appears to have formed the view that he cannot determine whether they are wasted without an opinion from an accounting expert. It seems to me that the narrative of the work undertaken by Mr Ferrier sufficiently discloses the nature of that work and there was no challenge to the accuracy of that narrative. Mr Taylor's approach also fails to recognise that, as I have noted above, the work undertaken by Mr Ferrier which has been claimed under the Costs Order largely relates to identifying the missing information that was necessary for preparation of his report, and the need to do so was consequential on the Plaintiffs' failure to comply with their discovery obligations in that regard. The amount of Mr Ferrier's costs claimed, subject to excluding two items noted below, should be included in the Costs Order on an indemnity basis.
The Defendants claimed expert fees in respect of the identification of further assumptions as to specified matters (item 16) in the amount of $675 and an amount of $1800 as to Mr Ferrier's involvement with an access issue on and after 30 April 2020 (items 18 and 19) which do not seem to me to fall within the Costs Order.
The Plaintiffs also claim other disbursements within the Costs Order. Mr Taylor does not appear to take any issue with those other claims for disbursements and they should be allowed.
[8]
GST
Mr Taylor assumed that the Defendants were registered for GST and were entitled to claim a GST input credit and did not allow GST in his calculations. I would not necessarily proceed on that basis, where the Defendants include natural persons in their capacity as officers of a company as well as that company. However, it will be necessary for the parties to address this matter in submissions in respect of orders, if they cannot reach agreement about it.
[9]
Summary and orders
In summary, I am satisfied that the Court can do justice to the parties in making a lump sum costs order, which will avoid the detriment to the Defendants of the costs and time of an assessment and avoid the detriment to the Plaintiffs of the proceedings being dismissed, as would otherwise have been appropriate for the reasons noted in the Earlier Judgment. The parties should recalculate the costs on the basis of a discount of 10% to the solicitors' costs quantified in Mr Grossman's affidavit (after excluding items 1-3 and 195 referred to in Appendix 7 to Mr Taylor's report); including the costs claimed in respect of Ms Dolenec's fees, other than the amount of $2100 referable three items noted in paragraph 35 above; including the costs claimed in respect of Mr Ferrier's fees, other than $675 referable to item 16 and $1800 referable to items 18 and 19; and including other disbursements. The parties should seek to agree the question of GST or otherwise address it in submissions as to orders.
The Plaintiffs have now been on notice of the fact that costs would be payable since the Earlier Judgment was delivered on 8 May 2020 and of the amount of the costs claimed by the Plaintiffs since the Interlocutory Process was filed on 22 May 2020. As I noted in the Earlier Judgment, the costs orders that I make will be payable within a short time after orders are made to give effect to this judgment. The parties should agree the time to be allowed for payment or, if no agreement is reached, address their respective positions in their submissions as to orders.
As I noted in the Earlier Judgment, the proceedings may well be dismissed if the order for payment of these costs is not complied with, given the extended non-compliance with the Court's orders recorded in the Earlier Judgment and the real prejudice that the Defendants will suffer if they are now left to a costs order that is also not complied with. Alternatively, so far as the Costs Order and orders made to give effect to this judgment are interlocutory in nature, a non-compliance with them may amount to a change of circumstances that would warrant the Court vacating the costs orders and instead dismissing the proceedings with costs. It would then be apparent that costs orders I have made would not in fact address the detriment to the Defendants noted in the Earlier Judgment because they were not complied with and only dismissal of the proceedings would do so.
I direct the parties to bring in agreed short minutes of order to give effect to this judgment within 7 days or, if there is no agreement between them, their respective draft short minutes of order and submissions as to the differences between them not exceeding 8 pages in Arial 12 point font and one and a half spacing.
[10]
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Decision last updated: 02 July 2020