Kostov v Zhang

Further oral hearing

1. The applicant objects to the respondents' cost application being determined on the papers and without an oral hearing.
2. Her principal reasons for so submitting were to allow her to "present my position in person" and explain that "there has been a severe miscarriage of justice, and I believe the public has every right to hear what has occurred here".
3. There was no suggestion that any submission that Ms Kostov wished to make could not be made in writing. Further, all of the submissions and evidence filed on this application will be placed in the file and available for inspection by members of the public in the ordinary way. This judgment records the submissions of the parties and will be available on the internet. There is no infringement of the principle of open justice and the public's right to know about matters before the Court involved in determining a costs application on the papers.
4. The Court's inherent power to determine a motion such as the present on the papers is amplified by ss 56, 60 and 62 of the Civil Procedure Act. Section 56 requires the Court to seek to give effect to the objectives of just, quick and cheap resolution of civil proceedings. Section 60 requires that the practice and procedure of the Court be implemented in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter of the dispute. Section 62 specifically gives power to the the Court to direct that all submissions about a particular topic be made in writing.
5. Having considered the written submissions made by the parties, the Court is not persuaded that it should vary the orders made on 19 September 2016 and conduct a further oral hearing. To do so would unnecessarily increase the costs of the proceedings, which are already disproportionate to the subject matter of this dispute, which is a transfer application under s 140 of the Civil Procedure Act and not in any way a determination of the underlying merits of the dispute between Ms Kostov and the respondents.

Applicable principles in making lump sum costs

1. The Court's power to make a lump sum costs order is contained in s 98(4)(c) of the Civil Procedure Act: (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.
2. A lump sum costs order can be made any time before costs are referred for assessment and is appropriate where it is desirable to avoid the expense, delay and aggravation likely to be involved in contested or extensive costs assessment.
3. Section 98 confers a wide discretion on the court. The principles relevant to the Court's exercise of discretion were stated by Beazley JA (as her Honour then was) in Hamod v New South Wales [2011] NSWCA 375 at [813]-[820].
4. Her Honour identified some of the factors which merit particular consideration, including the relative responsibility of the parties for the costs incurred, the degree of any disproportion between the issue litigated and the costs claimed, the complexity of proceedings in relation to their cost, and the capacity of the unsuccessful party to satisfy any costs liability.
5. The power to award a lump sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schipp (2002) 54 NSWLR 734 at 743; [2002] NSWCA 213 at [21]-[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123; [1995] FCA 350.
6. The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod v New South Wales at [818].
7. A "broad brush" approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5; [1999] FCA 673; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7].
8. The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod v New South Wales at [814].

Application for a lump sum costs order

1. The respondents seek a lump sum costs order for the following reasons: 1. requiring the respondents to undergo a costs assessment would unnecessarily add to the delay and expense of the proceedings; 2. the applicant's conduct in the proceedings to date made it likely that any costs assessment would be even more costly and expensive than usual and involve greater delays; and 3. the applicant may not be in a position to satisfy the costs order.
2. It is appropriate to consider each of those submissions in turn.

Delay, expense and aggravation of a costs assessment

1. The respondents adduced evidence about the costs that they have incurred in the conduct of the proceedings in this Court. The applicant did not dispute the amounts claimed by the respondents.
2. Thus, the unchallenged evidence is that $31,285.50 has been incurred by the first and third respondents in relation to the appeal proceedings, comprising: 1. the costs of the solicitors for the respondents, which amount to $20,747.50, being $12,082.50 billed and $8,665.00 yet to be billed. 2. the costs of counsel for the respondents, which amount to $10,538.00.
3. The evidence of Mr Powell, a senior solicitor with 18 years' experience in commercial litigation, is that if costs were to be assessed, 75 - 80 per cent of the total costs claimed would be awarded. Ms Kostov did not address any submission directed to this evidence or lead any evidence concerning this subject.
4. The respondents submitted that they were entitled to an award of costs of a lump sum of at least $20,000. Again, Ms Kostov did not address any submission directed to this topic or lead any evidence concerning this subject.
5. If the matter proceeded to assessment, the uncontested evidence is that there would be a delay of a further six months and additional expenditure of between $5,000 and $8,000.
6. The expenditure of that sum in a case involving a simple leave to appeal from a transfer motion would be disproportionate to the issues at stake and the overall costs incurred by the respondents in the proceedings.
7. The likely delay and expense involved in a costs assessment tends strongly in favour of making a lump sum award.

Applicant's conduct in the hearing of the matter before this Court

1. The applicant submitted that the respondents' opposition to her transfer motion indicated that they had unnecessarily incurred expenses. That submission should be rejected. The respondents were entitled to defend the claims made against them.
2. It may, however, be thought that a sum in excess of $30,000 expended by these respondents in defence of an application for leave to appeal from the dismissal of a simple transfer motion was excessive.
3. To allay that concern the respondents pointed to the following matters: 1. the significant procedural delays, including two adjournments obtained by the applicant, described in Kostov v Zhang [2016] NSWCA 262 at [8] - [16]; 2. the evidence of the significant volume of correspondence between the respondents and the applicant about this matter. The respondents submitted that the applicant raised a large number of additional issues that needed to be addressed which made this matter more complex and costly than first appeared; 3. the detailed time sheets tendered show that additional complexity and expense was created by the applicant having joined the first respondent, an individual, and the third respondent, the employer of the first respondent, in addition to the media company which published the article about which she complains. This multiplicity of parties, and communication with the separate firm of solicitors retained by the media company, added to the expense of the proceedings.
4. It may be accepted that the applicant's conduct in these proceedings has significantly increased their complexity and the respondents' costs of dealing with them. The conduct of the proceedings to date makes it likely that any costs assessment would be even more costly and expensive than usual and involve greater delays.
5. That is not to say, however, that in adopting a "broad bush" approach, the Court will necessarily adopt all of the evidence of likely quantum of recovery following assessment, even where that evidence is not directly challenged. This is even more so when the party liable to pay the costs is unrepresented.
6. Nevertheless, the applicant's conduct in the hearing of the matter before this Court is a matter which tends in favour of making a lump sum costs order.

The ability of the applicant to satisfy a costs order

1. The respondents submitted that the applicant's amended statement of claim dated 9 August 2016 in the District Court proceedings indicated that she is currently unemployed. We do not find this submission persuasive. The amended statement of claim contains no express statement to that effect. Absent further evidence we would not infer that Ms Kostov is presently unemployed. In any event, even if true, in the absence of further evidence we would not be prepared to assume that the applicant does not have an ability to meet a lump sum costs order if made.
2. Secondly, the respondents submitted that costs orders have been made against the applicant in unrelated proceedings. Assuming that to be true, and that those orders have not been satisfied, matters about which we express no view, we would nevertheless not be prepared to proceed on the basis that the applicant does not have an ability to meet any such costs order.
3. Finally, the respondents submitted that certain small amounts of miscellaneous fees said to be owing to the Court in the present case remained outstanding. The applicant strenuously challenged this submission and argued that she does not have any outstanding fees owed to the Court. She attached documentation to her submissions in support of this submission.
4. We express no views about any accounting on this issue but, generally, we accept Ms Kosov's submission. In any event, even if certain small fees have not been paid, we would nevertheless not be prepared to assume that Ms Kostov does not have an ability to meet a costs order.
5. We reject the submission that the respondents have shown that Ms Kostov may not be in a position to satisfy a lump sum costs order.
6. This conclusion tends against making a lump sum costs order.

Conclusion and orders

1. Weighing all of the relevant factors, the Court has concluded that a lump sum costs order should be made.
2. A costs assessment would involve six months delay and likely expense of between $5,000 and $8,000. The history of the proceedings to date indicates that any assessment would be strongly contested. The applicant's stated intention to file an application for special leave indicates that it may be some time before the substantive issues between the parties are heard and determined. The District Court case is still in the "Inactive List".
3. Whilst the ability of the applicant to meet a costs order is a matter which weighs against the making of a lump sum order, these conclusions as to cost and delay provide sufficient reason for doing so, avoiding the "expense, delay and aggravation" arising out of the process of quantifying the entitlement to costs: Beach Petroleum NL v Johnson at 120.
4. As to quantum, the respondents are seeking a lump sum order of $20,000. This equates to just under two thirds of the actual costs incurred.
5. Applying the "broad brush" approach noted above and discounting for exigencies we propose to order that a lump sum for costs of $15,000 be paid. This equates to a little less than 50 per cent of the costs incurred. Our reasons for reaching this figure are as follows.
6. While the applicants for a lump sum costs order have led sufficient evidence to determine the costs they have actually expended, and the Court is satisfied that the rates charged are reasonable, having regard to the nature of the matters in issue, we are not satisfied that a sum in excess of $30,000 represents a fair and reasonable amount reasonably incurred. Accordingly, there should be a higher discount applied to the actual costs expended than the usual discount of 33 per cent to 25 per cent applied in fixing an amount of party-party costs.
7. In adopting a "broad brush" approach to the award of costs on a lump sum basis, we consider that a costs award of $20,000 (or approximately 66 per cent of the total figure incurred) would not represent a sufficient discount having regard to the matters just addressed and notwithstanding the fact that $8,665 is yet to be billed to the respondents by their solicitors. The Court should be cautious about too readily accepting that the total amount will ultimately be billed to the client.
8. The courts have typically applied a discount in assessing costs on a lump sum basis. Applying that approach here, and taking into account the matters identified above, a discount of approximately 50 per cent of the actual costs incurred is appropriate, leading to a lump sum award of $15,000.
9. The order of the Court is that pursuant to s 98(4) of the Civil Procedure Act, Ms Kostov pay the first and third respondents' costs of her summons for leave to appeal in the lump sum of $15,000.

Amendments 14 October 2016 - Correction to headings and corresponding numbering. 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: 14 October 2016