Hundy v Turner

Supreme Court of NSW|2019-12-20|Before: Darke J, Mr P, Kunc J

Judgment

This is an application by the plaintiff for a specified gross sum costs order in respect of the costs of the proceedings. The plaintiff seeks an order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) that the defendant pay the plaintiff's costs of the proceedings (including this application) in a total gross sum of almost $43,000.
The plaintiff was appointed as the trustee in bankruptcy of the estate of John McLaughlin. On 7 December 2018, Kunc J made orders appointing the plaintiff and Christopher Darin as trustees for the sale of certain land in Tallong, New South Wales, pursuant to s 66G of the Conveyancing Act 1919 (NSW). The land was formerly co-owned by Mr McLaughlin and the defendant. His Honour also made orders on that occasion that the defendant pay the plaintiff's costs of the proceedings.
On 4 October 2019, following a period of negotiation between the solicitor acting for the plaintiff and the solicitor acting for the defendant in relation to the costs to be paid by the defendant, the plaintiff filed the present application. The Court made directions for the filing and service of any affidavits and for the provision of written submissions in respect of the application, with the view to the matter being determined on the papers.
The plaintiff relies upon the following affidavits:

Affidavits of the plaintiff affirmed on 23 October 2018 and 9 September 2019;
Affidavits of Mitchell Evelyn affirmed on 17 September 2019 and 31 October 2019.

The defendant did not file or seek to rely upon any affidavits.

Submissions

In his written submissions, the plaintiff identified s 98(4) of the Civil Procedure Act as the relevant provision governing the Court's discretion to award costs on a specified gross sum basis. By reference to Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9] and In the matter of GTH Equipment [2017] NSWSC 1816 at [9], the plaintiff submitted that the purpose of awarding costs on a specified gross sum basis was to "avoid the expense, delay and aggravation" involved in protracted litigation arising out of taxation. The plaintiff submitted that if no such order were made in the present case, there would likely be a protracted assessment process. This was said to be due to the defendant's conduct both prior to the proceedings and after the orders were made appointing the trustees for sale.
The plaintiff further submitted that if the Court was minded to make a specified gross sum order, then the Court should vary Order 3 made on 7 December 2018 such that the defendant's costs be paid out of the defendant's share of the proceeds of sale. However, upon the Court requesting further submissions as to whether such an order would be inconsistent with statements of principle expressed by Macfarlan JA and Leeming JA in Boyd v Thorn (2017) 96 NSWLR 390; [2017] NSWCA 210 at [41]-[49] and [180]-[181], the plaintiff did not press that order.
Although the defendant did not initially provide written submissions by the date set in the Court's timetable, the defendant provided written submissions following the Court's request for further submissions. It is not necessary to refer to those submissions insofar as they concern the question whether the defendant's costs should be paid out of the defendant's share of the proceeds of sale. As to whether the Court ought to make a specified gross sum costs order, the defendant noted that Mr Evelyn's estimate of further costs (contained in his 17 September 2019 affidavit) was imprecise. The defendant suggested that if the Court was not minded to order that the costs be paid out of the defendant's share of the proceeds of sale, then the entire application was essentially misconceived, and as a result "the Plaintiff ought to not be awarded costs in these proceedings." The defendant submitted that the proceeds from the sale of the property were not large and the legal costs had potential to significantly reduce the amount to be distributed. It was put that if the relief sought by the plaintiff is refused then an order for costs to be payable "as agreed or assessed" would have the capacity to allow more of the proceeds of the sale of the property to be available for distribution to the parties. I confess that I found that last submission impossible to comprehend.

Determination

As the plaintiff submitted, the power to award costs on a specified gross sum basis is found in s 98(4) of the Civil Procedure Act. I have recently summarised the principles applied by the Court in such applications in Stoddart (NSW) Pty Ltd v Kellyville Building Pty Ltd [2019] NSWSC 1480 at [23]-[26]. I adopt those principles here.
I am satisfied that this is an appropriate case to make an order that the plaintiff's costs (including the costs of this application) be awarded on a specified gross sum basis. I generally accept the plaintiff's submissions in this regard. Notwithstanding the prompt resolution of the substantive issues in the proceedings, the evidence shows that the defendant (by her solicitor) has persistently failed to engage with the plaintiff's solicitors in the resolution of a relatively simple claim for costs. The evidence does not explain the defendant's conduct. The defendant's solicitor has not provided any evidence of his own to explain the course he took during these negotiations. The evidence indicates that the defendant's solicitor has adopted a similar attitude in respect of the preparation of the present application, notably by failing to engage in a timely manner with the plaintiff's solicitors, and by the belated provision of written submissions. The Court therefore cannot be confident, were the matter to proceed to assessment, that the defendant through her solicitor would not adopt a similar attitude to the assessment process (cf Ghougassian v Fairfax Community Newspapers Pty Ltd [2015] NSWCA 307 at [63]). This is of added significance in the context of a modest bankrupt estate and the relatively small amount of costs claimed by the plaintiff. Any assessment of costs that was not able to be conducted efficiently is itself likely to result in the incurring of costs that would likely be disproportionate to the real amount in issue.
I think that the Court has all the information necessary to undertake a rational and reasonable assessment of the plaintiff's costs that does justice to both parties (see James v Australian and New Zealand Banking Group Limited [2016] NSWSC 833 at [17]). The plaintiff has adduced an itemised account of the costs incurred by the plaintiff up to 10 May 2019 on a solicitor-client basis. That account includes a breakdown of the time spent on the matter by solicitors and administrative staff of varying levels of experience. Those costs seem to be reasonable in all circumstances of the case. The defendant did not submit otherwise. I think it is appropriate to award a figure in the order of $24,523.43 on account of the plaintiff's costs of the proceedings up to 10 May 2019. That amount equates to the $32,697.90 total less a 25% discount. I would round that figure down to $24,500.
I accept the defendant's submission that there is imprecision in the estimate of legal costs incurred by the plaintiff after 10 May 2019. The figures do not, however, appear to me to be unreasonably high. It is clear that considerable time and effort had to be directed towards the issue of costs between 17 May 2019 and October 2019. In addition, the present application involved the preparation of three affidavits and written submissions of counsel. Nevertheless, in view of the broad nature of the estimates, it would have been appropriate to apply a greater discount, in the order of 35%, were it not for the Calderbank offer made by the plaintiff on 18 July 2019 to accept only $12,873.50 for costs. Taking the making of that offer into account, I consider that a discount of only 25% is warranted. On that basis, the costs after 10 May 2019 would be about $16,275. I would round that figure down to $16,000.
Accordingly, I will order that the defendant pay the plaintiff's costs of the proceedings (including the present application) in the specified gross sum of $40,500 instead of assessed costs.

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: 20 December 2019

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