On 18 February 2022 I gave judgment for the plaintiff against the defendant in the sum of $1,353,850.00: Lewis v Doyle [2022] NSWSC 92. The plaintiff indicated that he would be seeking a costs order other than the usual order that the defendant paid the plaintiff's costs. Such an application has now been made, and the parties have agreed that I should determine the application on the papers without a further hearing.
The plaintiff seeks that the defendant pay costs on an ordinary basis up to one of three dates when offers of compromise were served by the plaintiff, and thereafter that the defendant pay the plaintiff's costs on an indemnity basis. In addition, the plaintiff seeks a gross sum costs order under s 98(4)(c) of the Civil Procedure Act 2005 (NSW).
The defendant, in his submissions, does not appear to oppose the making of an order for indemnity costs from the date of one of the offers of compromise (although he does not identify which is the appropriate one), but appears to oppose a gross sum costs order being made, while conceding that such an order was made against the same defendant in other proceedings involving similar issues: Miles v Doyle (No 3) [2021] NSWSC 1524.
The plaintiff first instructed his solicitors, Carroll & O'Dea, in about March 2015. Carroll & O'Dea were retained on the basis of a conditional costs agreement, meaning that the retainer was conducted on a no win - no fee basis.
On 15 October 2015, Mr Kelvin Andrews of counsel was briefed and retained by the solicitors, also on a conditional basis, that is, that unless the plaintiff was successful, Mr Andrews' fees would not be payable.
On 17 November 2016, a claims summary and schedule of damages was first served on the defendant. The schedule of damages was updated on 5 February 2018 and served on the defendant.
Two reports were obtained from a psychiatrist retained by the plaintiff, Dr John Baker, dated 19 July 2015 and 30 January 2018. The defendant obtained a report from a psychiatrist, Dr Alex Apler, dated 11 July 2017.
On 14 February 2018, an informal settlement conference took place in an attempt to resolve the matter prior to the commencement of the proceedings. Settlement was not achieved.
On 29 June 2018, the plaintiff commenced proceedings by the filing of a statement of claim and a statement of particulars.
On 2 July 2018, an offer of compromise was served by the plaintiff indicating that the plaintiff would accept judgment in the sum of $350,000.00. The offer was not accepted.
On 2 November 2018, a defence was filed which did not admit or deny that the assaults occurred. The defence admitted an allegation that the defendant had been convicted of assaults against the plaintiff.
On 5 June 2019, a mediation took place before the Honourable Ian Callinan QC as mediator. The mediation was unsuccessful.
On 25 June 2019, the plaintiff forwarded a further offer of compromise, which indicated that the plaintiff would accept judgment in the sum of $630,000.00. The offer of compromise was not accepted.
On 20 February 2020, the plaintiff's evidentiary statement was served, and at various dates in February 2020 statements of other young men, to be relied on as tendency statements, were served.
On 29 March 2021, the plaintiff served a further offer of compromise, which indicated that the plaintiff would accept judgment in the sum of $570,000.00. That offer was rejected.
On 26 July 2021, an amended statement of claim was served. Relevantly, some amendments were made to the particulars of the sexual assaults in terms of what occurred on three occasions, and one further occasion was added.
[2]
Indemnity costs
One consideration in determining whether indemnity costs should flow from a refusal to accept an offer of compromise is that it was unreasonable for the offeree not to have accepted the offer. Justice Garling discussed this matter in Young v Hones (No 3) [2014] NSWSC 499 where he said at [36]:
In considering whether it was unreasonable for the offeree not to accept the offer, a number of considerations will be relevant. The first will be timing, that is, that the conduct of the offeree must be assessed at the time it was made, and not with the benefit of hindsight resulting from a known outcome. Other considerations include the stage of the proceedings at which the offer was made and received, the time allowed to the offeree to consider the offer; the extent of the compromise offered, the offeree's prospects of success, assessed at the date of the offer, the clarity with which the terms of the offer were expressed, and whether the offeree foreshadowed an application for indemnity costs in the event that the offer was not accepted. These are all considerations to which the Court may have regard. See Miwa [Miwa v Siantan Properties Pte Limited (No 2) [2011] NSWCA 344] at [12]; Hazeldene's Chicken Farm Pty Ltd v Victoria WorkCover Authority (No 2) [2005] VSC 8298; (2005) 13 VR 435.
The plaintiff submits that indemnity costs ought to be ordered from the date of the first offer of compromise on 2 July 2018. The factors put forward to justify such an order are said to be these:
(a) The plaintiff had notified an intention to seek civil damages in respect of the assaults in April 2015;
(b) The evidence regarding the allegations of abuse had been tested through the criminal process, and was of sufficient strength to result in the defendant's conviction;
(c) As at the date of the offer, the defendant had not served or sought to rely upon any evidence on the question of whether the assaults occurred, it being assumed that the issue would not be traversed in the civil proceedings;
(d) Claim summaries and schedules of damages were first served on 17 November 2016, and were updated and served on 5 February 2018;
(e) The reports of Dr Baker and Dr Apler were available to the defendant;
(f) An informal settlement conference had taken place;
(g) The offer was made well in advance of the hearing;
(h) The offer was a genuine compromise on what the plaintiff was actually awarded; and
(i) The letter enclosing the offer clearly indicated that indemnity costs would be sought.
As noted above, no submissions were made on behalf of the defendant against the making of an order for indemnity costs. For that reason, it must be assumed that the defendant does not actively oppose indemnity costs being awarded. Nevertheless, I consider that the Court needs to be satisfied that it was not unreasonable for the defendant to have rejected the offer of compromise, for an indemnity costs order to follow from that offer.
In my opinion, the refusal of this first offer was not unreasonable. Offers of compromise are designed to facilitate the settlement of proceedings. Proceedings had only commenced some three days prior to the offer being made. It may be accepted that there was some psychiatric evidence of the effects of the assaults on the plaintiff, and particulars of damages had been served. However, the plaintiff had not served his evidentiary statement, nor the expert report in relation to his claim for economic loss.
The submission that the evidence regarding the allegations of abuse had been tested through the criminal process is apt to mislead. The conviction of the defendant for the offences did not prove the evidentiary aspects of the allegations made in the civil proceedings, by virtue of s 91 of the Evidence Act 1995 (NSW). As it became apparent from the defence ultimately filed, the defendant accepted the convictions, but put in issue the proof of the particulars in the statement of claim.
It is difficult to understand the submission that the failure of the defendant by 2 July 2018 to have served any evidence on the question of whether the assaults occurred, favours a conclusion that it was unreasonable for the defendant to reject the offer. When the proceedings had only commenced three days prior to the service of the offer of compromise, it could not reasonably be expected that any evidence would have been forthcoming from the defendant.
By the time of service of the second offer of compromise on 25 June 2019, matters had advanced considerably. Pleadings had closed more than seven months earlier, and a formal mediation had taken place. Sufficient details of the allegations and how the sexual assaults took place would have been available to the defendant by the time of the second offer of compromise. The economic loss report had been served. Further, the fact that the defendant seemingly agreed to, and took part in, a mediation is a strong factor supporting the unreasonableness of the defendant in rejecting the second offer of compromise.
In the circumstances, the plaintiff is entitled to costs on the ordinary basis up to and including 25 June 2019, and thereafter on an indemnity basis.
[3]
Gross sum costs order
In Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213, Giles JA said of the earlier equivalent provision to s 98(4) (Part 52A r 6(2) Supreme Court Rules 1970 (NSW)):
[21] The power conferred by r 6(2) is not confined, and may be exercised whenever the circumstances warrant its exercise. It may appropriately be exercised where the 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 the assessment (Leary v Leary (1987) 1 WLR 72; Sparnon v Apand Pty Ltd (von Doussa J, 4 March 1998, unreported); Beach Petroleum NL v Johnson (1995) 57 FCR 119; Hadid v Lenfest Communications Inc [2000] FCA 628).
[22] Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson at 124, the gross sum "can only be fixed broadly having regard to the information before the Court"; in Hadid v Lenfest Communications Inc at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that … is what the rule contemplates". 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]). The power 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 (CA, 21 February 1996, unreported, per Clarke JA).
In Hamod v State of New South Wales [2011] NSWCA 375 Beazley JA (with whom Giles and Whealy JJA agreed) said:
[813] … The discretion thereby conferred upon the court is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Harrison & Anor v Schipp [2002] NSWCA 213; 54 NSWLR 738 per Giles JA at [21]-[22]. In Harrison v Schipp, Giles JA considered that the discretion in s 98(4) may be exercised where the assessment of costs would be protracted and expensive and, in particular, if it appeared that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment. However, his Honour stated, at [22]:
"The power 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."
[814] See also Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported). The courts have typically applied a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW, LexisNexis, Sydney, 2005 to date, " Civil Procedure Act ", at [s 98.65]; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788; Idoport Pty Ltd v National Australia Bank Ltd; Lorenzato v Lorenzato & Anor (No 2) [ 2011] NSWSC 790 per Black J.
…
[816] The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); 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: Ritchie's Uniform Civil Procedure NSW at [s 98.45].
[817] The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.
[818] 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: Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261; Sony Entertainment (Aust) Ltd v Smith; Microsoft v Jiang (2003) 58 IPR 445; [2003] FCA 101; Ritchie's Uniform Civil Procedure NSW at [s 98.60]).
[819] 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: Smoothpool v Pickering [2001] SASC 131. In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: Harrison v Schipp at 743; Hadid v Lenfest Communications Inc at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5; [1999] FCA 673.
[820] The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills): Beach Petroleum NL v Johnson (No 2); Leary v Leary; Harrison v Schipp at 743; Sparnon v Apand Pty Ltd (FCA, 4 March 1998, unreported). The approach taken to estimate the costs to be ordered must be logical, fair and reasonable: Beach Petroleum NL v Johnson at 164-165; Hadid v Lenfest Communications Inc at [27]; Harrison v Schipp at 743. This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment: Leary v Leary at WLR 76 per Purchas LJ; Beach Petroleum NL v Johnson (No 2) at 123; Auspine Ltd v Australian Newsprint Mills Ltd at 164-165.
In Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863, Beech-Jones J said:
[6] Thus, in addition to complex cases, another common category in which lump costs will be awarded is the very short and relatively straightforward case. In such cases it can be expected that costs will be modest so that the pursuit of the costs assessment process might lead to unnecessary expense. This is particularly so where there is doubt about the payer's financial capacity. Further, in such cases the court will often be in a good position to make a reasonably well-informed assessment as to how much of the costs were reasonably incurred, because in a straightforward case it may often be apparent what out of court work was necessary for the case as presented.
[7] Against the above is, of course, the broad proposition that the detailed scheme for costs assessment which affords protections to the parties should not be undermined by too quick a resort to the power conferred by s 98. Counsel for Mr Bobb, Mr Raphael, urges that consideration upon me. He also submits the amount claimed in this case is such that it cannot be characterised as a small matter.
[8] I disagree. I consider that the circumstances of this case clearly warrant the making of a lump sum costs order. In the scheme of cases in this Court, the costs claimed are relatively modest. There are significant doubts about the plaintiff's capacity to pay such that there is a real risk that the costs of any assessment process undertaken by the first defendant may be thrown away. The issues in the case were straightforward and the Court is in a position to make a reasonably well-informed assessment as to the appropriate level of costs. Further, it must be borne in mind that the substantive issue of the proceedings was a dispute over the costs assessment process. A further order requiring the re-engagement of that process has the risk that the substantive dispute between the parties will become wider rather than narrower.
In my opinion, a gross sum costs order should be made for these reasons:
The defendant became bankrupt during 2021, and there is some doubt about his capacity to pay any costs order;
Notwithstanding the conviction of the defendant for the matters the subject of the civil proceedings, the defendant effectively put the plaintiff to proof of all the allegations. That resulted in the plaintiff having to obtain statements from a number of witnesses to be used for tendency purposes. That approach does not augur well for the conduct of any costs assessment.
The events which gave rise to the proceedings took place in 1986, and given the nature of what I have found occurred, the plaintiff is entitled to finality sooner rather than later. The attitude of the defendant to date is likely to mean that there will be a prolonged costs assessment, where further costs are incurred in circumstances where there is doubt the defendant will be in a position to pay them.
The existence of other significant creditors is a relevant consideration: Chaina v Presbyterian Church (NSW) Property Trust (No 26) [2014] NSWSC 1009 at [50]; Miles (No 3) at [20(4)]. That is the more so when the defendant is bankrupt. A costs order of significant magnitude was made against the defendant in Miles (No 3).
The plaintiff's costs up to 25 June 2019 total $53,001.85, with counsel's fees totalling $19,885.00 and disbursements totalling $12,547.69.
The plaintiff's costs from 26 June 2019 total $133,386.55. Counsel's fees for Mr Kelvin Andrews total $47,930.00 and for Mr Ryan Brown $48,180. Disbursements total $55,663.17. I consider that the hourly rates charged by the partner and the employed solicitor of $520.00 and $330.00 respectively are reasonable for the nature of the proceedings.
I consider that Mr Brown's fees for the hearing are excessive. Seven and a half days are charged for a hearing that lasted four days. Even if a cancellation fee for one day was allowed on the basis that the matter was fixed for five days (as Mr Andrews has charged), there can be no justification for fees for two and half extra days. I will reduce Mr Brown's fees for present purposes by $10,500.00 This reduces the total of costs and disbursements for the period from 26 June 2019 to $274,659.72, and the total for both periods to $360,094.26. Counsel's fees are otherwise reasonable as to the hourly rates charged, and for the work done.
When assessing the costs for the purpose of making a gross sum order a broad brush approach may be taken: Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99 at [31] and [38]; Hamod v New South Wales (No 13) [2009] NSWSC 756 at [31]; see also Hamod at [819]-[820] and Young v Hones (No. 3) at [28]-[30].
Although, as I noted in the principal judgment, the hearing was conducted with considerable economy, and Mr Hall for the defendant can take much of the credit for that, the defendant's approach in putting the plaintiff to proof of all of the allegations notwithstanding his convictions in respect of most of the incidents identified by the plaintiff, undoubtedly resulted in far more costs being incurred than would otherwise have been necessary or warranted.
In my opinion, the plaintiff's solicitors were entirely justified in briefing a second much more junior counsel to assist Mr Andrews in the preparation of the case. There is likely to have been some saving of costs in that regard, given the difference in hourly rates charged. I do not consider that it was unreasonable for both Mr Andrews and Mr Brown to appear at the hearing. I have already adjusted counsel's fees for the hearing itself. I disagree with Mr Hall's submission that it is unlikely that senior counsel would have been certified for the trial, notwithstanding that Mr Hall conducted the defence of the proceedings himself.
The total of the costs and disbursements is $360,093.60. Having regard to the fact that costs are recoverable by the plaintiff on the ordinary basis until 25 June 2019 and thereafter on an indemnity basis, I consider that the total figure should be discounted by 30%, producing a figure of $252,065.52
Mr Hall opposed any amount being added for the costs of the present application. In the circumstances where the defendant opposed a gross sum costs order, I consider that I should allow a modest sum to the plaintiff for the costs of the present application, to bring the total to a figure of $255,000.
Accordingly, I make the following order:
I order the defendant to pay the plaintiff's costs in the sum of $255,000.00.
[4]
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Decision last updated: 27 April 2022