The Lebanese Moslem Association v Dandan

Judgment

In this matter, I made an interlocutory costs order in favour of the first defendant in October 2022. The first defendant has now applied for an order for payment of a lump sum of approximately $210,000 on account of the plaintiff's liability for costs under that order.
The order which is sought requires some explanation. It is not uncommon for the Court to be asked to make an order that the amount due under an interlocutory costs order be assessed, and paid, forthwith. But a separate assessment may be a distracting and expensive exercise. If the beneficiary of the order ultimately succeeds in the proceedings, and receives the benefit of an order for the costs of the proceedings generally, there may be no need for a separate assessment at all.
These considerations have led me, in a number of cases where the circumstances would justify the making of an order that interlocutory costs be assessed and paid forthwith, instead to make an order for payment of a lump sum on account of those costs. Such an order does not involve any final determination of the parties' rights and obligations under the order. If, on assessment, the assessed costs exceed the lump sum, the beneficiary of the order will be entitled to the difference. If the assessed costs are less than the lump sum, then the beneficiary will need to repay, or otherwise credit, the difference. See for example: Moustapha v Nelson (No 3) [2020] NSWSC 1263 at [97].

Application for payment on account

Two factors may be of particular significance in deciding whether to make an order that interlocutory costs be assessed and paid forthwith. They are that the costs in question relate to a discrete issue, and that the completion of the proceedings and the making of a final order for costs is still some distance away: Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 at [11], [13] per Barrett J.
Each of these factors come into play in the present application. Counsel for LMA pointed out that, following the amendments, LMA is still pursuing a claim for damages against Ms Dandan. Counsel submitted that there had been little or no material change in LMA's case.
I cannot agree. While the claim based on the confidentiality covenant arose out of the same employment agreement as the other claims by LMA, it is a claim under a different covenant which would, if pursued to hearing, give rise to different issues of construction and reasonableness. The assessment of any damages under the competition covenant would be quite a different exercise from the assessment of damages for the loss suffered by LMA from the alleged destruction of its records by Ms Dandan.
For these reasons, I consider that the costs thrown away by reason of the amendment are discrete costs. They will not be affected by the ultimate result in the proceedings. There does not appear to be any dispute that the completion of the proceedings is quite a long way off.
Counsel for LMA observed that the amendment which resulted in the costs order was the first amendment made to the plaintiff's case since it was initially pleaded. Counsel submitted that the plaintiff did not behave unreasonably by making an amendment at what counsel characterised as an early stage of the proceedings. Counsel also submitted that LMA did not act unreasonably in bringing the claim based on the restraints.
Counsel for LMA contended that, in these circumstances, no order as to costs should be made. For their part, counsel for Ms Dandan contended that the bringing of the claim based on the competition covenant had been unreasonable and that this was a factor in favour of Ms Dandan's application (cf Fiduciary Ltd v Morningstar Research Pty Ltd at [12]).
In my view, it is quite clear, in hindsight, that the claim based on the competition covenant should not have been brought. The questions which I posed to junior counsel on 26 August remain unanswered. By abandoning the claim, LMA has effectively conceded that it was unsustainable.
I must say that I find it difficult to see how, with full consideration, the claim could ever have been thought justified. This is a particular concern when the conduct of the proceedings by LMA are presumably, like its other activities, funded by public money. But it is not necessary to go into this question for the purpose of resolving the present application. The fact is that costs have been awarded against LMA, which, sooner or later, it will have to pay. Factors in favour of making the order sought have already been established and I think that the reasonableness or unreasonableness of LMA's conduct makes little or no practical difference in the circumstances.
Counsel for LMA submitted that Ms Dandan's evidence about her financial position is irrelevant for the purposes of the present application. But counsel for Ms Dandan pointed me to the decision of Biscoe AJ in Royal Australian Naval Reserve Rifle Club Inc v New South Wales Rifle Association Inc [2010] NSWSC 351, where his Honour stated at [29] that, on an application for assessment and payment of interlocutory costs forthwith, it may be relevant that an applicant has limited resources, and those resources have been depleted by the costs of the interlocutory issue in question. Ward CJ in Eq accepted this in Wang v Cai (No 2) [2021] NSWSC 1268 at [24].
The evidence as to Ms Dandan's financial position is very general in nature. So, as will be seen below, is the evidence about the costs for which she is or may be liable. Certainly, there is no evidence that LMA's abandoned claim which is the subject of this application, has made any particular difference to Ms Dandan's ability to fund the proceedings. I think that, in the present, case Ms Dandan's entitlement to the orders she seeks must primarily depend upon the objective circumstances. Again, I think it is unnecessary to pursue this issue any further given the established factors in favour of the application.
Counsel for LMA next pointed to the lack of any written retainer agreement or cost estimate between Concordia and Ms Dandan. Counsel submitted that I could not be satisfied that Ms Dandan had in fact any obligation to pay for any of the costs the subject of the order, at least at this stage of the proceedings. Counsel also suggested that the proceedings might be being conducted on a "no win no fee" basis.
I think these submissions go a bit too far. The absence of a written retainer agreement and a costs estimate will not prevent Concordia Legal recovering reasonable remuneration for the work done for Ms Dandan. All it means is that the costs will have to be determined by assessment, which will take place at Concordia's expense: Legal Profession Uniform Law, s 204(2).
The absence of any written retainer agreement may allow me to infer that no conditional fee arrangement is in place (cf Legal Profession Uniform Law, s 181(1)) but it does not necessarily mean that the parties have agreed that costs will be only payable in the event that Ms Dandan ultimately succeeds in the proceedings. The simple explanation may be, as Ms Dandan suggests in her affidavit, that Concordia has not so far insisted on payment. And this application is only for a payment on account. The Court is not required to make any determination of the amount, if anything, recoverable under the costs order. In the circumstances, I do not see this as a factor warranting the refusal of the application.
But counsel for LMA was on firmer ground in attacking the evidence of quantum. Ms Dandan was plainly not entitled to a payment on account of the whole of her costs of the proceedings to date. The evidence as to the quantum of those costs was hopelessly inadequate. Counsel went so far as to submit that the pursuit of the application was a breach of Ms Dandan's duty as a party to assist the Court in facilitating a just, quick and cheap resolution of the real issues in the proceedings (Civil Procedure Act 2005, s 56).
The figure for costs allegedly incurred, $209,000, seems to me extraordinarily high given the limited interlocutory steps which have so far been taken. The figure of $110,000 for costs thrown away is equally extraordinary. I agree that the application was put far too broadly and the evidence in support of it was unsatisfactory.
But I do not think that these are sufficient reasons to refuse the application completely. The costs attributable to LMA's abandoned claim would at least have included the costs of the series of interlocutory hearings which arose out of the questions I raised about the claim. Indeed, had the proceedings been confined to the claims now being pursued, they would probably never have come to the Expedition List in the first place.
Counsel for LMA presented no evidence, and made no submissions, on what the proper level of recoverable costs would be under the order. In those circumstances, I am left to make an assessment, necessarily using the broadest of brushes, from my own observations and experience. In the exercise of my judgment, I fix the amount to be paid at $20,000.
The parties put competing submissions on the costs of the application. The application has succeeded, but only for a small fraction of the amount claimed. On the other hand, LMA entirely opposed the grant of any relief. In the circumstances, there will be no order as to costs.

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Judgment (5 paragraphs)

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Cases Cited (4)