Idoport v NAB

Supreme Court Rules 1970 (NSW) Civil Procedure Act 2005 LEGISLATION CITED : Uniform Civil Procedure Rules 2005 (NSW) Legal Profession Act 2004 (NSW)

Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 Harrison v Schipp (2002) 54 NSWLR 738 Vrkic v Otta International [2003] NSWSC 641 Sparnon v Apand Pty Ltd, unreported, Federal Court of Australia 4 March 1998 Hadid v Lenfest Communications Inc [2000] FCA 628 Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006 Rajski v Carson (1988) 15 NSWLR 84 Tepko Pty Ltd v Water Board (2001) 206 CLR 1 Auspine Limited v Australian Newsprint Mills Limited (1999) 93 FCR 1 Wentworth v Wentworth unreported, NSW Court of Appeal Leary v Leary [1987] 1 All ER 261 Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629 Perre v Apand Pty Ltd (1999) 198 CLR 180 The Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816 Buckley & another v Bennell Design & Constructions Pty Ltd & anor (1978) 140 CLR 1 Engineering Constructions Pty Ltd v Freight Rail Corp [1999] NSWSC 1037 CASES CITED : Walker & Another v ANZ (2001) 19 ACLC 1584 CBS Productions v O'Neill (1985) 1 NSWLR 601 Dunstan v Simmie & Co Pty Ltd [1978] VR 699 Tallglen v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 Love v Mirror Newspapers Ltd [1980] 2 NSWLR 112 Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 Allstate Exploration NL v Beaconsfield Gold NL [1999] NSWSC 832 Idoport v NAB [2000] NSWSC 1215 Park Rail Developments Pty Ltd v RJ Pearce Associates Pty Ltd (1987) 8 NSWLR 123 Law Society of NSW v Bruce, unreported, Supreme Court of NSW 24 April 1996 Parramatta Stadium Trust v Civil and Civic Pty Ltd, unreported, 27 August 1996 Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411 Story of Sydney Pty Ltd v Ling, unreported, Supreme Court of NSW, 14 November 1994 Century Medical v THLD [2000] NSWSC 5 Hathway v Cavanagh (2002) 43 ACSR 497 Carl Zeiss Stiftung v Herbert Smith & Co [1969] 1 Ch 93 Hadid v Australis Media Ltd, unreported, Supreme Court of NSW

Idoport Pty Limited (plaintiff) National Australia Bank Limited (defendant) PARTIES : Idoport Pty Limited ACN 075 318 106 (plaintiff) Donald Robert Argus (defendant)

Mr L Foster SC (plaintiff) COUNSEL : Mr J Kirk (defendant)

Sarvaas Ciappara (plaintiff) SOLICITORS : Freehills (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50113/98 IDOPORT PTY LIMITED V NATIONAL AUSTRALIA BANK LIMITED

50026/99 IDOPORT PTY LIMITED V DONALD ROBERT ARGUS JUDGMENT The proceedings 1 The motions presently before the Court concern: (a) Idoport Pty Ltd v National Australia Bank Ltd & Ors, proceeding number 50113 of 1998 ("the main proceedings"); (b) Idoport Pty Ltd v Donald Robert Argus, proceeding number 50026 of 1999 ("the Argus proceedings"); and (c) Idoport Pty Ltd v National Australia Bank Ltd & Ors, proceeding number 3991 of 2000 ("the MLC proceedings"). 2 On 29 January 2002, in each of the main proceedings, the Argus proceedings and the MLC proceedings, the Court dismissed the proceedings with costs: see [2002] NSWSC 18. 3 The costs of the MLC proceedings were assessed. Those costs have been paid in full by the plaintiff ["Idoport"]. 4 The applications before the Court relate to the main proceedings and the Argus proceedings only.

The gross sum costs application 5 By amended motions filed on 17 June 2005 the National parties have sought gross sum costs of approximately $62.6 million under what was Part 52A rule 6(2)(c) of the Supreme Court Rules 1970 (NSW) (the "SCR"), and which is now [in materially the same terms] dealt with in s.98(4)(c) of the Civil Procedure Act 2005 (see also Part 42 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR")). The original motions seeking such an order had been filed on 1 September 2003 following the High Court's rejection of Idoport's special leave applications on 20 June 2003. 6 Section 98 provides inter alia :

(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the Court, and (b) the Court has full power to determine by whom, to whom and to what extent costs are to be paid, (c) the Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis…

(4) In particular, at any time before costs are referred for assessment, the Court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: …

(c) a specified gross sum instead of assessed costs…" The separate question motion 7 Idoport filed Notices of Motion on 6 July 2005 in the main proceedings and in the Argus proceedings seeking the following orders:

1. Pursuant to Part 31 Rule (2) of the Supreme Court Rules, there be determined as separate questions, and before the determination of any other questions raised in the defendant's Notice of Motion filed herein in August 2003, the following questions, namely: (a) Whether, in the events which have happened and in the circumstances of the present case, the costs of the defendants ordered by the Court to be paid by the plaintiff on 29 January 2002 should be paid as a gross sum pursuant to Part 52A Rule 6(2) (c) instead of being assessed in accordance with Part 52A Rule 6(1). (b) Whether the plaintiff should pay the costs of the defendants in respect of each of those interlocutory applications in these proceedings in which costs were reserved on 21 July 1999; 2 August 1999; 18 May 2000; 26 May 2000; 13 June 2001; 20 June 2001; 22 August 2001; 26 October 2001 and 1 November 2001. 2. If the Court answers question 1(a) in the affirmative, pursuant to Part 72 Rule 2(1) of the Supreme Court Rules, there be referred to a senior litigation solicitor and costs assessor as referee for inquiry and report by the said referee the question of what is the appropriate gross sum to be ordered by the Court. [Question 2 was deferred] Principles applicable to a gross sum application

8 The principles which inform the discretion to make a gross sum award are likely to be agitated on the final hearing of the actual application. In those circumstances it is presently arguably inappropriate to seek to definitively set out what those principles may be. On the other hand, parameters of the motions presently for hearing do require at least some reasonable consideration of the relevant principles. It seems to me to suffice for present purposes to note that authorities are available which arguably support the propositions which follow. Naturally submissions will be appropriate on the final hearing of the gross sum costs award as to whether or not these authorities do stand for the following propositions. Those submissions will be treated with on their merits at the appropriate time. 9 Proceeding accordingly I note that there are authorities which arguably support the following propositions: · The purpose of a gross sum costs award is to avoid the expense, delay and aggravation involved in protracted litigation arising out of a taxation (and by an1alogy an assessment): Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120; Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 at 812 [190]. · The discretion to award a gross sum is not confined and may be exercised whenever the circumstances warrant its exercise: Harrison v Schipp (2002) 54 NSWLR 738 at 742 [21]. · It may appropriately be exercised where an assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from an assessment: Harrison v Schipp (2002) 54 NSWLR 738 at 742-743 [21]-[22]; Vrkic v Otta International [2003] NSWSC 641 at [28]; BC200304171; Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 at 812, 813 [189], [194]-[195]; Sparnon v Apand Pty Ltd unreported, Federal Court of Australia 4 March 1998, von Doussa J; Beach Petroleum NL v Johnson; Hadid v Lenfest Communications Inc [2000] FCA 628; BC200002428. · The discretion is particularly suited to complex litigation where the costs of assessing or taxing a bill would be considerable, and the delay and inconvenience involved would also be considerable: Beach Petroleum NL v Johnson at 120; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; BC9905295. · Specification of a gross sum is not the result of a taxation or assessment of costs: Harrison v Schipp at 743 [22]. The rule contemplates application of a much broader brush approach than would be applied on taxation: Hadid v Lenfest Communications Inc at [35]. It is to be fixed broadly having regard to the information before the Court: Beach Petroleum NL v Johnson at 124. To descend into the level of detail required on taxation or assessment defeats the purpose of a gross sum order: Auspine Limited v Australian Newsprint Mills Limited (1999) 93 FCR 1 at 5. · Nevertheless the power to award a gross sum should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available: Wentworth v Wentworth unreported, NSW Court of Appeal, 21 February 1996 per Clarke JA; Harrison v Schipp at 743. · The approach taken to estimate costs must be logical, fair and reasonable: Beach Petroleum NL v Johnson at 123; Hadid v Lenfest Communications Inc at [27]; Harrison v Schipp at 743. On the one hand the Court must be astute to prevent prejudice to the unsuccessful party by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary "fail safe" discount on the costs estimate submitted to the Court: Leary v Leary [1987] 1 All ER 261 at 76 per Purchas LJ; Beach Petroleum v Johnson at 123; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629; Auspine Limited v Australian Newsprint Mills Limited at 4; Hadid v Lenfest Communications Inc. · The assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing: see Smoothpool v Pickering [2001] SASC 131 at [12]. · Expert evidence from a legal costs consultant has been accepted as appropriate to support an application of this kind (see, for example, Beach Petroleum v Johnson and Charlick Trading Pty Ltd v Australian National Railways Commission). · The expert's evidence will commonly canvass the following matters: i. that the preparation of an assessment/taxation is likely to be protracted and expensive: Hadid v Lenfest Communications; ii. the manner in which an assessment or taxation is ordinarily undertaken by a costs assessor. For example, the expert might depose as to the discount ordinarily imposed by a costs assessor: Beach Petroleum v Johnson; and iii. the complexity and novelty of the proceedings: Charlick Trading at [46]. Should the court determine a preliminary point? 10 Part 31, Rule 2(a) of the Supreme Court Rules 1970 (NSW) provides:

The Court may make orders for: (a) the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and (b) the statement of a case and the question for decision. 11 Any question for preliminary determination must be stated with particularity: Rajski v Carson (1988) 15 NSWLR 84 at 88D. 12 Special caution needs to be taken against orders for separate determination in all but the clearest of cases: eg Tepko Pty Ltd v Water Board (2001) 206 CLR 1 per Kirby and Callinan JJ at 55 [168]-[170]; Perre v Apand Pty Ltd (1999) 198 CLR 180 per Callinan J at 332 [436]; The Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816 per Kirby and Heydon JJ at [37] - [38]; Buckley & another v Bennell Design & Constructions Pty Ltd & anor (1978) 140 CLR 1 per Barwick CJ at 6 - 7; ABB Engineering Constructions Pty Ltd v Freight Rail Corp [1999] NSWSC 1037; BC9906885 per Rolfe J at [4]; Walker & Another v ANZ (2001) 19 ACLC 1584 per Austin J at [24]. 13 Justices Kirby and Callinan commented in Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at 55 [168]-[170]: "… The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and that factual matters relevant to one issue are relevant to others, and they all overlap. The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision, reached in the court's rather than the parties' interests. … Single-issue trials should, in our opinion, only be embarked upon when their utility, economy and fairness to the parties are beyond question." 14 In CBS Productions v O'Neill (1985) 1 NSWLR 601 Kirby P, in considering the question of a preliminary issue, said, at page 606: "Care must also be taken in utilising the procedures now available for the determination of preliminary points to avoid such determination in cases which are not ripe for this treatment. A matter is 'ripe' for separate and preliminary determination where it is a central issue in contention between the parties, the resolution of which will either obviate the necessity of litigation altogether or substantially narrow the field of controversy. … It is my view that the court should be facultative in the matter of separate decisions on questions arising in the course of the trial. The rules now provide for it. Where the exceptional circumstances exist that make it sensible to do so (and no reason exists to suggest the contrary) the procedure can be beneficial. It can contribute not only to the prompt disposal of crucial issues in the litigation (sometimes resulting in disposal of the whole action and even judgment for a party). It can also contribute to the saving of time and costs where an authoritative decision narrows the issues for trial substantially, excluding the necessity to explore factual matters which, on one determination of the preliminary question, are entirely unnecessary." 15 At an earlier stage of these proceedings I had cause to consider Part 31, Rule 2(a) of the Supreme Court Rules. Idoport made an application to separate the hearing of liability from quantum. In paragraphs 7 and 8 of the judgment ([2000] NSWSC 1215 I set out some general principles:

7. Without examining specific cases in relation to the power conferred on the Court in Part 31, Rule 2, I proceed on the basis of the following principles. (1) The power of the Court to order the separate determination of an issue is a discretionary power which must be exercised judicially, but cannot otherwise be fettered: Dunstan v Simmie & Co Pty Ltd [1978] VR 699 at 670 per Young CJ and Jenkinson J. (2) In exercising the power under Part 31, Rule 2, the Court is now enjoined to give effect to the overriding purpose of the Supreme Court Rules; namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings and cannot be stated in a more confined way: Part 1, Rule 3 (1), (2) Supreme Court Rules. (3) The Court begins with the proposition that it is ordinarily appropriate that all issues in a proceeding should be disposed of at the one time: Tallglen v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141 per Giles CJ in Comm D, Hadid v Australis Media Ltd (unreported, Supreme Court of NSW, 29 March 1996 per Rolfe J). Accordingly, it is for the party who wishes to have a question separately determined to show that it is desirable for that to occur. (4) Without being exhaustive, the separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances: (a) where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy: CBS Productions Pty Ltd v O'Neil [1985] 1 NSWLR 601 at 606 per Kirby P, Dunstan v Simmie & Co Pty Ltd (supra, at 671 per Young CJ and Jenkinson J); (b) where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their dispute themselves and thus avoid further litigation: Tallglen v Pay TV Holdings (supra, at 141 - 142 per Giles CJ in Comm D); (c) where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses: CBS Productions Pty Ltd v O'Neil (supra, at 606 per Kirby P), Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Rajski v Carson (1988) 15 NSWLR 84 at 88 per Kirby P and Hope JA. (5) Conversely, the separate determination of an issue will rarely be an appropriate procedure where: (a) there are intertwined issues of fact or law between the separated question and the other questions such that the determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation: Law Society of NSW v Bruce (unreported, Supreme Court of NSW, 23 April 1996, per Rolfe J), Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J). (b) where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witness, thus possibly precluding that same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411: Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of NSW 15 November 1994, per Rolfe J), Century Medical v THLD [2000] NSWSC 5; (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J). (c) there is a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from that decision in relation to that separate issue, creating a multiplicity of proceedings, interruption to the court and undesirable fragmentation of the proceedings: Story of Sydney Pty Ltd v Ling (supra), Century Medical v THLD (supra). (6) The experience of courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated, but often has the reverse effect, merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings: Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Parramatta Stadium Trust v Civil and Civic Pty Ltd (supra), Century Medical v THLD (supra).

8 As Giles CJ in Comm. D (as his Honour then was) said in Tallglen (supra, at 142): "Part 31, rule 2 of the rules empowers the court to make orders for the decision of any questions separately from any other question, whether before, at or after any trial or for the trial in the proceedings, and for the statement of a case and the question for decision. In the ordinary course, all issues in proceedings should be decided at the one-time, but separate decision of a question may be appropriate where, for example, the decision of the question is critical to the outcome of the proceedings and (at least if decided in one-way) will bring the proceedings to an end. In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions, but such occasions must be carefully controlled lest fragmentation of the proceedings (particularly when the exercise of right of appeal is borne in mind) brings delay, expense and hardship - that which the making of an order was intended to avoid. It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties dispute." 16 The separate determination of issues is not a suitable process for determining wide-ranging and contested factual matters: Hathway v Cavanagh (2002) 43 ACSR 497 at 506 [40]. 17 In the result, subject to the matters referred to by Giles J in Tallglen, the Court will have regard to the following matters in exercising its discretion whether or not to make an order for the separate determination of a question: · whether there is some preliminary question of fact or law that is dispositive of the proceedings: Carl Zeiss Stiftung v Herbert Smith & Co [1969] 1 Ch 93; CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 at 606; · whether resolution of the separate question may promote early resolution of the proceedings or, by narrowing the disputed issues, avoid expense and delay: Love v Mirror Newspapers Ltd [1980] 2 NSWLR 112; Tallglen Pty Ltd v Pay TV Holdings Pty Ltd supra at 141-2; CBS Productions Pty Ltd v O'Neill at 606; · whether the question is clearly severable, as opposed to where the question proffered: - involves the whole subject matter of the proceedings; - involves alternative causes of actions or defences; - requires findings of fact likely to be contentious on remaining issues in the proceedings; or - involves the credibility of witnesses' material to the remaining issues in the proceedings. 18 Notwithstanding the relatively unusual nature of both the proposed gross sum application as well as the separate questions order now sought in that regard, the above observations inform the principled exercise of the discretion. The respective submissions Idoport submissions 19 Idoport relied upon the proposition that in determining an appropriate gross sum amount, it is relevant to consider what might be determined as a fair and reasonable amount if the matter was subject to a traditional costs assessment. Idoport went on to contend as follows: Despite the enormous volume of the material filed by the NAB parties there are, self evidently on the materials filed by the parties, real gaps in the evidence. In particular, file notes and primary records of time spent by solicitors, including computerised records, are not intended to be tendered in support of the NAB parties' claim for a gross sum costs order. The absence of solicitor's file notes and the primary time records means that Idoport is unable to properly test the material filed by the NAB parties. An assessment in the ordinary way would provide a fair opportunity to test the very large claims for costs being made by the NAB parties. The deficiencies in the evidence mean that the Court is not presently in a position to determine the quantum of costs fairly and will never be in that position for so long as these records are withheld. If the NAB parties resist the production of these materials it will be necessary for a further interlocutory application before the ultimate hearing in respect of quantum. If the Court determines as a preliminary issue that the matter is not appropriate for a gross sum cost order, the parties will save the costs of such an application and the resultant need to produce and then examine vast quantities of additional documents. 20 I have taken this submission into account in weighing the proper exercise of the present discretion. Those allegations will no doubt in due course recur in relation to the question of whether a gross sum is appropriate and can be made on the basis of the material before the Court. Alternatively Idoport may succeed on a motion seeking access to all or a sample of the above described materials. 21 As the National parties have contended the allegations illustrate the interlinked nature of the issues. The further discretionary factors 22 Both parties addressed by reference to the following further discretionary factors: Is the question clearly defined? Will the answer to the question be dispositive of the proceedings, in the sense that, if decided in one way, it will be decisive of the litigation? What is the overlap in the evidence? What is the degree of commonality of witnesses and issues of credit as between the separate issue and other issues in the case? Will or might this necessitate a ruling on the credit of one or more of the common witness, and possibly preclude the trial judge from again dealing with the matters going to the credit of the common witness?

The likelihood of an appeal. The delay. Will there be cost savings and efficiencies in splitting the hearing? Question of mixed fact and law 23 The question whether a gross sum award is appropriate is a question of mixed fact and law. The question likely involves the exercise of a discretion based upon a review and analysis of the nature of the proceedings, the circumstances of the parties (including the financial status of the party liable to pay the costs) and an assessment as to whether it is possible to make a fair and reasonable assessment of costs on the materials before the Court. That is to say, the task involves the application of the relevant legal standards to the facts as found by the Court as part of an exercise of judicial discretion. 24 The majority judgment of the High Court noted in Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 at 358 [53] that "special problems" can arise where the preliminary question is one of mixed fact and law. In such circumstances, the High Court held, there needs to be a precise formulation of the question and specification of the facts upon which it will be decided. Accordingly, all of the facts that are on any fairly arguable view relevant to the determination of the question, should be ascertainable, either as facts assumed to be correct for the purposes of the preliminary determination, or as agreed facts, or as facts to be judicially determined: Bass v Permanent Trustee at 358 [53]. I accept that: · The requirement that the facts be found or agreed is a "fundamental barrier" that must be crossed in order to obtain an order for a separate determination on a question of mixed fact and law: Allstate Explorations NL v Beaconsfield Gold NL [1999] NSWSC 832 at [24]-[25] per Santow J. · If this is not done there is a grave danger that the Court will end up answering a hypothetical question, because the answer depends on facts still to be proved: see Bass at 357 [49]. 25 In my view question of whether to award a gross sum cannot, at least in the instant circumstances, be divorced from the issue of how such a sum is to be assessed. The Civil Procedure Act and the rules permit such an order to be made but do not specify any particular methodology. It is implicit in the very nature of the order that the method is something considerably simpler and quicker than the usual assessment procedure, but beyond that the question is left open - subject, no doubt, to the guiding principles of achieving a result which is just, quick, and cheap (see ss.56-8, Civil Procedure Act). 26 The suggested questions cannot be said to be dispositive of the litigation, not least given the real possibility that the answer might prove wrong. 27 The motion raises mixed questions of fact and law which are inappropriate to be answered separately from a consideration of all the evidence filed in support of the gross sum application.

Definition of separate questions 28 It is strictly unnecessary to further consider the submission put by the National parties that the separate questions are not clearly defined in the relevant sense. Overlap in the evidence relevant to determination of the separate question and the final determination 29 The factors relevant to the discretion whether or not to make a gross sum cost order can, in some circumstances, include: The delay and costs associated with an assessment: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123 Whether the party ordered to pay the costs is likely to attend on any assessment and if they do involve themselves in such a hearing, whether they will assist in an orderly and expeditious determination of the amount to be assessed: Sony Entertainment v Smith (2005) 215 ALR 788 at [192]. Whether the party ordered to pay the costs will be able to pay them: Sony Entertainment v Smith (2005) 215 ALR 788 at [194] - [195]. Whether the Court can assess the costs fairly as between the parties, and have sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738. 30 Idoport has submitted as follows: "Further, as identified above the evidence the NAB parties have filed is vast: more than 33,000 pages. In making a final determination of quantum, the Court (unless a referee is appointed) will need to come to grips with this evidence because in determining an appropriate gross sum amount, it is relevant to consider what might be determined as a fair and reasonable amount if the matter were subject to a traditional costs assessment ( Harrison v Schipp (2002) 54 NSWLR 738 at 745 [39]). The Court will also need to deal with the deficiencies in the NAB parties' evidence referred to above.

On the other hand, in determining whether the Court can assess the costs fairly as between the parties, the Court will only need to determine whether it can make a gross sum costs order fairly as between the parties, and have sufficient confidence in arriving at an appropriate sum on the materials available. It is submitted that this task can be achieved by looking at a sample of the evidence. For example it would be possible to look at the fees of only one barrister and to look at a few of the discrete topics touched upon in parts D to K of Mr Lovell's affidavit sworn 20 December 2002. It is submitted that this will result in a prompt disposal of a crucial issue and possibly the disposal of the whole application and result in considerable saving of time and costs. If Idoport's proposal for the appointment of a referee is acceded to this will have the effect of splitting the issues in any event. It is submitted that the sensible approach would be to determine this issue after the determination of the proposed preliminary question and prior to any attempt at quantification. Such an approach will reduce the likelihood of the trial judge having to descend into the minutia of the evidence." 31 It should however be recalled that a significant portion of the evidence filed by the National parties in support of the gross sum application is relevant to both the issue of whether a gross sum order is appropriate (the "First Issue") and the amount that is to be awarded if such is to be done (the "Second Issue"). 32 Idoport acknowledges that there is overlap between the evidence that will be led on both of these issues. It seeks to confine these to just one of the four matters that it mentions. That attempted confinement is unpersuasive. For example, the factor of whether or not Idoport is capable of paying the costs will be significant not only for whether a gross sum order should be made, but also to what methodology should be employed and what sum arrived at. 33 I accept as of substance the submission put by the National parties that to engage in a complex and expensive procedure would have little point - and would not be just, quick and cheap - if there was little practical possibility of the sum being paid. 34 In any event, the criteria for which Idoport concedes there is overlap is the broadest one, being whether the Court can assess the costs fairly between the parties, having sufficient confidence that it can do so on the materials available to it. However in my view that must require consideration of all of the evidence filed by the National parties. 35 The contention by Idoport that the proper approach is to permit the court to look at a sample of the evidence is not of substance in the present context. The proposal, whilst at first blush attractive, fails to recognise the entitlement of all parties to have the entirety of their evidence weighed in the balance in such a significant application 36 The National parties have additionally submitted that the suggested sampling approach is inconsistent with the proper exercise of the judicial power. The submission is that the matter is in federal jurisdiction in light of the federal law claims raised in the substantive proceedings, thus this Court is exercising the judicial power of the Commonwealth pursuant to Ch III of the Constitution. It is said to follow that the following observations of the majority of the High Court in Bass at [56] are pertinent (citations omitted): "Judicial power involves the application of the relevant law to facts as found in proceedings conducted in accordance with the judicial process. And that requires that the parties be given an opportunity to present their evidence and to challenge the evidence led against them. It is contrary to the judicial process and no part of judicial power to effect a determination of rights by applying the law to facts which are neither agreed nor determined by reference to the evidence in the case." 37 I accept as correct and adopt the following further submissions of the National parties: "By way of specific example of the overlap, the following two areas of evidence will be relevant to both whether a gross sum order should be made and the quantification thereof: i. the size and complexity of the proceedings; ii. the methodology proposed by the National Parties' expert, Ms Castle, for arriving at an appropriate gross sum. Size and complexity : Evidence as to the size and complexity of the proceedings is relevant to the First Issue given that the discretion to award a gross sum may be appropriately exercised where an assessment of costs would be protracted and expensive ( Harrison v Schipp at 742-3) and is particularly suited to complex litigation where the costs of assessment would be considerable, and the delay and inconvenience involved would also be considerable (see Beach Petroleum NL v Johnson at 120 and the other cases cited in paragraph 10 above). Evidence as to size and complexity is also relevant to the Second Issue because it is appropriate to consider (as Ms Castle has done in her expert report): iii. whether or not it was reasonable to carry out the work to which the costs relate; iv. whether or not the work was carried out in a reasonable manner; and v. the fairness and reasonableness of the amount of costs in relation to the work, (see section 363 of the Legal Profession Act 2004 (NSW) and Harrison v Schipp at 743). In considering these factors, it is necessary for the Court to have regard to the size and complexity of the Proceedings, as Ms Castle has done in her expert report (see, for example, Sections E.7 to E.9 of the Castle Affidavit). The following three affidavits filed by the National Parties are relevant to a consideration of the size and complexity of the proceedings (and therefore to both the First and Second Issues): vi. the Lovell Affidavit - this affidavit sets out information about the size and complexity of the Proceedings (see paragraphs 32 to 46 of the Lovell Affidavit); vii. the affidavit of Mr Johnson sworn 25 February 2003 (the "Johnson Affidavit") - this affidavit sets out the nature of Idoport's damages claim and the imprecise and speculative nature of Idoport's damages case and how this impacted on the way the National Parties defended the damages claim (see paragraphs 24 to 43 of the Johnson Affidavit); and viii. the affidavit of Ms Castle sworn 28 April 2004 (the "Revised Castle Affidavit") - this affidavit exhibits a report by Ms Castle which considers the likely costs and time it would take to undertake an assessment of costs of the present Proceedings (a matter which as noted above is relevant to the First Issue) as well as considering the matters referred to in paragraph 41 above which are relevant to the Second Issue. Methodology: Evidence as to the appropriate methodology for arriving at a gross sum is clearly relevant to the First Issue as a gross sum award will only be appropriate if the Court can fix an appropriate sum fairly between the parties on the materials available: Wentworth v Wentworth ; Harrison v Schipp at 743. Accordingly in considering the First Issue, the Court will be required to review the methodology proposed by Ms Castle in her expert report, which in turn relies on the factual background and information set out in the Lovell Affidavit and Johnson Affidavit (as well as a number of subsequent affidavits filed by Mr Lovell and Mr Johnson which build on their earlier affidavits). The Court will also need to consider any evidence filed by Idoport in response to the approach proposed by the National Parties. All of this evidence will, of course, be crucial to the Second Issue, that is, the actual quantification of the National Parties' costs. In these circumstances, and given the nature of the legal issues to be determined, the answer to the third of the Idoport's "key criteria" is thus that there is complete overlap of material needing to be considered. Credit 38 In my view on the evidence presently before the court the likelihood of credit issues arising should be regarded as minimal. That having been said, there must always be at least an extreme outside chance that credit issues may arise. My experience in presiding over the subject litigation suggested that the parties were effectively waging a litigious war and I see no reason to assume that the application for the gross costs sum order is not going to be fought in the same way. Possibility of an appeal 39 The fifth of Idoport's criteria is the likelihood of an appeal. In fact, the real curial concern in this respect relates to fragmentation of the proceedings: see eg factor 5(c) identified in Idoport v NAB [2000] NSWSC 1215 at [7].

40 The Idoport proposal involves, potentially, a number of hearings. The proposal of the National parties involves one hearing. This factor, too, is against the determination of the separate questions.

Delay 41 There is in my view a real chance that determination of the separate questions will require a greater amount of court time. If the Court does determine that there should be a gross sum order, then the Court will need to consider the same evidence again, plus whatever further evidence is filed, in relation to determination of methodology and quantum. So much is conceded by Idoport in its submission that a "sample" of the evidence filed in support of the National Parties' gross sum motion should be considered for the purposes of the proposed separate question.

42 This lack of cost saving or efficiency is of particular importance in the present case. The course of hearings proposed by Idoport in correspondence to date would seem likely to result in both parties incurring further significant costs and to delay the resolution of the quantification of the gross sum, when, notwithstanding requests to indicate whether Idoport is in a position to meet a cost order it has not done so, and where there is no evidence that Idoport is in a position to meet any of the National Parties' costs. Interlocutory reserved costs 43 Idoport submits that whether a gross sum costs order is made or not, it is essential for the Court to determine prior to hearing any such application or prior to sending the costs to an assessor, precisely what costs orders should be made in respect of those occasions when costs have been reserved. Otherwise, no account can be fairly taken of such orders or in any gross sum determined by the Court or in any assessment made by an assessor. 44 I accept the submission as of substance. The care management of the proceedings will follow accordingly. The issue of whether an "otherwise order" should be made under UCP Rule 42.7 may then be agitated. Decision 45 The principled exercise of the courts discretion is not to order the determination of the separate questions suggested by Idoport. The reasons are given above. Without being in any way exhaustive they include: · The approach suggested by Idoport involves fragmentation of the resolution of the matters at issue, and is likely to involve further delay, increased costs and reduced efficiency in resolving the matters in dispute.

· The issues of whether a gross sum order should be made, how this is to be assessed, and what quantum should be ordered, are intertwined.

· The evidence to be considered on the putative preliminary questions and on determination of the gross sum application would substantially overlap.

The 'reference out' issue 46 Having regard to the principles and circumstances set out above, and the overriding purpose of the UCPR, Idoport has indicated that it may wish to advance submissions suggesting the suitability of the matter for referral by the Court to a referee. That matter will be determined at an appropriate time if it is purported. Short minutes of order 47 The parties are to bring in short minutes of order accordingly. I certify that paragraphs 1 - 47 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 9 December 2005

              Jacqueline Warr
              Associate
              9 December 2005

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