(f) 25 July 2007 per the Court of Appeal. The first defendant was ordered to pay the plaintiffs' costs of the first defendant's appeal against the 13 June 2007 decision of Simpson J.
8 Mr Stonham deposed to having been informed that the last three costs orders had been "formally assessed" in the sum of approximately $272,000 by a costs assessor who had issued a Certificate of Determination and Reasons with respect to his costs assessment on 6 June 2008. An Application for Review was filed by the first defendant on 15 July 2008 but dismissed by the Costs Review Panel on 19 August 2008. The first defendant filed an appeal against the decision of the Costs Review Panel in the District Court of New South Wales on 1 September 2008 and those proceedings were transferred to this Court in late October 2008. Hulme J stayed the costs appeal proceedings on 3 April 2009 until further order, presumably to await my decision in the principal proceedings.
9 Mr Stonham said that he was not in a position to provide an accurate assessment of the costs and disbursements that might be allowed with respect to the first three costs orders described earlier. He expressed the opinion that such costs would not be trivial or insignificant.
10 The plaintiffs submitted that the costs calculated by the defendants (see below) by way of estimates of their likely costs entitlements following assessment were "simply estimates based on raw figures and may not accurately reflect the amount of costs and disbursements allowed by an Assessor following preparation of an itemised bill of costs and subsequent assessment". The plaintiffs also foreshadowed an argument that significant costs were incurred by the defendants as a result of delays for which the defendants were alone responsible so "that a significant amount of the costs claimed by each of the Defendants [was] either unreasonably incurred or unreasonable in terms of quantum". No evidence to support this assertion was offered.
11 Mr Stonham was not cross examined on his affidavit.
The first defendant's evidence and submissions
12 The first defendant relied upon the affidavits of Stephanie Koch and Donna Caffrey made on 27 May 2009. There are four exhibits to the former affidavit contained in separate lever arch folders. The pages are unnumbered but it is sufficient to observe that the paper that they contain is approximately 17cm thick. It consists in the main of tax invoices for legal services and itemised bills of costs in relation to these proceedings. It is not possible efficiently to summarise the material more accurately than that, but for present purposes it is unnecessary to do so. It is sufficient to note that the material contained in the files is assembled in exquisite detail and logically organised. It is easy to follow and has been prepared with an apparently high regard for accuracy.
13 Ms Koch's affidavit itself is equally detailed and particular. Ms Koch has set out in a logical fashion a series of matters in support of the first defendant's application for a specified gross sum costs order under a series of headings. It should be noted that the plaintiffs challenged none of the matters to which she deposed in any way. This included Ms Koch's historical review of the matter, details of the costs and disbursements incurred over and during specified periods since August 2000, and details of the solicitors and counsel involved during these periods and the amounts of the fees billed or charged. She gives evidence of having reviewed the hard copy file held by the first defendant in the matter, consisting of over 480 A4 lever arch folders in various categories that she identifies. She gives details of the bills of costs rendered to the first defendant with a documentary trail cross-referenced to the exhibits to her affidavit that I have already described. The amounts that have been billed for work that the first defendant is unable to claim are also described. The affidavit contains 66 paragraphs over 14 pages in all.
14 The first defendant's submissions contain a summary of what the affidavits and the folders contain. The summary has not been challenged just as Ms Koch was not cross-examined. The total amount of the first defendant's costs billed to the first defendant is said by Ms Koch to be $1,594,575 less $87,720 which are the costs incurred by the first defendant on applications upon which the plaintiffs ultimately succeeded and $31,090 being the costs incurred by the first defendant in the costs appeal proceedings commenced in the District Court referred to earlier. The total of the resulting costs is therefore said to be $1,475,765.
15 The first defendant seeks an order for the payment of 80 per cent of that sum. The reduction of 20 per cent is said to be a reduction that reflects what are described as "the relatively modest fees charged by the first defendant's solicitors, the Crown Solicitor's Office and by counsel retained by the first defendant". The first defendant seeks an order that the costs so reduced be paid by the first and second plaintiffs respectively in the ratio of 4:1. That apportionment is said by the first defendant to reflect "the limited participation of the second plaintiff in the proceedings". The first defendant submitted that the order is sought under s 98(4)(c) of the Act "in order to avoid the significant expense and delay associated with costs assessment". The first defendant submitted that it "is not unreasonable to assume, given the [first] plaintiff's evidence of his personal circumstances, that such expense (estimated to be in the order of $150,000) could ever [sic, 'never'] be recovered".
16 The affidavit of Ms Caffrey is also very instructive and provides the material upon which these submissions have been based. She is a solicitor employed by the Crown Solicitor with extensive experience in costs assessment issues in New South Wales and Victoria since 1980. Her qualifications are set out in her affidavit, are impressive and are unchallenged. Between 1980 and 1982 she was employed by the Law Institute of Victoria in the Costs Advisory Service providing advice to the public and the profession on legal costs. Between 1982 and 1985 she held a similar position with the Victorian Legal Aid Commission. She practised as a costs consultant between 1985 and 2000. In February 2003 Ms Caffrey was employed in the Crown Solicitor's Office as "Costing Solicitor" and has worked in that role since then with minor exceptions including a three-month secondment as Acting Manager, Costs Assessment in the Supreme Court of New South Wales in 2007.
17 It is the evidence of Ms Caffrey that the first defendant would be likely to recover 80 per cent of its incurred costs on an assessment. She sets out the basis of that opinion and the process of reasoning that leads her to her conclusion, including the matters set out in s 363 of the Legal Profession Act 2004. She also offers her expert opinion that the costs of undertaking the assessment process in a matter of this size will be in the order of $150,000.
18 The first defendant submitted that the making of a specified gross sum costs order in all of the circumstances would be in accordance with the overriding purpose expressed in s 56 of Act. For example, Palmer J in Hall v Poolman [2007] NSWSC 1330 at par [392] said the following:
"[392] In applying the wide discretion conferred by CPA s.98 the Court must have regard to the principle that the purpose of the Act and the Rules is to promote the just, quick and cheap resolution of the real issues in proceedings in such a way that the cost to the parties is in proportion to the importance and complexity of the matter in dispute: CPA s.56 (1), (2), s.60…"
The second defendant's evidence and submissions
19 The second defendant relied upon two affidavits of Patrick Holmes made respectively on 4 May 2009 and 5 May 2009 and an affidavit of Paul Nicols made 18 May 2009. There were coincidentally also four exhibits to Mr Holmes' first affidavit that correspond in general terms in size and content to the four exhibits to Ms Koch's affidavit referred to above. These folders of material have also been prepared in the same organised and particular fashion as Ms Koch's folders and are as easy to read and understand. The information that the folders contain is dense with detail, however, and similarly incapable of efficient summary going beyond description in the most general of terms.
20 Mr Holmes' affidavits are equally detailed. His first affidavit contains 128 paragraphs over 28 pages. It is difficult to nominate any aspect of the second defendant's participation in these proceedings that has any relevant connection to the costs incurred by it, and their relationship to the present application, that has not been referred to by Mr Holmes in that affidavit. There has been no challenge to anything said by him in that affidavit or to the tender of the four detailed exhibits to it. The same is true of his second affidavit.
21 Mr Nicols' affidavit can be similarly characterised. He deposes to having acted in this matter for the second defendant since the proceedings were commenced in the Federal Court of Australia on 19 June 2000. Mr Nicols' qualifications and experience were not put in issue and he was not cross-examined. His affidavit is also replete with detailed analysis of the matter from the point of view of the second defendant's costs and a comparison between the costs of an assessment, if that were to occur, and the costs that might be avoided, if the present application were to succeed. He said that the assessment in the normal course of events would be likely to take about a year if not more at a cost of several hundred thousand dollars. He anticipated in fact that an assessment of costs in this case would in all probability take longer and cost more than usual having regard to the course of the proceedings so far. His affidavit included 48 paragraphs over some 12 pages.
22 The second defendant also submitted that there is little likelihood that any costs incurred in the assessment process would be recovered from the first plaintiff. The second defendant recognised and accepted for the purposes of the present submission that the first plaintiff is a man of limited means and no substantial assets. The proposition that assessed costs would be any more likely to be paid must therefore be treated as correspondingly doubtful. In that sense the whole argument about whether or not to assess the costs or make a specified gross sum costs order would appear to have little significance beyond the theoretical, except to the extent of the possible need to establish an entitlement to costs against which to set off any smaller costs entitlement that the plaintiffs may have and which in due course they may for some reason seek to pursue.
23 According to the calculations of Mr Holmes, the second defendant's claimable costs total $2,690,620. That sum excludes the costs covered by certain costs orders and costs that the second defendant has been ordered to bear by itself, as well as costs relating to the Federal Court proceedings, costs that the second plaintiff alone was ordered to pay and costs that the first defendant was ordered to pay. The calculation includes no amount for costs or disbursements incurred prior to 31 May 2003.
24 The second defendant sought an order that the first plaintiff pay 60 per cent of the second defendant's costs or approximately $1,614,000. This was based upon Mr Nicols' evidence that in a case such as this where a claimant for costs has been represented by a large law firm the most common result of an assessment is that the costs as assessed will fall somewhere between 60 per cent and 75 per cent of the actual costs. Mr Nicols said that it is relatively uncommon for such costs to be assessed at more than 75 per cent or less than 60 per cent of the actual costs. He also said that it is highly unusual for the costs to be assessed at less than 50 per cent of the actual costs in the absence of some demonstrated inefficiency, impropriety or misguided quality in the type of work done or in the manner in which the proceedings have been conducted. Having regard to Mr Nicols' evidence, the second defendant submitted that the figure of 60 per cent of actual costs sought by the second defendant fell clearly at the bottom end of the likely or usual range.
25 The second defendant drew attention to Mr Stonham's submission that the costs incurred by each defendant were either unreasonably incurred or unreasonably high. The second defendant emphasised that the plaintiffs proffered no evidence in support of that contention, and no critique of Mr Nicols' analysis has been given on behalf of the plaintiffs despite the availability of a considerable period in which to formulate it. The second defendant submitted that whatever one might have thought to be the likelihood that the plaintiffs would succeed in a suit against the second defendant for billions of dollars, the allegations were seriously made and the second defendant was entitled to defend them in a similar way.
26 The second defendant made other submissions about interest and indemnity costs to the general effect that it was foregoing arguments about its possible entitlement to either or both of these things in making the present application and by offering to accept 60 per cent of its actual costs in the circumstances. The submissions also emphasised that the first plaintiff is likely to be better off if a specified gross sum costs order is made than if the matter proceeded to an assessment in the normal way. To some considerable extent, however, that submission begs the ultimate question. I consider that I should approach the plaintiffs' opposition to the course proposed by each of the defendants upon the basis that they do not accept that they will be better off as the result of the making of a specified gross sum costs order of the type, or in particular in the amounts, for which the defendants respectively contend.
Consideration
27 It will be apparent, as I have in essence already mentioned, that to some extent the present debate is being conducted in an air of unreality. Put simply, the first plaintiff says that he has no money and the defendants accept that statement as true. Indeed, the defendants each point to evidence that supports it. There are therefore no funds or assets in the possession or within the control of the plaintiffs or either of them that could satisfy the defendants' conceded entitlement to costs as the successful litigants in the proceedings. In that sense the award of costs in favour of the defendants appears to be no more than a completely theoretical exercise. The same is not true of the costs that might be incurred if the ordinary assessment process were to proceed for the obvious reason that those costs have not yet been incurred and could still actually be saved.
28 In these circumstances one feels inclined to ask what utility there can be in the defendants pursuing the plaintiffs for costs, howsoever they might be calculated or assessed, or in any way at all for that matter, if the whole exercise is inevitably going to be fruitless. To that extent the costs that have yet to be incurred and which might be saved by the making of a specified gross sum costs order could equally be saved by the defendants choosing to take no steps at all to assess or to recover their costs because it is likely, if not certainly, going to be a complete waste of time. The defendants are in that sense as much in control of the saving of those costs as anybody. I must assume however that there is some matter of fundamental importance that impels the defendants to want to finalise this issue by the making of a specified gross sum costs order that has not so far been revealed. The apparently important prospect of having an entitlement to costs against which to set off the plaintiffs' own entitlement to costs may be that imperative for all I know.
29 I remind myself that the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of the assessment process. The very detailed nature of the material prepared by the defendants for the present application suggests that at least as far as those parties are concerned a considerable amount of work has already been done. Accordingly, if the costs assessment process were to proceed, much of the work of preparing itemised bills of costs and marshalling documents to verify the claims could efficiently draw upon the work done so far so as to be available for immediate use without delay or the need to incur significant further costs.
30 As the plaintiffs' opposition to the defendants' applications reveals, however, the determinative issue is no more and no less than one of fairness. The plaintiffs should be ordered to pay the defendants' costs of the proceedings and the plaintiffs do not at this stage contest the inevitability of that outcome. The defendants are entitled to recover costs from the unsuccessful plaintiffs at rates that are either produced by the operation of the costs assessment procedure if it takes place, as the plaintiffs contend, or in an amount that this Court can confidently be satisfied is no greater than the amount that such a process would produce if a specified gross sum costs order is made instead, as the defendants contend. As the cases emphasise, the touchstone is one of confidence that the approach taken to estimate costs is logical, fair and reasonable. The fairness aspect of the inquiry includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available. In the present case, all of the material derives from the defendants themselves and none of that material has been challenged or cast in doubt by the plaintiffs except in the most cursory of ways. I have already observed that Ms Koch, Ms Caffrey, Mr Holmes and Mr Nicols have not been challenged upon anything that they have said or done in preparing the evidence upon which the defendants rely and that the attention to detail exhibited by all of them is most impressive. I have taken this into account in forming a view about whether or not I can confidently rely upon the material that they have presented.
31 The cases emphasise that a broad-brush approach must be taken and that a gross sum assessment by its very nature envisages that a traditional assessment process cannot take place. In the case of the first defendant it is prepared to discount the actual amount of its costs by one fifth. In the case of the second defendant that fraction is two fifths. Both defendants forsake an entitlement to interest and the right to argue for a special costs order. In this last respect I note that the weight that I can give to such a concession is small because as yet I have no material before me to suggest persuasively that the defendants or one of them might have been able to establish an entitlement to indemnity costs. General submissions to the effect that the plaintiffs' case was hopeless or doomed to fail require much closer analysis before they can be used as a basis for decisions in this regard.
32 Finally the cases remind me, if reminder were necessary, that 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. All parties have made detailed submissions. Only the defendants have provided evidence in support of their positions. The evidence of Mr Stonham was in the form of submissions that for some reason were contained in an affidavit. There is no material from the plaintiffs, for example, in the nature of a costs assessor's opinion about or commentary upon anything said by the defendants' deponents that assists me to evaluate their opinions and conclusions. Mr Stonham professes no particular expertise in the area of costs assessment and his affidavit has the strong flavour of the plaintiffs' instructions about it. To that extent the defendants' evidence stands unopposed and unchallenged. I feel unable to give any weight to Mr Stonham's sworn allegations that the defendants' costs have been inflated by reason of their own inefficiencies and delays without some documented or identified examples of such conduct or other material to support them.
33 As attracted as I am to the efficient disposition of the question of costs in this long running matter, in particular having regard to what I know of its course and history in this Court, I am somewhat troubled by the tension between the essential requirement for a judicial decision on the one hand and the need for reasons of efficiency and speed to make some form of "next best guess" about what the outcome of an assessment might be on the other hand. The defendants' applications, if acceded to, would undoubtedly promote the quick and cheap disposition of the issue. I am concerned, however, that the final result will necessarily be just. The decision that the defendants ask me to make proceeds upon the assumption that the evidence should satisfy me that the costs they seek will be less than their entitlement if an assessment were to take place. I strongly suspect that that assumption is likely to be vindicated. However, in any case such as this there is always the possibility that nothing short of an independent analysis by a costs assessor can answer the question in a reliable fashion at a level higher than mere suspicion. The plaintiffs' tenacious opposition to the applications should not therefore be casually treated as little more than uninformed and obstructive opposition or unreasonable intransigence. Indeed, the plaintiffs may well be out of pocket by hundreds of thousands of dollars if the defendants' evidence is accurate and they become entitled to an order for the payment of their undiscounted costs. The plaintiffs have presumably sought and taken, and I assume also very carefully heeded, professional advice about the matter with the benefit of which they have analysed the defendants' respective positions before forming the view that they would prefer to take their chances. Interpolating from what I take to be the plaintiffs' submissions in this regard, if I am to act judicially, taking that chance is a risk of which I ought not to proceed to deprive them. The plaintiffs argue (presumably with advice) that they ought in this sense to be afforded the unfettered opportunity to assume authorship of their own misfortune.
34 However, in my opinion, the material with which I have been provided permits the making of a decision at a level far removed from mere suspicion. The evidence in favour of making specified gross sum costs orders is strong, if not overwhelming, and there is no competing evidence beyond assertion to the contrary. It would be churlish to treat the careful and detailed evidence and opinions of the defendants' deponents as unreliable or unhelpful or possibly infected with inaccuracies when the opposite is so clearly the case. There is also the real and tangible, as opposed to the hypothetical or theoretical, prospect that something in the order of a total of $350,000 may be saved by the avoidance of a costs assessment process that would in practical terms (having regard to the plaintiffs' impecuniosity) produce no different result for them, even if it were a less favourable result, but which would by way of important contrast leave the defendants actually out of pocket for that amount. The overriding purpose again comes to mind.
35 I am satisfied in all of the circumstances that on balance, the contest between depriving the plaintiffs of an opportunity to subject the defendants to the rigours of the costs assessment process on the one hand, and the avoidance of undue and unnecessary as well as unrecoverable costs on the other hand, favours the making of specified gross sum costs orders in favour of each of the defendants in the terms that they seek. I am satisfied that it is both just and fair to the plaintiffs to do so. That is so, among other reasons, because the defendants' costs appear to have been accurately calculated and do not appear to have been inflated or unreasonably incurred, so that no injustice is caused to the plaintiffs. The discounts of one fifth and two fifths respectively, which the first and second defendants contend should apply to their actual costs, also seem to me to be appropriate and based on reliable evidence, so that no injustice is caused to them either.
Orders
36 In these circumstances I make the following orders:
1. I order the plaintiffs to pay the first defendants' costs of the proceedings, which I specify as a gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 in the amount of $1,475,765.