Hazan v The Manager, Costs Assessment

Supreme Court of NSW|2023-12-15|Before: Campbell J

Solicitors: Gilchrist Connell (Plaintiffs) Pointon Partners (until 12 December 2022) (Second Defendant) York Law (Third Defendant) Jo-Anna F.S. Moy Solicitor (Fourth Defendant) File Number(s): 2022/80991 Decision under review Jurisdiction: Costs Assessment Date of Decision: 10 March 2022 Before: Manager, Costs Assessment

JUDGMENT

These proceedings, commenced by summons filed on 21 March 2022, are an application under s 93B Legal Profession Uniform Law Application Act 2014 (NSW) ("Application Act") and r 49.19 Uniform Civil Procedure Rules (NSW) ("UCPR") for the review of a decision of the Manager, Costs Assessment ("MCA") made under s 198(4) Legal Profession Uniform Law (NSW) ("Uniform Law") on 10 March 2022 extending the time for the second defendant to bring an application for the assessment of solicitor and client costs incurred in family law proceedings (2021/00354374).

The disposition of the principal proceedings

On 22 July 2022, the second defendant filed a notice of motion seeking leave to bring a cross-summons. In general terms, the many prayers for relief proposed in that cross-summons sought to undercut the legal and factual entitlement of the plaintiffs, the third defendant and the fourth defendant to charge the fees raised by them in respect of the legal work performed for the second defendant. While there was a dispute about the fees actually incurred and paid by the second defendant, on her reckoning, disputed by the other parties, they were in the vicinity of $2.5 million.
The second defendant's motion was to be heard by Fagan J on 9 September 2022. By then, on 23 August 2022, the second defendant had withdrawn her underlying application for the assessment of costs and, subject to costs, indicated she did not intend to proceed with her motion. It seemed quite obvious to me, the underlying costs assessment having been effectively abandoned, that neither the plaintiff's application for review nor the proposed cross-summons enjoyed any foundation on which they could, as a matter of practical reality proceed.
When the matter was called on before Fagan J, all this was made clear by counsel then appearing for the parties (the appearance of the fourth defendant was mentioned by counsel for the third defendant).
Prior to the making of any orders by Fagan J, there was a discussion about the costs of the proceedings including the following exchanges between his Honour and counsel for the second defendant, Mr Doyle Gray (who also provided written submissions before me) (6.46 - .49T; 7.1 - .8T): His Honour: Mr Doyle Gray you're not going to seek your costs of these proceedings? Doyle Gray: No. … His Honour: Your position is everyone should just bear their own? Doyle Gray: Yes, that's right. His Honour: So, if others apply for costs, you'll just be in a defensive position? Doyle Gray: Correct, yes. On this basis, his Honour proceeded to make the following orders and directions: "1. The Court notes the second defendant having withdrawn the underlying application for costs assessment filed on 13 December 2021, and amended on 28 January 2022, the plaintiffs have leave to discontinue the proceedings. 2. The second defendant's Notice of Motion dated 22 July 2022 is dismissed. 3. Direct that the plaintiff and the 3rd and 4th defendants file and serve on each other party by 19 September 2022: a. Written submissions in support of the costs order sought by each party, specifying at the commencement of such submissions the precise terms of the orders sought, and b. An affidavit substantiating the quantum of costs claimed, providing sufficient detail of categories of work performed, hours expended by each professional staff member, hourly rates and disbursements incurred, to enable a gross sum assessment to be undertaken by the Court pursuant to s 98(4)(c) of the Civil Procedure Act 2005. 4. Direct that the 2nd defendant file and serve on each other party any submissions and/or affidavit evidence in response by 4 October 2022. 5. Direct that the plaintiff and the 3rd and 4th defendants file and serve on each other party submissions and any affidavit evidence in reply by 7 October 2022. 6. Any costs ordered to be paid are to be assessed by the Court in a gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005. The determination of the orders and the assessment of the gross or sums to be undertaken in chambers."
The plaintiffs and the third defendant claimed costs against the second defendant on a gross sum basis by complying with order 3. The fourth defendant did not.

The second defendant changes position

As is apparent from the terms of order 1 pronounced by Fagan J, his Honour granted leave to the plaintiffs to discontinue the proceedings because the second defendant had already withdrawn the underlying application for a costs assessment, rendering the plaintiffs application for review of the MCA's decision otiose. Moreover, given the clear statement of the second defendant's position, by her counsel, his Honour made no directions requiring the second defendant to file written submissions in support of an application for costs nor any affidavit substantiating the claim. His Honour ordered that any costs payable to either of the plaintiffs, the third defendant and the fourth defendant were to be assessed on the gross sum basis provided for by s 98(4)(c) Civil Procedure Act 2005 (NSW) ("CPA").
Given that the only outstanding questions to be determined were whether the second defendant should be ordered to pay the costs of the other parties and the amount that should be allowed, his Honour directed that the determination of those matters should be undertaken in chambers without the need for any party to appear. On the basis that the second defendant no longer wished to propound her notice of motion of 22 July 2022, which sought both leave to file her cross-summons and an order for a separate trial on the cross-summons prior to the determination of the summons, was dismissed.
Without first obtaining, or even seeking, leave to change her stated position upon which Fagan J and the other parties acted, when the written submissions contemplated by order 4 pronounced by Fagan J were filed on 10 October 2022, the second defendant sought the following orders: 1. The plaintiffs to pay her costs on an indemnity basis in accordance with UCPR 42.19(1); 2. In the alternative, the plaintiffs pay the second defendant's costs on the ordinary basis up to, but not including 25 August 2022 and thereafter on an indemnity basis; 3. The 3rd defendant to pay the 2nd defendant's costs of his application for a gross sum costs order on the ordinary basis.
The grounds upon which the second defendant sought these orders were: 1. the second defendant "was almost certain to have succeeded" had the matter been "fully tried"; 2. the MCA caused the controversy brought to this Court, not the second defendant; 3. the plaintiffs acted unreasonably; 4. The alternative prayer 2 was propounded on the basis of an open offer made by letter dated 25 August 2022 on behalf of the second defendant that the plaintiffs' summons be dismissed and there be no order as to costs with the intent that all parties bear their own costs.
This unforeshadowed change of position required the plaintiffs and the third defendant to file further evidence (pursuant to directions made by the Registrar) and supplementary written submissions.
It seems logical to deal with the second defendant's application first, but before doing so, I will set out relevant principles to which the parties drew my attention in their written submissions.

Principles

The general rule, of course, is that "costs follow the event unless it appears to the court that some other order should be made": UCPR r 42.1. Also relevant are UCPR rr 42.19 and 42.20. The former applies when proceedings are discontinued by the plaintiff. "Unless the court orders otherwise … the plaintiff must pay such of the defendant's costs as, at the date on which the Notice of Discontinuance was filed had been incurred by the defendant". Under the latter, "if the court makes an order for dismissal of proceedings … then, unless the court orders otherwise, the plaintiff must pay the defendant's costs".
Complexities arise where there has been no determination on the merits of otherwise finalised proceedings. But such an outcome is not unfamiliar. In the single-justice decision of Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 at 624-625, McHugh J stated the principles in a manner which has been without demur accepted as authoritative: "In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation… Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. … But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases." (My emphasis; footnotes and citations omitted).
Counsel referred to a large number of other cases, and in particular to the collection of relevant principles by Hallen AsJ (as his Honour then was) in McNamara v San [2010] NSWSC 809, followed by Black J in Re Cabramatta King Tea Pty Ltd [2022] NSWSC 462 at [9]. It is not necessary to set out each of the interrelated principles identified by Hallen AsJ. Among them, is the reference to Bryson J's (as his Honour then was) judgment in Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [54]. Bryson J, inter alia, said it was appropriate to depart from the ordinary position in matters finalised without a hearing on the merits where the plaintiff achieved practical success in the proceeding. Hallen AsJ also referred to the position where one party "effectively surrenders to the other": McNamara at 12.
To similar effect are Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 (per Davies AJA at [5]) and Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 (Payne JA at [27] and [32]; Meagher JA agreeing at [13]). While Basten JA did not "disagree with the reasons of Payne JA" and agreed with his Honour's orders, he also said, pertinently in my view for the present case, (at [8]): "… although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon."

Application of these principles

To my mind, this is a clear case where, by her unilateral withdrawal of her application for a costs assessment 5 months after the commencement of the plaintiffs' proceedings for the review of the MCA's decision, the second defendant capitulated. This view is bolstered by the consideration that, when her notice of motion seeking leave to file her cross-summons came on for hearing, she abandoned it, consenting to its dismissal. To be quite clear, by abandoning her notice of motion, the second defendant also abandoned: her proposed challenges to the validity of her costs agreement with the plaintiffs and the validity of the tax invoices issued by the plaintiffs; her assertion that the plaintiffs had failed to comply with the Uniform Law; her claim that her application for assessment of costs was within time; her claim for restitution as money had and received of all legal costs paid to the plaintiffs or at their direction; and in truth a claim for the costs of the proceedings (see proposed first cross-summons, prayer 6). To borrow Basten JA's expression from Nichols these conclusions are all "manifest by reference to known circumstances, not in dispute between the parties". They are arrived at "without reviewing large swathes of evidence".
Contrary to this, the second defendant's complete volte-face (without leave) manifestly seeks to try its now-abandoned proposed cross-action contrary to the principles articulated by McHugh J in ex parte Lai Qin. To countenance the volte-face "would burden the parties with the costs of a litigated action which by settlement or extra curial action they had avoided" (ex parte Lai Qin at 624). As Basten JA said, if the costs question "cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon". Yet that is exactly what the second defendant is inviting the Court to do. For completeness, given her withdrawal of the cost assessment application and her abandonment of her proposed cross summons, the argument that she was "almost certain to have succeeded if the matter had been fully tried", is simply unsustainable in light of the authorities to which I have referred. The argument could not possibly be sustained other than by the full trial that has been avoided principally because the second defendant withdrew the underlying costs assessment application.
I cannot help but say that the second ground relied upon by the second defendant is simply astounding. To suggest that the MCA, whom I have already observed is not a proper or necessary party to the review application, and who is a public official exercising the powers vested in him under the Application Act and the Uniform Law, is the true contradictor betrays a fundamental misunderstanding of the nature of the legal process involved. In Wende v Howarth (NSW) Pty Ltd (2014) 86 NSWLR 674; [2014] NSWCA 170, Barrett JA, admittedly while speaking of the Review Panel's task, rather than the MCA's, observed (at [158]) that the process "[is] not adversarial in any strict sense, [but] the panel must consider competing contentions and also make up its mind in the light of them". The same must be true in my opinion of the task of the MCA when determining a contested application to extend the time limited for making an application for costs assessment under s 198(4) Uniform Law. The MCA was the impartial arbiter of the dispute between the plaintiffs and the second defendant about whether time may properly be extended. The MCA was in no sense a contradictor. Contrary to her submissions, the second defendant, and only the second defendant, was the plaintiffs' contradictor.
Given my findings, no occasion arises to consider whether the offer made on 25 August 2022 was in truth an offer of compromise enlivening a special order for costs under the UCPR.
My consideration of these matters leads me to conclude that the second defendant should be adjudged liable to pay the plaintiffs' costs of the proceedings (but not of the application before the MCA which should be dealt with under any applicable provisions of the Application Act or the Uniform Act).
As the third defendant was a respondent to the costs assessment, I am of the view that he is entitled to his costs from the second defendant. I am of this view because the conduct of the second defendant, whom I have held was in effect an unsuccessful defendant given her capitulation, in bringing the application for costs assessment against the third defendant also made it necessary to join him as a defendant to the review application, such as to make it fair to impose liability on the second defendant for the costs of the successful third defendant in accordance with the principles discussed in Great Lakes Shire Council v Dederer (No 2) [2006] NSWCA 336 enlivening the Court's power to make a Sanderson order (per Ipp JA at [4]-[5]); see also Sanderson v Blyth Theatre Company Limited [1903] 2 KB 533.
At the conclusion of these reasons, I will make orders that the second defendant pay the plaintiffs' costs and the third defendant's costs in an amount I will assess on a gross sum basis under s 98(4)(c) CPA. Neither the MCA, who submitted to the order of the Court save as to costs nor the fourth defendant have sought an order for costs and the position of each of them may be put to one side.

Assessment of the plaintiffs' costs

From the affidavits of Olivia Josepha Jane Cameron affirmed on 19 September 2022 and 17 October 2022, the plaintiffs claim a gross sum costs order of $163,484.13 after a 10% reduction is made from solicitors costs but not disbursements. This represents an increase in the sum of $134,971.73 originally claimed by reference to Ms Cameron's first affidavit. The reason for the increase in the claim is that work in progress as at 19 September 2022 was invoiced to the plaintiffs on 30 September 2022. That amount totalled $26,665 (inclusive of GST). Additionally, the second defendant's volte face resulted in the performance of further necessary work to answer the second defendant's belated claim. Additional work resulted in the plaintiffs incurring further solicitor's costs in the sum of $7,655 and fees in the sum of $16,600 for senior and junior counsel, a total of another $24,255.
Neither the written submissions of counsel for the second defendant (dated 10 October 2022) nor the affidavit of the then solicitor sworn on the same date (Simon Della Marta) takes any issue with the fairness and reasonableness of the claims made on behalf of the plaintiffs in respect of the costs of the review application. For that matter, nor are the costs claimed by the third defendant in these proceedings called into question. Rather, both the written submissions and Mr Della Marta's affidavit focus upon the matters underpinning the abandoned cross-summons, which are really inadmissible for the reasons given by McHugh J and Basten JA which I have set out above. A costs application is not the occasion to try the case which trial has been averted. Moreover, given that all parties agreed to the matter being determined in chambers there has been no cross-examination of Ms Cameron. This makes it very difficult for me to do other than make the best assessment I can of the fairness and reasonableness of the charges, accepting her description of the work done and the charges made at face value.
Ms Cameron has made clear that no part of the costs claimed relates to work done before the MCA (first affidavit [55]-[57]).
The total time expended in the legal work by the solicitors and counsel was 348 hours. Of this: 81 percent was performed by the solicitors (283 hours); 8 percent by junior counsel (27 hours); and 11 percent by Senior Counsel (38 hours). While the work was initially focused upon the summons, later there was a distribution between the summons and the motion for the proposed cross-summons. The work of both solicitors and counsel was not quite evenly divided between these different aspects of the proceedings, but there was not much difference between the two (as at 19 September 2022 $84,020 for the summons; and $75,425 for the motion/cross-summons). The "legal team" working on the matter consisted of: Mr Paul Kozub, a principal of the firm and a solicitor of more than 35 years standing; Ms Cameron, a relatively junior lawyer admitted in May 2019 with some pre-admission experience; a paralegal from time to time; Mr Mark Ashurst SC, a senior silk, who did not in the end bill; Mr Kieran Smark SC, another senior silk, who was briefed on 6 July 2022; initially Ms Michelle Castle, a senior junior and an expert in costs matters; and later Ms Talitha Fishburn, also a senior junior. Mr Smark and Ms Fishburn replaced Mr Ashurst and Ms Castle. Contrary to Mr Doyle Gray's submission there were not four barristers working on the case at the one time. Mr Smark charged at the hourly rate of $800, Ms Castle when she was involved at the hourly rate of $500 and Ms Fishburn at the hourly rate of $400. These rates are very reasonable for counsel of their respective seniority and experience. Mr Kozub charged at $450 ph, Ms Cameron at $325 ph and then $370 ph when she was promoted to associate. The paralegal was billed at $200 per hour. Once again, I would regard these hourly rates as very reasonable.
I confess that, initially, I had some concern about the total of the costs charged. I questioned whether the overall charges could be regarded as fair and reasonable (see s 76 Application Act). Even in good faith, a case might be overworked by diligent lawyers so that more work than is reasonably necessary, even performed at a reasonable rate of renumeration, might produce an overall result which is disproportionate (s 60 CPA). Afterall, the case initially involved no more than, in effect, an application to review a Registrar's decision to extend a time stipulation which had not yet been fixed for final hearing.
However, by consideration of the content of Exhibit OJC-1 to Ms Cameron's affidavit affirmed 21 March 2022 in support of the summons persuades me that the matter was one of considerable complexity so far as costs assessments go. Even accepting that that material had been compiled initially for the purpose of the primary application for costs assessment, it had to be recompiled for the purpose of the proceedings in this court. Recompilation required a good deal of renewed professional effort and judgment as to what was reasonable and necessary to prosecute the plaintiffs' case in this Court.
Moreover, the proposed cross summons raised potentially grave allegations impugning the professional conduct of the plaintiffs, the third and (to a lesser extent) fourth defendants. That this is so to my mind is amply demonstrated by the tone and content of the written submissions of 10 October 2022. These allegations extended to trenchant criticism of counsel charging cancellation (or reservation) fees and an extravagant allegation that those fees were charged after counsel "procured psychiatric evidence to the effect that [the second defendant] was incapable of managing her affairs, and then used that opinion as a basis for terminating their engagement and forcing an adjournment of a 19 day trial" (written submissions p 4 [11]-[12]; my emphasis). There is also an allegation that the total amount charged for the family law proceedings, of itself, brought the administration of justice into disrepute (p 5 [18]). It was said to be "telling" that two senior counsel and two junior counsel had been briefed and 2,869 pages of evidence had been served in the principal proceedings. The strong implication is that these measures were necessary because there was no "simple, clear and persuasive explanation" justifying the charges. As I have said the evidence establishes that no time were four counsel engaged concurrently.
The gravity of these allegations goes without saying. It was necessary that they be taken seriously and therefore strong resistance was well-justified. Permitting allegations of this nature to go unanswered was not an option. Moreover, the amount in question ($2.5m) of itself justified prosecution of the proceedings in detail as well as stout resistance of the cross-summons, had it materialised. In all of the circumstances, I am satisfied that the total claimed is fair and reasonable and should be allowed as claimed. In making this assessment, I appreciate that the plaintiffs have proposed a relatively modest discount of 10 percent on solicitors costs and no discount on disbursements including counsels fees. Given the matters I have referred to, I am of the view that is appropriate in the circumstances of this case. I repeat, that no active opposition or reasoned objection to the amounts claimed has been put forward. Further, given the volte-face, I would have been prepared to allow the additional costs of responding to the second defendant's application on an indemnity basis. In accordance with Ms Cameron's second affidavit and the written submissions of Mr Smark and Ms Fishburn of 17 October 2022, I assess the plaintiff's costs on a gross costs sum basis in the amount of $163,484.13. I will pronounce orders at the end of these reasons.

Assessment of the third defendant's costs

The third defendant relies upon the affidavits of his solicitor, Nabil Wahhab sworn on 19 September 2022 and 18 October 2022 and the written submissions Mr Declan Roche. I have already decided that the second defendant should pay the third defendant's costs on a Sanderson basis. Mr Roche has now taken silk, but when the work was done he was a senior junior of 12 years standing.
Mr Wahhab has been a solicitor since 1994. From his first affidavit he informs me that he is the only solicitor who worked on the matter for the third defendant, but from time-to-time billable support work was undertaken by administrative staff. His hourly rate is $770 (including GST). Administrative staff were billed variously at $275 per hour (including GST). He commenced acting for the third defendant on 21 March 2022. He describes the work that he has undertaken in acting for the third defendant in the proceedings. Mr Roche was briefed on 8 August 2022. His hourly rate was then $605 (including GST).
The professional work undertaken by Mr Wahhab totalled 26.5 hours and approximately six hours of work was undertaken by administrative staff. Mr Roche's fees were in the sum of $14,520 and other disbursements related mainly to photocopying in the sum of $880.
From Mr Wahhab's second affidavit, the only additional fees claimed relate to Mr Roche considering the second defendant's material after the volte face and preparing submissions in reply. Counsel charged for an additional 7 hours bringing his total fees to $4,235 for that work.
While Mr Wahhab's hourly rate is somewhat above that charge for the plaintiffs, it is by no means unreasonable for a solicitor of his experience and standing, especially having regard to the apparent complexity of the issues and the amount at stake. If anything, Mr Roche's fees for a senior junior on the cusp of silk err on the side of modesty. The total amount claimed by the third defendant is $42,097. A discount rate across the board of 20 percent is proffered reducing the total figure claimed to $33,677.60. In my view, these costs are entirely fair and reasonable. I assess the costs due to the third defendant on a gross sum basis in the amount of $33,677.60. I record, again, no active opposition was advanced by the second defendant to the amount of the costs claimed by the third defendant.
My orders are: 1. Refuse the second defendant's application for costs. 2. The second defendant to pay the plaintiff's costs in the sum of $163,484.13. 3. The second defendant to pay the third defendant's costs in the sum of $33,677.60.

Amendments 18 December 2023 - Cover page: Correction of the spelling of the name Diane 18 December 2023 - Front Cover - in "Cases Cited" the No. 2 removed before Sanderson v Blyth; Front Cover - in "Representation" the post nominal SC removed after Declan Roche. 18 December 2023 - Parties name amended to: Diane Maloney 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: 18 December 2023

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