State of New South Wales v Hamod & Ors [2011] NSWCA 376 | Case summary

Court of Appeal (NSW)|2011-07-20|Before: Beazley JA, Giles JA, Whealy JA, Young J, Harrison J

The application for leave to appeal 30In its draft notice of appeal the State proposed the sole ground - "1. That his Honour Justice Harrison erred in determining that a set-off of the costs orders between the applicant (the first defendant in the proceedings below) and the respondent (the first plaintiff in the proceedings below) was not available." 31The State sought that "the orders made by Harrison J on 2 October 2009" be set aside, which should be understood as the two declarations, and that this Court "make an order of set-off of the costs orders between the applicant (the plaintiff in the proceedings below) and the first respondent (the defendant in the proceedings below)". It also sought that "[t]he costs appeal proceedings ... be permanently stayed"; this is odd, since the State was appealing from the Review Panel's assessment of costs and the amount of costs had to be known for a set-off. 32Mr Hamod also applied for leave to appeal from Harrison J's judgment of 2 October 2009. He did not seek to appeal against the declaration as to set-off, but against the declaration of entitlement to a lien which he saw as adverse to his costs dispute with Mr Diab. His application for leave to appeal was heard immediately after the hearing of the present application for leave to appeal. It was dismissed: Anthony Hamod v Simon Diab [2011] NSWCA 205. 33In the State's application for leave to appeal, Mr Hamod at first said that he supported the State's contention that there should be a set-off, and then rather Delphically that he "want[ed] to have the cards fall where they lay" [sic]. He put no submissions, and I understand him to have taken a submitting stance. As earlier noted, Mr Diab was the effective opponent to a set-off.

Leave to appeal 34Mr Hamod is impecunious. Any set-off is unlikely to make a practical difference to his position. However, whether or not there is a set-off is important to Mr Diab, since the costs payable by the State to Mr Hamod are likely to be the only source of recovery of any costs to which he is entitled for his legal services. It is also important to the State for the financial bottom line. While as yet not finally determined, the amount involved has been assessed at over $270,000 and is likely to be a significant amount. There is some arguable basis for an appeal. Leave to appeal should be granted.

The nature of the appeal 35Harrison J did not specifically describe his decision of the issue he identified as the exercise of a discretion; indeed, his Honour's description of the issue spoke of the State's "claimed right of set-off" (italics added). However, in describing the State's submissions his Honour cited from Wentworth v Wentworth (12 December 1994, unreported), in which Young J referred to the Court's discretion to allow a set-off of costs orders made in the one set of proceedings and to "an inherent power to direct set-off vested in the Judge because of the Judge's power over the suitors in the Court." 36The set-off was also considered by White J in Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560; (2006) 230 ALR 184. (The case was appealed, but this point was not considered: Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374.) White J said - "68 Notwithstanding ABD's submissions to the contrary, set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings. The jurisdiction is explained in many cases dealing with claims by solicitors to assert a lien over a judgment for costs in favour of their client where the opposite party has obtained judgment against their client in the same or in other proceedings ( Edwards v Hope (1885) 14 QBD 922 at 926-927; Reid v Cupper [1915] 2 KB 147; Puddephatt v Leith (No 2) [1916] 2 Ch 168 especially at 173-174; Re a Debtor No 21 of 1950 [1951] 1 Ch 612 at 617-618). 69 This jurisdiction is accurately described in R Derham, The Law of Set-Off , 3 ed, 2003, at paras 2.71-2.83. Although in Edwards v Hope , Brett MR and Bowen LJ (at 926 and 927) described the jurisdiction as an equitable jurisdiction, in truth, it was not a creature of the Court of Chancery, but was applied by all courts. Indeed, it was applied more liberally in the Courts of law than in the Court of Chancery owing to Lord Eldon's care that solicitors should not be deprived of liens for their costs ( Puddephatt v Leith (No 2) at 174-179). 70 Dr Derham says at para 2.80 that: ' The basis of the set-off is the general jurisdiction of the Court over the suitors in it ', citing Mitchell v Oldfield (1791) 4 Term Rep 123; 100 ER 929. There, in a case where each party had recovered judgment against the other for separate debts in separate actions, Lord Kenyon CJ stated that the case did not depend on the statutes of set-off, but the general jurisdiction of the Court over the suitors in it." 37The State submitted that Harrison J had exercised the discretionary power conferred by s 98 of the Civil Procedure Act 2005 to determine by whom, to whom and to what extent costs were to be paid (s 98(1)(a), (b)), alternatively an inherent power of the Court to permit set-off of costs. Mr Diab submitted that his Honour had exercised a discretionary power under the general jurisdiction described in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd . On either basis it was common ground on appeal that his Honour had come to his decision in the exercise of a discretionary power. 38Accordingly, it is necessary that the State establish on appeal error of the kind described in House v The King (1936) 55 CLR 549. It is not sufficient that this Court might have come to a different exercise of discretion. 39The nature of the appeal in a case such as the present was described by Heydon JA, with whom Sheller JA and Studdert AJA agreed, in Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 2001 at [45] - "As a result, Garling DCJ had to make a discretionary decision on a matter of practice and procedure - an extremely important one, having potentially serious consequences for the plaintiff, but a discretionary decision on a matter of practice and procedure nonetheless. Any attack on decisions of that character must fail unless it can be demonstrated that the decision-maker: (a) made an error of legal principle, (b) made a material error of fact, (c) took into account some irrelevant matter, (d) failed to take into account, or gave insufficient weight to, some relevant matter, or (e) arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning. Even though this Court might conclude that it would have exercised the discretion differently if the discretion had been conferred on it in the first instance - might have adjourned the matter so as to permit the defendants to consider the late-supplied particulars, or might have held the plaintiff to the old particulars, or might have fixed one more "final" date for outstanding matters to be completed by - any such conclusion would be immaterial. The law committed the exercise of the discretion to Garling DCJ. The law permits interference with his exercise of the discretion in only the limited circumstances just described. See House v R (1936) 55 CLR 499 at 504-505; Lovell v Lovell (1950) 81 CLR 513 at 518-519 and 532-533; Australian Coal and Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621 at 627. These principles are applied to a wide range of discretionary judgments ... ".

The State's submissions 40The State submitted that the discretion was to be exercised to prevent injustice, and that justice required that the costs orders should be set off one against the other. It recognised that Simpson J had had in mind that a costs order might be made in favour of the State, against which the costs with which she was concerned would ordinarily be set off, but submitted that there had been a change of circumstances in that, instead of her Honour's contemplation of "an unknown quantity in terms of when and if there would be" a contrary costs order, when Harrison J made his decision "all that was known". In the circumstances as then known, it said, set-off should have been permitted "so as not to result in an absurd outcome". The absurd outcome was that, despite succeeding in the proceedings, the State would be out of pocket not only as to the costs ordered to be paid to it which would not be recovered from the impecunious Mr Hamod (and an impecunious Hamock), but also as to the costs payable to Mr Hamod. This appears to have assumed that the costs payable to Mr Hamod would go to Mr Diab, or otherwise end up beyond recovery by enforcement of the costs order in favour of the State, on which assumption I am content to proceed. 41The State also made particular complaints concerning the reasons of Harrison J. They were not articulated with particular attention to identification of error within House v The King principles, or with precision. My understanding of the complaints is that it was submitted that his Honour erred in the exercise of the discretion because - (i) He gave weight in [18] to the fact that Simpson J contemplated the possibility of a contrary costs order, when he should have considered the circumstance then known of an actual contrary costs order. (ii) He said in [19] that neither Mr Hamod's impecuniosity nor his own decision and costs orders in the proceedings were factors, when they were because the State had succeeded in the proceedings and had obtained an order for costs which Mr Hamod's impecuniosity made nugatory unless there was a set-off. (iii) He said in [19] that Simpson J's order had not been made based on unreasonable assumptions about the future or reasonable assumptions which turned out to be wrong, when there had been an assumption that any contrary costs order would not be known for a long time but the assumption had turned out to be wrong and it was now known that there was a contrary costs order. (iv) He said in [20] that the Court of Appeal saw no reason to interfere with Simpson J's decision and it was not open to review, and thereby took into account an irrelevant consideration because the Court of Appeal had refused leave to appeal from an interlocutory decision and "[d]idn't foreclose anything". (v) He referred in [21] to the spectre of what would amount to inconsistent decisions on identical facts, when the facts were different because the contrary costs order was now a reality. (vi) He said in [23] that the delays in the assessment process were considerably contributed to by the State, and thereby took into account an irrelevant consideration because the State was entitled to contest the assessment of costs and was not said to have been acting unreasonably in doing so. (vii) He had regard in [24] to the justifications of discreteness and future length of the proceedings for the costs order made by Simpson J, when he should have considered the circumstances then known that the assessment of costs had not concluded and the proceedings had concluded. 42The thrust of the submissions was that his Honour should have confined himself to the just result as matters then stood, uninfluenced by the costs ordered by Simpson J having been assessable and payable forthwith; and that any result other than one of set-off was not reasonably open to his Honour and there had been error within House v The King principles in arriving at a wholly unreasonable or unjust result.

Consideration 43Two matters should be mentioned and put aside. 44First, Harrison J's separate question and declaration extended to the Court of Appeal's costs order of 25 July 2007, as well as Simpson J's costs order. The costs ordered by the Court of Appeal were not made payable forthwith; thus that basis for no set-off, which permeated his Honour's reasons, did not apply to them. The State did not take this point. Its submissions, and those of Mr Diab, did not distinguish between the two costs orders, and it was not suggested that there should have been, and should be, set-off of the costs payable to Mr Hamod pursuant to the Court of Appeal's order even if there was no set-off of the costs payable to Mr Hamod pursuant to Simpson J's order. 45Secondly, it was not suggested that Mr Diab's lien over the costs payable to Mr Hamod was material to whether there should be a set-off of costs. In earlier times it was otherwise, but no longer, see in re A Debtor, No 21 of 1950 (No 2) Ex parte The Petitioning Creditors v The Debtor. Mr Diab's concession before Harrison J, that he had no greater entitlement to payment from the State pursuant to the lien than Mr Hamod would have had absent the lien, was undisturbed. 46The central contention that Harrison J should have confined himself to the just result as matters then stood is unsound. It was a relevant consideration that it had been ordered that the costs payable to Mr Hamod be assessed and payable forthwith, even though there had not been assessment and payment by the time his Honour made a contrary costs order, particularly when the first order had been made with contemplation that there might later be a contrary costs order. In the discretionary control over the parties' costs entitlements, regard could be had to the occasion for and nature of the first costs order. 47The word "forthwith" in the order made by Simpson J did not require that the costs be assessed and paid at any particular time, or with any special promptness. "Forthwith" meant only that the costs were payable prior to the conclusion of the proceedings. Any costs order carries with it that the costs are to be paid within a reasonable time of any agreement as to the amount of the costs payable pursuant to the order, or if there is no agreement, within a reasonable time of finalisation of the assessment process. That was the case for the order made by her Honour, but "forthwith" did not add to it. 48In this regard, a party is entitled to exercise the review and/or appeal rights provided under the Legal Profession Act 2004, ss 373-383 and/or ss 384-389. If there is no application for review of the assessment, the costs must be paid within a reasonable time after the result of the assessment has been notified; and if a party exercises the review or appeal rights under the legislation, the costs must be paid within a reasonable time after such review or appeal has been determined. In the present case the State exercised both its right of review of the initial assessment and its right of appeal therefrom, as it was entitled to do. The order that the costs be assessable and payable forthwith did not preclude it from doing so. 49If Harrison J had attributed more to the order than that the costs were payable prior to the conclusion of the proceedings, there may have been an error. But I do not think that he did. His Honour emphasised "forthwith" in [22], but not as an obligation of prompt payment; rather, as an indication of an intention that payment would occur before the proceedings concluded and any "right" of set-off arose, as was plainly in the contemplation of Simpson J because of the distance to go in the proceedings and Mr Hamod's limited resources. It is apparent that the intention behind Simpson J's order was to restore to Mr Hamod the resources he had outlaid in the discovery proceedings, and to that extent provide him with funds for the continuation of the proceedings. 50Even if there was not delay or the appearance of delay by the State, as his Honour found at [31], the contemplation in Simpson J's order was relevant to justice between the parties when it came to considering set-off after the contrary costs order was made. It is false reasoning to assert a change in circumstances. The circumstances of Simpson J's order remained the same. The circumstances of Harrison J's consideration of set-off were (obviously enough) different circumstances, one of which was the fact of Simpson J's order and the occasion for and nature of the order. That is a difference, not a change. True it is that Simpson J's intention had not been fulfilled, but that did not make of no relevance the fact of her Honour's order and the occasion for and nature of the order. 51The preceding paragraphs dispose of at least particular complaints (i), (iii) and (vii). As to the other particular complaints - (i) This misunderstands his Honour's reasons. His Honour did not say that Mr Hamod's impecuniosity and his own decision and costs orders were not factors in his set-off decision, but that they were not unanticipated or unexpected events when Simpson J made her order. This was correct, and was material to the regard which might be had to her Honour's order. (iv) Foreclosure did not arise when the State did not suggest that Simpson J's discretion had miscarried. (v) At a high level of generality, it could be seen as inconsistency if Simpson J ordered that costs be payable to Mr Hamod forthwith notwithstanding that there might be a later order that Mr Hamod pay costs to the State, but Harrison J ordered a set-off. (vi) That the State had not acted unreasonably did not make irrelevant, in deciding what was just between the parties, that there had been delays to which the State had contributed. 52The matters to which Harrison J referred were of varying significance to the exercise of his discretion, but the weight to be given to each was a matter for his Honour. The conclusion to which his Honour came was not so unreasonable or unjust as to suggest that he had erred in principle, or in the matters to which he had regard or in the weight he gave to relevant matters. This may be tested as follows. Had the costs payable to Mr Hamod been assessed and paid, there would have been no question of set-off when the contrary order was later made, but it could not properly be said that there had been injustice between the parties because the State was and would be out of pocket as to both sets of costs. The costs had not been assessed and paid and there was a question of set-off, but a result whereby the State would be out of pocket as to both sets of costs did not suddenly become an injustice between the parties. 53It is not material that another judge, or this Court, might have exercised the discretion differently. In my opinion, error in the exercise of the discretion has not been established.

Orders 54I propose the orders -

Grant leave to appeal and direct that the notice of appeal be filed within seven days.
Appeal dismissed with costs, in the case of Mr Hamod the costs to be on a submitting basis. 55WHEALY JA: I agree with Giles JA.

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The proceedings 5The Hamod parties commenced the proceedings in the Federal Court in 2000; they were transferred to the Supreme Court in 2003. As the proceedings were ultimately framed, they alleged against the State as first defendant false arrest, false imprisonment and malicious prosecution by reason of Mr Hamod's arrest in January 1995 and prosecution thereafter for offences in connection with a certificate purporting to represent a quantity of platinum held by the Union Bank of Switzerland; injurious falsehood by reason of statements made by the police in connection with the arrest; and that certain goods had been wrongly detained by the police after the prosecution had concluded. Other allegations were made against a second defendant, which need not be described. 6The proceedings were heard by Harrison J over a number of days in June and September 2008, with final submissions on 21 October 2008. His Honour gave the substantive judgment on 3 April 2009: Hamod v State of New South Wales (No 12) [2009] NSWSC 242. He concluded that all claims of the Hamod parties failed, and gave verdicts for the State and the second defendant. He subsequently made gross sum costs orders against the Hamod parties. 7The Hamod parties appealed to this Court, including against the gross sum costs orders. The appeal was heard immediately prior to the hearing of this application for leave to appeal. In a judgment given contemporaneously with this judgment, the appeal is dismissed: Hamod v State of New South Wales [2011] NSWCA 375. The costs orders against the Hamod parties therefore remain in place.

The costs order in favour of Mr Hamod 8In preparation of the proceedings for hearing a dispute arose between Mr Hamod and the State concerning discovery of documents. Mr Hamod, but not Hamock, applied by notice of motion for an order that the State give discovery of a number of categories of documents. The notice of motion was heard by Harrison AsJ, who in May 2007 ordered that the State give discovery of the documents: Hamod v State of New South Wales [2007] NSWSC 425. 9An appeal from the order of Harrison AsJ was heard by Simpson J. Her Honour gave judgment on 13 June 2007, dismissing the appeal with costs. 10On delivery of the judgment Mr Hamod applied for an order that the costs be payable forthwith. The occasion for such an order, and an understanding of its nature, lie in UCPR 47.7. It is in the following terms - " 42.7 Interlocutory applications and reserved costs (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings." 11Unless an order otherwise was made pursuant to r 47.7(2), the costs ordered to be paid by the State to Mr Hamod on 13 June 2007 would not become payable until the conclusion of the proceedings. An order that they be payable forthwith would be the expression of an order otherwise, whereby Mr Hamod did not have to await the conclusion of the proceedings before the costs became payable. 12Simpson J gave judgment on the application on 6 July 2007. Her Honour ordered "that the costs be assessed and payable forthwith". 13Her Honour did not accept that the State's response to the discovery sought by Mr Hamod was unreasonable "in the sense that it calls for sanction in the form of an immediate payment of the costs order" (at [11]). Her reasons for the order were as follows, the first sentence reflecting that counsel for Mr Hamod had disclaimed reliance on the costs relating to a separately identifiable component of the proceedings - "12 I am, however, troubled by the plaintiffs' abandonment of discreteness as a basis for such an order. In my opinion, this is a classic instance of a discrete issue having arisen and being determined adversely to the first defendant. Further, and as I have already indicated, the substantive proceedings have some distance to go before they are likely to be resolved. The plaintiffs have been put to considerable expense in a proceeding in which they are pitted against the resources of State. It is not difficult to infer, from examination of the pleadings, and the historical matters referred to in the appeal, to infer that the plaintiffs' resources are limited. Nor could it be suggested that an order of the kind now sought would work any hardship to the first defendant. 13 Whatever the outcome of the substantive proceedings, the first defendant will be liable to the plaintiffs for the costs of the discovery application. I can see no reason why it should not be required to make that payment forthwith. I recognise that, should the first defendant ultimately prevail, there may be some risk that its recovery of costs that could be then expected to be ordered against the plaintiffs would not be recoverable [sic], and that, in the ordinary course, the costs of the discovery application would be offset against whatever the first defendant was entitled to. 14 However, in the end, I am of the view that the interests of justice are best served by making an order of the kind sought on behalf of the plaintiffs." 14In the judgment of 13 June 2007 her Honour had said at [2] that "[t]he present proceedings concern only the first plaintiff, Mr Hamod, and the first defendant, the State of NSW". This was correct since, perhaps oddly, the applicant for discovery was Mr Hamod alone. In the judgment of 6 July 2007 her Honour referred to the order then made as an order that the State pay "the plaintiffs'" costs, and otherwise spoke of the plaintiffs in the plural. This was a slip, and the relevant party appears thereafter to have been regarded as Mr Hamod alone. 15The State applied for leave to appeal from the dismissal of the appeal from Harrison AsJ, and also from the order that the costs be assessed and payable forthwith. On 25 July 2007 the application was dismissed with costs: State of New South Wales v Anthony Hamod [2007] NSWCA 186. It was not ordered that the costs of the application be payable forthwith.

The costs order in favour of the State 16Following delivery by Harrison J of the substantive judgment on 3 April 2009, the State and the other defendant each applied for an order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 for the payment of its costs as a specified gross sum instead of assessed costs. His Honour received evidence and written submissions, and gave judgment on 5 August 2009: Hamod v State of New South Wales (No 13) [2009] NSWSC 756. He relevantly ordered that the Hamod parties pay the State's costs in the proceedings specified as a gross sum of $1,475,765. 17His Honour noted at [7] a number of costs orders in favour of the Hamod parties, including the order of Simpson J made on 13 June 2007 but without noting the subsequent order that those costs be assessed and payable forthwith. In the concluding [37] of his reasons he said - "The orders that I have made are intended to finalise the calculation of the defendants' costs entitlements against the plaintiffs. The orders leave on foot the plaintiffs' entitlement to costs in accordance with the costs orders made in their favour, to which I have earlier referred. I note in this respect, for more abundant caution, that neither defendant promoted a gross sum calculation that took account of any such costs orders favouring the plaintiffs, so that they remain to be deducted from, or set off against, the respective gross sum costs amounts in due course when assessed or agreed."

The set-off decision 18Mr Diab had been the solicitor for the Hamod parties for a considerable time, including for the purposes of the dispute over discovery of documents. His retainer was terminated at some time in 2008. He and the Hamod parties fell into dispute over costs. 19Before the termination of the retainer, Mr Diab had acted in obtaining an assessment of the costs payable pursuant to the order of Simpson J and in the review of the assessment by a Review Panel. The costs were assessed at $273,660.34. The State then appealed to the District Court from the Review Panel pursuant to s 384 of the Legal Profession Act 2004 ("the costs proceedings"). 20In October 2008 Mr Diab applied to be joined in the costs proceedings and for leave to file a cross-claim, and for the transfer of those proceedings to the Supreme Court, on the ground that he had a lien over the costs payable by the State. On 9 December 2009 Goldring DCJ made the orders. 21Mr Diab filed a cross-claim in the costs proceedings, claiming a declaration that he was entitled to the lien and "has an equitable charge over the Costs" and an order that the State pay the costs to him. Mr Hamod filed a defence to the cross-claim disputing any entitlement to a lien. Although not apparent from the defence, from the transcript of the hearing before Goldring DCJ he also disputed the amount of costs payable to Mr Diab, possibly that Mr Diab was entitled to any costs at all. 22At this point there is some procedural obscurity, and a degree of irregularity. Apparently because his Honour had heard the principal proceedings between the Hamod parties and the State, the costs proceedings came before Harrison J. Directions had been or were given for service of written submissions. There was a hearing before his Honour on 25 September 2009, described in the judgment subsequently given as a determination of Mr Diab's claim to a lien. As will appear, the essential determination was of the State's claim to set off the costs payable by it to Mr Hamod against the costs payable by Mr Hamod to it; it seems that this claim was not made in any formal process, but through the written submissions. 23His Honour gave judgment on 2 October 2009: State of New South Wales v Hamod [2009] NSWSC 1042. He recorded at [1] that the State opposed Mr Diab's entitlement to a lien "upon the basis that following his loss in the principal proceedings Mr Hamod was ordered to pay it $1,475,765 in costs" and "it can set off costs owed against costs owing", and said that "[t]he issue is effectively whether the State's claimed right of set-off trumps Simpson J's order that the costs should be paid forthwith". He said at [8] that Mr Hamod contended that Mr Diab had acted negligently and was not entitled to payment for his legal services and the costs should be paid to him (Mr Hamod), but that Mr Hamod "appeared in a contradictory way to support the State's contention that it had the right of set-off that it claimed". 24Harrison J went at some length to the reasons of Simpson J of 6 July 2007. His Honour then summarised the course of events as to the costs assessment and the appeals leading to Mr Diab's cross-claim. He described Mr Diab's submissions, in the course thereof noting that Mr Diab "conceded that he had no greater entitlement to payment from the State pursuant to the lien than Mr Hamod would have had absent the lien", and described the State's submissions. 25His Honour said at [16] that he did not perceive a genuine dispute that, in accordance with the principles in Firth v Centrelink [20002] NSWSC 564: (2002) 55 NSWLR 451 at [33]-[44] to which he had earlier referred, Mr Diab would be entitled to the lien he asserted "were it not for the question of set-off that the State propounds". He said that "[t]he issue remained throughout the one identified by me in [1] above". 26In resolving that issue in favour of Mr Diab and consequently upholding Mr Diab's claim to a lien, his Honour gave a collection of reasons. For the consideration which follows, an extensive extract from his Honour's reasons should be set out - "18 First, the discretion exercised by Simpson J was exercised with a full and articulated knowledge of what might occur. Her Honour was aware that the State might become entitled to its own costs order and presumably appreciated that if it were entirely successful in the proceedings it would become entitled to an award of costs in a substantial amount. The prospect that the State would be denied the ability to set off these costs if paid forthwith must also have been apparent. Notwithstanding these matters, her Honour decided to order that costs were to be assessed and paid forthwith. In terms of the applicable rule, her Honour "otherwise ordered". 19 Secondly, nothing that might have been in her Honour's reasonable contemplation at the time that she made the order has turned out to be different. This is not a case of a decision that in retrospect sits uncomfortably with later unanticipated or unexpected events that render it meaningless or unfair or unjust. Mr Hamod's impecuniosity is not such a factor. Nor is my decision in the principal proceedings or my orders as to costs. The drawn out and still incomplete costs assessment process is by no means in such a category. A successful challenge in the Court of Appeal to her Honour's order might have been such a circumstance but that did not occur. The State has not identified and cannot point to a single supervening event or circumstance that makes her Honour's order futile or nugatory or glaringly wrong. It was neither made based upon unreasonable assumptions about the future nor reasonable assumptions that turned out to be wrong. 20 Thirdly, there is no suggestion that her Honour's discretion somehow miscarried by reason of a failure to take account of some relevant factor or the consideration of some irrelevant matter. In any event, since the Court of Appeal saw no reason to interfere with her Honour's decision it is not open to the State or to me now to review it in such light. 21 Fourthly, any different approach by me would raise the spectre of what would amount to inconsistent decisions by two judges at the same level on identical facts. The only basis proffered by the State for a different order is that the anticipated costs order in its favour has become a reality. However, that is in my opinion an illegitimate attempt to promote to some greater level of significance what is known as a fact over what her Honour correctly appreciated would in all reasonable likelihood become a fact. It would be highly unsatisfactory to permit a second judge to revisit the same facts for no good purpose other than the inconvenience of the order to one of the parties. 22 Fifthly, it is not correct to say that the maintenance of her Honour's order would produce an absurd or unjust result. This Court retains a discretion to order a set-off in an appropriate case. The very notion of an exercisable discretion by definition permits of the notion of more than one outcome from its exercise. It is not the case that a failure to order a set-off that produces a loss to one party thereby renders the exercise of the discretion invalid. Such a contention forecloses on the very essence of a discretion in the first place. The decision of Harman J [ In re A Debtor, No 21 of 1950 (No 2) Ex parte The Petitioning Creditors v The Debtor (1951) 1 Ch 612] is distinguishable on at least two grounds. The first is that in the present case there is an order of long standing that the costs owing or due were to be paid forthwith . We are not concerned with competing entitlements for costs arising in circumstances where the terms of the respective orders give no particular weight to one over the other. The second is that her Honour's order specifically contemplated that the costs would, or might, not be set off. She took this very possibility into account in terms. This is not a case of two competing orders made at different times when the question of set-off was not even adverted to or conversely where the orders were made close in time where a set-off almost unarguably applied in the ordinary course. The very order that the costs of the discovery issue were to be paid forthwith suggests that the payment was intended to occur, and should have occurred, before any right of set-off crystallised. 23 Sixthly, the argument that a set-off should occur is only available to the State as a result of delays in the assessment process, although not in my opinion as the result of any unreasonable conduct on the part of the State. By its 11 September 2008 letter the State's solicitor asked Mr Diab "to refrain from taking any steps in relation to the question of costs". The letter went on to say that "[i]n the event that any step is taken I am instructed to make an application for [a] stay of such proceedings". No step was ever taken by Mr Diab or Mr Hamod to enforce the costs order following the panel's decision on 19 August 2008 and certainly not after the receipt of that letter. However, within four weeks of 19 August 2008 the State had commenced the present proceedings challenging the panel's decision. At one level it seems inappropriate to permit the State to rely on circumstances that delayed the finalisation of the assessment process when the delays were considerably contributed to by the State itself and solely created by the State in the sense that it commenced the present proceedings. Moreover, the whole process will remain stalled until the proceedings are finalised. 24 Seventhly, in purely objective terms her Honour's order in the present case appears unambiguously to qualify as one payable forthwith by reason of the interests of justice, the discrete nature of the subject matter of the dispute that generated the costs in the first place and the length of time that the case might have been expected to run when all viewed at the time that the order was made. [In the balance of this paragraph and paras 25-30 his Honour developed this reason, with reference to some cases. It is not necessary to set out what he said.] 31 Finally, and as a general proposition, any result in these proceedings that had the effect, or even the appearance, of encouraging either delay in the payment of costs by a party that had been ordered to pay them forthwith, or disregard by that party for such an order, would be most regrettable. As I have earlier observed, I do not consider that the State has done either of these things in this case. However, it would in my opinion be a less than satisfactory outcome if support were given to the notion that an order for the payment of costs in a particular way or by a particular time could be subverted or ignored without apparent sanction until by the passage of time an opportunity arose to argue that changed circumstances rendered the strict enforcement of the order absurd or commercially unrealistic or burdensome. Wholly unpredictable or unforeseeable events apart, such a development would be potentially inimical to the authority of the original order and should be avoided as far as possible." 27His Honour concluded at [32] that "[i]n all of the circumstances I consider that Mr Diab is entitled a declaration that he has a lien in the terms sought". However, he did not make a declaration or other orders at that time, and expressed the hope that the parties could agree upon an appropriate regime. 28That did not occur. An application or applications to this Court intervened. The matter was again before Harrison J on 1 July 2010. 29His Honour noted that the parties had not been able to agree upon short minutes of order. He made a retrospective order for decision of separate questions, and declarations deciding the questions - "1. Order pursuant to UCPR 28.2 that the question raised in paragraph 1 of the first cross-claim and the question whether or not the State of New State of New South Wales is entitled to set off such costs as are or may have become payable by it to Anthony Hamod pursuant to the costs orders of Simpson J on 6 July 2007 and the Court of Appeal on 25 July 2007 against any costs that are or may have become payable to it by Anthony Hamod be determined separately and before any other question in these proceedings. 2. Declare that Simon Diab is entitled to an equitable lien over such costs as are or may have become payable by the State of New South Wales to Anthony Hamod pursuant to the costs orders made by Simpson J on 6 July 2007 and by the Court of Appeal on 25 July 2007. 3. Declare that the State of New South Wales is not entitled to set off such costs as are or may have become payable to it by Anthony Hamod pursuant to the costs orders of Simpson J and the Court of Appeal against any costs that are or may have become payable to it by Anthony Hamod."

State of New South Wales v Hamod & Ors

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