Loretta Kistmah Craig v Anthony Francis Johnson

Supreme Court of NSW|2020-11-18|Before: Lonergan J

Judgment

On 22 April 2020 I made orders setting aside a subpoena issued by the plaintiff on the basis that it was an abuse of process: Loretta Craig & Ors v Anthony Johnson & Ors [2020] NSWSC 423. Those orders were made as a result of the defendants' notice of motion filed on 6 August 2019.
I ordered that the plaintiffs pay the defendants' costs of the notice of motion and I provided a timetable for evidence and submissions if the defendants wished to press for any additional costs orders.
The defendants seek a gross sum costs order and an order in the sum of $28,300 and an order that those costs be paid forthwith.
The plaintiffs would agree to a gross sum costs order in the sum of $20,000 but dispute that there should be an order that the costs be paid forthwith.
I have concluded that a gross sum costs order should be made in the sum of $25,000 and that those costs should be paid forthwith. These are my reasons.
The proceedings were commenced in November 2016 and concern allegations of solicitors' negligence arising out of litigation heard and determined in the Equity Division of this Court in 2013.
There have been long delays caused by the plaintiffs' repeated failures to comply with procedural timetables set down by the Court and their unmeritorious and repeated pursuit by subpoena of documents that are the subject of legal professional privilege.
The procedural history is set out in Loretta Craig & Ors v Anthony Johnson & Ors [2020] NSWSC 423 [9] to [19]. The subpoena in question, issued on 19 June 2019 sought the same documents that had already been the subject of a failed application for access and a summons for leave to appeal, withdrawn at the last minute, on 24 May 2019. The plaintiffs also sought leave to appeal my April 2020 judgment, which was dismissed with costs on 5 November 2020: Craig v Johnson [2020] NSWCA 278.

Affidavit evidence in support of the application for the costs orders sought by the defendants

The affidavit of Mr Tredinnick affirmed 2 June 2020 sets out the costs incurred on the notice of motion which totalled $31,425.67 including disbursements. He set out in detail the various solicitors' charge out rates and the disbursements. He estimated the likely outcome of a party/party costs assessment would be between $26,300 and $28,300 excluding interest. He deposed to the likelihood of delays in assessment given the plaintiffs' demonstrated intransigence in respect of nearly every other aspect of the proceedings. He deposes to the further cost that would be incurred in dealing with a full costs assessment process, a figure likely to be an additional $8,000 to $11,000 entailing a likely delay of a further six to ten months.
Mr Tredinnick also referred to the fact that there have already been seven costs orders made in the proceedings in favour of the defendants, none of which have been paid.

Affidavit evidence of the plaintiffs

Loretta Craig's affidavit of 17 June 2020 raised mostly irrelevant matters including many paragraphs that refer back to specific aspects of the 2013 litigation and evidencing an apparent inability to move on from the loss of those proceedings. The points of relevance seem to be: (i) The defendants have an insurer behind them and so are in a better position than the plaintiffs to bear the ongoing costs of the proceedings; (ii) The $10,000 advanced to the Shine Lawyers Trust account in early 2020 was to pay counsel Mr Elliot SC for the 3 April 2020 hearing and was loaned to Ms Craig by other people; (iii) A forthwith costs order has the potential to stultify the proceedings.

Defendants' Submissions

The defendants submit that the Court has power to make a gross sum order under s 98(4) of the Civil Procedure Act 2005 (NSW) and that the power is not confined and may be exercised whenever circumstances warrant the exercise of the power: Harrison v Schipp (2002) 54 NSWLR 738 at [21]. Factors which favour a gross sum costs order are where an assessment is likely to be lengthy or complex: Beach Petroleum NL and Claremont Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120, where a party's conduct has unnecessarily contributed to the costs of the proceedings: Leary v Leary [1986] 136 NLJRep 942, and/or where a costs assessment is likely to be unduly protracted: Harvey v Barton (No 4) [2015] NSWSC 809.
All these criteria are satisfied. The plaintiffs' behaviour has been unreasonable and led to unnecessary costs being incurred. The already demonstrated intransigence will likely lead to further incurring of costs and delays if the costs have to be formally assessed.
Rule 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) provides that unless the Court orders otherwise, the costs of any interlocutory application are not payable until the conclusion of the proceedings, however an order permitting the payment of costs forthwith may be appropriate in certain circumstances: (a) where the interlocutory proceedings relate to matters distinct from the substantive issues in the proceedings: Wentworth v Wentworth [1996] NSWCA 552; Hamod v NSW [2007] NSWSC 707; (b) where the costs were incurred by the unreasonable conduct of the party against whom an order has been made: Fiduciary Ltd v Morning Star Research Pty Ltd (2002) 55 NSWLR 1; (c) where the costs are significant and the time for payment may otherwise be long postponed: Fiduciary v Morning Star; (d) where the interlocutory proceedings are an unnecessary and unwarranted application: see Perpetual Trustee Co. Ltd v McAndrew [2008] NSWSC 790.
All of these circumstances apply in this case. The only real factor telling against making the costs payable forthwith is if there was a basis to conclude that the proceedings would be stultified by the making of the order. The affidavit of Ms Craig is carefully worded in that regard and does not state a basis upon which the Court could reach that conclusion. There is an incomplete unsworn document attached to Ms Craig's affidavit that makes vague reference to Ms Craig's financial position which should be ignored (and, I interpolate, is ignored). The affidavit demonstrates funds can and have been obtained.

Plaintiff's Submissions

In their submissions filed on 1 July 2020, the plaintiffs state an agreement to a gross sum costs order in the sum of $20,000 but argue against an order that those costs should be payable forthwith. They submit that because it was "reasonably arguable" that the subpoena in issue was not an abuse of process, it was not unreasonable to issue it and press for production. Second, the interlocutory proceeding is not "distinct from the substantive issues in the proceedings" as the subpoena relates to a critical issue in the primary proceedings. Third, the costs are not significant. Fourth, emphasis was placed on the disparity between the parties' ability to bear ongoing costs.

Decision

I reject all of the plaintiffs' submissions. It was not reasonable to issue the subpoena as the terms of it meant that without doubt, the documents responsive would be privileged documents. The background of the failed previous attempt to obtain the same or similar documents and the ruling that such material was privileged, made the conduct patently unreasonable. Pressing for compliance in circumstances where the plaintiffs were informed repeatedly that the only documents responsive, were those subject to the Court's previous ruling, only added to the unreasonableness of the plaintiffs' approach.
The argument and cost associated with it, is easily divisible and is distinct from the substantive issues in the trial. It was a distraction and a costs-wasting side issue.
If the plaintiffs seriously press the argument that the order would stultify proceedings, there should have been sworn material as to the financial position of the plaintiffs. There was not.
The amount of the costs involved may not on their own be significant in the scheme of the whole proceedings, but they are significant because they are yet another tranche of costs incurred in the unreasonable pursuit of an untenable position which has delayed proceedings and wasted Court time in a manner wholly inconsistent with the obligations imposed on practitioners and parties under ss 56, 57 and 58 of the Civil Procedure Act. The costs should be paid forthwith.
In relation to the discretion to make the costs a gross sum, as identified by von Doussa J in Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120: The purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation. The power is appropriate to be used in complex cases. An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place, but the power must be exercised judicially and after giving the parties an adequate opportunity to make submissions on the matter.
The Court should only make the gross sum costs order if it considers that it can do so fairly between the parties and that it has sufficient confidence that it is able to arrive at an appropriate sum: see Idoport v National Australia Bank [2007] NSWSC 23 at [9]. The approach to estimation of costs should be logical, fair and reasonable: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123. If the Court is persuaded to make a gross sum costs order then the Court may adopt a broad-brush approach: see Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [22].
In Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [8] Campbell AJA accepted that situations where it might, depending on the individual circumstances, be appropriate to make a gross sum costs order would include: 1. Simple cases where there would be utility in "cutting the Gordian knot" of protracted fights about costs: see Keen v Telstra Corporation Ltd (No 2) [2006] FCA 930 at [5]; 2. Where the amount in issue is a modest sum and it would not be appropriate to require a further process of assessment to be undertaken: see Kiwi Munchies Pty Ltd v Stern [2006] NSWSC 433; and 3. Where the costs assessment is likely to be a protracted and expensive exercise and the other party is unlikely to pay: see Leary v Leary [1987] All ER 261 at 266.
It seems to me that those three circumstances identified by Campbell AJA apply here. A gross sum costs order is appropriate and likely to avoid further argument, expense and delay. I accept the evidence of Mr Tredinnick as demonstrating a logical, fair and reasonable approach to the assessment of costs, but take the view that a slight overall reduction should be made to the figure sought by the defendants to ensure that all the exigencies that may apply to a formal costs assessment is not lost to the plaintiffs.
I assess the appropriate gross sum costs figure to be $25,000 and I order that sum is payable forthwith.

Orders

I make orders as follows: 1. The plaintiffs are to pay the defendants' costs of the notice of motion filed on 6 August 2019 including disbursements in a gross sum amount of $25,000. 2. The costs referred to in order 1 are payable forthwith.

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: 18 November 2020

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