Siteberg Pty Ltd v Bruce Maples & Ors

LEGISLATION CITED : Civil Procedure Act 2005 (NSW)

Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 Gagne Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413 Hadid v Lenfest Communications Inc [2000] FCA 628 Hamod v State of New South Wales (No 13) [2009] NSWSC 756 CASES CITED : Harrison v Shipp (2002) 54 NSWLR 738 Idoport v NAB [2005] NSWSC 1273 Julien v Secretary of Department of Employment and Workplace Relations (No. 2) [2009] FCA 1259 Kiwi Munchies Pty Limited v Stern [2006] NSWSC 433 Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 Wentworth v Wentworth, NSWCA, unreported

Siteberg Pty Ltd (Plaintiff) PARTIES : Bruce Maples (First Defendant) Atco Building Structures Pty Ltd (Second Defendant) Berrima District Credit Union (Third Defendant)

SOLICITORS : Eugene Lepore & Associates (Plaintiff) Frontier Law Group (First Defendant)

• 2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/290151 SITEBERG PTY LTD v BRUCE MAPLES & ORS JUDGMENT 1 HIS HONOUR: This is an application that the First Defendant (Mr Maples) pay the costs of the Plaintiff (Siteberg) assessed on a gross sum basis. Siteberg also seeks an ancillary order that Mr Maples be restrained from taking steps which could or might have the effect of causing a company known as Sandhills Village Pty Ltd (Sandhill Village), of which Mr Maples is sole director and shareholder, from disposing of property (in particular, a hotel) that it owns. 2 The circumstances leading to this application are, briefly, as follows. 3 On or about 20 July 2009 Mr Maples caused a company known as Atco Building Structures Pty Ltd (Atco) (the Second Defendant), to commence proceedings against Siteberg at Camden Local Court. The initiating process in the Local Court proceedings was never served on Siteberg. Despite that, and before on any view Mr Maples was entitled to do so, he, on 17 August 2009, caused Atco to obtain default judgment against Siteberg. He then caused Atco to obtain a garnishee order on the basis of that judgment. That order was served on Siteberg's bank. As a result, Siteberg's bank paid the amount claimed by Atco - totalling approximately $59,000 - into an account controlled by Mr Maples and Atco. 4 It transpired that Mr Maples had no authority to commence proceedings on behalf of Atco. Moreover, the claim in the Camden Local Court was itself incoherent. It was expressed in the following terms: "The Plaintiff sues the Defendant for loss of money due to lack of supervision and loss of contracts for the Department of Commerce." 5 When Siteberg found out what Mr Maples had done it, on 20 August 2009, filed an application in the Camden Local Court to set aside the default judgment and garnishee order and sought an order for summary judgment. At the same time, it commenced proceedings in this Court claiming urgent injunctive relief to restrain Mr Maples from dealing with the money which had been the subject of the garnishee order. 6 On 20 August 2009, Rein J granted an ex parte injunction in the terms sought by Siteberg. That injunction was continued on a number of occasions. 7 In the meantime, on 15 September 2009, the Camden Local Court granted the orders sought by Siteberg and ordered that Mr Maples pay Siteberg's costs on an indemnity basis. 8 On 22 September 2009, Mr Maples repaid the money he had obtained from Siteberg and, on 13 November 2009, Siteberg made an application that the costs of these proceedings be determined on an indemnity basis and be awarded on a gross sum basis pursuant to s98(4)(c) of the Civil Procedure Act 2005 (NSW). 9 On 13 November 2009 Rein J relevantly made the following orders: "1. The first defendant to pay the plaintiff's costs of these proceedings on the indemnity basis. ("costs judgment"). 2. Leave be granted to the plaintiff to enter the costs judgment forthwith. 3. The first defendant file and serve the disclosure affidavit, the subject of orders 9,9.1 and 9.2 made by Justice Rein on 26 August 2009, as reinstated and varied by Registrar Walton by consent on 22 September 2009, on or before Friday 17 December 2009. 4. The summons be otherwise dismissed. 5. A charging order in favour of the plaintiff to apply to the following interests a. The Berrima District Credit Union account of Stever Investment Trust Readiaccess Cheque Account Number 20038. b. The Berrima District Credit Union account of Maples Family Trust Account Number 105222. 6. The first defendant, his servants, agents or assigns be restrained from dealing with the security interests otherwise than in accordance with:- a. the plaintiff's direction b. until further order of this Honourable Court; or c. until the costs judgment against the first defendant is satisfied in full. 7. The plaintiff's solicitor serve on the defendant by 27 November 2009 an itemised bill. 8. The defendant to respond to the plaintiff's solicitor by 4 December 2009. 9. If no agreement has been reached between the parties as to the amount to be paid by the defendant to the plaintiff by 11 December 2009, the defendant to file and serve the disclosure affidavit in accordance with order 3 of this order by 17 December 2009. 10. This matter be stood over to the Duty Judge on 18 December 2009 at 10 am." 10 On 12 November 2009, in accordance with those orders, Mr Nash, Siteberg's solicitor, swore and served an affidavit exhibiting a Bill of Costs that had been prepared by a cost consultant. 11 The parties were unable to reach agreement on the amount to be paid by the Defendant to the Plaintiff. Consequently, on 3 February 2010, Mr Maples filed an affidavit disclosing his assets. The assets which he disclosed were:

(a) plant and equipment and tools estimated to be worth $60,000; (b) units in a family trust having total assets of $500; (c) trade debtors of $144,000; (d) shares in Atco Castlereagh Building Construction Pty Ltd and Lakeline Properties NSW Pty Ltd, the value of which is not disclosed. 12 Mr Maples did not disclose that he is the sole shareholder of Sandhills Village, which apparently owns the Farmers Home Hotel at Matong. Mr Feerick, the solicitor representing Mr Maples, submits that I should infer from the evidence that the shares in Sandhills Village were not disclosed because that company was deregistered at the time the affidavit was made. No evidence was lead at the hearing before me concerning the value of Sandhills Village's interests in the hotel. 13 On 3 December 2009 Siteberg filed a Motion seeking an order in terms of its application on 13 November 2009. It is that Motion which is the subject of this judgment. 14 At the hearing of this matter on 20 April 2010 Siteberg also sought two additional orders. One was to the effect that the orders of Rein J on 13 November 2009 be varied by inserting at the end of paragraph 5 the following additional subparagraph: "c. The first defendant's shareholding in Sandhills Village Pty Ltd ACN 115 221 700."

That order was not opposed and I made it on 20 April 2010. 15 Siteberg also sought what, on its face, appeared to be an interlocutory order restraining Mr Maples from taking any action which might cause the Farmers Home Hotel to be disposed of, mortaged or otherwise encumbered. I reserved judgment in relation to that order. 16 As a preliminary matter, Mr Feerick submitted that it was not now open to Siteberg to seek an order pursuant to s98(4)(c) of the Civil Procedure Act. He submitted that to do so was inconsistent with the judgment given by Rein J on 13 November 2009 and, in particular, with the following passage (paragraph 6): "No intelligible submissions were put in opposition to the orders for indemnity costs sought by Siteberg, however, Mr Maples I think did demonstrate that, contrary to the contention of Siteberg that a gross sum should be awarded pursuant to s98(4) of the Supreme Court Act, on the limited evidence available, it is not appropriate for the Court to make such an order. This means Siteberg will now have to have its costs assessed. " [emphasis added] 17 I do not accept this submission. All His Honour was saying in this passage was that, as things stood on 13 November 2009, Siteberg would have to have its costs assessed. However, His Honour went on to make orders which were only consistent with the fact that he was reserving to Siteberg the right to make a further application for costs on a gross sum basis. That is clearly the purpose of paragraphs 7 to 10 of the orders made on 13 November 2009. 18 Similarly, I do not regard paragraph 4 of the orders made by Rein J as disposing of the matter. When read in context, I think what His Honour did by that paragraph was to dismiss the proceedings other than in relation to the outstanding question concerning costs. 19 The question whether a gross sum costs order should be made raises two issues. The first is whether the nature of the case makes it appropriate for a gross sum order to be made. The second is whether the Court has sufficient materials available to it "to make an order which is fair and just between the parties" (per Clarke JA in Wentworth v Wentworth (Court of Appeal, 21 February 1996) unreported at [97]) - or, to put the point another way, whether it has sufficient material to reach an estimate of costs which is logical, fair and reasonable: Beach Petroleum NL v Johnson (No 2) (1995) at 57 FCR 119 at 123; Hadid v Lenfest Communications Inc [2000] FCA 628, at [27]. 20 Often, applications for gross sum costs orders are made in large and complicated cases where the costs of assessment are likely to be very substantial and time consuming. Some of the cases I was taken to fall into that category. Idoport v NAB [2005] NSWSC 1273 is certainly an example. So, I think, is Hamod v State of New South Wales (No 13) [2009] NSWSC 756. 21 However, as Giles JA pointed out in Harrison v Shipp (2002) 54 NSWLR 738 at [21]: "The power conferred by Part 52A, r 6(2) [which is in substantially the same terms as s98(4)(c)] is not confined, and may be exercised whenever the circumstances warrant its exercise."

See also Jacobson J in Sony Entertainment v Smith (2005) 215 ALR 788 at [189]. 22 The Courts have considered a number of factors in deciding whether to make a gross sum costs order. They include the conduct of the Defendant in connection with the proceedings (Sony Entertainment v Smith (2005) 215 ALR 788); whether the party obliged to pay the costs order is able to meet a liability which is likely to result from assessment (Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119; Hadid v Lenfest Communications Inc {2000] FCA 628); whether the costs of assessment are disproportionate to the amount of the costs that are recoverable (Julien v Secretary of Department of Employment and Workplace Relations (No. 2) [2009] FCA 1259 at [12] per Spender J) and the related question of whether the costs of the proceedings are disproportionate to the amount claimed (Kiwi Munchies Pty Limited v Stern [2006] NSWSC 433 at [17] per McClellan CJ at [6]). 23 There was a dispute between the parties about whether the second of the factors that I have mentioned (the ability to meet the cost order) was present in this case. Mr Feerick points to the affidavit of Mr Maples disclosing his assets and the charging order granted by Rein J on 13 November 2009 as evidence that it was not. It is not possible on the material before me to form a view on this question. Mr Feerick also says that I should place little weight on the third factor (disproportionate costs). He submits that the costs of assessment are not that large and that a substantial part of them has already been incurred in preparing the Bill of Costs. 24 In my opinion, however, this is an appropriate case for a gross sum costs order. That is so whether or not Mr Maples is in a position to satisfy the order. Mr Maples' conduct in obtaining the garnishee order in the Camden Local Court was, to say the very least, unsatisfactory. It put Siteberg in the position where it had no choice but to commence these proceedings. It should never have been put in that position. On any view, the costs of these proceedings were significant - and very significant having regard the amount that Siteberg was seeking to protect. In those circumstances, I do not think that it should be put to the further expense, delay and aggravation of having its costs assessed if this Court is in a position to award a gross sum. 25 It is clear that the assessment of a gross sum is not to proceed as if it were an assessment of costs. The Court may take a broad brush approach provided it is logical, fair and reasonable: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 at 123; Hadid v Lenfest Communications Inc {2000] FCA 628 at [27]. As Giles JA said in Harrison v Shipp (2002) NSWLR 738 at [39]: "The hearing of the Notice of Motion should not become a process of taxation or assessment of costs. It is nonetheless relevant to consider what might be determined as a fair and reasonable amount of Counsels' fees if there were an assessment by a costs assessor."

The same point, no doubt, applies to solicitors fees and disbursements. 26 Mr Benson relies on the Bill of Costs exhibited to the affidavit of Mr Nash sworn on 12 November 2009 as providing a reasonable basis for the assessment of a gross sum. 27 Mr Feerick challenges that Bill of Costs on a number of grounds. First, he points out that the cost consultant, in preparing the Bill, has used a rate of $350 per hour for attendances whereas the costs agreement between Siteberg and its solicitors provides for a rate of $300 per hour. Second, Mr Feerick identifies at least one item on the Bill which relates to the Camden Local Court proceedings. He says that there may be others and that the example he refers to casts doubt on the reliability of the Bill of Costs as a whole. Third, he points to a number of items - such as receiving documents and perusing accounts - which do not appear to be reasonable. Fourth, he points to a number of fees which are included on the Bill which Mr Nash conceded in cross-examination were not items for which his firm would normally charge its clients. 28 There is no doubt that the assessment of a gross sum has been complicated by the approach that Siteberg has taken to the recovery of costs in this case. Normally, in a case such as this, the cross claimant would identify the costs charged to it and seek to lead evidence that those costs were reasonable. However, in this case, Siteberg's solicitors have agreed not to issue a bill unless Siteberg is successful and it appears from evidence given by Mr Nash that Siteberg's solicitors have also agreed to charge only the amount recovered by it. As a consequence, there do not appear to be any accounts at least in respect of solicitors fees which can provide a starting point for the assessment of a gross sum. 29 Nonetheless, in my opinion, the draft Bill of Costs does provide a reasonable basis for assessing Siteberg's costs which is logical, fair and reasonable, albeit in a broad brush way. Generally speaking, the Bill of Costs sets out a reasonable description of the work done in connection with these proceedings and amounts that are claimed in respect of them. The total amount identified in the Bill of Costs is $96,352.52. 30 In my opinion, that amount needs to be adjusted in several ways. First, there is a claim for anticipated fees of $6,150. I do not think that amount can be included. Second, there is a claim for GST. GST is specifically identified in relation to solicitors fees and is presumably included in the gross amount claimed for counsel fees. After the hearing, I invited the parties to provide me with written submissions in relation to GST. I have not been given any reason for not deducting GST in accordance with the principles identified by the Court of Appeal in Gagne Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413. The total amount of GST claimed by Siteberg is in the order of $7,000. Third, I think that the attendances charged at an hourly rate ought to be charged at the rate set out in the costs agreement - that is $300 per hour, not the amount set out in the Bill of Costs. Fourth, I think that the disbursement of $500 for photocopying should not be included on the basis of Mr Nash's evidence that Siteberg's solicitors would not normally charge its clients for photocopying. Finally, I think that the solicitors' costs component of the Bill of Costs should be reduced by approximately a further 10% to allow for unreasonable items and the possibility of duplication of the costs claimed in the Camden Local Court proceedings. Taking into account these matters, I think a reasonable gross sum is $70,000. This figure is not the result of a precise calculation. Rather, it is a figure which in my opinion fairly reflects the matters that I have referred to. 31 In addition, Mr Maples should pay Siteberg's costs of this application. 32 That leaves the second order sought by Siteberg (concerning the Farmers Home Hotel). 33 I have difficulty in understanding why, at this stage of the proceedings, an interlocutory order should be made. I doubt that it is appropriate to make what is, in effect, an interlocutory freezing order in support of a charging order that has been granted on a final basis. However, I do not think it is necessary for me to resolve that question finally. In my opinion, there is not sufficient evidence before me that there is an imminent risk that Mr Maples will cause Sandhills Village to dispose of any interest in the Farmers Home Hotel. Moreover, I think that the order that I am prepared to make in relation to a gross sum costs order provides Siteberg with adequate protection against the possibility that Mr Maples will cause Sandhills Village or any other company of which he is the shareholder to dissipate its assets, since Siteberg may take steps to enforce that order immediately. For those reasons, I decline to make the order concerning the Farmers Home Hotel.

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.