O'Brien v Supercheap Security Pty Ltd

Supreme Court of NSW|2024-09-11|Before: Nixon J

JUDGMENT

On 4 September 2024, I delivered reasons for judgment in this matter: O'Brien v Supercheap Security Pty Ltd [2024] NSWSC 1117 (Primary Judgment). I determined that the Plaintiffs are entitled to equitable compensation from the Second Defendant, Mr Mehdi, for the amount deposited by each of them into the bank account which the First Defendant, Supercheap Security Pty Ltd, held with the Third Defendant, National Australia Bank Limited (NAB) (the Supercheap Account). This amount was subsequently paid away to third parties and has not been recovered. Additionally, I determined that the Plaintiffs are also entitled to interest and their costs.
At that time, I directed the Plaintiffs to provide to Mr Mehdi and my Associate proposed Short Minutes of Order to give effect to these reasons for judgment, including dealing with interest and costs. I indicated that if Mr Mehdi raised any issue about the form of those orders, I would relist the matter to determine that issue, otherwise, I would make final orders in chambers.
On 11 September 2024, the solicitor for the Plaintiffs provided to Mr Mehdi and my Associate draft Short Minutes of Order and a supporting affidavit. The proposed orders as follows: "1 Order that the Second Defendant is to pay the First Plaintiff the sum of $500,000. 2 Order that the Second Defendant is to pay the Second Plaintiff the sum of $100.000. 3 Order that the Second Defendant is to pay the Third Plaintiff the sum of $100,000. 4 Order that the Second Defendant is to pay the Fourth Plaintiff the sum of $175,000. 5 An order that the Second Defendant is to pay the Plaintiffs' costs of the proceedings in the gross sum of $81,123.14. 6 Interest payable by the Second Defendant to the First Plaintiff pursuant to section 100 of the Civil Procedure Act 2005 on the amount of $500,000.00 as of 11 September 2024 in the sum of $80,119.62. 7 Interest payable by the Second Defendant to the Second Plaintiff pursuant to section 100 of the Civil Procedure Act 2005 on the amount of $100,000.00 as of 11 September 2024 in the sum of $16,057.62. 8 Interest payable by the First Defendant to the Third Plaintiff pursuant to section 100 of the Civil Procedure Act 2005 on the amount of $100,000.00 as of 11 September 2024 in the sum of $16,046.39. 9 Interest payable by the First Defendant to the Fourth Plaintiff pursuant to section 100 of the Civil Procedure Act 2005 on the amount of $175,000.00 as of 11 September 2024 in the sum of $28,258.10."

Orders for judgment and interest

Proposed orders 1-4 reflect my findings in the Primary Judgment. For the reasons there set out, I have determined that each of the Plaintiffs is entitled to equitable compensation from Mr Mehdi in the amount of the total sum transferred by each Plaintiff into the Supercheap Account: Primary Judgment, [160]. The amounts specified in Orders 1-4 equate to the sums transferred into that account by, respectively, each of the First to Fourth Plaintiffs. Accordingly, judgment will be entered in those amounts.
The Plaintiffs' solicitor has, in his affidavit in support of the proposed orders, set out his calculation of the pre-judgment interest in respect of each of the judgment sums set out in proposed orders 1-4. Having reviewed this evidence, I am satisfied that the award of interest he has set out in his affidavit, which is reflected in proposed orders 6-9, is appropriate. Accordingly, I will make those proposed orders.

Gross sum cost order

In the Primary Judgment, I determined that the Plaintiffs are entitled to their costs of the proceedings against Mr Mehdi. The Plaintiffs have sought an order that Mr Mehdi pay their costs of the proceedings in the gross sum of $81,123.14.
Section 98 of the Civil Procedure Act 2005 (NSW) enlivens a broad power to award costs, including a power to award costs in a specified gross sum instead of assessed costs (s 98(4)(c)).
In Hamod v State of New South Wales & Anor [2011] NSWCA 375, Beazley JA, with whom Giles and Whealy JJA agreed, said at [816] as follows: "The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act ..., suggest that factors that merit particular consideration include: 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 ..."
In O'Connor v O'Connor - [Gross Lump Sum Cost Order] [2022] NSWSC 940 at [9]-[10], Hammerschlag CJ in Eq observed that: "A gross sum costs order is a form of special order as to costs, which can be made when the circumstances warrant departure from the usual position that the beneficiary of a costs order needs to have them assessed, and that such an assessment is subject to review. A gross sum costs order is not warranted simply because a party has a costs order and it will convenience that party not to have their costs subject to the formal process of assessment with the time and expense involved in that process. There must be some good reason to make such an order. Relevant factors may be the likely length and complexity of the assessment process, the possibility that additional costs of formal assessment would disadvantage the winner, that a party has unnecessarily contributed to the costs of the proceedings, especially where the costs are disproportionate to the result, and an expectation, based on prior experience, that further costs assessment is likely to be unduly protracted and unnecessarily add to the costs of the proceedings. The categories of relevant factors are not closed, and each case will turn on its own circumstances."
I am satisfied that it is appropriate to make a gross sum cost order in the circumstances of this case.
Mr Mehdi has stated to the Court that he does not have the means to meet any costs order. At the hearing, Mr Mehdi said if judgment were entered against him in favour of the Plaintiffs, the result would be that: "I need to be declared bankrupt, I don't have that much money. I can't pay anything like that."
Further, Mr Mehdi has chosen not to respond to the Plaintiffs' proposed orders in relation to costs.
There is a risk that, if costs were ordered in an amount to be agreed or assessed, Mr Mehdi would not engage with the Plaintiffs so as to agree an amount for those costs, with the result that an assessment process was required. Given Mr Mehdi's statements regarding his financial position, the additional costs of that assessment process would unnecessarily add to the costs of the proceedings, in circumstances where there is significant doubt about Mr Mehdi's capacity to meet such an order, and might therefore disadvantage the parties which have been successful in the proceedings.
It is then necessary to consider the quantum of the gross sum cost order.
In cases where a gross sum costs order is appropriate, the Court applies a much broader brush than would be applied on assessment: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [22] per Giles JA. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Bechara t/s Bechara and Co v Bates [2016] NSWCA 294 at [14] (Beazley P, Meagher and Payne JJA). The power to award a gross sum cost order 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: Harrison v Schipp at [22].
In Perera v Genworth Financial Mortgage Insurance Pty Ltd (No.2) [2018] NSWSC 1577 at [33]-[34], Garling J summarised the applicable principles as follows: "If it decides to make a gross sum costs order, the Court is not required to undertake a detailed examination of the kind that would be appropriate to a taxation or a formal costs assessment: Harrison at [39]; Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Auspine Ltd v Australian Newsprint Mills Ltd [1999] FCA 673; (1999) 93 FCR 1 at [16], [49], [79] and [84]; Hamod at [819]. Rather, the approach to a gross costs order must be, although an estimate, a process which is logical, fair and reasonable, and 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: Hamod at [820]. In exercising the power to award a gross sum for costs, the Court needs to be astute to prevent prejudice to the respondent on the one hand, by over-estimating the costs, and on the other hand, not to cause an injustice to the successful party by applying some form of failsafe discount on the costs estimate submitted: Leary v Leary [1987] 1 All ER 261 at 265; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]; Savage v Australian Unity Fund Management Ltd [2011] NSWCA 270 at [31]-[33]; Hamod at [794]."
The Plaintiffs' solicitor has given evidence of the total legal costs that the Plaintiffs have incurred during the proceedings against Mr Mehdi. In calculating the quantum of those costs, he has excluded the costs of separate proceedings which were brought by the Plaintiffs against NAB to obtain discovery of documents so as to be able to identify Mr Mehdi as a proper defendant, and has also excluded the costs which were incurred by the Plaintiffs in prosecuting their claims in these proceedings against NAB (this claim having been dismissed with no order as to costs).
Having excluded such costs, the Plaintiffs' solicitor calculates: 1. the solicitors' costs incurred by the Plaintiffs in these proceedings to be in the amount of $64,327.45 (including GST); 2. counsel's fees to be in the amount of $29,865.00 (including GST); and 3. total disbursements to be in the amount of $10.239.37 (including GST).
These figures are supported by a detailed narrative setting out, for each individual line item giving rise to those total costs, the person performing the work, the hourly rate applied, the task performed and the time spent on that task. I have reviewed those entries and I am satisfied that the work undertaken was related, for the most part, to the prosecution of the Plaintiffs' claims against Mr Mehdi. However, I consider that one element of the claimed costs should be excluded, namely, the costs of the hearing of the summary judgment application against the First Defendant. Mr Mehdi did not participate in that hearing, and the costs of that hearing were awarded against the First Defendant.
Excluding the costs of that hearing on 4 February 2024, and in particular excluding the work performed by the Plaintiffs' solicitor on 1 and 4 February 2024, and the work performed by the Plaintiffs' counsel on 30 January 2024 and 2 February 2024, results in the following amounts in respect of solicitor costs and counsel fees (with disbursements remaining unchanged): 1. solicitors' costs to be in the amount of $63,037.15 (including GST); and 2. counsel's fees to be in the amount of $27,843.75 (including GST).
The Plaintiffs' solicitor has given evidence, based on his experience of costs assessments, that a successful party will be likely to recover, at the conclusion of a party/party assessment of costs on the ordinary basis, between 60% and 80% of the solicitor's costs actually incurred by the party, and approximately 90% of disbursements actually incurred.
In the light of that evidence, and the adjusted cost amounts which I have set out above, the Plaintiffs would expect to recover between around $72,097 to $84,704.
Adopting a broad brush approach, and having regard both to the contingencies that would be relevant in any formal costs assessment and the need to prevent prejudice to Mr Mehdi by over-estimating the costs (while not causing injustice to the Plaintiffs by applying some fail-safe discount on the costs estimate submitted), I have determined that a gross sum cost order should be made in the amount of $70,000.

Orders

For those reasons, I make the following orders. 1. Judgment for the First Plaintiff against the Second Defendant in the sum of $500,000. 2. Judgment for the Second Plaintiff against the Second Defendant in the sum of $100.000. 3. Judgment for the Third Plaintiff against the Second Defendant in the sum of $100,000. 4. Judgment for the Fourth Plaintiff against the Second Defendant in the sum of $175,000. 5. The Second Defendant is to pay the Plaintiffs' costs of the proceedings in the gross sum of $70,000. 6. Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the Second Defendant pay interest to the First Plaintiff on the amount of $500,000.00 as of 11 September 2024 in the sum of $80,119.62. 7. Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the Second Defendant pay interest to the Second Plaintiff on the amount of $100,000.00 as of 11 September 2024 in the sum of $16,057.62. 8. Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the Second Defendant pay interest to the Third Plaintiff on the amount of $100,000.00 as of 11 September 2024 in the sum of $16,046.39. 9. Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the Second Defendant pay interest to the Fourth Plaintiff on the amount of $175,000.00 as of 11 September 2024 in the sum of $28,258.10.

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: 20 September 2024

At a glance

Court

Decision date

Before

Source

Judgment (5 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (12)