Plaintiff v Defendants

2 The second defendant applied for a costs order in the nature of a Gross Sum Costs order and for the following reasons I will grant that application.

(2) Where the Court orders that costs be paid to a party, the Court may then or thereafter order that as to the whole or any part of the costs specified in the order, instead of taxed costs, that party shall be entitled to:

(i) ...

(ii) ...

(iii) a gross sum specified in the order instead of taxed costs;

(iv) a sum in respect of costs to be determined in such manner as the Court directs.

4 The second defendant applies on an affidavit of Kyle Sebel, sworn 2 November 2012, but there is no evidence before the court that would enable the court to specify in its order a gross sum instead of an order for taxed costs.

5 In Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors (No 3),[1] Croft J was invited to make such an order. Although his Honour declined to do so, he did facilitate a process whereby a whole gross sum costs order might be made by the Costs Court, referring to that court all aspects, both procedural and substantive, of that process with a view to such an order ultimately being made.

6 The second defendant developed its application as an application that I order that it be entitled to a sum in respect of costs to be determined in such manner as the Court directs and that such directions should provide for a gross sum assessment by the costs court rather than for taxation. The precise relief that it seeks is as follows:

(a) The costs to be assessed pursuant to order 3 made on 14 November 2012 are to be assessed by an Associate Justice as a gross sum instead of taxed costs under rule 63.07(2)(d) of the Supreme Court (General Civil Procedure) Rules 2005.

(b) A reference is to be made to an Associate Justice under rule 77.05 of the Supreme Court (General Civil Procedure) Rules 2005 for this purpose.

(c) On or before [date], the second defendant is to file and serve the evidence on which it relies in support of the assessment, as a gross sum, of its costs pursuant to order 1.

(d) On or before [date], the plaintiff is to file and serve any evidence in answer.

(e) The costs assessment is to be referred to an Associate Justice on a date to be fixed.

This proposed costs order is based on the order in Sunland Waterfront.

7 In that case, Croft J observed that the provisions of rule 63.07 are cast in similar terms to former Federal Court Order 62, rule 4 of the Federal Court Rules that have been considered in a number of cases in that jurisdiction.[2] Sackville J in Seven Network Limited v News Limited[3] identified the object of, and approaches to, gross sum costs orders in terms that Croft J found apposite, and I agree, to applications under r 63.07.

(i) The purpose of the sub-rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation.

(ii) An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62.

(iii) The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed.

(iv) Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the 'necessary or proper' test) and those stated in Stanley v Phillips [1966] HCA 24; (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause).

(v) Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Sch 2 provide assistance in fixing an appropriate gross sum.

8 The second defendant submitted that the orders sought are appropriate for the following reasons:

(a) it is probable that an assessment of costs by taxation would be protracted and expensive;

(b) it appears that Mr Love will not be able to meet his costs liability, having regard to its likely quantum, however assessed.

9 There was not evidence before the court of the likely quantum of a costs assessment whether by lump sum or on taxation, and there was not evidence of the cost and delay associated with the process of taxation. I am not in the position that Croft J was in when he concluded that there would be a significant costs saving to the parties and a reduction in Court allocated resources by adopting a gross sum process. I am prepared to give some weight to the prospect of savings in costs, time and court resources in the circumstances. Ordinarily, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, a party must bring the relevant circumstances that will influence the court's discretion to its attention in a manner that permits the court to appropriately assess and weigh up the competing considerations.[4]

10 The like criticism can be offered about the competing considerations put by Mr Love who submitted that the assessment of the quantum of costs should be a relatively simple matter and not be such as to warrant the imposition of a Gross Sum Costs Order. The thrust of Mr Love's submission is that the proceeding for the assessment of damages on the undertaking was modest in scope, involving three interlocutory hearings, and a four-day trial. However, the scope of the proceeding sheds little light on the task of assessing costs and Mr Love offers no basis to accept that the assessment of costs on taxation will be no more protracted and expensive than a gross sum basis assessment. It is evident from the nature of the gross sum assessment procedure that it is likely to achieve the purpose identified in Seven Network Limited. Moreover, the history of litigation in this court between Mr Love and Roads Corporation suggests a prospect of protracted litigation on a taxation. As noted below, there is a further reason to anticipate a protracted taxation.

11 On balance, the competing considerations advanced by the parties on the first ground favour the making of the orders sought by the second defendant as a gross sum assessment of the costs is likely to be less protracted and costly than an assessment by taxation.

12 On 14 September 2012, the Court of Appeal ordered that Mr Love provide security for costs of $85,000 within 14 days in an appeal in related litigation. From 12 October 2012, that security not having been posted, the appeal has been stayed.

13 The second defendant relied on an affidavit of Ronald Gavin Lane sworn 14 August 2012 in that appeal proceeding. Mr Lane deposes that Mr Love faces untaxed costs liabilities of about $16m. In various proceedings involving Mr Love and Roads Corporation, McClusky Solicitors from time to time represented Mr Love. It appears that Mr Love's own legal costs in respect of various proceedings when represented by McClusky's total $16.6m. On 30 March 2012, Mr Love's former solicitor Mr Hill of McClusky's commenced proceedings against Mr Love for recovery of unpaid fees and disbursements in the amount of $3.575m plus interest. Further, Mr Lane deposes to substantial liabilities to Roads Corporations for costs on bills of costs that are yet to be taxed. Over five proceedings, the costs are estimated at about $10.8m. There is also a liability on an untaxed bill of costs served by the State of Victoria of $1.65m.

14 Mr Lane provides further information about Mr Love's financial position. In May 2010, Mr Love owned 210 hectares of land. The Commonwealth Bank as mortgagee sold a parcel of 62.24 hectares of that land in July 2011. Expressions of interest in another parcel of 32.09 hectares were sought in April 2012. An article in the Australian Financial Review on 26 July 2012 reported the sale of another parcel. At the time that Mr Lane swore his affidavit, much of the land remaining in Mr Love's proprietorship was subject to mortgages, covenants and caveats, including a caveat in favour of his wife, Helen Love. Mrs Love, as caveator, claims an interest as beneficiary under an implied trust created by the operation of s 53(2) of the Property Law Act 1958. Although the caveator's claim is yet to be substantiated, there is no evidence that Mr Love challenges it. Rather, his solicitor has suggested that the caveat is intended to notify creditors of a prior interest.

15 I deferred resolving this aspect of costs to enable Mr Love to respond to the second defendant's application, but he filed no material answering Mr Lane's affidavit. He has not disclosed his financial position. He submitted that he has not been declared bankrupt. He asserted that he has advice from an unidentified costs consultant that the amount sought in the Cooper Street Duplication Land Acquisition compensation proceeding 10147 of 2005 is likely to be substantially less than what has been claimed. Further he contends, by way of submission without evidence, that secret dealings between Roads Corporation and one of Mr Love's witnesses on a matter that was central to that proceeding came to light from the taxation of costs process in that proceeding. Although I would reject that submission as scandalous as it is wholly unsupported by any evidence before me, for present purposes it is sufficient to note that it is irrelevant. There is no evidence on which I might conclude, even at a low standard of proof, that there is any ground, whether reasonable or otherwise, to suspect that taxation of costs, rather than a gross sum assessment, is desirable in order to expose such conduct on this assessment. The submission lends some slight credence to a fear that Mr Love is fishing in the taxation process for allegations that might be pressed against the second defendant, which suggests a prospect of protracted litigation on a taxation.

16 I am satisfied that the second basis on which the orders are sought is made out and, in that context, it appears that Mr Love may not be able to meet his costs liability, having regard to its likely quantum however assessed, and may have taken measures to render the task of recovery more difficult for his judgment creditors.

17 I will add two matters. First, the practical effect of the orders that I propose to make places the assessment of the second defendant's costs before a specialist costs court, where Mr Love may challenge the costs claimed, if so advised. Second, orders for a cost effective and expeditious assessment of the costs of the damages assessment are consistent with the nature and purpose of the undertaking, as clearly articulated by the High Court in European Bank.[5]

18 Although the question was not argued before me, my preliminary view is that the Costs Court has jurisdiction to hear and determine this assessment under s 17D of the Supreme Court Act 1986 and Division 2B of that Act governs its procedures. To avoid any doubt, I will also refer the assessment under rule 77.05 of the Supreme Court (General Civil Procedure) Rules 2005 to the Associate Judge who is a Costs Judge of the Costs Court and that reference is intended to enable the Associate Judge to give directions under s 17F of the Act.

1. The costs to be assessed pursuant to order 3 made on 14 November 2012 are to be assessed by an Associate Judge who is a Costs Judge of the Costs Court as a gross sum instead of taxed costs under rule 63.07(2)(d) of the Supreme Court (General Civil Procedure) Rules 2005.
2. I refer that assessment under paragraph 1 of this order to the Associate Judge who is a Costs Judge of the Costs Court.

3 Subject to any further direction of the Costs Court -

1. on or before 28 February 2013, the second defendant file and serve the evidence on which it relies in support of the assessment, as a gross sum, of its costs pursuant to the judgment of the court made 14 November 2012.
2. on or before 29 March 2013, the plaintiff files and serves any evidence in answer.

20 By 29 January 2013, the solicitors for the second defendant shall provide a copy of this order to the associate to Associate Justice Wood and shall issue and serve such originating process for the assessment pursuant to this order as the Costs Court may direct.

21 The second defendant's costs of and incidental to the application under paragraph five of the judgment of the court made 14 November 2012 are costs of the proceeding.

[1] [2012] VSC 399 (14 September 2012).

[2] Some of these cases are noted in Williams, Civil Procedure Victoria, I63.07.15.

[3] [2007] FCA 1062 [25], (citations omitted).

[4] Cf Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 [103].

[5] European Bank Limited and Robb Evans of Robb Evans & Associates [2010J HCA 6, (2010) 240 CLR 432, 438-439.