O’Farrell v McCarthy (No 4)

Catchwords: JUDGMENTS AND ORDERS — calculation of pre-judgment interest and post-judgment interest
COSTS — application for gross sum costs order pursuant to s 98(4) Civil Procedure Act 2005 (NSW) — court’s discretion as to quantum of gross sum costs order
CIVIL PROCEDURE — interim preservation — freezing orders — variation of — varied to be discharged on payment of amounts owing

Legislation Cited: Civil Procedure Act 2005 (NSW), ss 98(4), 100, 101
Evidence Act 1995 (NSW), s131
Uniform Civil Procedure Rules 2005 (NSW), r 36.7

Cases Cited: O’Farrell v McCarthy (No 3) [2025] NSWSC 249
Hamod v State of New South Wales [2011] NSWCA 375

Category: Costs

Parties: Brian Richard O’Farrell (First Plaintiff)
Talentpool Recruitment Pty Ltd (Second Plaintiff)
Talentpool Consulting Pty Ltd (Third Plaintiff)
Trevor Gerrard McCarthy (First Defendant)
Talentpool Recruitment Pty Ltd (Second Defendant)
Talentpool Consulting Pty Ltd (Third Defendant)

Representation: Counsel:
S Steinhoff (Plaintiffs)
Solicitors:
Lander & Rogers (Plaintiffs)

File Number(s): 2023/93781

Publication restriction: No

JUDGMENT

1. On 26 March 2025, I handed down my decision in the principal dispute in this matter (O’Farrell v McCarthy (No 3) [2025] NSWSC 249). I made a number of orders which can be found in para 150 of the decision.

2. For present purposes the relevant orders were Orders 5, 10 and 11:

“5. An order pursuant to s 1317H of the Corporations Act 2001 (Cth) that the first defendant compensate the second plaintiff for damage resulting from his breaches of ss 180 and 181 of the Corporations Act 2001 (Cth) by payment to the second plaintiff of the amounts of the consultancy payments and the travel payments, namely the sums of $501,355.01 and $88,281.85 respectively.

10. The first defendant is to pay the first, second and third plaintiffs’ costs of the proceedings.

11. The parties have liberty to make submissions on interest and on any alternative costs order.”

3. The first plaintiff (whom I will refer to as Mr O’Farrell), listed the matter before me on 30 May 2025. He was unrepresented but provided me with Short Minutes of Order and some supporting material. The first defendant, Mr McCarthy, had been notified of the listing and appeared by telephone from Morocco where he said he was currently in the recovery phase of medical treatment. His permanent address seems to be in Egypt or Dubai although he appeared today from Portugal.

4. I told Mr O’Farrell that some of the orders he sought were more in the nature of enforcement than suitable for re-listing. I suggested he seek legal advice, noting that he had been represented during the primary hearing. I stood the matter over to 13 June 2025.

5. Mr O’Farrell took up my suggestion to obtain legal advice; and has clearly derived the benefit of doing so. This was reflected in the Short Minutes of Order sought by him which fell within the liberty that I granted in Order 11.

6. On 13 June 2025 I gave orders setting out a timetable for any further evidence and for submissions. I allocated a hearing date of 1 August 2025.

7. The evidence, when the matter came on for hearing today included the following:

8. Affidavits of Mr O’Farrell dated 28 May 2025, and 18 July 2025 respectively. Both affidavits annex a large exhibit.

9. Emails from Mr McCarthy sent on 13 June 2025, 4 July 2025 and 1 August 2025 respectively. The emails may be described as a combination of evidence and submissions.

10. I also have written submissions on behalf of the plaintiffs both in support of the orders, and in reply to Mr McCarthy’s submissions.

11. Mr McCarthy was unrepresented on 30 May 2025 and remains so. He was represented during the principal proceedings.

12. Mr McCarthy objected to a number of paragraphs in Mr O’Farrell’s May affidavit. The objections rely on s 131 of the Evidence Act 1995 (NSW). This section is concerned with the exclusion of evidence of settlement negotiations. The difficulty with the objections is that the various items of correspondence all bear a notation: “Without Prejudice, Save as to Costs.” The argument here is about interest and costs. As will be seen below, Mr McCarthy does not oppose an order for interest, although he does challenge the calculations. The relevance of the paragraphs and correspondence that are the subject of objection can only go to costs. Accordingly, I do not uphold the objections raised by Mr McCarthy.

13. The current claim, in summary, is for interest and the granting of a fixed, or gross, sum costs order in favour of the plaintiffs. The sum requested for the substantive proceedings is $175,000. An additional sum of $15,000 is sought for the current application.

14. The interest claimed is for the benefit of the second plaintiff (Talentpool Recruitment Pty Ltd, “Talentpool”). I think this claim is able to be pursued by Mr O’Farrell pursuant to Order 4, that I made on 26 March 2025:

“4. An order that the first plaintiff has leave to bring derivative actions against the first defendant on behalf of the second and third plaintiffs.”

13. The defendant has not lodged an appeal from my primary decision, nor has he paid the second plaintiff the amounts set out in Order 5 ($501,355.01 and $88,281.85). In his email of 4 July 2025, Mr McCarthy refers to a payment to Talentpool Recruitment Pty Ltd of $5,000. There is no date or reason attached to the payment, and it is impossible to know if it is related to the verdict sums. Bearing in mind its small size and unexplained background I will ignore it as relevant to the current exercise

14. In his most recent submission (1 August 2025) Mr McCarthy begins by saying:

“I refer to the hearing today. I have made attempts to seek representation but due to the current freezing order, I was unable to.”

15. One of the purposes of a freezing order is to secure funds to pay a verdict. Mr McCarthy has made no attempt to pay the verdict. In respect of legal costs, on 27 February 2025, I amended the freezing order to allow for legal costs. Mr McCarthy has not made another application to that effect.

16. I do however think the freezing order needs to be amended again so that it will cease to have effect upon payment of the verdict sums together with the interest and costs ordered today.

Interest

17. Mr McCarthy stated:

“I do not oppose an order for interest to be applied as per the above.”

18. The “above” refers to some figures put forward by Mr McCarthy.

19. Mr O’Farrell’s figures are said to have been calculated according to Practice Note SC Gen 16 (for pre-judgment interest), and r 36.7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) (for post judgment interest).

20. Mr McCarthy does not say why his figures are correct or why Mr O’Farrell’s figures are not correct. McCarthy also complained that the matter had dragged on for far too long. He is correct, but the claim for interest would have been substantially affected if he had paid the verdict sums as he was ordered to do.

21. The interest that is claimed is on the two figures in Order 5 of my orders made on 26 March 2027. Because of Mr McCarthy’s challenge to the interest figures I have calculated the interest using the NetLaw online tool, namely the NSW Supreme Court Pre-Judgment Interest Calculator found at:

https://www.netlaw.com.au/calculator/nsw/supreme-court-pre-judgment-rate.

22. McCarthy, in his written and oral submissions, continued to agitate the travel expenses findings. He is convinced that the findings are wrong but, in fairness to him, he did say that he respected the Court’s findings.

23. Starting with the consultancy payments ($501,355.01), I have arrived at an almost identical figure for post-judgment interest and a similar but not identical figure for pre-judgment interest. The various calculations are set out in the attached annexure. Annexure (13.5 KB, xlsx) It can be seen that my calculation for pre-judgment interest is $269.74 less than Mr O’Farrell’s calculation.

24. The figures where Mr O’Farrell’s calculations are different are highlighted.

25. My calculation of the Order 5 amounts relating to consultancy payments is $99,502.23 + $17,977.35 = $117,479.58, which is the figure I would otherwise have allowed.

26. However, the calculations in the reply submissions on costs, and interest seem to have defied simple addition. In [17(a)] of the submissions the total amount claimed is $116,839.23, said to be a product of adding $99,771.97 to $17,977.36. My calculation of this addition is $117,749.33.

27. Turning to the travel expenses ($88,281.85), Mr O’Farrell’s figures and mine again do not completely correlate. Looking at the schedule it is apparent that the anomaly is created by the plaintiff using the wrong date; namely 3/11/2022 instead of 11/3/2022 as the start date for one of the interest calculations.

28. Ultimately, again referring to the schedule, the total interest I have calculated exceeds that calculated by Mr O’Farrell by $687.89 ($138,670.05 – 137,982.16). The errors made by or on behalf of Mr O’Farrell are simple and capable of immediate remedy. However, I am mindful that Mr McCarthy is self-represented and dealing with these matters from afar. Accordingly, I intend to order the interest as claimed by Mr O’Farrell, namely $137,982.16.

Gross sum costs order

29. Mr O’Farrell’s claim is for $175,000. In written submissions, Mr O’Farrell’s counsel has referred me to Hamod v State of New South Wales [2011] NSWCA 375. This is stated at [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].”

30. Section 98(4) of the Civil Procedure Act 2005 (NSW) states:

(4) In particular, 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—

(a) costs up to, or from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(c) a specified gross sum instead of assessed costs, or

(d) such proportion of the assessed costs as does not exceed a specified amount.

31. The Court of Appeal in Hamod also stated, at [814], that “The courts have typically applied a discount in assessing costs on a gross sum basis.”

32. The discount suggested by Mr O’Farrell is a reduction from $226,677.10 down to $175,000, about 23%.

33. Mr McCarthy opposes a gross sum costs order, and he challenges the quantum sought by Mr O’Farrell. He makes five points:

34. Mr O’Farrell did not entirely succeed in his litigation. He claimed $2,050,908.40 but only received $589,636.86. Therefore, Mr O’Farrell received less than 30% of what he claimed;

35. if Mr O’Farrell had only claimed $589,636.86 the evidence would have been confined accordingly, the preparation would have taken less time, and the matter would have only required a one-day hearing;

36. the asserted costs of $227,891.30 have not been substantiated;

37. the only costs of which there is evidence amount to $126,669. Any gross sum costs order should not exceed $66,000; and

38. there is no evidence to support the $15,000 claimed for relisting the matter.

39. Although not one of the considerations referred to in Hamod, at [816], I think it is relevant that Mr O’Farrell did not achieve the success he was aiming for and particularly noting that the claims where he failed were substantially claims for payments of sums to him personally.

40. Mr O’Farrell responded that costs normally follow the event and the plaintiffs had succeeded. Further there were multiple issues in the case which would be difficult to differentiate. It was submitted that the damages claim had significant overlap with the derivative action.

41. The submissions in reply, at [35], also state:

“Further, where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation.”

37. Because of Mr McCarthy’s strident opposition to any orders against him, and remembering he then had legal representation, it is impossible to estimate the extent to which the costs and hearing time would have been different if Mr O’Farrell had only pursued those parts of the claim on which he succeeded. I do nevertheless think that Mr McCarthy’s point is one which should affect the discounting of the claimed costs. This will enable me to increase the discount of the claimed costs as a matter of the discretion referred to in the previous paragraph.

38. The complexity of the proceedings is also relevant to whether a gross sum costs order should be made at all. The litigation was complex and included the same companies (Talentpool Recruitment Pty Ltd and Talentpool Consulting Pty Ltd) appearing on both sides, subject to which of Mr O’Farrell or Mr McCarthy was granted leave to represent each company (the derivative actions).

39. In relation to the substantiation of the costs, Mr McCarthy was correct to the extent that Mr O’Farrell relied on his affidavit of 28 May 2025. However, with the addition of the second affidavit and its exhibit, the picture is more complete, and I am satisfied that the overall figure of $226,677.10 has been established as owing for legal expenses. I reject Mr McCarthy’s suggestion that “figures had been pulled out of nowhere.”

40. Taking all of the above matters into account, I think there should be a gross sum costs order but at an amount well below that sought by Mr O’Farrell. Instead of the discount of about 23% I think it should be closer to 50%. I will make a gross sum costs order in the amount of $110,000.

41. Mr O’Farrell has also asked for $15,000 for his costs in relisting and pursuing the orders for interest and costs. The invoices suggest a figure of $23,212.08. Again, I think the discounting should be a little more than suggested and should be roughly the same as the discount I applied to the costs overall. I will allow $11,500. In this regard I note that Mr O’Farrell needed to put on a second affidavit to substantiate all of the legal costs. They could have been included in the first affidavit.

Orders

42. I make the following orders:

43. The first defendant, Mr McCarthy, is to pay pre-judgment interest pursuant to s 100(1) of the Civil Procedure Act 2005 (NSW) on the sums stated in Order 5 made on 26 March 2025 in the sum of $116,839.23.

44. The first defendant, Mr McCarthy, is to pay post-judgment interest pursuant to s 101(1) of the Civil Procedure Act 2005 (NSW) in the sum of $21,142.93 and continuing to accrue.

45. The first defendant, Mr McCarthy, is to pay the plaintiffs’ costs in accordance with Order 10 made on 26 March 2025 on a gross sum basis in the amount of $110,000, pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW).

46. The first defendant, Mr McCarthy, is to pay the plaintiffs’ costs of preparing for and appearing at the relisting of the proceedings in respect of costs and interest on a gross sum basis in the amount of $11,500, pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW).

47. Order 12(a) of the freezing order made by Kunc J on 28 March 2023 is varied so as to add a further subparagraph:

(iv) pay all amounts owing to the plaintiffs including the verdict sums in Order 5 made on 26 March 2025 and the interest and costs as ordered on 1 August 2025.

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