Scope Data Systems Pty Ltd v Aitken

CATCHWORDS: COSTS - summons brought almost a year after assessment and after bankruptcy proceedings instituted - application for indemnity costs

Civil Procedure Act 2005 (NSW), ss 56-62 LEGISLATION CITED: Legal Profession Act 1987 (NSW) Legal Profession Act 2004 (NSW) Uniform Civil Procedure Rules 2005 (NSW), rr 50.2 and 50.3

AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Cultus Petroleum NL v OMV Australia Pty Ltd [1999] NSWSC 435 Currabubula & Paola v State Bank NSW [2000] NSWSC 232 CASES CITED: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Oshlack v Richmond River Council (1998) 193 CLR 72 Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd [2005] NSWSC 691 Scope Data Systems Pty Ltd v Aitken (No. 2) [2010] NSWDC 65

First Plaintiff: Scope Data Systems Pty Ltd PARTIES: Second Plaintiff: Peter Gorczynski Defendants: Andrew Napier Aitken, Peter Douglas McLachlan and Andrew Bruce Thorpe trading as Aitken McLachlan Thorpe Lawyers

COUNSEL: Plaintiffs: Mr Niall Connolly (solicitor) Defendants: Mr J Knackstredt

SOLICITORS: Plaintiffs: Niall Connolly Lawyers Defendants: Macpherson + Kelley Lawyers

[1] The plaintiffs by Amended Summons dated 9 October 2007 sought to set aside determinations of costs assessor John Sharp in assessments numbers 2005/1780, 2005/1766 and 2005/1919. In addition, orders were sought to set aside certain consequential orders. Each of the assessments relates to fees for legal work undertaken by the defendants who are hereafter referred to as "AMT" on behalf of the plaintiffs in relation to litigation in which they and other lawyers acted for the plaintiffs. The plaintiffs did not pay these sums when invoiced and have brought challenges to the assessments in the Summons which came before me on 25 March 2010.

[2] When the matter came before me, an application was made for the hearing date to be vacated so that this matter could be case managed along with matter 4812 of 2008. In an ex tempore judgment, I dismissed that application. I note that an application had been made earlier that day to the List Judge, Garling DCJ, and he had also refused that application.

[3] There has been substantial delay in the commencement of these proceedings. The chronology of that delay is as follows:

Relevant Dates August 2004: Plaintiff ("Scope") retains defendants ("AMT") to act for Scope in Supreme Court matter no. 12191 of 2004 (Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd [2005] NSWSC 691 - "the Jarrett matter"). August 2005: AMT's retainer is terminated following dispute over AMT's costs and conduct of the Jarrett matter. November/December 2005: AMT seeks assessment of its costs, naming Scope's director, Mr Gorczynski, as second respondent to the assessment. December 2005 to March 2006: Plaintiff disputes AMT's claim that Mr Gorczynski is liable for AMT's costs and that the assessor has jurisdiction to proceed with assessments. Plaintiff advises costs assessor of impending negligence action against AMT for loss and damage exceeding AMT's claimed costs. March 2006: Plaintiff commences proceedings against AMT by Notice of Motion filed in Supreme Court no. 12191 of 2004. 8 May 2006: Plaintiff withdraws Notice of Motion and is granted leave to re-commence action by way of Summons filed in fresh proceedings. 25 May 2006: Crown Solicitor (on behalf of costs assessor) notifies plaintiff that the costs assessor "does not propose while the Supreme Court litigation is current to resume the assessment of any application". July 2006: Costs assessor issues certificates of determination in respect of costs claimed by AMT. Assessor holds Scope and Mr Gorczynski jointly liable for assessed costs. 27 August 2007: Summons filed in Supreme Court (no. 14381/07). 4 September 2007: First mention of Summons. Plaintiff is granted leave to file an Amended Summons. 9 October 2007: Amended Summons is filed and served.

[4] In a judgment dated 25 March 2010, I refused the application to extend time from 31 August and 13 September 2006 to 27 August 2007: Scope Data Systems Pty Ltd v Aitken (No. 2) [2010] NSWDC 65.

[5] When I handed down my ex tempore judgment, the defendants sought an order for indemnity costs. Written submissions were received from the defendants on 31 March 2010 and from the plaintiffs on 12 April 2010. It has been necessary for me to obtain my judgment from Court Reporting Services and to review the file and re-read the material before me in order to evaluate these submissions.

[6] Both the plaintiffs and defendants agreed that, for the court to depart from the usual order to award costs on a party/party basis in order to award costs on an indemnity basis, the court must be satisfied that there has been misconduct or some unreasonable action in connection with the course of the proceedings: Oshlack v Richmond River Council (1998) 193 CLR 72. Those circumstances may include, but are not limited to, circumstances where a party has carried on proceedings with no real prospect of success (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401), or for an ulterior purpose (Cultus Petroleum NL v OMV Australia Pty Ltd [1999] NSWSC 435).

[7] The first ground relied upon is not that the 28-day period prescribed by rr 50.2 and 50.3 Uniform Civil Procedure Rules 2005 (NSW) expired a year before the appeal was brought, but that the appeal was brought for an ulterior purpose. As the chronology set out above shows, the Summons in these proceedings was not filed until 27 August 2007, namely after the issue of the bankruptcy notice against the second plaintiff. In addition, the Summons filed did not commence an appeal under the Legal Profession Act 1987 (NSW) or the Legal Profession Act 2004 (NSW). Nor did the Summons named the second plaintiff as a party to the proceedings. Amendments were necessary and the appeal was not in proper form until 9 October 2007, when the Amended Summons is filed joining the second plaintiff. As the defendants pointed out, this was well in excess of one year following the issuing of the costs assessment.

[8] The plaintiffs offered a belated explanation for the delay, which is set out in my judgment of 25 March 2010. The plaintiffs in paragraph 2 of the submissions note that I considered this explanation insufficient or unsatisfactory, but submit that it was nevertheless an explanation. It is submitted that the plaintiffs' application for an extension of time was made on a bona fide basis and as the relief to extend time is discretionary, it was neither delinquent nor unreasonable of the plaintiffs to seek the exercise of the discretion in their favour. The fact that the discretion was not exercised in their favour does not amount to conduct satisfying the test set out in Oshlack v Richmond River Council.

[9] This submission misses the point. This was delay of a very substantial nature, and requiring the kind of sufficient or adequate explanation that the High Court considered appropriate in AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (at [102]-[103] per Gummow, Hayne, Crennan, Kieffel and Bell JJ). The bald explanation offered, namely that the second plaintiff was "busy and stressed" (to quote from my judgment of 25 March 2010), was not referred to in the written outline of submissions, or even identified as an explanation, until the affidavit of Mr Gorczynski sworn 24 March 2010 (at paragraphs 10-18). This was filed the day before the hearing.

[10] The second basis is that the appeal itself, regardless of the discretionary factors relating to the extension of time, was hopeless, in that all of the factors set out by Einstein J in Currabubula & Paola v State Bank NSW [2000] NSWSC 232 at [87] were in favour of the defendants. AMT submits that this is an indication that these proceedings were, in substance, entirely unmeritorious. For this additional reason, I am invited to draw the inference that the proceedings were commenced and carried on for an ulterior purpose, namely to forestall or delay the bankruptcy proceedings. Accordingly, on this basis only, an order for indemnity costs would be warranted.

[11] The plaintiffs' answer to this submission is that whether or not the proceedings were likely to fail when ultimately heard is "simply not a conclusion that is open to the court" (written submissions paragraph 4). However, one of the factors I took into account when considering the question of whether to exercise my discretion was the unlikelihood of success of the proceedings.

[12] The plaintiffs further submit that the court "cannot properly conclude what the outcome of the bankruptcy proceedings is likely to be" as there a number of other matters, including a cross-claim which exceeds the amount in the bankruptcy notice. Nor should I assume that in attempting to have the bankruptcy notice set aside, the plaintiffs have act in a way that is improper and unmeritorious. It is submitted by the plaintiffs that it is not open to the court to conclude that these proceedings were carried out for an ulterior purpose, namely to forestall the bankruptcy proceedings, or at all.

[13] The purpose of the 28-day appeal period is to ensure that there is finality in litigation. In addition, regard must be had to the provisions of ss 56-62 Civil Procedure Act 2005 (NSW) that the resolution of proceedings should be "just, quick and cheap". In addition, the significant concern expressed by the High Court in AON Risk Services Australia Ltd v Australian National University concerning the impact of delay in legal proceedings means that the days when parties can come before the courts with late and inadequate explanations for commencing proceedings where the chronology of events must lead to an inference that the proceedings were commenced for some ulterior purpose are now over.

[14] Accordingly, the orders I make are as follows: (1) Vary order 4 of my orders of 25 March 2010 to provide that the plaintiffs pay the defendants' costs on an indemnity basis.

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