Seven Network (Operations) Ltd v Dowling

Whether appropriate to make lump sum costs order

1. Section 98(4)(c) of the Civil Procedure Act provides: Courts powers as to costs 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: … (c) a specified gross sum instead of assessed costs …
2. A specified gross costs order involves a departure from the usual process by which costs are assessed in accordance with the statutory procedures now found in the Legal Profession Uniform Law (NSW): eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [8] per Beazley P and Basten JA. The power to make a specified gross sum costs order should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available: Hamod v State of New South Wales [2011] NSWCA 375 at [813] per Beazley JA (Giles and Whealy JJA agreeing).
3. As Giles JA noted in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21]: The power conferred by [section 98(4)] is not confined, and may be exercised whenever the circumstances warrant its exercise. It may appropriately be exercised where the assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment …
4. It is a relevant consideration whether "the financial capacity of the party liable to pay costs is such that the additional cost of taxation will impose a significant burden on the party in whose favour costs are ordered without real prospects of recovering those costs": Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 at [24], citing Hadid v Lenfest Communications Inc [2000] FCA 628; Sparnon v Apand Pty Ltd [1998] FCA 164; Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 215 ALR 788. By way of example, Kenny J described the circumstances in which such an order was made in Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506; (2012) 290 ALR 288 at [17]: In the present case, the respondents have wasted the applicant's resources and time by their ongoing refusal to respond to the applicant's communications, the institution of this proceeding, and court orders. Moreover, the respondents' conduct, as evidenced by the affidavits sworn by the applicant's solicitor, Mr Tye, indicates that they are unlikely to co-operate in any further court processes and meet any liability for costs in an efficient and appropriate way. There is evidence, as in a further affidavit of Mr Tye sworn on 30 March 2012, that the respondents' failure to progress the litigation or to comply with court orders is on-going, notwithstanding the service of these orders and the applicant's continued attempts to communicate with the respondents. … In all the circumstances, in order to avoid a further waste of time and money that the applicant may not be able to recoup readily from the respondents or at all, I consider it appropriate to make a lump sum costs order.
5. The plaintiffs submitted that this case clearly falls within the description in Harrison v Schipp. The Court has already noted the prospect that Mr Dowling cannot or will not pay any costs: Seven Network (Operations) Ltd v Dowling (No 2) [2021] NSWSC 1106 at [89]. Whilst this did not mean that a costs order was futile nor that a lump sum order was inappropriate, it pointed to the appropriateness of reducing the complexity of the process of fixing the amount of costs payable. Further, such an order was appropriate where the other party's conduct has unnecessarily contributed to the costs of the proceedings: Hamod at [818]. This was just such a case, where Mr Dowling's conduct in disputing that he was the publisher of the offending material and, preceding that by conducting his acts of publication anonymously, very substantially contributed to the costs of the contempt motion.
6. It is unclear whether Mr Dowling has the ability to pay the costs order. Placing an additional burden on the plaintiffs to undertake a costs assessment process may be for no useful purpose. I infer that Mr Dowling either cannot or will not pay the plaintiffs' costs. This favours the award of a lump sum costs order, thereby reducing wasted costs on any unnecessary costs process. None of this should be taken to mean that Mr Dowling should not pay the plaintiffs' costs. He has been ordered to do so, is liable to do so and should do so.
7. I consider that this is an appropriate case to specify a gross sum instead of putting the plaintiffs to the further time and expense involved in an assessment of their legal costs in circumstances where it is readily apparent that Mr Dowling is unlikely to participate in a costs assessment in any meaningful or relevant way, if his written submissions on this application are anything to go by. In addition, as I have elsewhere observed, the defendant's conduct substantially contributed to the costs incurred in prosecuting his contempt: Seven Network (Operations) Ltd v Dowling (No 2) [2021] NSWSC 1106 at [56]-[59].

Fixing a sum

1. Where costs have been ordered on an indemnity basis, "all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed": rule 42.5(b), Uniform Civil Procedure Rules 2005 (NSW).
2. In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23, Einstein J summarised the principles which inform the exercise of the discretion to specify a gross sum, at [9]: … ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16]; iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at [22] …; … iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at [22]; v. the gross sum "can only be fixed broadly having regard to the information before the Court": Beach Petroleum at 124; [In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that … is what the rule contemplates".] vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120; vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at [16]: "On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary "fail safe" discount on the cost estimates submitted to the Court: Leary v Leary at 265 …"
3. His Honour's summary has been cited with approval in the Court of Appeal: Hamod at [793]. Beazley JA continued, at [816]: … the 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 proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability…
4. And at [820] (citations omitted): The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills). The approach taken to estimate the costs to be ordered must be logical, fair and reasonable. This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment.
5. Further, as Ball J explained in Baychek v Baychek [2010] NSWSC 987 at [11]: Implicit in this principle is that the gross sum bear a reasonable relationship to the actual costs of the party making the application, and to the costs that that party might reasonably be expected to recover on assessment. That means, among other things, that there must be a reasonable evidentiary basis for the order the court makes. That evidentiary basis is normally provided by the costs applicant in the form of an affidavit setting out the actual costs incurred and how they were calculated. Often, the evidence also includes evidence of the amount that is likely to be recovered on assessment.
6. The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod at [814]. A "broad brush" approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Kostov v Zhang (No 2) [2016] NSWCA 279 at [27] per Meagher and Payne JJA.

Consideration

1. The plaintiffs do not claim the costs associated with attending more than 20 directions hearings since the contempt motion was filed. Rather, the plaintiffs sought costs in respect of solicitor and counsels' fees for preparation and settling evidence relied upon on the motion and appearing at substantive hearings, being before me on 27 September 2018, before Kunc J on 2 and 3 December 2019, the hearing of the contempt motion on 1 and 2 February 2021 and the hearing on 13 August 2021 when I heard submissions on sentence.
2. In addition, the plaintiffs sought disbursements for the fees of the independent solicitor, Ms Sylvia Fernandez, whom I appointed in December 2018 (Seven Network (Operations) Ltd v Dowling [2018] NSWSC 1890); fees charged by expert witness Dr Bradley Schatz; together with court fees and filing fees.
3. In total, the plaintiffs seek a lump sum costs order in the amount of $152,156.86, comprising solicitors' fees of $55,911.00, counsel's fees of $113,152.18 (noting that, by and large, senior counsel appeared without a junior) and the disbursements identified. Legal fees have been further discounted by 10%. Mr Keegan said that these costs and disbursements are significantly less than the plaintiffs' total costs incurred. I expect that is the case.
4. The plaintiffs submitted that their costs were sought on a conservative, even concessional, basis, and only in respect of matters at the heart of what was needed to pursue the contempt motion. The costs were appropriately incurred and the gross sum sought was appropriate in the circumstances.
5. Mr Keegan's affidavit provides a detailed breakdown of the costs, which are not challenged by the defendant. I am not persuaded that any of the costs have been unreasonably incurred or are of an unreasonable amount, noting that the onus is on the paying party to show this: Bouras v Grandelis (2005) 65 NSWLR 214; [2005] NSWCA 463 at [119] per Santow JA (Giles JA relevantly agreeing at [2]). The costs claimed are limited in scope and appropriately discounted given that the basis of assessment is on an indemnity basis.
6. For these reasons, I am satisfied it is appropriate to make a specified gross sum order in the amount claimed by the plaintiffs. I make the following order: 1. Pursuant to section 98(4) of the Civil Procedure Act 2005 (NSW), order the defendant to pay the plaintiffs' costs of the contempt motion filed on 21 July 2017 in the gross sum of $152,156.86.

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: 27 October 2021