Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie

Supreme Court of NSW|2017-12-19|Before: Slattery J, Young J, Pembroke J

Plaintiffs: John Bui, Bui Lawyers First Defendant: Richard Killalea, Kazi & Associates Second Defendant: Howard Norman Simons, Remington & Co solicitors

Plaintiffs B. Zipser First Defendant: Dr G. O'Shea; Ms B. Oliak Second Defendant: Mr Duc

Plaintiffs: John Bui, Bui Lawyers First Defendant: in person Second Defendant: Justin Bates, Dentons Australia Pty Ltd Third Defendant: Hsin-Hung Wang, Mark Wang Fourth Defendant: n/a File Number(s): (2015/325044); (2015/56505) Publication restriction: No

EX TEMPORE Judgment

This is my second judgment in these proceedings. But it is not the Court's second judgment. Previous judgments have been given between these parties by Young J and Pembroke J (Pham v Sebie [2015] NSWSC 745 (Young AJA); Pham v Enterprise ICT Pty Ltd [2017] NSWSC 446; Pham v Enterprise ICT Pty Ltd (No 2) [2017] NSWSC 583 (Pembroke J)). My first judgment was given on 8 November 2017, after argument on 8 September 2017: Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie [2017] NSWSC 1509. As a result of my first judgment, the Court made the following orders for costs and other consequential orders in favour of the plaintiffs and against both the first and third defendants, Enterprise ICT Pty Limited and Mr Robert Sebie: 1. Order the first and third defendants, Enterprise ICT Pty Limited and Mr Robert Sebie, pay the plaintiffs' costs of the plaintiffs' contempt motion filed on 15 June 2017 on the indemnity basis. 2. Order that there may be deducted from the consideration payable by the plaintiffs at the settlement of the sale by the third defendant to the plaintiffs of the Chiswick Property the subject of these proceedings, the quantum of the costs ordered in Order (1), as agreed or assessed, or as determined by the Court. 3. Grant liberty to the parties to approach the Court to seek a specific gross sum costs order in respect of costs orders made in these proceedings.
The plaintiffs have now taken up the liberty afforded by order 3 of those orders. They now seek a specific gross sum costs order under Civil Procedure Act ("CPA"), s 98(4)(c) in respect of all the indemnity costs orders made in the proceedings: those made by Pembroke J and those made in my first judgment.
The Court has decided it will make a gross sum costs order in the amount which the plaintiff has sought. This judgment assumes a reading of my first judgment. Events, matters and persons are referred to in both judgments in the same way.
The plaintiffs' application for a specific gross sum costs order was argued on 29 January 2018. Supplementary argument took place on 30 January 2018, following which the Court made orders. These reasons for those orders were published the following day.
Mr B. Zipser of counsel continued to represent the plaintiffs on this application. Enterprise ICT Pty Limited, the third defendant, was represented on 29 January 2018 on the motion by Mr Killalea. Mr Robert Sebie, the first defendant, was not present. His absence raised the first issue for the Court's consideration.

Proceeding Against Mr Robert Sebie?

When the matter was called at midday on 29 January 2018, Mr Robert Sebie was not present. The Court directed that he be called outside the courtroom. He did not appear. The plaintiffs now seek to proceed. In the circumstances, the plaintiffs should be allowed to do so. To understand why that is so requires examination of the directions hearing the Court held in this matter on 8 December 2017 and the prior listing of this matter on 19 December 2017.
The proceedings were listed for directions on 8 December 2017. The Court resolved a number of issues on that day; including the delivery of the certificate of title of the Chiswick Property to the plaintiffs' solicitor Mr John Bui. Mr Bui was directed to hold the certificate of title on trust for Mr Robert Sebie until the completion of the sale of the Chiswick Property.
The Court also gave directions on 8 December 2017 to regulate the plaintiffs' application for a specified gross sum costs order, arising out of the leave granted on 8 November 2017. On 8 December 2017, the Court made the following directions: "1. Pursuant to rules 23.8 and 25.3 of the Uniform Civil Procedure Rules ("UCPR"), the following persons may, subject to these orders, enter the property at 11 Tutt Crescent Chiswick ("the Property") between 12 noon and 2pm on Tuesday, 12 September 2017: (a) a valuer engaged by Westpac Banking Corporation (b) a person assisting the valuer in (a) who will have a video camera (and who may take such video photography as is reasonably required of the Property) (c) a valuer engaged by or for the second defendant (d) Mr H Simons, the solicitor for the second defendant and Mr R. Killalea, the solicitor for the first defendant ("the solicitors"). 2. The first defendant and third defendant shall provide continuous access to the Property in accordance with paragraph 1. 3. None of the parties to these proceedings (the plaintiffs, the second defendant, the third defendant, and any officer of the first defendant) shall be at the Property at the time of the inspection in paragraph 1. 4. In relation to the solicitors referred to in paragraph 1 the plaintiff and the second defendant will pay equally the solicitors' reasonable costs, without prejudice to their ability to apply to recover those costs from the first defendant or third defendant in these proceedings. 5. The first defendant and third defendant shall ensure that the persons in paragraph 1 have access to all rooms and parts of the Property other than the room identified in paragraph 6 below. 6. The persons in paragraph 1 shall not enter the bedroom in the south-eastern corner of the ground floor of the Property on the basis that Mrs Rose Sebie may be occupying this room at the time of the inspection. …"
The plaintiffs complied with order 4 and provided copies of those orders to all the defendants. Order 5 of those orders made clear that the hearing of the application for a specific gross sum costs order was fixed for Tuesday, 19 December 2017. This was during the Court's vacation. The Court does not normally sit in vacation. The Court did this especially before the annual Christmas break so that these parties would have the certainty that part of this matter would be able to be resolved before 2018.
Shortly before 19 December, the Court received correspondence, purportedly sent on behalf of Mr Robert Sebie, saying that he was unwell and that he was seeking to adjourn the proceedings on medical grounds. Mr Sebie neither appeared nor engaged counsel. The correspondence for him came to my Associate from a third party. The situation was unsatisfactory. This came in the background of Pembroke J's findings of dishonest conduct against Mr Sebie in the principal proceedings.
Against the possibility that Mr Sebie may indeed be suffering from some illness which prevented him from being in a position to engage counsel and attend court, the Court decided to grant an adjournment of the application to 29 January 2018. On 19 December 2017 the Court expressed its strong dissatisfaction with the state of affairs with which it had been presented. To ensure that the hearing proceeded on 29 January 2018 without any further delay, except for good cause, the Court vacated the hearing and made the following orders on 19 December 2017: "1. Direct that the plaintiff serves by 22 December 2017 on Mr Robert Sebie at his email address for service in these proceedings all the affidavits upon which the plaintiff proposes to rely at the adjourned hearing of the plaintiff's application for a lump sum costs order. 2. Further direct the plaintiff serve by 22 December 2017 on Robert Sebie all of the plaintiff's written submissions and calculations of the gross sum costs order which the plaintiff claims, namely the amount of $256,180. 3. Direct the second defendant to serve by 22 December 2017 a copy of all her written submissions on Mr Robert Sebie at his email address for service. 4. Direct the plaintiff notify Mr Sebie a copy of the orders made today in these proceedings. 5. Note that Mr Robert Sebie has sought to adjourn today's proceedings on medical grounds. Further note that the matter is being adjourned to 29 January 2018 because of the ambiguous information available to the Court about Mr Robert Sebie's medical condition. But the Court further notes that no further adjournment will be granted on 29 January 2018 in the absence of affidavit evidence from medical practitioners about Mr Robert Sebie's medical condition on 29 January 2018. 6. Adjourn the hearing of the plaintiff's application for a lump sum costs order to 12 noon on 29 January 2018. 7. Direct that the plaintiff serve by 22 December 2017 upon all parties to these proceedings any supplementary written submissions concerning what the plaintiff contends is the proper construction of Order 12(b) of the Orders made by Pembroke J on 15 May 2017. 8. Direct the second defendant, Ms Musabwasoni, to serve on all parties any submissions in reply by 22 December 2017 to the submissions filed by the plaintiff pursuant to Order 7, together with any submissions showing the legal basis upon which the second defendant contends that she now has any entitlement to argue that her claims in the Family Court of Australia have any priority over the payment of legal costs to the Phams in relation to the distribution of funds paid into Court following settlement of the property. 9. List at 12 noon on 29 January 2018 the question of the determination of any outstanding issues as to the reserved costs between the plaintiff and ENA Development Pty Ltd ("the reserved costs issue") for a short hearing of no more than half an hour. 10. The Court directs the plaintiff and ENA Development Pty Ltd to exchange any written submissions concerning the reserved costs issue by Friday 26 January 2018 at 4pm, by forwarding them to my Associate. 11. Direct the plaintiff to forward the Court's orders of today to ENA Development Pty Limited at their email address for service it he proceedings."
I am satisfied that the plaintiffs have substantially complied with all the directions that were made for them to provide documents and submissions to other parties before 29 January 2018. The plaintiffs' preparation of submissions, initiation of correspondence and communication with other parties has been timely, diligent, reasonable and of a high professional order in this case.
Shortly prior to 29 January 2018, the Court was presented with what has become a familiar problem in this case. Correspondence came from a third party to my Associate indicating that Mr Robert Sebie would again be unavailable for the hearing. None of this correspondence was accompanied by the medical evidence which the Court had indicated on 19 December 2017 (Order 5) would be necessary to explain Mr Sebie's absence and to found an application for an adjournment. Even if the Court had not pointed out on 19 December 2017 that this would be the evidentiary requirement to justify an adjournment, all the Court was really doing was stating the obvious: that a party notified of a hearing date well in advance needs to provide adequate grounds to justify an adjournment.
The facts speak for themselves. This matter was listed at 12 noon on 29 January. Forty-two minutes before the matter was listed for hearing, at 11.18am, my Associate received an email (Exhibit SB) from a person by the name of Ms Helen Tae, who purported to be making representations on behalf of Mr Robert Sebie. It was copied to the legal representatives of the plaintiffs. It foreshadowed that Mr Sebie was doing something to prepare a draft affidavit disputing the plaintiffs' costs. Such a draft affidavit was attached. No written submissions were supplied. No other clear indication was received from Mr Sebie of the nature of his opposition to the application, which had by then been on foot for approximately two months, with the bulk of the plaintiffs' affidavit evidence served long ago.
Ms Tae's email (Exhibit SB) stated as follows: "On the 25 January 2018, I provided an affidavit of Robert Sebie's medical record, this including part of the Concord Hospital admission records and medical report. I am still obtaining other mental health records. I have re-attached this affidavit to this email. Over this long weekend Robert Sebie had another collapse and breakdown, which left him to be in a non fictional state and is requested to attend back to hospital. I am apologise he is in no condition to attend court today. I will also provided updated medical records for this period as well. Last week Robert Sebie was assisted with preparing a draft affidavit disputing the plaintiff's costs and requested these costs to be assessed. This affidavit has not been finalised and required the input from a legal professional to be completed. I have attached this affidavit to be for your reference."
An affidavit was forwarded concerning Mr Sebie's medical condition. That, at least, is what Exhibit SB claims of the affidavit. Mr Sebie, if indeed he is the author of the affidavit purported to be signed by him on 23 January 2018 (Exhibit SA), says in it, "I provide this affidavit to update the Court on my medical condition". The affidavit does no such thing. The medical certificate, which is referred to as Exhibit A to the affidavit, was a document dated 16 December 2017 that had already been provided to the Court on 19 December. All Exhibit A says under the purported signature of a Dr John Gambrill is the following: "Dear sir or madam, re Mr Robert Sebie This is to confirm that Mr Robert Sebie suffers from longstanding stress/anxiety/sleep problems - as a result he has ongoing problems with concentration/task completion et cetera."
The rest of the affidavit (Exhibit SA) states as follows: "2. I have my regularly appointments with my Psychiatrist, Dr Younan which included my January appointment on the 9 January 2018. 3. 1 have being getting support from Mental Health Team at Croydon Health Centre and the GP Dr Gambrill. 4. I have attended Concord Hospital in December 2017 which have provided assistance and relief to me. This attendance includes on 17 and 18 December 2017. I have attached some medical report labelled as Annexure "A"."
The affidavit, taken as a whole, does nothing to inform the Court about Mr Sebie's capacity to attend Court on 29 January 2018 or indeed the the nature of Mr Sebie's medical issues, whatever they may be. The Court cannot act on material such as this to grant adjournments.
These proceedings were heard on the afternoon of 29 January 2018. They were then adjourned for the completion of the giving of judgment to 30 January 2018 at 9.30am. But six minutes before the appointed adjourned time of 9.30am on 30 January, the Court received an email from Mr Sebie (Exhibit SG) asking that the giving of judgment be stood over until this Thursday, 1 February 2018. In that email Mr Sebie claims that he continues to be in severe pain and asks for an opportunity to further plead his case before the Court gives judgment. The medical certificate attached apparently under the hand of a Dr Ali Kutlu, a general practitioner of Drummoyne, is in respect of Mr Robert Sebie and says, "In my opinion the patient is suffering from a medical illness and is therefore unfit from 29/01/2018 to 29/01/2018". This medical certificate is no more informative than any of the previous so-called evidence and does not justify any further adjournment of the proceedings.
Mr Killalea, who appears for Enterprise, said that he thought that Mr Sebie is unwell at the present time. But, in light of the Court's clear directions on 19 December about what kind of evidence was required, mere statements from the bar table are quite insufficient to found an adjournment. Moreover, given Pembroke J's findings about Mr Sebie's past engagement in fraudulent conduct, I am not prepared to grant any further adjournments to give him the benefit of the doubt, especially given the clear warning on the last occasion about what would happen if insufficient medical evidence was provided. The Court will proceed.
Before it does, another issue arose with respect to ENA Developments Pty Limited ("ENA"). ENA has indicated that it may have a claim for costs in the proceeding.

The Position of ENA

Just before the hearing on 19 December 2017, ENA foreshadowed that it wished to argue that it had an entitlement to its costs of the proceedings, costs that had previously been reserved. ENA complained before 19 December 2017 that it had insufficient time to engage counsel and to prepare to argue for its reserved costs.
ENA's application was another reason the matter was adjourned from 19 December 2017 to 29 January 2018: to allow the determination of any outstanding issues of reserved costs between the plaintiffs and ENA to be determined. This is provided for in Order 9 of the orders made on 19 December 2017.
Although the vacation intervened, the five weeks that followed was ample time for ENA to prepare itself to deal with this issue. So it came as something of a surprise then at the last minute ENA decided to correspond with the plaintiffs and the Court about its inability to attend on 29 January 2018 to advance its case for an award of costs.
The correspondence from ENA presents a wholly unsatisfactory picture. In an email from Mr Ronald Jemmott, who purports to act for ENA, sent to the Court on 29 January 2018 at 9.07am (Exhibit SF) he indicates that he has just heard back from his proposed counsel (Mr Adrian Williams) who is said to have informed Mr Jemmott that he would be available to appear on 14 and 15 February 2018 to represent ENA. Mr Jemmott requests an adjournment to 14 or 15 February 2018 and suggests that Mr Zipser contact Mr Williams. Mr Jemmott declares that he is not in a position to attend Court on 29 January 2018. Mr Jemmott provides an affidavit on which he says he proposes to rely. The affidavit is by a Mr Ramzy Sebie, who claims to be a "de facto director" of ENA. In an email to my Associate (Exhibit SE), notwithstanding that 29 January 2018 was fixed as the date for hearing and ENA was informed of it, Mr Jemmott asks "can you please provide a date when this can be heard".
This is insouciance of a high order. ENA's casual disregard for appointed and notified hearing dates shows a marked lack of respect for the Court's procedures. But that being said, the issue of whether ENA should receive any costs on the issues upon which they were reserved is not on the critical path of steps that must be taken before the conveyancing transaction for the Chiswick Property is settled between the plaintiffs and Enterprise. ENA's application can therefore still be accommodated.
But given ENA's casual approach so far, rigour needs to be brought into ENA's dealings with the Court. The Court will not hear its application unless it applies formally for appropriate orders by motion filed in accordance with the Uniform Civil Procedure Rules 2005 ("UCPR") and made returnable on the next occasion. And whoever acts for ENA must be demonstrably authorised to do so in accordance with the applicable provisions of the UCPR.

The Court's Jurisdiction under CPA, s 98(4)(c)

The plaintiffs seek a specified gross sum costs order under the jurisdiction conferred by CPA s 98(4)(c). The applicable law in relation to CPA s 98(4)(c) may be shortly stated.
The Court's power to make a specified gross sum costs order instead of assessed costs was in the rules of this Court by 1970. These rules were initially enacted as the Fourth Schedule to the Supreme Court Act No. 52, 1970. And Part 52, Rule 6(2)(c) of the Fourth Schedule had in turn been based on a rule to similar effect in the English Rules of the Supreme Court (Revised in 1965) Order 62 Rule 9 (4)(b) entitled "Fractional or gross sum in place of taxed costs". One early example of the application of the English predecessor rule is Silva v Czarnikow Limited [1960] 1 Lloyd's Rep 319 in which, after an action lasting eight days, the managing clerk for the defendant's solicitor estimated the total legal costs at over GBP 2,000 and based upon that evidence the judge fixed under O 62 r 9(4)(b) a gross sum in lieu of assessed costs at GBP 1,250.
Reported Australian case law on the topic of specified gross sum costs orders is scant until the early to mid-1990s, when in cases such as Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 ("Beach Petroleum"), judges began to commonly apply analogous provisions. Part 52A (Costs) was inserted into the Supreme Court Rules 1970 in 1994, which provided in rule 6(2) that the Court could make a gross sum costs order. This Part was repealed in 2005, upon the passing of the Civil Procedure Act.
But Courts have long exercised the power to fix a specified gross sum instead of assessed costs as part of the Court's broad costs discretion, without the need for specific authorising rules. One early example of the High Court exercising such jurisdiction is Edgar & Walker v Mead (1916) 23 CLR 29 in which Isaacs J (at 46) explained his application of the practice adopted and described by Jessel MR in Willmott v Barber (1881) 17 Ch D 772, as follows: "But taking everything into consideration, including the several findings in favour of the respective parties, and realizing the desirability of putting an end to unnecessary further expense, I act on the principle laid down or recognized by the Court of Appeal in Willmott v. Barber. It was there stated that the discretion of the Judge as to costs is very large and extends even to the course which Jessel M.R. said he sometimes adopted, and generally found the parties were grateful to him for so doing. He thus described the course: "fix a definite sum for one party to pay to the other, so as to avoid the expense of taxation, taking care in doing so to fix a smaller sum than the party would have to pay if the costs were taxed."
In New South Wales this Court's specified gross sum costs jurisdiction is now embodied in Civil Procedure Act, s 98(4)(c) which relevantly provides as follows: "(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."
It is to be noted that the jurisdiction is only available before a matter is referred for the assessment of costs. Referral to costs assessment of the costs orders in question has not occurred in this case, so the specified gross sum costs jurisdiction is available.
The principles for the making of specified gross sum costs orders instead of assessed costs are now well settled. The circumstances in which the Court may make a CPA, s 98(4)(c) gross sum costs order are not confined and the power may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Hamod v State of New South Wales & Anor [2011] NSWCA 375 ("Hamod") at [813] and Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99 at [28] and [29].
The purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum. Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered, then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also probably being unrecoverable: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 ("Schipp") at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 ("Hadid") (Lehane J).
How does the lump sum assessment take place? The specified gross sum under s 98(4)(c) can be fixed broadly, having regard to all the information available to the Court: Schipp at [22] and Hadid at [27]. The approach taken to the estimation of costs must be "logical, fair and reasonable" and the powers should only be exercised when the Court considers it can do so "fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available": Schipp at [22] per Giles JA."
I further summarised the law regarding the powers available under Civil Procedure Act, s 98(4)(c) in Simone Starr-Diamond v Talus Diamond (No. 4) [2013] NSWSC 811.

Should a Specific Gross Sum Costs Order be Made in this Case?

This is an appropriate case for the making of a specific gross sum costs order. Many aspects of the background to these proceedings support the making of such an order. First, Mr Robert Sebie's capacity to take unmeritorious points and seek adjournments has been evident since this matter has been conducted before me. I infer from the Court's direct experience of Mr Robert Sebie's conduct of these proceedings that any costs assessment of existing costs orders that was to take place is likely to be unnecessarily and unreasonably protracted.
Secondly, after much delay in the conveyance of the Chiswick Property, the ascertainment of the costs as between the plaintiffs and the first and third defendants is an important step in being able to effect that conveyance in accordance with Pembroke J's orders and in a way that allows some measure of speedy justice to be done between Mr Robert Sebie and the second defendant, Ms Musabwasoni in the Family Court of Australia. The plaintiffs had originally proposed that they deduct the costs of the proceedings awarded in their favour from the consideration payable upon the conveyance. Were the Court to so order (as order 2 of the orders made on 8 November contemplates) the ascertainment of the quantum of those costs would be on the critical path towards resolution of the conveyance.
But the Court has decided to vary that machinery order and will not allow the costs to be so deducted. The Court proposes that the amount of the plaintiffs' costs be paid into Court. The balance of the purchase price, after the payment out of any mortgagee and the deduction of sale costs, can be separately paid in such a way as to preserve Ms Musabwasoni's claims over that fund in the Family Court of Australia. Ms Musabwasoni will also be able to make such claims as she is advised upon the funds to be paid into Court to assert priority to those funds she claims over the Phams. But the holding of that contest will not delay the settlement of the Chiswick Property.
In order for all of this to proceed in an orderly way, it is desirable that the quantum of the Phams' costs be identified now and separated out into different funds so that the subsequent contests can take place as soon as possible. Were the proceedings to await a costs assessment, which is unlikely to take place in the near term, these other contests are likely to be significantly delayed.
Thirdly, Pembroke J ordered the first and third defendants to pay the plaintiffs' costs of the proceedings on an indemnity basis, because this litigation was the result of Mr Robert Sebie's dishonesty in which Mr Richard Sebie participated. Pembroke J said "the complications and further litigation arising from that dishonesty should never have occurred" (Pham v Enterprise ICT Pty Ltd (No 2) [2017] NSWSC 583 at [9]). The Court may exercise the power to make a gross sum costs order where one party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs have been disproportionate to the result of the proceedings: Hamod at [818]. This is a case in which the first and second defendants' conduct has unnecessarily contributed to the plaintiffs incurring legal costs and is another basis for making a specified gross sum costs order.
The two sets of indemnity costs orders are the subject of the application for the specific gross sum costs order now in question. The first set are Pembroke J's orders made on 15 May 2017 (Pham v Enterprise ICT Pty Ltd (No 2) [2017] NSWSC 583), Orders 9 and 10 in which is Honour ordered that the first and third defendants pay the plaintiffs' costs of Supreme Court proceedings 2015/325044 and 2015/56505 on the ordinary basis up to 20 July 2015 and thereafter on the indemnity basis. The second set of orders are those I made on 8 November 2017 that the first and second defendants pay the plaintiffs' costs of the plaintiffs' contempt motion filed on 15 June 2017 on the indemnity basis: Pham v Enterprise ICT Pty Ltd and Others; Pham v Sebie [2017] NSWSC 1509 (82). After examining the materials tendered, the Court has sufficient confidence it can arrive at an appropriate sum to make a specific gross sum costs order: Schipp at [22] and Hammod at [793].
The Quantum of the Plaintiffs' Claim
The plaintiffs have filed a detailed costs affidavit of the first plaintiff Mr Andy Pham, which details the costs of the proceedings both descriptively and supported by invoices and memoranda of fees, together with applicable costs, disclosures and costs agreements between the legal practitioners concerned and the client.
The plaintiffs' principal costs evidence in Mr Pham's affidavit of 5 December 2017 covers the incurring of those costs between February 2015 and December 2017, in respect of the two proceedings the subject of Pembroke J's orders. The plaintiffs' costs were then updated to 29 January 2018 in a supplementary affidavit filed and read on 29 January 2018. The amount of costs that would have been claimed had the matter proceeded on 19 December 2017 was $256,180. But when the matter was presented on 29 January 2018 the calculation which had been advanced on 19 December 2017 was updated to reflect the increased costs incurred after that date and the monies claimed were a total of $263,660. Both these amounts represented discounts on the actual fees rendered to the client.
The Court is satisfied that all of the affidavits in support of the plaintiffs' application for a gross sum costs order and relevant calculations have been emailed to the first and third defendants in accordance with the Court's orders and that the first and third defendants have adequate notice of both the evidence for, and the calculation of, the amounts being sought by way of lump sum costs order. It is not necessary to reproduce all the respective invoices of counsel and the solicitors. But a brief overview will outline the profile of the case the plaintiffs make.
The costs memoranda of fees are divided up showing work done before and after 20 July 2015 before which date the plaintiffs are only entitled to costs on the ordinary basis. Mr Bui, the plaintiffs' solicitor, undertook much of the solicitors' legal work for the two proceedings, instructing Mr Ben Zipser, who appeared throughout as counsel for the plaintiffs. Mr Zipser relieved the burden of some of the legal work on Mr Bui by taking on a greater portion of the preparation than counsel would perhaps normally undertake. But this was done within Mr Zipser's proper area of operation of counsel and was, in my view, in no way inappropriate.
The only point made by Mr Killalea on behalf of the third defendant against the making of a s 98(4)(c) order and against the quantum of the plaintiffs' claim is that Mr Zipser did more of Mr Bui's legal work than would perhaps be done in the normal case. But in the absence of any analysis or proof that Mr Zipser thereby added to the total burden of the plaintiffs' legal costs, this argument does not persuade the Court that a lump sum costs order should not be made, nor does it throw doubt on the quantum claimed. Indeed, quite the contrary, because of their familiarity with litigation-related procedures counsel can often undertake litigation-related legal work very economically. And there is certainly no evidence that Mr Zipser's charge out rates were at all excessive in the circumstances. Rather, in my view, at up to $440 per hour inclusive of GST they are very reasonable and only slightly higher, up to $100 per hour, than Mr Bui's fees.
The plaintiffs retained a number of other counsel from time to time. Expert valuation reports were obtained in respect of the Chiswick Property. Disbursements were incurred for the ASIC searches, the service of subpoenas, the lodging of caveats, the retaining of a process server, the incurring of Court filing fees and the like.
Were a cost assessment of the two indemnity costs orders to take place, the plaintiffs would be entitled to all costs other those which were unreasonably incurred, or appear to be of an unreasonable amount: UCPR, r 42.5. The Court should now approach the fixing of a specific gross sum costs order in light of the standard that would have been applicable to a cost assessment had it taken place. Here Mr Sebie and Enterprise bear the onus of proving unreasonableness and any doubt about the reasonableness of the amount charged for a particular item should be resolved in favour of the beneficiary of the indemnity costs order: Hancock v Rinehart [2015] NSWSC 1640 ("Hancock") at [61].
Mr Sebie and Enterprise have had ample opportunity to identify any elements of unreasonableness in the work done or the amounts charged and have only done so by means of the draft affidavit of Mr Sebie of 23 January 2018. There is some material in this draft affidavit indicating the basis on which he would contest the making of a specified gross sum costs order. That material is analysed below. None of it is persuasive.
The plaintiffs claim for costs up to 29 January 2018 was for the total sum of $263,660 and was calculated (in Exhibit SD) taking up each of the memoranda of professional fees rendered and the principal disbursements as follows: 1. All costs and disbursements other than fees of solicitor (John Bui) and counsel (Ben Zipser): $682 + $4,235 + $2,200 + $1,637 + $100 + $435 + $60 + $764 + $11,217 + $2,000 = $23,330 2. Fees of solicitor (John Bui) and counsel (Ben Zipser) up to 20 July 2015: a) Bui-$6,928 b) Zipser - $3,163 + $8,157 + $8,569 + $1,300 = $21,189 c) Total of (a) and (b) is $28,117. 75% of total is $21,087. 3. Fees of solicitor (John Bui) and counsel (Ben Zipser) from 21 July 2015 to 18 December 2017: a) Bui-$35,806 b) Zipser - $5,666 + $7,590 + $11,323 + $16,495 + $17,182 + $74,657 + $63,731 + $16,683+ $8,800 = $222,127 c) Total of (a) and (b) is $257,933. 85% of total is $219,243. 4. Total of (l) + (2) + (3) is $263,660"
Here the defendants have not been deprived of the opportunity of objecting to this detailed and itemised claim to point out any issues of alleged unreasonableness. Where objection is not taken, or where possible further items that might be disallowed on a full assessment are not identified, a general discount from the amount claimed may on occasion not be warranted: Hancock at [62]. In Beach Petroleum von Doussa J applied a discount of 7.5 per cent. In Harvey v Barton (No. 4) [2015] NSWSC 809 I declined to apply a discount to a case in which indemnity costs had been awarded.
Mr Zipser's fees are charged out at a higher rate, which only becomes applicable if a contingency is satisfied, and at a lower rate until then. The identified contingency is the obtaining of a costs order. These parts of Mr Zipser's costs agreement are permissible and he is charging the higher rate. Mr Zipser's fees represent the larger portion of the overall fees claimed, but the reasons for that have been fully explained in the affidavit evidence and do not appear to have increased the total burden of legal fees.
Based on the material provided, the Court finds the plaintiffs' proposal for the structure of a specified gross sum costs order persuasive. It is in three parts: 1. One hundred per cent of all disbursements apart from professional costs should in my view be allowed. These would ordinarily be allowed in full on assessment. There is no evidence that any of them were unreasonably incurred. 2. Seventy five per cent of the fees for solicitors and counsel up to 20 July 2015 should be paid. This reflects an appropriate discount for professional fees incurred on the ordinary basis for this limited period between February and July 2015. It is not dissimilar from discounts applied in other cases in the Supreme Court: Uber BV & Anor v Howarth (No. 2) [2017] NSWSC 889. 3. Ninety per cent of the fees for solicitors and counsel from 21 July 2015 onwards should be paid. This in my view represents a ten per cent discount from the fees charged which is reasonable in the circumstances and a greater discount than is applied in many other cases, where indemnity costs have been awarded.
Mr Sebie's 23 January 2018 draft affidavit raises a number of issues concerning the making and quantification of a specific gross sum costs order. The Court is prepared to treat that affidavit as a form of submission. None of its contents persuade the Court that a specific gross sum costs order should not be made in the amount the plaintiffs propose. The points that Mr Sebie makes in the draft affidavit are dealt with seriatim in these reasons.
Mr Sebie complains he is not legally represented. He asks for pro bono legal assistance. On 23 August 2017 the Court made orders under UCPR, r 7.36 so that he could have the benefit of pro bono assistance. But his obtaining that assistance for the hearing was unsuccessful. The Court sees no point in the circumstances in renewing the orders.
Mr Sebie raises his medical condition. As earlier indicated, presently there is no satisfactory evidence before the Court as to what Mr Sebie's current medical condition is. Moreover, whatever his medical condition may be, it does not appear to bear upon the appropriateness of the plaintiffs' claim for a specific gross sum costs order.
Mr Sebie accused Mr Pham of dishonestly fabricating documents. The unsworn affidavit does not provide any basis for such a serious allegation. On its face the material attached to Mr Pham's affidavit seems to be authentic, internally consistent and in accordance with applicable legal requirements. The criticisms of Mr Pham's preparation of the Court book are without foundation. Allegations of no substance were also made against Mr Zipser.
Mr Sebie says that Mr Zipser has been doing trivial work which could have been done by a solicitor at a lower costs rate. But there is very little work in this category. In any event, the discount that has been permitted will account for this issue.
The plaintiffs were criticised for claiming the costs of the Westpac valuation in an amount of $2,200, which should be a cost only as between the plaintiffs and their. This criticism has no substance, as it can be seen that a bank valuation may arguably have been relevant to the issues Pembroke J determined and the fees in question are so small relative to the total fees claimed that even if those fees were not recoverable on assessment, their non-recovery would be well accounted for by the discount which the Court is imposing.
The plaintiffs are said to be claiming excessive property search fees for SAI Global. But some regular repetition in real property search fees were certainly warranted given the protraction of this case and the well-founded suspicions the plaintiffs held of Mr Sebie's dishonesty. ENA's recent lodgement of the caveat on the title of the Chiswick Property shows exactly why continuous searches would be necessary to protect the Phams' interests. There was always a risk, given the history of this case, that ENA or Mr Sebie would place other caveats on the property.
Mr Pham is criticised for claiming fees for service where he has served his own documents. The occasions where this has allegedly happened are not identified. In any event the fees concerned are quite small.
Complaint is made that Mr Pham claims costs on behalf of Bridges Lawyers, who were never solicitors in the case. Bridges Lawyers were not solicitors on the record but the engagement of other solicitors for the carrying out of aspects of legal work is not unreasonable.

The Further Conduct of these Proceedings

Five matters remain.
First, Pembroke J's 15 May 2017 orders (Order 11) already set out a complete regime for the Registrar in Equity to complete the settlement. Should it emerge that any aspect of this regime appears to be inadequate, and an amendment or supplementation of those orders is required, the matter can be referred back to me. Liberty to apply for that purpose will be granted.
Secondly, another obstacle to the proposed settlement has emerged. The Phams are seeking finance from another mortgagee, Pepper Mortgages, which is a subsidiary of Westpac Banking Corporation. The plaintiffs say that Pepper Mortgages require another inspection of the property before settlement. But the Court is very reluctant to allow this. The last inspection was conducted over the opposition of Mr Robert Sebie, took a great deal of Court time and generated significant expense. The Court is not persuaded that another inspection is necessary and is reluctant to order further inspection of the property unless it is clearly justified to the Court why the results of the previous inspection cannot be used for the new mortgagees' purposes, particularly as Pepper Mortgages is related to Westpac Banking Corporation, the party that had the benefit of the previous inspection and whose representatives entered the Chiswick Property under the Court's orders on the last occasion.
Thirdly, ENA has just lodged another caveat over the Chiswick Property. The plaintiffs seek to remove the caveat so that it does not become an obstacle to settlement. It is logical for ENA's application for reserved costs to be heard at the same time of the caveat removal application. The Court will give leave for the plaintiffs' motion for removal of the caveat to be made returnable before the Court on Monday, 12 February 2018 at 10am.
Fourthly, the plaintiffs' written submissions raise the question of whether interest may be claimed on costs pursuant to CPA, s 101. Whether this is to be pursued can await the matter next coming before the Court as there will be ample time before the conveyance of the Chiswick Property needs to settle.
Fifthly, Ms Musabwasoni has expressed concern about the payment of the plaintiffs' costs out of the purchase price. But as indicated, the Court will vacate the orders made to this effect on 8 November 2017 and will also direct the monies be paid into Court. If Ms Musabwasoni wants to press this issue she should put on a motion in support of her contention that a sum less than all the costs payable to the plaintiffs needs to be set aside and paid into Court after settlement pending payment out to the plaintiffs. But overall the contest between Ms Musabwasoni and Mr Robert Sebie will be left to the Family Court. And this Court is prepared to entertain submissions about the preservation of the fund in dispute on settlement of the Chiswick Property. For example, it may need to be paid into the Family Court.

Conclusion and Orders

In the result, for the reasons given, the Court has decided to make a specified gross sum costs order in the plaintiffs' favour against the first and third defendants in the sum of $263,660 and to make directions for the further conduct of the proceedings.
Accordingly the Court makes the following orders and directions: 1. In respect of Pembroke J's 15 May 2017 orders, Orders 9 and 10, and my 8 November 2017 orders, Order 1, the Court orders that instead of assessed costs the first and third defendants will pay the plaintiffs a specified gross sum of costs in the sum of $263,660. 2. Refer these proceedings to the Registrar in Equity with a view to the Registrar considering whether a completion of the contract for the sale of the Chiswick Property should occur on 27 March 2018 at 2pm at the Registry of the Supreme Court of New South Wales, level 5, Law Courts Building, Queens Square Sydney, or at such other time as the Registrar considers to be more appropriate. 3. Grant liberty to the parties to approach the Registrar in Equity to put material and submissions to the Registrar to enable her to give effect to Order 11(a),(b) and (c) of the orders made by Pembroke J on 15 May 2017. 4. If any party wishes to vary Pembroke J's Order 11 of 15 May 2017, in order to effect settlement of the Chiswick Property efficiently, if the proposed variation cannot be dealt with within the Registrar's own powers, then the parties have liberty to apply to the Court on 48 hours' notice. 5. Direct the second defendant by the 28 February 2018 to put on any motion together with any written submissions to claim that less than the whole of the monies proposed to be paid into Court pursuant to Order 1 hereof ($263,660) should be paid out to the plaintiffs. That motion may be made returnable before me at a date fixed by arrangement with my Associate. 6. In proceedings (2015/325044), upon the plaintiffs' solicitor undertaking to pay any applicable filing fees, grant leave to the plaintiffs to file the motion, dated today and initialled by the Court, returnable before me at 10am on 12 February 2018. 7. Vacate order (2) of the orders made on 8 November 2017. 8. Adjourn these proceedings before me at 10am on 12 February 2018.

Amendments 24 July 2018 - Parties corrected in coversheet 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: 24 July 2018

At a glance

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Judgment (11 paragraphs)

Cases Cited (16)

Cited By (12)