Moutia Elzahed & Ors v Commonwealth of Australia and State of New South Wales

District Court of NSW|2017-06-26

Solicitors: Zali Burrows (Plaintiffs) Australian Government Solicitor (First Defendant) Crown Solicitor for NSW (Second Defendant) File Number(s): 305851 of 2014

Outline

On 15 December 2016 I made the following orders:

Verdict for the first defendant against the first plaintiff.
Verdict for the second defendant against the first plaintiff.
Verdict for the first defendant against the second plaintiff.
Verdict for the first defendant against the third plaintiff.
Verdict for the second defendant against the third plaintiff.
Verdict for the first defendant against the fourth plaintiff.
Verdict for the second defendant against the fourth plaintiff. [Moutia Elzahed & Anors v Commonwealth of Australia and State of NSW [2016] NSWDC 353].

Evidence

The first defendant read affidavits from Mr Melican dated 14 December 2016 and 14 February 2017 and an affidavit from Ms Robinson dated 14 February 2017. They were not required for cross examination.
The second defendant read an affidavit from Ms Tretheway dated 15 February 2017. She was not required for cross examination.
The plaintiffs did not call any evidence.

Findings

By letter dated 3 December 2014 the solicitor for the first defendant informed the solicitor for the plaintiffs that the entry to, and securing of, the premises had been effected solely by officers of NSW Police. The AFP officers had entered after the premises had been secured. Accordingly, there seemed to be no basis for the continuation of the proceedings against the first defendant and he invited the plaintiffs to discontinue the proceedings before any substantial costs had been incurred by the first defendant.
On 4 December 2014 the plaintiffs filed an Amended Statement of Claim which included a claim for damages for defamation.
At a directions hearing on 16 April 2015 Judge Gibson ordered the plaintiffs to pay the defendants' costs thrown away by reason of the failure of the plaintiffs to answer two requests for particulars.
On 14 August 2015 the first defendant served an Offer of Compromise offering to compromise the whole of the claim against the first defendant on the basis of a judgment in favour of the first defendant with no order as to costs.
On 18 November 2015 Judge Gibson struck out and dismissed the claims for defamation and ordered the first, third and fourth plaintiffs to pay the defendants' costs in relation to their defamation claims.
On 20 November 2015 the second defendant served an Offer of Compromise offering to settle the matters against each plaintiff with a verdict being entered for the second defendant and no order as to costs.

Separate Orders or Joint and Several Orders?

Although there are four plaintiffs, their causes of action were pleaded in the one Statement of Claim.
As I have said, senior counsel for the first defendant submitted that the first and second plaintiffs and Sanie Fawal, the tutor for the third and fourth plaintiffs should be jointly and severally liable for the costs of the first defendant.
Counsel for the second defendant asked me to make separate costs Orders against the first plaintiff, the third plaintiff and the fourth plaintiff. This submission was not supported by any legal authority.
Counsel for the plaintiffs chose not to make any submissions in relation to whether the costs Order should be made separately against the first, third and fourth plaintiffs or whether they should be jointly and severally liable.
Counsel for the first defendant relied on 42.1.48 of Ritchie's Uniform Civil Procedure Law. It relevantly says:

Unsuccessful parties are ordinarily jointly and severally liable for the costs of the successful parties in the proceedings.
This is subject to two qualifications. The first is that a party who has entered a submitting appearance and has taken no part in the proceedings, should not be exposed to joint and several liability for the whole of the costs of the proceedings. That qualification does not apply.
The second is that an unsuccessful party should not be ordered to pay costs involved in the determination of separate and discrete issues that were relied on only by other parties. It was not suggested that this qualification applies.

I am satisfied that the plaintiffs and the tutor should be jointly and severally liable for any costs Order I make.

Costs Orders in favour of the defendants

The plaintiffs accept that costs, in the usual course, follow the event.

Indemnity costs

Each defendant sought an Order for indemnity costs from the date after the Offer of Compromise was served.
UCPR 42.15A relevantly provides: (1) This rule applies if the offer is made by the defendant, but 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 the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant'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.
Counsel for the plaintiffs: 1. Did not dispute that the Offers of Compromise had been served. 2. Did not contend that there was any error or inadequacy as to the form of either of the Offers of Compromise. 3. Did not submit that the defendants had not made a genuine offer to compromise each of their claims. 4. Did not put any matter to me which should cause me to "otherwise order".
In these circumstances I am satisfied that in respect of each of the Offers of Compromise the defendants are entitled to costs on the ordinary basis up to the date they were served and costs on an indemnity basis from the day after service.

Legal principles

Each of the defendants seek a gross sum costs Order.
S 98 of the Civil Procedure Act 2005 relevantly provides: (4) … 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: (c) a specified gross sum instead of assessed costs.
The relevant principles are considered in Hamod v State of NSW and Anor (No 13) [2009] NSWSC 756 and Idoport Pty Limited v National Australia Bank Limited, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23. They are: 1. The purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of assessment. 2. The touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable. On the one hand the Court must be astute to prevent prejudice by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary fail safe discount on the cost estimates submitted to the Court. 3. The fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available. 4. A gross sum assessment, by its very nature, does not envisage that a process similar to that involved in an assessment of costs should take place. 5. The gross sum can only be fixed broadly having regard to the information before the Court. 6. Nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions.
Palmer J held in Hall v Poolman [2007] NSWSC 1330 at [392] that, when considering s98 the court must have regard to the principle that the purpose of the Civil Procedure Act 2005 and Rules is to promote the just, quick and cheap resolution of the real issues in proceedings in such a way that the cost to the parties is in proportion to the importance and complexity of the matter in dispute.

Capacity of the plaintiffs to pay any costs Order

Counsel for the plaintiffs did not dispute any of the matters put to me in relation to the capacity of the plaintiffs to pay any costs Order being the following:

The plaintiffs are a family unit consisting of a mother (the first plaintiff) a stepfather (the second plaintiff) and two children (the third and fourth plaintiffs).
The second plaintiff is currently serving a term of imprisonment of 8 years which commenced on 12 July 2016 and expires on 11 July 2024, with a non-parole period fixed for 6 years, expiring on 11 July 2022. Only the first defendant seeks a costs Order against the second plaintiff.
The third plaintiff is presently facing terrorism charges.
The house where the plaintiffs reside is owned by the Housing Commission of NSW.
Ms Sanie Fawal, who was appointed the tutor for the third and fourth plaintiffs on 29 April 2015, is not shown as owning any real property in Australia.

I am satisfied that the defendants have shown that it is unlikely that the plaintiffs will pay any costs Order made against them.

The first defendant

There was comprehensive and clear evidence from the first defendant.
Mr Melican, the Australian Government lawyer who had the conduct of the matter on behalf of the first defendant, provided detailed information about the AGS' file. He has had experience with the assessment and recovery of costs incurred in this type of litigation.
Mr Melican said that the first defendant's costs have been borne by Comcover. He gave evidence of the hourly rate charged by AGS to Comcover and counsel's fees. The AGS kept an electronic file which he said includes 186 court documents including drafts, 103 file notes, 2,273 emails and 58 background or evidential documents. The brief was comprised of two thick lever-arch binders of documents printed double sided and five hours of video footage.
The detailed calculation of the first defendant's actual costs provided by Mr Melican shows that, as at 31 January 2017, it had incurred costs of $131,755.48 (GST exclusive) and estimated future costs of $13,187.65 (GST exclusive). This was made up of $26,372.82 (GST exclusive) before the service of the Offer of Compromise and $105,382.66 (GST exclusive of GST) to 31 January 2017.
Ms Robinson has, in addition to her work as a practising lawyer in civil litigation for over 20 years, worked as a legal costs consultant for five years. She has been a lawyer at AGS since 2001. Ms Robinson was provided with Mr Melican's affidavits, the relevant pleadings and the judgment delivered on 15 December 2016.
Mr Robinson said that in common law claims for damages heard in the District Court where the Commonwealth is awarded its costs of the proceedings, the assessment of those costs usually ranges between:

on a party/party basis - approximately 60-70% of actual professional fees, 80-100% of counsel's fees and 60% of general disbursements plus approximately 80% of the costs of assessment; and
on an indemnity basis - approximately 75-85% of actual professional fees, 90-100% of counsel's fees and 75-80% of general disbursements.

Consistently with this evidence, the claim for the gross sum Order is made by applying the following:

Claiming approximately 50% of fees up to the service of the Offer of Compromise and 65% after service of the Offer of Compromise;
Claiming approximately 65% of counsel fees up to the service of the Offer of Compromise and less than 80% after service of the Offer of Compromise;
Not claiming anything for other disbursements before service of the Offer of Compromise and less than 25% after the service of the Offer of Compromise.

The total, $95,000, is approximately 65% of the actual costs incurred by the first defendant and the anticipated further costs.
Mr Melican estimates that the cost of having the first defendant's costs formally assessed would be in the order of $17,000.
Counsel for the plaintiffs said that the plaintiffs were not in a position to accept or deny the costs, charges, disbursements or rates claimed and were not in a position to concede that all the costs claimed were reasonably incurred in the conduct of the litigation.
However counsel for the plaintiffs did concede that the submissions of the first defendant and the evidence in support had been served on the plaintiffs, in accordance with the timetable, by 15 February 2017. He did not suggest that the plaintiffs had not been given sufficient time to put on evidence in reply. In Hamod v State of New South Wales and Anor [2011] NSWCA 375 at [824] the NSW Court of Appeal held: "The State and UBS had adduced detailed evidence of the costs each had incurred. That evidence was contestable, although given the principles that govern the making of an order under s 98(4), the costs would not be challenged to the same extent as may occur on a formal assessment. However, Mr Hamod chose not to contest the evidence. He may not have had the resources to do so, but Mr Hamod's lack of resources was one of the factors that led his Honour to make the order. Mr Hamod was protected by the principles which required his Honour to be satisfied that the costs claimed were fair and reasonable."

Vacation of two previous costs Orders

I was also asked to vacate the two costs Orders made by Judge Gibson so that all costs incurred after the serving of the Offer of Compromise (including those relating to the claim in defamation) were recoverable on an indemnity basis. This was not opposed by the solicitor for the plaintiffs provided that those costs were included in the claim for an Order for $95,000. I accordingly will vacate those costs Orders because I accept that, as submitted by counsel for the first defendant, the Offer of Compromise was 'to compromise the whole of the claim against the first defendant' - that is, including the defamation claim.

Finding - the first defendant

In exercising the discretion, which must be exercised judicially after giving the parties an adequate opportunity to make submissions on the matter, I take into account the following:

The purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of assessment.
I must be confident that the approach taken to estimate costs is logical, fair and reasonable. In relation to the first defendant, I have no hesitation in making that finding in view of the comprehensive material which has been adduced.
The cases also emphasise that a broad-brush approach must be taken and that a gross sum assessment by its very nature envisages that a traditional assessment process cannot take place. The first defendant is making a very significant discount on its actual costs which I am satisfied is to the benefit of the plaintiffs.
It is unlikely that there are any funds or assets in the possession or within the control of the plaintiffs or the tutor that could satisfy the defendants' conceded entitlement to costs as the successful litigants in the proceedings.
The costs that might be incurred if the assessment process were to proceed could be saved by the making of the gross sum costs Order as they have not yet been incurred.
The making of the Order would promote the quick and cheap disposition of the issue.

I am satisfied in all of the circumstances that it is appropriate to make a specified gross sum costs Order in the sum of $95,000 in favour of the first defendant.

The second defendant

Ms Tretheway is a solicitor employed by the Crown Solicitor and had the carriage of the matter for the second defendant. For over 13 years she has had carriage of, and also has supervised junior solicitors in, complex civil litigation matters including through the costs assessment process.
Ms Tretheway provided detailed evidence of the amounts billed by the Crown Solicitor's Office to the NSW Police Force including disbursements supported by copies of the invoices. She has also disclosed the hourly charge-out rates for the solicitors according to grade level and the rates charged by counsel. Ms Tretheway has advised that the Crown Solicitor's Office's file consists of 14 lever arch folders, including five volumes of correspondence.
In arriving at her calculations, Ms Tretheway took into account three quarters of the costs and charges up to the date of the Consent Judgment with the second plaintiff (so that his costs were not included) and 100% costs of the costs and charges thereafter.
Ms Tretheway relied on two decisions made in the NSW Supreme Court where a discount of 20% was applied to the State's actual costs.
The second defendant asks for an Order for 80% of the actual costs up to the date of service of the Offer of Compromise and 100% thereafter together with 100% of counsel's fees and 75% of other disbursements being a total of $158,706.18 (being a discount of $38,266.59).
Counsel for the plaintiffs again said that the plaintiffs were not in a position to accept or deny the costs, charges, disbursements or rates claimed and were not in a position to concede that all the costs claimed were reasonably incurred in the conduct of the litigation. Counsel for the plaintiffs also conceded, in relation to the second defendant, that its submissions and the evidence in support had been served on the plaintiffs, in accordance with the timetable, by 15 February 2017 and did not suggest that the plaintiffs had not been given sufficient time to put on evidence in reply.

Finding - the second defendant

In exercising the discretion, which must be exercised judicially after giving the parties an adequate opportunity to make submissions on the matter, I take into account the following:

The purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of assessment.
I must be confident that the approach taken to estimate costs is logical, fair and reasonable. I have been provided with sufficient information from the second defendant as to the hourly rates charged by the solicitors, the work done, the fees charged by and paid to counsel and other disbursements.
The cases emphasise that a broad-brush approach must be taken and that a gross sum assessment by its very nature envisages that a traditional assessment process cannot take place. On the one hand the amount sought is not significantly less than the second defendant's actual costs. While the second defendant seeks to discount its actual costs before the service of the Offer of Compromise, there is no discount on solicitor's costs after the service of the Offer of Compromise or on counsel's fees. In addition I note that counsel for the plaintiff submitted that the costs of the second defendant seem particularly high. On the other hand, the amount sought does not seem excessive. I take into account the submission by counsel for the second defendant that the second defendant's legal services providers' hourly rates are well below commercial value. He relied on the decision of Adamson J in Bechara v Bates (No 4) [2015] NSWSC 1722 where a charge out rate of $400 per hour for a principal solicitor and $300 per hour for a paralegal for work done in 2015 was considered reasonable. Those costs in this case are $140 - $440. This was a complex matter and was listed before the Court on many occasions over two years. As I have already mentioned, there was an interlocutory hearing concerning the claims in defamation. The claims by the three remaining plaintiffs were directed at the conduct of the NSW police officers. The substantive claims were heard over six days. The second defendant called a number of witnesses. Counsel for the plaintiffs conceded that, at the hearing, the plaintiffs had relied on the actions of the NSW police officers in establishing their claims and that it was not surprising that the costs of the second defendant were higher than those of the first defendant. Taking a broadbrush approach, I am satisfied that the sum of $158,706.18 is reasonable.
I have already found that it is unlikely that there are any funds or assets in the possession or within the control of the plaintiffs or the tutor that could satisfy the defendants' conceded entitlement to costs as the successful litigants in the proceedings.
As I have noted in relation to the first defendant, the costs that might be incurred if the assessment process were to proceed could be saved by the making of the gross sum costs Order as they have not yet been incurred.
As I have noted in relation to the first defendant, the making of the Order would promote the quick and cheap disposition of the issue.

I am satisfied in all of the circumstances that it is appropriate to make a specified gross sum costs Order in the sum of $158,706.18 in favour of the second defendant.

Orders 1. Vacate costs Orders made on 16 April 2015 and 18 November 2015. 2. The first and second plaintiffs and Sanie Fawal (as tutor for the third and fourth plaintiffs) are jointly and severally liable for the costs of the first defendant and those costs are to be paid in a gross sum of $95,000 within 28 days from the date of these Orders. 3. The first plaintiff and Sanie Fawal (as tutor for the third and fourth plaintiffs) are jointly and severally liable for the costs of the second defendant and those costs are to be paid in a gross sum of $158,706.18 within 28 days from the date of these Orders.

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: 30 June 2017

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