Strathfield Municipal Council v Malass

Principles for gross sum costs orders

1. A number of relevant principles to consider in determining whether to make a gross sum costs order were identified n Hamod v State of New South Wales [2011] NSWCA 375 (Hamod) Beazley JA as her Excellency then was (Giles and Whealy JJA agreeing) stated at [813]-[820]: 813 I have already set out the relevant provisions of s 98. The discretion thereby conferred upon the court is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Harrison & Anor v Schipp [2002] NSWCA 213; 54 NSWLR 738 per Giles JA at [21]-[22]. In Harrison v Schipp, Giles JA considered that the discretion in s 98(4) may be exercised where the assessment of costs would be protracted and expensive and, in particular, if it appeared 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. However, his Honour stated, at [22]: "The power 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." 814 See also Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported). The courts have typically applied a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW, LexisNexis, Sydney, 2005 to date, "Civil Procedure Act", at [s 98.65]; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788; Idoport Pty Ltd v National Australia Bank Ltd; Lorenzato v Lorenzato & Anor (No 2) [ 2011] NSWSC 790 per Black J. 815 In Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; 135 ALR 160, von Doussa J noted that the specified gross sum costs procedure was particularly useful in complex cases, that the power must be exercised judicially and only after giving the parties an adequate opportunity to make submissions, and that before exercising the power the court should be confident that the approach taken to estimate costs is fair, logical and reasonable. 816 The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); 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: Ritchie's Uniform Civil Procedure NSW at [s 98.45]. 817 The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or 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: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628. 818 The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261; Sony Entertainment (Aust) Ltd v Smith; Microsoft v Jiang (2003) 58 IPR 445; [2003] FCA 101; Ritchie's Uniform Civil Procedure NSW at [s 98.60]). 819 The assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing: Smoothpool v Pickering [2001] SASC 131. In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: Harrison v Schipp at 743; Hadid v Lenfest Communications Inc at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5; [1999] FCA 673. 820 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): Beach Petroleum NL v Johnson (No 2); Leary v Leary; Harrison v Schipp at 743; Sparnon v Apand Pty Ltd (FCA, 4 March 1998, unreported). The approach taken to estimate the costs to be ordered must be logical, fair and reasonable: Beach Petroleum NL v Johnson at 164-165; Hadid v Lenfest Communications Inc at [27]; Harrison v Schipp at 743. 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: Leary v Leary at WLR 76 per Purchas LJ; Beach Petroleum NL v Johnson (No 2) at 123; Auspine Ltd v Australian Newsprint Mills Ltd at 164-165. …
2. These principles will be considered below in my finding.

Council's submissions

1. Given the length and complexity of the Class 4 proceeding due to the unco‑operative approach of the Respondent which resulted in the Council incurring substantial additional costs, it is desirable to avoid further expense, delay and aggravation that will likely be involved in a costs assessment. Any costs assessment is likely to be highly contested, will further protract already lengthy proceedings and will result in the parties incurring significant further costs. The Respondent's conduct has significantly contributed to the costs incurred by the Council in this proceeding, see Malass No 4 at [62]-[66], [72].
2. Additional costs had to be incurred due to difficulties with service, obtaining orders for inspections and overall delay while the Class 1 proceedings were heard which resulted in more costs as all the proceedings required additional affidavits dealing with the state of construction of the Property. Nine affidavits were relied on in Malass No 4 attesting to the large number of council officer inspections of the Property that were necessary because of the protracted history.
3. Mr Loether's evidence establishes that the solicitor's hourly rates charged are well below that which would be expected to be charged in these circumstances and are fully itemised. This demonstrates that the solicitors' fees already incorporate a discount. The counsel's fees are reasonable. Similarly the necessary expert reports of Mr Grech and Mr Dewar and appearances of Mr Grech appear fairly incurred.
4. A further discount of 15% has been made on the costs claimed, adopting a broad brush to the quantum sought. To the extent that a small amount of work on the Class 1 proceedings appears in invoices that will be taken into account by the 15% discount. It is fair and reasonable in the circumstances to make the order sought.

Respondent's submissions

1. The gross sum costs order is opposed. As recognised in eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [8] (Beazley P and Basten JA) such an order is a departure from the usual process by which costs are assessed as provided by the Legal Profession Uniform Law 2014 (NSW). Based on Hamod at [816], factors to consider include the relative responsibility of the parties for the costs incurred, the degree of any disproportion between the issues litigated and the cost claimed (see also at [818]), the complexity of proceedings in relation to their costs and the capacity of the unsuccessful party to satisfy any costs liability. The court must be able to do justice to both parties and the power should only be exercised where an appropriate sum can be determined from the evidence adduced, Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [22] (Giles JA), Bell v Hartnett Lawyers (No 4) [2023] NSWSC 1592 at [49] (Peden J) citing Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 at [14]-[18] (Meagher, White and Brereton JJA). Whether costs are disproportionate must also be considered.
2. A number of matters taken together suggest it is not reasonable to make the gross sum costs order, rather the matter should proceed to costs assessment in the usual way. Firstly there is reference to the Class 1 proceedings in at least one invoice, one invoice refers entirely to the contempt proceedings which are the subject of a separate costs order (the Council reduced its claim for that amount of $2,217.60), the possibility of double invoicing arises given that similar descriptions of work appear in multiple entries, the Respondent is unable to test whether the expert fees of Mr Grech and Mr Dewar are warranted and counsel's fees appear at the high end of the senior junior range.
3. No evidence has been brought as to the expected time and expense likely to be involved in getting costs assessed, and no formal evidence of a costs assessor has been brought. The Court cannot be comfortably satisfied that it would be fair and just between the parties to make an order for gross sum costs as the Court cannot be confident at arriving at an appropriate sum on the materials available, see Colquhoun v District Court of NSW (No 2) [2015] NSWCA 54 at [6] (Beazley P, Barrett and Leeming JJA) referring to Harrison v Schipp at [22] and Hamod at [813].
4. The Council's submissions that the Respondent will be unco-operative with any assessment process is speculative, noting that the Respondent has not filed any appeals in relation to Malass No 4. The delay of the Class 4 proceeding to enable the Class 1 proceedings to be pursued did not obviously generate greater cost. The amount of costs incurred are not disproportionate so as to warrant a departure from the usual cost assessment process.
5. If a gross sum costs order is made the appropriate discount should be in the order of 25-30%.

Finding

1. Costs are compensatory not punitive per Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543 (Mason CJ), 563 (Toohey J), 567 (McHugh J).
2. The parties did agree that while the assessment of costs in the absence of agreement is the usual approach, s 98(4)(c) provides a mechanism that can be availed of and is part of the costs regime under the CP Act. There is no 'usual' approach, such as the assessment of costs, informing the making of a gross sum costs order if the circumstances justify it, see Hamod at [821].
3. Considering the nature and conduct of the proceeding, in Malass No 4 I found the following: 63 The history of the Council's enforcement efforts and the lack of compliance by the Respondent with that enforcement action is highly relevant to understanding how these events occurred. The lengthy history is summarised in the chronology above in [21] and includes the Stop Work Order issued in September 2020 and the Compliance Order issued in March 2021. … 66 The Class 4 enforcement proceeding commenced on 2 August 2021. A court order was made on 11 August 2021 that the Respondent immediately cease work until finalisation of the Class 4 matter. An order enabling inspection of the Respondent's property by the Council was made in October 2021. The Respondent pleaded guilty to contempt of both orders. In sentencing for contempt proceeding in Strathfield Municipal Council v Malass [2022] NSWLEC 132 findings were made that the contempt was wilful and objectively serious. The Respondent's on-going failure to stop unlawful work at the Property is the principal reason for the unlawful dwelling now being completed and occupied on the Property. The Respondent is responsible for substantial breaches of the EPA Act orders and the court orders. … 72 … Given the history of determined non-compliance with the EPA Act over several years, the scale of the breaches and the private benefit gained at public expense, I am minded to make orders restraining the unlawful use of the dwelling on the Property and require compliance with the 2017 development consent and the 2018 construction certificate, at least in relation to demolition. Whether I should make orders requiring rebuilding will be discussed with the parties.
4. The continued non-compliance with the EPA Act over several years by the Respondent was also reflected in the unco-operative manner of the Respondent in the Class 4 proceeding. The Respondent's behaviour resulted in the Council incurring substantially more costs given the need to commence the proceeding, apply for a stop work order, make two applications for orders for inspection, the necessity for numerous council officer inspections as reflected in the large number of affidavits the Council had to rely on and the incurring of expert witness fees for Mr Grech and Mr Warner. A lengthy chronology and statement of facts was usefully prepared. Neither document was agreed by the Respondent or her agent necessitating the Council having to rely on extensive affidavit evidence. I consider the Respondent's behaviour via her agent Mr Malass did contribute unnecessarily to the costs of the proceeding. These costs are disproportionate to the nature of the proceeding which became protracted and complex. in addition, for the reasons given by the Council the length and complexity of the Class 4 proceeding does suggest that further expense and delay is likely to be involved in a costs assessment should be avoided.
5. The evidence relied on by the Council enables the Court to make an informed assessment about the actual costs incurred in the Class 4 proceeding noting the Council has reduced the total fees charged by a discount of 15%. The invoices attached to the affidavits of Mr Loether and Ms Lewis itemise work undertaken and the time taken by the solicitors engaged on the matter. That numerous similar descriptions of work appear is most likely to reflect the complexity of what had to be prepared for the lengthy hearing. I accept Mr Loether's opinion about the reasonableness of the hourly rates charged for the solicitors working on the matter. Counsel's fees do not appear excessive. Nor do the experts' fees. While the Respondent sought to argue that an assessor would be able to determine if the time spent was reasonable I consider on a permissible broad brush basis the costs appear to be reasonable.
6. The various matters relied on by the Respondent summarised above in [11] as in combination justifying a costs assessment process being warranted do not, applying a broad brush approach, appear to so undermine the invoices supplied by the Council that the order it seeks ought not be made. A logical, fair and reasonable basis for making a gross sum costs order has been established by the Council's evidence. A 15% discount is appropriate.
7. There is no necessity for an applicant for a gross sum costs order to bring forward specific evidence of the likely assessment costs. The scheme provided for under the relevant legal profession legislation as set out on the Supreme Court of New South Wales website 'Costs assessment forms and fees' will result in further cost being incurred in terms of an application fee, payment of the costs assessor's time and the likely incurring of further legal costs in briefing and making submissions to the costs assessor.
8. In light of all the above matters I consider a gross sum costs order should be made in the amount of $157,301.68 payable within three months of the court order, the period for payment sought by the Respondent.
9. As the Council has been successful in this costs application its costs of the notice of motion should also be paid by the Respondent.

Orders

1. The Court orders in the Council's notice of motion dated 13 May 2024 that: 1. The Respondent is to pay the Council the specified gross sum of $157,301.68 pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW) within three months (90 days) of the date of this order. 2. The Respondent is to pay the Council's costs of the notice of motion dated 13 May 2024.

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