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John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd - Costs - [2020] NSWSC 779 - NSWSC 2020 case summary — Zoe
HIS HONOUR: I have given two principal judgments in these proceedings: 9 August 2019: John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd [2019] NSWSC 1006 (the first Judgment); 15 May 2020: John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd - Supervisory Jurisdiction [2020] NSWSC 573 (the second Judgment).
This judgment deals with costs.
Definitions in the first Judgment and the second Judgment are, unless the context otherwise indicates, used here.
Written submissions (in the case of Birketu, lengthy ones) were received. I have dealt with costs on the papers.
Costs are in the discretion of the Court, which has full power to determine by whom, to whom, and to what extent costs are to be paid. The primary rule is that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. Generally, the Court does not attempt to differentiate between the issues on which a party succeeded and those upon which it failed, but apportionment may be appropriate. An award of indemnity costs is appropriate where there has been relevant unreasonable action, including relevant misconduct, in connection with the conduct of the proceedings by the person against whom the order is made. The Court's discretion is wide but is to be exercised judicially.
The essentially relevant facts for present purposes are:
1. AH sued Birketu for fees and disbursements of $1,094,248.60 claimed in seven invoices including the investigation invoice of $172,786.27 (the fee proceedings).
2. The fee proceedings were heard concurrently with Birketu's proceedings against AH and Deutsche arising out of Clarke's frauds. The trial took 13 days (the damages proceedings).
3. AH was represented by separate counsel in the fee proceedings and the damages proceedings but it was the solicitor on the record in both.
4. Birketu defended AH's claim on the six invoices principally on the grounds that the fees were unfairly and unreasonably excessive in the sense that the quantum of the charges was unjustifiable. Birketu challenged $227,761.34 of the six invoices, and $75,845.17 of the investigation invoice on this ground. [1] Its total challenge for "overcharging" was thus $303,606.51. Each party adduced evidence from an expert costs assessor. [2]
5. Birketu argued that the question of overcharging should be referred out to a referee for inquiry and report.
6. On day 12 of the hearing, Birketu offered, in Court, to agree the quantum of AH's fees at the midpoint between what AH was claiming and the amount which Birketu's expert costs assessor had assessed as fair and reasonable, which midpoint was $990,265.63. This was not an offer to settle the fee case as a whole, but only to resolve quantum in the context of the overcharging assertion. Acceptance would not have meant either that Birketu's challenges to the investigation invoice on other grounds or its assertion that it had a countervailing damages claim would not have proceeded. [3]
7. After the hearing and shortly before judgment was to be delivered, the damages proceedings, but not the fee proceedings, settled. [4]
8. Any contention that a damages claim was a legitimate ground of resistance to AH's claim for fees then ceased to be available to Birketu.
9. I dealt with the question of overcharging in the first Judgment and the Court gave an interim verdict to AH for $928,982, being the amount covered by the six invoices (with minimal reductions conceded by AH), but not the amount of the investigation invoice. [5]
10. I was not satisfied that Birketu had demonstrated sufficient prospect of establishing excessive overcharging so as to warrant reference to a referee in relation to the six invoices. The investigation invoice was in an entirely different position and was the sole subject of dispute after the first Judgment. [6]
11. Questions in relation to the investigation invoice were referred to Mr RV Gyles AO QC, whose report is dealt with in the second Judgment. [7]
12. In the second Judgment, the Court, exercising its supervisory jurisdiction, declined to lend its assistance to AH to recover on the investigation invoice except to the extent of $14,930.15, giving AH a total verdict $943,912.
AH argues that Birketu should pay all of its costs of the proceedings on the ordinary basis. Alternatively, it argues that Birketu should pay its costs to 16 September 2019 (the date of entry of the first Judgment) on the ordinary basis and the parties should otherwise bear their own costs. Its argument is that this would reflect its total success on the issues the subject of the first Judgment and its partial success with respect to the issues the subject of the second Judgment.
Birketu argues that it should get "the vast majority" of its costs on the whole proceedings on the indemnity basis. Alternatively, it argues that AH should pay 80% of its costs up to 20 June 2019 (the date of Birketu's open offer) and all of its costs thereafter on the indemnity basis, on the grounds that AH acted unreasonably in not accepting the offer. It argues that the Court should award costs on the basis of the relative time spent on the six invoices as compared with the investigation invoice and that AH engaged in relevant misconduct by seeking to recover on the investigation invoice, which subject dominated the proceedings.
I do not think that any of the outcomes promoted by the parties is the correct one. The appropriate outcome is, perhaps unsurprisingly, somewhere in between.
AH succeeded in recovering almost the entirety of the face value of the six invoices. This success should be recognised in the costs orders.
The open offer was not one to settle the case and it came very late in the piece with the consequence that it is not fair or reasonable that anything should turn on AH's rejection of it.
The vast bulk of the hearing time during the first hearing concerned the damages claim, including Birketu's claim against Deutsche. Some (but a modest) part of the time taken up by the damages claim was relevant to the investigation invoice.
AH's conduct in persisting in its unmeritorious claim on the investigation invoice warrants, in my opinion, an award of indemnity costs against it. The aspects of its behaviour which merit such an award are detailed in the second Judgment. Such an award is warranted applying the general principles as to costs, but it is also the appropriate order to make in the context of the Court exercising its supervisory jurisdiction.
The actual time devoted to the investigation invoice, and issues directly related to it, was modest. That time, for example, did not include the time spent on the substantial issue of ostensible authority. Without the investigation invoice, the fee proceedings would have occupied no more than two days, if that.
There is force in AH's argument that the costs orders should recognise that it did have a measure of success, albeit modest, in the second Judgment on the investigation invoice.
There is also force in Birketu's argument that AH should pay its costs of the first hearing in relation to the investigation invoice.
Although precision is not possible, I think that, fairly, these contentions should be given equal weight in the determination and should be recognised by cancelling each other out.
AH submits that the quantum of all costs orders should, absent agreement, be the subject of assessment. I agree.
Recently, that is a month after the first Judgment, the High Court in Bell Lawyers Pty Ltd v Pentelow (2019) 93 ALJR 1007 reversed the so-called Chorley exception which allowed solicitors to charge for their own time in representing themselves. The result is that AH will not be able to recover for time spent by its own employees in bringing the fee proceedings. It argues that the Court should take into account, as a matter in AH's favour, in exercising its discretion as to costs, that the law changed after AH had acted for itself. I reject this submission. AH's decision to act for itself was its own and it has no role to play in the exercise of the Court's discretion.
In my view, the principled exercise by the Court of its discretion warrants the following outcome:
1. AH should have its costs attributable to its claim on the six invoices (that is, excluding its costs attributable to the investigation invoice), on the ordinary basis. What such costs are is a matter for assessment; and
2. Birketu should have its costs of the proceedings from the day after the first judgment, on the indemnity basis.
Birketu argued that the amount of any costs payable to it be set off against the verdicts AH has obtained. I do not think that this is a matter of set off. However, I consider that in the present case, which is a dispute between a lawyer and his former client where there has been a found breach of professional duty in respect of which the Court has exercised supervisory jurisdiction, all accounts should be brought to finality together.
There is presently in place a stay, on terms under which Birketu has paid money into court. AH moves that the stay should be dissolved. I do not accept this submission. In my view, the process of assessment should occur first. I would expect the parties to act expeditiously in furthering that process.
A stay of the additional verdict was not addressed by the parties. I will give them leave to apply in case they do not reach agreement about what should happen.
I also do not consider that the monies in Court should be paid out, unless the parties otherwise agree, until there is a finalisation of all accounts between them. The leave to apply which I propose to grant can be utilised in connection with this issue as well.
AH is entitled to pre-judgment interest on the additional verdict obtained by it in the second Judgment. As at 29 May 2020, this amounted to $1,162.51. Birketu put a submission that AH should be deprived of post-judgment interest on the first Judgment amount. I reject this. There is no basis to warrant depriving AH of this.
The orders of the Court are:
1. Judgment for the plaintiffs against the first defendant for $16,092.66 as at 29 May 2020.
2. Birketu is to pay AH's costs of the proceedings up to and including 16 September 2019, attributable to its claim on the six invoices, assessed on the ordinary basis.
3. AH is to pay Birketu's costs of the proceedings from 10 August 2019 (the date of the first Judgment), assessed on the indemnity basis.
4. The parties have liberty to apply on seven days' notice.
I will stand the matter over for fourteen days to 3 July 2020 (or some other convenient date if the parties agree in which event they are to contact my Associate) to allow them to bring in short minutes (which may include updating the figures to take account of additional pre-judgment interest) and to give them an opportunity to confer with respect to any further stay or other directions or orders that are necessary or appropriate.
[3]
Endnotes
First Judgment at [29].
Valerie Edith Higginbotham in the case of AH; Christopher Phillip Wall in the case of Birketu.
First Judgment at [30].
First Judgment at [37]-[38].
First Judgment at [44]-[57].
First Judgment at [57].
Second Judgment at [46]-[63].
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Decision last updated: 19 June 2020
Parties
Applicant/Plaintiff:
John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell