Romanos v Punjabi Fusion Group Pty Ltd

Supreme Court of NSW|2023-09-01|Before: Schmidt AJ

JUDGMENT

In September 2023 I gave judgment on two motions, giving Mr Romanos leave to file both an amended statement of claim and a further amended statement of claim, but refusing to order the transfer of the proceedings to NCAT, which the defendants had sought.
This judgment deals with the costs of the motions, both parties seeking a departure from the usual order under the Uniform Civil Procedure Rules 2005 (NSW), that costs follow the event: Pt 42.
Mr Romanos seeks a gross costs order in his favour for $29,576.90 plus GST, relying on: 1. his success on the motions; 2. the defendants being jointly represented and their joint instructions being inextricably entangled; 3. that Punjabi Fusion Group Pty Ltd being likely still to be insolvent, that impacting the effectiveness of any order made against it, the restructuring practitioner it had appointed having explained in his report why he had concluded that its unsecured creditors will receive only 19.88 cents in the dollar on what they were owed; 4. that the other defendants ought not be permitted to shelter behind an insolvent company which resisted the possession which he sought of the premises Punjabi continues to occupy, despite his ongoing efforts to have it vacate; 5. the defendants' failure to accept his offer of compromise, by consenting to the filing of the amended statement of claim and withdrawal of their transfer application, in return for which he would not pursue an order for costs; 6. my conclusion that the resistance of Mr Romanos' application for leave to amend had not accorded with the obligations imposed by s 56 of the Civil Procedure Act 2005 (NSW); and 7. the sum claimed not including the costs incurred in relation to the argument on costs.
There was no issue in respect of what was sought in relation to GST. But the defendants opposed a gross order being made, contending that the just costs order was that Punjabi pay 80% of Mr Romanos' costs of the motions, as agreed or assessed.
The parties were given leave to file further written submissions, given the opportunity Mr Romanos sought to rely on a further affidavit sworn by his solicitor, which further explained the costs incurred.

The applicable principles

There was no issue about the Court's power to make the competing orders sought under s 98 of the Civil Procedure Act: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21] and Hamod v State of New South Wales and Anor [2011] NSWCA 375 at [813], recently considered in Ahern. The power may be exercised where:

the assessment of costs would be protracted and expensive;
it appears that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment; and
the Court considers that it can exercise the power fairly between the parties, having sufficient confidence in arriving at an appropriate sum on the materials available.

The principle purpose of such an order is to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment process, attention having to be paid to the requirements of s 60 of the Civil Procedure Act, which requires the Court to ensure that the issues between the parties are resolved "in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute". Costs providing an opportunity for ongoing litigation about "non-essential issues" to be resolved with as little technicality and expense as reasonably practicable.
Relevant to the exercise of the discretion is:

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;
that the Court may adopt a "broad-brush" approach to such a quantification because to undertake a detailed examination of the kind carried out in a formal costs assessment, would defeat the purpose of the order; but
that costs ordered should be based on an informed assessment of the actual costs, having regard to the information before the Court, with the result that a discount is typically applied, the aptness of a discount primarily depending on the accuracy and reliability of the costs evidence before the Court.

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 the proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Hamod at [816]. The exercise of the power is particularly appropriate where it is desirable to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment flowing from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: at [817].

The parties' cases

Mr Romanos initially relied on what was concluded in the September judgment, as well as on the short affidavit of his solicitor Mr Yan to argue that the discretionary power to make a gross costs order could here be justly exercised in his favour. Mr Yan there explained the costs which had been incurred and the efforts unsuccessfully earlier pursued, to settle the parties' differences.
The defence case was that a gross costs order was not appropriate, because the seeking of such an order had not been foreshadowed in the parties' prior communications; Punjabi had had a measure of success, given that Mr Romanos accepted that the proposed amended summons would have to be further amended; that the orders sought achieved no discount on the costs incurred; that what was relied on involved only estimates; and that a nexus between the claimed costs and what had been involved in the hearing of the motions had not been established, with the result that the applicable principles had not been satisfied.
It was also contended that there was no warrant for making a costs order in favour of Mr Romanos for the argument about costs; that the amended statement of claim had not complied with some of the applicable rules; that the dictates of justice did not favour the making of the order sought, there being no evidence that the defendants would be dilatory in any costs proceedings; that the costs assessment should take account of the costs thrown away order, which had yet to be assessed, albeit no doubt those costs were relatively small.
Here, what was before the Court was submitted to be a bare statement of costs and disbursements incurred, that evidence being insufficient for the Court fairly to make a gross costs order: Colquhoun v District Court of New South Wales (No 2) [2015] NSWCA 54 at [5]-[7]. Importantly, there was no objective opinion evidence of an expert about the likely outcome of any assessment, nor even any invoices, which would shed light on relevant information: Tim Barr Pty Ltd & Anor v Narui Gold Coast Pty Ltd [2011] NSWSC 11 at [10]-[12].
No basis for a gross costs order for the entirety of the costs incurred had thus been established. Nor had any basis for a costs order against the personal defendants, given what the heads of agreement on which Mr Romanos relied provided for, their personal guarantee for the payment of $72,750 unpaid rent, which Punjabi had paid, it being the occupant of the premises which remained in its possession.
The motions had turned on whether there was a retail tenancy dispute and a retail shop lease or lease in respect of those premises. The result was that the other defendants had no substantive role in the motions and should not be ordered to pay any of the costs.
Further, the alleged insolvency on which Mr Romanos relied rested on the untested opinion of a single restructuring practitioner, an opinion of which he was aware when he commenced the proceedings. The result was that he could not seek to use that insolvency to get around the orthodox position, which was submitted to be that costs following the event should result in a costs order made only against Punjabi.
Mr Yan's further affidavit provided more information about the claimed costs, with counsel's itemised costs being $25,652.25 plus GST and solicitor's itemised costs for preparation and appearance at the hearing $10,287.40.
But the defendants' position advanced in its further written submission remained unaltered. It contended that Mr Romanos' primary position effectively sought an indemnity costs order, for which no just basis had been established on the evidence and its secondary position, for 90% of the costs incurred, failed to give a necessary impressionistic discount typically resulting from the adoption of a broad-brush approach, explained in In the matter of PSR Crown Investments Pty Ltd [2021] NSWSC 491 at [6].
Mr Yan's affidavit provided no explanation of the basis on which the claimed costs were incurred and shed no light on their reasonableness or proportionality, given the nature and complexity of the matters raised by the motions, nor any insight into the experience of those who had acted, given the work undertaken by those whose charges were sought to be recovered. Mr Yan had not undertaken the majority of the work charged and Mr Archer, who had undertaken that work had not provided an affidavit. Nor had any independent expert expressed any opinions on those charges. Further, some of the costs claimed did not appear to relate to the motions and the reasonableness of counsel's fees, given what arose on the motions was also not addressed.
In all those circumstances, if a fixed sum order was to be made, which was opposed, a discount in the order of 40%-50% would be appropriate, to take into account the obvious contingencies and uncertainness of an assessment of what was claimed.
Mr Romanos responded to these submissions, contending that Mr Yan's second affidavit provided the required precise explanation of the costs which had been incurred in respect of the motions and that the redacted bills attached established that unrelated costs were not pursued.
In all the circumstances assessment of costs would result in needless protracted delay and further costs, rather than they being dealt with justly, quickly and cheaply. The departure from the usual order which the defendants sought could not be ordered, given their joint representation and resistance of the orders Mr Romanos had sought. They had failed to establish the case they advanced jointly, in circumstances where the personal defendants effectively sought to be shielded by an insolvent company; where there was a significant risk it could not meet any costs order; and they had all relied on the report of the restructuring expert it had appointed, Punjabi necessarily having acted in accordance with Ms Luthra's directions, she being its controlling mind.
The circumstances thus fell within those considered in Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 at [13]-[18], there being a material risk Punjabi will not be able to pay any costs order, the defendants having jointly advanced the position which failed and the evidence being sufficiently detailed to permit the Court to determine what costs had been incurred and to assess their reasonableness.
The order sought justly avoided the expense of expert evidence, unnecessary in all the circumstances and the expense, delay and aggravation of the pursuit of an assessment of those costs, given the particularised invoices in evidence. They distinguished this case from those the defendants relied on. A gross order made against all defendants would also permit them to arrange between themselves their respective liability for those costs.

What costs order should be made?

There was no issue between the parties that Punjabi remained in occupation of Mr Romanos' premises, refusing to vacate despite not paying him any rent and having unsuccessfully brought proceedings before NCAT, to have the consent orders which had settled their earlier dispute about the premises and outstanding rent set aside. Those proceedings were struck out by NCAT for want of jurisdiction. Despite this, Punjabi still did not vacate.
That this necessitated Mr Romanos taking other steps to regain possession, must be accepted. The lease he had granted Punjabi under the parties' heads of agreement having come to an end, he having granted it no other lease and it not either paying any rent or vacating. Despite this, both the possession which he sought and the motion he pursued to amend his pleadings, was resisted by all three defendants, who then also unsuccessfully pursued their transfer motion.
They having pleaded that the heads of agreement which underpinned NCAT's consent orders were not binding, Mr Romanos' motion, seeking leave to amend his pleadings to pursue relief which I concluded NCAT had no power to grant, was successfully pursued. That resulted in the dismissal of the defence motion, seeking transfer of the proceedings to NCAT.
As I explained in the September judgment, compliance with the obligations imposed by s 56 of the Civil Procedure Act ought to have resulted in the defendants' consent to the filing of Mr Romanos' amended pleadings: at [50]. Instead that was opposed.
It is relevant to what lies in issue in relation to a costs order being made against all three defendants, was that they all persisted with their resistance of Mr Romanos' motion and pursuit of theirs, despite evidence that Punjabi's own expert had advised that it was insolvent, with the result that it had to pursue resolution of its financial problems by agreement with creditors. It can sensibly be inferred from what is in evidence that the defendants resisted Mr Romanos' case despite being aware that Punjabi did not have the means either to pay rent or any costs order made against it. The defendants certainly led no evidence to suggest otherwise.
In all of those circumstances I am satisfied that justice requires that a costs order be made against all three defendants. Not only were they jointly represented, they unsuccessfully advanced the same case in respect of both motions. This reflects the personal defendants support of Punjabi's resistance of the possession which Mr Romanos seeks.
True it is that the way in which the parties developed their respective cases had the result that not only was Mr Romanos given leave to file his amended summons, but also leave to file the further amended summons, in order to address problems which the defendants had raised and he accepted at the hearing of the motions.
But had the defendants complied with the requirements imposed upon them by s 56, that result ought to have been arrived at without the time, trouble and expense of the motion Mr Romanos was forced to pursue.
Whether a gross costs order can justly be made is more difficult to resolve.
Had expert evidence of the kind discussed in the authorities been led, about what was likely to result in an assessment of the costs Mr Romanos incurred, given the fees charged and the work performed, a gross costs order could not have been resisted. But the expense of obtaining such evidence was not incurred.
I am satisfied in all of the circumstances, that this cannot sensibly result in the conclusion that justice permits the refusal of a gross costs order.
Given the defendants' approach to the motions, that the cost of an assessment process is likely to be disproportionate to the importance and complexity of what is in dispute about the costs which Mr Romanos pursues, must be accepted.
There does have to be a proper evidentiary basis for application of the broad-brush approach discussed in the authorities to costs which are pursued by way of a gross costs order. More is required than an identification of the total costs and disbursements incurred. Mr Romanos relied on the itemised bills annexed to Mr Yan's second affidavit to meet that onus.
While the defendants challenge the adequacy of that evidence, it must be accepted that what it deals with is not complex and can readily be understood and assessed. That supporting the conclusion that the Court's power to make a specified costs order can be fairly exercised in relation to those costs, with the necessary confidence that an appropriate sum which does justice between these parties can be arrived at: Hamod at [813].
What is in issue about the costs of these motions certainly does concern "non-essential issues" which should be resolved with as little technicality and expense as reasonably practicable, with the result that I have been persuaded that a gross costs order should be made in respect of the motions: James v Australia and New Zealand Banking Group Ltd [2017] NSWCA 84 at [3].
It must also be accepted, in the circumstances I have explained, that the responsibility for incurring the majority of the claimed costs lay with the defendants, albeit that account must also be taken of the costs thrown away order in respect of the leave to file a further amended statement of claim.
Like in Ahern, a gross costs order will help avoid further delay and acrimony between these parties, in circumstances where there is a demonstrated history of both: at [38].
As to quantification, the Court is entitled to take into account that if assessed on the ordinary basis, the usual outcome is that the costs recovered represent a proportion in the range of 60% to 85% of the total costs incurred: Bechara v Bates [2016] NSWCA 294 at [69].
I have concluded that even though there is no expert evidence about the claimed costs, given the limited compass of what the disputed costs relate to and the light which the itemised bills shed on how they have been incurred, that the Court can in all of the circumstances justly exercise the 'broad-brush' discussed in the authorities, to arrive at a gross costs order.
That order must have regard to the actual costs incurred in the particular circumstances of this case, taking into account the matters which the parties have each raised for consideration, as I have explained, including the costs thrown away order.
Having undertaken that exercise and allowing for contingencies and a potential margin of difference in the costs assessment process, I have concluded that an appropriate overall discount of the costs incurred is in this case is 30%, that resulting in a just resolution of what lies in issue in relation to discount and taking into account the costs thrown away order. That would appear to result in a gross order of $25,160.56 plus GST, the deduction being made from the costs dealt with in Mr Yan's second affidavit.

Orders

For the reasons given, unless the parties disagree with that mathematical calculation, in which event they should confer, agree the correct figure and approach within 7 days, the Court's order will be that the defendants bear Mr Romanos' costs of the motions, assessed to be a gross sum of $25,160.56 plus GST.

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: 17 November 2023

At a glance

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