Kalathas v Techtronic Industries Australia Pty Limited trading as AEG Power Tools

Costs on a gross sum basis

1. Paragraph 2 of the Notice of Motion seeks an order that the plaintiff is to pay the defendant's costs of the proceedings for a specified gross sum as determined reasonable by the court.
2. In relation to a specified gross sum, s 98(4) of the Civil Procedure Act 2005 (NSW) provides as follows: "98 Courts powers as to costs (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 - (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount."
3. There is no evidence before me that the costs of the proceedings have been referred for assessment. Paragraphs 14-16 of Mr Devaris' affidavit of 5 May 2020 (of 17 paragraphs) indicate the contrary.
4. The court has a discretion as to whether to make a specified gross sum costs order and as to the amount of the order. In Kerry Albert Pty Ltd t/as Kerry Albert & Co v Fuller (No 2) [2018] NSWDC 383 I stated as follows in paragraph 75: "75. Various matters must be taken into account in deciding whether to exercise the discretion including: (a) The responsibility of the parties relatively for the costs incurred; (b) Any disproportion between the issue litigated and the costs claimed; (c) The complexity of the proceedings in relation to the costs sought; (d) The capacity of the unsuccessful party to satisfy any costs liability; (e) The general considerations reflected in ss 56, 57 and 60 of the Civil Procedure Act; (f) In particular, it is important as stated in s 60 of the Civil Procedure Act, that costs should be proportionate to the importance and complexity of the subject matter in dispute; (g) A specified lump sum costs order should only be made where the court has sufficient confidence to arrive at an appropriate sum on the materials available; (h) A further relevant factor is whether making a specified gross sum costs order will save time and further costs.""
5. I take into account the matters referred to in the three affidavits of Mr Devaris relied upon by the defendant. I also refer to the general principles applicable set out in Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [28]-[30]. The relevant facts here are quite different to those in Zepinic.
6. The following matters seem to me to be relevant: 1. The plaintiff did not appear at the final hearing of the matter; 2. The court did not determine the matter after a full hearing on the merits. Therefore, the court is unable to assess with any real confidence the relevance of all the legal services provided or the need for the retaining of the relevant experts referred to in the memoranda of fees in evidence; 3. The application has been made nearly one year after the original costs order was made. There has therefore been, it appears, some delay in making the application; 4. The solicitors for the defendant have attempted to reach agreement with the plaintiff but have not been able to communicate with the plaintiff; 5. Mr Devaris gives evidence that in his experience, the costs assessment process can be protracted, depending on the complexity of the application for assessment of costs and the extent to which objections may be taken. In addition, the assessment process can be expensive; 6. In the light of all the evidence, a further factor to be taken into account is that a specified gross sum costs order may save time and further costs. An assessment process may result in a certificate which will take significant time and trouble to obtain.
7. In my opinion, considering the above factors and the evidence, the court should not make a specified gross sum costs order in the present case. Nearly a year passed between the costs order made and the Notice of Motion being filed. As there was no final hearing on the merits, the court has no proper understanding of the evidence sought and obtained by the defendant. It therefore has no confidence in arriving at an appropriate gross sum on the materials before it. The affidavit evidence also seems to establish very substantial disbursements being incurred including expert and counsel fees (involving a number of opinions) as well as frequent reporting to the defendant or its insurer. Some complexity is therefore involved in any assessment of the costs as a gross sum. The financial position of the plaintiff is not clear. Also, the plaintiff has failed to take part in the hearing or this application and there is no indication he is likely to take part in the assessment process. They are therefore unlikely to be lengthy and expensive. These factors lead me to the conclusion that a specified gross sum order for costs should not be made.

The rates sought for fees

1. I have reviewed the evidence relating to the hourly rates sought to be claimed by the defendant's solicitors: see paragraph 8 of the affidavit of Mr Devaris (of 17 paragraphs) dated 5 May 2020. Those rates appear to me to be reasonable in all the circumstances.
2. I also have reviewed the memoranda of fees of senior counsel involved in the matter. The matter was a complex one involving various proposed expert witnesses. Causation issues were relevant. Having regard to the complexity of the matter, in my view the briefing of senior counsel without a junior was reasonable. I also accept that the hourly rate charged by senior counsel as revealed in his memoranda of fees was reasonable. Whether the cancellation fee charged was appropriate is properly a matter for the costs assessor to determine. I also note that a number of opinions were apparently given which may have been required for the defendant's own purposes. This will need to be considered by an assessor.

Indemnity costs application

1. In the Notice of Motion filed on 5 May 2020, the defendant seeks that its costs be paid by the plaintiff on the ordinary basis up to 6 February 2019 and on an indemnity basis after that time.
2. Section 98(4) of the Civil Procedure Act 2005 (NSW) allows the court to make an order for costs up to, or from, a specified stage of the proceedings.
3. Part 42.5 of the Uniform Civil Procedure Rules 2005 ("UCPR") provides as follows: "42.5 Indemnity costs (cf SCR Part 52A, rule 37) If the court determines that costs are to be paid on an indemnity basis - (a) in the case of costs payable out of property held or controlled by a person who is a party to the proceedings - (i) in the capacity of trustee, executor, administrator or legal representative of a deceased estate, or (ii) in any other fiduciary capacity, all costs (other than those that have been incurred in breach of the person's duty in that capacity) are to be allowed, and (b) in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed."
4. Part 42.15 of the UCPR provides as follows: "42.15 Where offer not accepted and judgment no more favourable to plaintiff (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise - (a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis - (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
5. In the affidavit of Mr Devaris sworn 5 May 2020 (of 15 paragraphs) there is evidence that: 1. On 6 February 2019, an offer of compromise was served on behalf of the defendant; 2. The offer of compromise was open for acceptance for a period of 28 days until 6 March 2019; 3. The plaintiff did not accept the offer of compromise served on behalf of the defendant.
6. I have reviewed the offer of compromise sent by the solicitors for the defendant. The offer complies with Part 20.26 of the Rules: the offer was an offer to compromise the whole of the plaintiff's claim in the proceedings; the offer proposed judgment in favour of the defendant against the plaintiff with no order as to costs; the offer referred to was made under Part 20 and Part 42 of the UCPR. The proposal for a judgment in favour of the defendant with no order for costs complies with Part 20.26(3) of the UCPR.
7. The orders made by the court on 14 May 2019 were more favourable to the defendant than the offer made under the offer of compromise. The offer appeared to be a proper offer and not merely a request to capitulate. Accordingly, the defendant is prima facie entitled to an indemnity costs order.
8. In Toyota Finance Australia Ltd v Gardiner (No 2) [2016] NSWCA 181 the Court of Appeal stated at [13]-[15] as follows: "13. Rule 42.15A of the UCPR applies when a defendant has made an offer which is not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of that offer. In those circumstances, the defendant is entitled to a special costs order from the time the offer was made, unless the Court orders otherwise. This rule is applicable to appeals: UCPR rr 51.47 and 51.48. 14. The making of a valid offer of compromise does not, however, guarantee a special costs order. This is a matter for the Court's discretion. 15. It is clear that "where no significant compromise at all is made by a party to an appeal, the default position provided for in the rules will not be applied": Mega-top Cargo Pty Ltd v Moneytech Services Pty Ltd [2016] NSWCA 3 at [5]; Taheri v Vitek (No 2) [2014] NSWCA 344 at [9] [11]."
9. In Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [40] McColl JA (with whom Gleeson JA and Sackville AJA agreed) stated that the consequence of the orders obtained being no less favourable to the defendant is that a prima facie entitlement to have costs awarded on an indemnity basis arose.
10. There are no reasons in the present case on the evidence to "otherwise order" having regard to all the circumstances of the case: Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [32]. Therefore, an indemnity costs order as sought should be made.
11. The defendant has obtained an indemnity costs order so it should have its costs of the Notice of Motion.

Determination

1. For the above reasons, the court makes the following orders: 1. The costs order in favour of the defendant made on 14 May 2019 is varied as set out in the following orders. 2. The plaintiff is to pay the defendant's costs of the proceedings on the ordinary basis up to and including 6 February 2019. 3. The plaintiff is to pay the defendant's costs of the proceedings on an indemnity basis from 7 February 2019 to 14 May 2019. 4. The plaintiff is to pay the defendant's costs of and incidental to the Notice of Motion filed 5 May 2020. 5. The Notice of Motion filed 5 May 2020 is otherwise dismissed.

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: 26 May 2020