Ludwig v Jeffrey

Supreme Court of NSW|2022-10-26|Before: Slattery J

Judgment

This is my fifth judgment in these proceedings and the Court's sixth judgment. My previous four judgments fully set out the background to these proceedings Ludwig and Jeffrey [2019] NSWSC 1550; Ludwig v Jeffrey (No. 2) [2020] NSWSC 1677; and Ludwig v Jeffrey (No. 3) [2021] NSWSC 23. The proceedings went on appeal and the Court of Appeal gave judgment upholding the Court's previous determinations: Ludwig v Jeffrey (No 4) [2021] NSWCA 256. My fifth judgment determined most of the remaining costs issues between the parties: Ludwig v Jeffrey (No. 5) [2022] NSWSC 497.
This judgment should be read with the Court's previous judgments. Events, matters and persons are referred to each judgment in the same way. This judgment determines the last of the outstanding costs issues between these parties.
In the orders with my fifth judgment (at 41) the Court appeared to note that Civil Procedure Act 2005, s 98(4)(c) orders had not yet been made in respect of the defendant's costs incurred between 20 February 2020 and 30 November 2020. But that was an imprecise description of what had occurred up to that point, as in the fifth judgment (at 41 and (4)) the Court had made a specified gross sum cost order of $30,000 for the 20 February - 30 November 2020 period but applied the cap of $20,000.
Thus, there is only one outstanding issue: the making of s 98(4)(c) orders in respect of post 30 November 2020 costs. The Court labelled this issue "the post 30 November 2020 costs dispute".
On 27 April 2022 the Court made directions with the fifth judgment to cap costs in relation to the adducing of evidence and advancing submissions to resolve the post 30 November 2020 costs dispute, at no more than $5,000. The Court directed the parties to file and serve evidence and submissions for the resolution of the post 30 November 2020 costs dispute and these orders were modified on 14 June 2022.
Mr David Shad has now ceased to be retained by the Ludwigs but they have been made aware of their right to put on further submissions on these final issues and have declined to do so.

The Post 30 November 2020 Costs Dispute

In my fifth judgment (at 41) the Court ordered the plaintiffs/cross-defendants, the Ludwigs, to pay the costs of the defendant/cross-claimant, Mr Jeffrey, of all disputes in relation to the fixing of a specified gross sum costs order instead of assessed costs, and of all other costs incurred after 30 November 2020 on the indemnity basis, but excluding the costs of the appeal proceedings: Ludwig v Jeffrey (No 4) [2021] NSWCA 256.
For the same reason that the Court has made the s 98(4)(c) orders earlier in these proceedings, it is now appropriate for the Court to make such an order for the post 30 November 2020 costs dispute. The Court has set out the authorities justifying this course of action in the circumstances of these proceedings in its previous judgments: see Ludwig v Jeffrey (No. 5) [2022] NSWSC 497 (at [14]).
Mr Jeffrey has adduced evidence of his post 30 November 2020 costs. He claims a total of $34,941.50. These costs are listed in the affidavit of Mr John Michael Whitfield sworn and filed on 1 July 2022, to which are annexed the tax invoices for professional services issued by Mr Whitfield to his client for the post 30 November 2020 period, and the memoranda of fees for professional services issued by Ms Courtney Ensor. Those invoices and memoranda of fees contain the detail of the legal work undertaken on behalf of Mr Jeffrey up to and including 4 March 2022 but do not include the costs of preparing and filing the submissions in relation to the post 30 November 2020 costs dispute itself, which were directed on 27 April 2022 by the orders of the Court. Costs relating to the period after 4 March 2022 are dealt with separately below. The costs for that period are subject to the Court's direction in the fifth judgment (at 41(a)) that the parties incur no more than $5,000 in costs in adducing evidence and putting submissions to resolve the post 30 November 2020 costs dispute.
The Court is familiar with the legal work done for Mr Jeffrey after 30 November 2020. It related to several readily identifiable issues in contest in these proceedings. The legal work done on Mr Jeffrey's behalf was mostly responsive to actions taken by the Ludwigs and was generally of a defensive nature, responding to actions the Ludwigs had taken in the proceedings.
The nature of this legal work may be briefly summarised. The Ludwigs advanced written submissions in relation to Trustee Act 1925, s 100A on 3 February 2021. This required Mr Jeffrey to instruct his lawyers to consider these submissions, deal with the Court's requests in relation to them and prepare responses. The orders with the Court's third judgment on 27 January 2021 directed the parties to prepare for a contest in relation to the making of s 98(4)(c) orders. It was reasonable and predictable for Mr Jeffrey to incur legal costs in anticipation of that contest in accordance with the Court's directions. But his legal preparation costs in respect of these issues were ultimately not deployed in a contest before the Court, because the Ludwigs abandoned their contentions in respect of both those issues: Ludwig v Jeffrey (No. 5) [2022] NSWSC 497 (at [9] and [10]).
The Court held a directions hearing on 15 December 2021 at which it invited the parties either not to read some of their evidence, or to narrow their submissions in order to limit the incurring of costs. The Ludwigs read the affidavit of Mr David Shad sworn and filed on 23 February 2021 and advanced submissions on the same date in relation to the application for judicial advice, the notice of motion filed on 2 June 2020, and issues of costs disclosure.
The memoranda of fees from Ms Ensor of counsel and Whitfield Solicitors for the period from 30 November 2020 through until 4 March 2022 total $34,941.50. The total fees for the period of $34,941.50 are divided between counsel and solicitors as follows. Three memoranda of fees from Ms Ensor amount to $21,945 and five tax invoices from Whitfield Solicitors amount to $12,996.50.
The Court is making a specified gross sum order in respect of an indemnity costs order. It is possible in such circumstances to reduce the fees claimed when making a specified gross sum costs order. But here the Court sees no reason to reduce either the solicitor's costs or counsel's fees in fixing the quantum of that order. The fees are reasonable for the respective work done by solicitors and counsel and are proportionate and appear to the Court to have been properly incurred given the issues dealt with since 30 November 2020. The Court will therefore fix a specified gross sum costs order in respect of these fees and will do so in the amount claimed of $34,941.50.
Finally, Mr Jeffrey has expended costs after 4 March 2022 in preparing to resolve the post 30 November 2020 costs dispute. These costs have been capped at $5,000. It is clear from the affidavit evidence and written submissions filed on behalf Mr Jeffrey that this sum has been incurred and the Court will allow it in addition to the amount of $34,941.50 fixed under s 98(4)(c). It is reasonable as it has already been capped by the Court.

The Balance of the Trust Fund Held by the Independent Solicitor

The Court has been told that the independent solicitor still holds in trust approximately $174,491.34 as at the date of Mr Whitfield's submissions of 29 July 2022. The orders with the Court's fifth judgment authorised the payment of substantial parts of this sum out of Court. Those orders need not be repeated here. The Court of Appeal ordered that Mr Jeffrey be awarded indemnity costs of the failed appeal by the Ludwigs. The Court of Appeal ordered that these costs should also be paid out of the funds with the independent solicitor. The costs in the Court of Appeal have not yet been assessed.
Before ceasing to act for the Ludwigs Mr Shad informed Whitfields on behalf of the plaintiffs that they would require the defendant's indemnity appeal costs to be assessed. Mr Jeffrey may wish to apply to the Court of Appeal to have those costs dealt with in the same way as the trial costs under s 98(4)(c) by way of the fixing of a specified gross sum costs order instead of assessed costs.
Mr Jeffrey submits the Court should make final orders in the form proposed to the Court on 28 February 2022. But those orders did not take full account of the orders the Court had made in the fifth judgment, which had already authorised the payment out of monies by the independent solicitor. All that the present orders need to do to finalise the matter other than in relation to the cost of the appeal, is to add to the orders made with the fifth judgment the further sums that may by this judgment also be paid out by the independent solicitor to Mr Jeffrey.
The present orders also record the joint and several liability of the plaintiffs in respect of any shortfall in the fund in Court in satisfying the orders now made. It is not anticipated on the Court's calculation that the shortfall will arise immediately. The amount presently held by the independent solicitor should satisfy the orders made with the fifth judgment and with this judgment. The total of those orders on the Court's calculation is the sum of $172,763.75 (being $90,000 + $20,000 + $22,822.25 + $34,941.50 + $5,000). There is no reason why this sum cannot be paid out by the independent solicitor immediately.
A shortfall is anticipated once the Court of Appeal assessment is made or a specified gross sum order instead of costs is made by the Court of Appeal. As on the Court's calculations there is not yet a shortfall from the fund held by the independent solicitor it is not possible for the Court to make specific orders giving judgment against the Ludwigs personally for the amount of any shortfall. But it is clear from my fifth judgment (at [9]) that the plaintiffs have since 21 December 2021 already expressly consented to being personally liable for any such shortfall when it arises. The case has been conducted on the basis of that concession since it was made, and it cannot be withdrawn.
When the Court considered this matter in its fifth judgment (at [40]) the Court declined to make orders against the Ludwigs to meet any shortfall in the payment of costs until extent of the shortfall became clearer. But to bring this matter to finality it will assist the parties if the Court makes a declaration of the Ludwig's joint and several liability for any shortfall that arises in the future based upon their concession.
All that remains now is either for a costs assessment to take place in respect of the indemnity costs ordered in the Court of Appeal, or for an application for a specified gross sum order instead of assessed costs to be made to the Court of Appeal in respect of the Court of Appeal's costs orders.
Liberty to apply for seven days will be granted if any issue is taken with the Court's calculation of the amount to be paid out by the independent solicitor. Otherwise, as this judgment concludes these proceedings at the trial level, the file will be returned to the Registry.

Conclusions and Orders

For these reasons the Court makes the following orders; 1. Order that in respect of Order 6 of the orders made on 27 April 2022 in respect of the defendant's costs incurred after 30 November 2020, that the Court will fix a specified gross sum instead of assessed costs under Civil Procedure Act 2005, s 98(4)(c) in the sum of $34,941.50; and the Court will allow the defendant an additional $5,000 in respect of fees to resolve that dispute; 2. Order that the sum described in paragraph (1) above may be paid out by the independent solicitor to the defendant/cross-claimant Mr Jeffrey, in addition to all other amounts ordered to be paid out by the independent solicitor to Mr Jeffrey on 27 April 2022, making therefore a total sum of $172,763.75 which may be paid out by the independent solicitor to Jeffrey; 3. Declare that the plaintiffs/cross-defendants are jointly and severally personally liable for any amount of costs incurred by the defendant/cross-claimant, Mr Jeffrey, in these proceedings that are ordered to be paid by the plaintiffs/cross-defendants to the defendant/cross-claimant, where costs cannot be satisfied out of the fund held by the independent solicitor; and 4. The file may be returned to the Registry.

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 October 2022

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Judgment (5 paragraphs)

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Cases Cited (5)