Hamod v New South Wales

No specified gross sum costs order

1. There was no dispute about the principles applicable to the discretion conferred on the Court by s 98(4)(c) of the Civil Procedure Act. The discretion is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision. The principal purpose of the provision is to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment process: Hamod v New South Wales [2011] NSWCA 375 (Hamod) at [813]-[820]; Ahern v Aon Risk Services Australia Ltd (No. 2) [2022] NSWCA 39 (Ahern) at [14]-[16].
2. The discretion should only be exercised where the Court considers that it can do so fairly and where an appropriate sum can be determined from the available materials: Ahern at [17].
3. As the Court of Appeal said in Ahern at [18]: "If it considers it appropriate to make the order, the Court may adopt a 'broad brush' approach to quantification, as to require the Court to undertake a detailed examination of the kind carried out in a formal costs assessment would defeat the purpose of the order: Harrison v Schipp at 743; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. 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)': Hamod at [820]. Courts have typically applied a discount when assessing costs on a gross sum basis, though the aptness of a discount primarily depends on the accuracy and reliability of the costs evidence available to the Court: Hamod at [814]."
4. In the present case, I accept that the costs assessment process will be more drawn out than the application for a specified gross sum costs order. The Taylor report indicates that the costs assessment process will involve little additional expense compared to the costs of the present application. I would nevertheless have been inclined to make a specified gross sum costs order, having regard to the impecuniosity of the plaintiffs, if the defendant had placed sufficient material before the Court to enable an appropriate sum to be determined adopting a logical, fair and reasonable "broad-brush" approach. The defendant failed to do so.
5. The material that the defendant placed before the Court comprises: 1. Mr Hidayat's evidence of Piper Alderman's costs agreement with the defendant dated 25 June 2020 and the hourly rates charged for work done by Mr Hidayat and staff of Piper Alderman in relation the proceedings; 2. one invoice issued by Piper Alderman to the defendant on 29 July 2020 for fees totalling $5,000 in respect of work performed during the period from 25 June 2020 to 22 July 2020 plus disbursements (counsel's fees) of $5,000 (excluding GST); 3. an extract from Piper Alderman's time management system recording the time spent by Piper Alderman working on the proceedings from 2 June 2020 until 9 May 2022, being a total of 342.6 hours in respect of which the time management system records fees totalling $187,750 (excluding GST) (the time records); 4. Mr Hidayat's summary of the total time spent and total fees into broad categories such as discovery, security for costs, preparing for final hearing and appearing at final hearing (noting that the total amount of 351.5 hours and total fees of $192,250 in the summary slightly exceed those recorded in the time records and this discrepancy is unexplained); 5. Mr Hidayat's evidence that the total costs incurred by the defendant in the proceedings until the delivery of judgment on 9 May 2022 is $399,377.62, comprising Piper Alderman's fees of $192,750, counsel's fees of $201,630.97 and disbursements of $4,996.65 (all figures excluding GST); 6. costs agreements and invoices issued by counsel; and 7. the Taylor report.
6. The time records and the Taylor report reveal that 86 per cent of the work done by Piper Alderman (being almost 300 hours, accounting for $169,190 of the firm's total fees) was done by Mr Hidayat himself. Mr Hidayat was a Senior Associate of the firm when the proceedings commenced, but was elevated to Partner on 1 October 2020. The vast majority of work was done after that date. Only 12 per cent of the work was done by a senior associate (Ms Nehme), a total of 15 minutes work was performed by a solicitor and negligible amounts of work were done by law clerks.
7. My very broad review of the time records has identified that the work undertaken by Mr Hidayat (including after 1 October 2020) includes many categories of work that would ordinarily be expected to be undertaken by a solicitor (or, in some instances, a senior associate) with appropriate supervision from a partner, rather than being undertaken by the partner at their significantly higher hourly rate. Those categories of work include drafting and collating briefs to counsel, reviewing discovered documents and documents produced in response to notices to produce, attending directions hearings and return of subpoena listings, drafting interlocutory processes, researching and preparing memoranda in relation to security for costs and setting aside subpoenas, and preparing the court book for the final hearing.
8. In his affidavit sworn on 16 May 2022, Mr Hidayat deposed that: "Given my knowledge of the matter, I considered that there were inherent efficiencies in having the majority of the work undertaken by me. However, I delegated to junior lawyers where I considered appropriate."
9. That evidence does not rise above the level of bare assertion.
10. The Taylor report addresses the manner in which work was distributed between fee earners at Piper Alderman without expressing an opinion as to whether that distribution was reasonable. Mr Taylor makes a number of observations (described as "findings") regarding the distribution of work. Mr Taylor states that it "avoided duplication of having multiple fee earners working on the matter" (incorrectly implying that delegation necessarily leads to duplication) but acknowledged "some inefficiencies which may result in some costs claimed in the WIP record being reduced". The "inefficiencies" identified by Mr Taylor include that some work was done which cannot fairly and reasonably be charged at Mr Hidayat's hourly rate, some work undertaken by Piper Alderman was within the realm of counsel who had been briefed on the matter and some research was undertaken in relation to matters that should be within the knowledge of a solicitor and would therefore not be allowed on assessment. Mr Taylor then opines that, "[w]eighing up these competing factors", between 80 and 90 per cent of the solicitor client costs in Piper Alderman's invoice and time records are fair and reasonable. Mr Taylor does not articulate the reasons why the "competing factors" to which he has referred support that conclusion. I note that Mr Taylor also states that, in his experience, assessed costs usually fall within the range of between 65 and 85 per cent of solicitor client costs.
11. Piper Alderman's fees represent approximately half of the defendant's total costs. In the absence of reasons for Mr Taylor's opinion that between 80 and 90 per cent of Piper Alderman's fees are fair and reasonable, the material presented by the defendant does not provide a starting point for the Court to fairly determine an appropriate sum for the defendant's costs under s 98(4)(c) of the Civil Procedure Act. I reject the defendant's submissions to the contrary. The absence of reasons cannot logically and fairly be overcome by the Court applying some increased discount to the defendant's solicitor client costs. What is required is a detailed review of the itemised charges to assess the extent to which work should reasonably have been undertaken by less experienced legal practitioners at a lower hourly rate and quantify the fair and reasonable costs of the work accordingly. That is a task required to be carried out by a costs assessor and not by the Court on an application for a specified gross sum costs order: Ahern at [18].
12. For those reasons, it is not appropriate to exercise the discretion to make an order for specified gross sum costs, notwithstanding the impecuniosity of the plaintiffs. It is not necessary to address the additional issues raised by the plaintiffs' submissions, Mr Lazarus' affidavit and the Capell report, including whether Piper Alderman's time records contain sufficient detail for the purpose of determining costs, apparent duplication of work by Piper Alderman and counsel in relation to preparation of submissions, whether the costs incurred by the defendant were proportionate to a five day hearing in this Court and the fact that the defendant's costs represent approximately a six-fold increase to Mr Hidayat's estimate of costs made in November 2020 for the purpose of an application for security for costs.

Paragraph 51A - no indemnity costs

1. Paragraph 51A of the plaintiffs' further amended points of claim is addressed in the principal judgment at [11]-[13] and [191]-[218]. Paragraph 51A concerned an allegation that the defendant misled the Court by deposing in paragraph 74 of a confidential affidavit sworn on 10 December 2019 that Levitt Robinson "have acted for the Fogo Franchisees who are creditors or potential creditors" of Fogo Brazilia Holdings. The confidential affidavit was sworn in support of the defendant's application for the issue of summonses to Mr Dresner and others for examination in relation to the affairs of Fogo Brazilia Holdings. Paragraph 74 of that affidavit was drawn to the attention of the Court at hearing on 3 February 2020 in connection with those examination summonses. The plaintiffs contended that paragraph 74 was misleading because Levitt Robinson was continuing to act for the former franchisee at the time it was sworn and at the time of hearing on 3 February 2020.
2. The defendant seeks an order that the plaintiffs pay his costs of defending the allegation in paragraph 51A on the basis that the allegation should not have been made, or should have been withdrawn after service of the defendant's affidavit sworn on 5 May 2021. The defendant submits that the plaintiffs should have known that their allegation in paragraph 51A was hopeless and bound to fail, and that he should therefore be more fully compensated by an indemnity costs order for the costs that the plaintiffs unreasonably caused him to incur in defending that allegation.
3. I reject the defendant's submissions. The outcome of the proceedings insofar as paragraph 51A is concerned turned on an assessment of the defendant's affidavit sworn on 5 May 2021, the defendant's evidence in cross-examination and other evidence. The other evidence included relatively contemporaneous statements made by Levitt Robinson in correspondence to the effect that they were (at the time of the correspondence) continuing to act for former franchisees. The other evidence also included statements made to the Court at the hearing on 3 February 2020 by counsel appearing for the defendant, briefed by Levitt Robinson. Those statements were consistent with paragraph 74 of the defendant's confidential affidavit. Given the conflicting evidence, I do not consider that it was unreasonable for the plaintiffs to make and maintain the allegation in paragraph 51A of the further amended points of claim and to test the defendant's evidence in cross-examination.
4. In substance, the defendant's application for indemnity costs in respect of paragraph 51A draws on the benefit of hindsight. It is true that the defendant's solicitors wrote to the plaintiffs' solicitors prior to the final hearing challenging the basis of the allegation in paragraph 51A and inviting the plaintiffs to withdraw the allegation. However, I note that the correspondence did not refer to most of the matters that ultimately led to the dismissal of the allegation. Even the defendant's written submissions served shortly prior to the resumption of the final hearing missed the point by focussing on a contention about the meaning of paragraph 74 of the confidential affidavit that was contrary to the defendant's own evidence in his 5 May 2021 affidavit about what he understood and had intended to convey to the Court in paragraph 74.

Costs of the March 2021 interlocutory application

1. On 15 March 2021, the Court heard an application by the defendant to set aside a subpoena issued by the plaintiffs to Mr Levitt on 24 February 2021. The application was made by interlocutory process filed on 8 March 2021. It raised issues concerning whether there was a legitimate forensic purpose for the issue of the subpoena and the extent to which the documents caught by the subpoena were the subject of legal professional privilege. The application was determined on 16 March 2021. In short, the privilege claims were abandoned by the defendant after the plaintiffs had filed and served detailed written submissions addressing those claims and the parties otherwise had an approximately equal measure of success and failure in relation to the application. Due to the proximity to the final hearing, the costs of the application were reserved and stood over for submissions to be made at the final hearing: In the matter of Fogo Brazilia Holdings Pty Ltd (in liq) [2021] NSWSC 242.
2. The plaintiffs' submission that the defendant should pay the whole of their costs of that application does not reflect the mixed outcome of the application and is rejected.
3. I also reject the defendant's submissions that the reserved costs of that application should be dealt with in the same way as the general costs of the proceedings pursuant to r 42.7 of the Civil Procedure Rules. That submission ignores that the costs of the application were reserved for the purpose of being specifically determined at a later time rather than with a view to r 42.7 applying to the costs.
4. There will be an order defendant is pay the costs incurred by the plaintiffs in adducing evidence and making submissions concerning the defendant's claims of legal professional privilege that the defendant subsequently abandoned, and that the parties otherwise pay their own costs of and incidental to the interlocutory process and the hearing on 15 March 2021. In my opinion, that is the order that most appropriately reflects the purpose of the discretion in relation to costs under s 98 of the Civil Procedure Act and takes into account the mixed outcome of the application and the costs wasted by the plaintiffs as a result of the defendant's change of position concerning the privilege claims.

Costs of the costs applications

1. In addition to seeking a specified gross sum order for his costs, the defendant sought an order that the plaintiffs pay his costs of the costs applications. I assume that the defendant was invoking the general rule that costs follow the event. Applying that rule, the plaintiffs' costs of the costs applications should be paid by the defendant.

Conclusion and orders

1. For the foregoing reasons, the orders of the Court are as follows: 1. Order that the plaintiffs are to pay the defendant's costs of the proceedings on the ordinary basis as agreed or assessed, save for those costs that are the subject of orders 2 and 3 below or any previous specific costs order made in these proceedings. 2. In relation to the defendant's interlocutory process filed on 8 March 2021 and heard on 15 March 2021: 1. order that the defendant is to pay the costs incurred by the plaintiffs in adducing evidence and making submissions concerning the defendant's claims of legal professional privilege that the defendant subsequently abandoned (as referred to in In the matter of Fogo Brazilia Holdings Pty Ltd [2021] NSWSC 242 at [22]-[23]); and 2. order that the parties otherwise pay their own costs of and incidental to that interlocutory process and hearing. 1. Order that the defendant is to pay the plaintiffs' costs of the costs applications that are the subject of the judgment delivered in these proceedings on 10 August 2022.

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: 10 August 2022