Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd & Anor

9Total fees of $356,675.70 were charged to the plaintiff but there were several changes of solicitors and counsel before the proceedings came on for trial in late 2009. 10The proceedings were ultimately conducted at trial by Mr Benson. The fees recorded for the plaintiff accurately records that Mr Benson did what I might describe as much of the heavy lifting on the plaintiff's side having as he did the carriage of the matter at the hearing. Although Mr Benson only came into the case fairly late, of the $356,675.70 billed to the plaintiff, $131,341 was charged by Mr Benson.

Recovery of Counsel's Fees 11The first basket of issues, is whether or not $356,675 is recoverable, or whether the sum to be used as the starting point is $356,675 less $131,341, namely $225,334. 12The submissions exchanged between counsel have identified the problem with simplicity. It appears that the problem was drawn to the attention of an expert witness Suzanne Maree Ward, from whom affidavit evidence on the subject of costs has been adduced by the defendants. 13After he gave fee disclosure in accordance with the Legal Profession Act 2004 a costs agreement was made between Mr Benson and interests associated with the plaintiff for this proceeding. 14But it was a conditional costs agreement involving an uplift fee. It was a costs agreement which therefore came within the Legal Profession Act , s 324, which provides:- "324 Conditional costs agreements involving uplift fees (1) A law practice must not enter into a conditional costs agreement in relation to a claim for damages that provides for the payment of an uplift fee on the successful outcome of the claim to which the fee relates. (2) Except as provided by subsection (1), a conditional costs agreement may provide for the payment of an uplift fee. (3) The basis of calculation of the uplift fee must be separately identified in the agreement. (4) The agreement must contain an estimate of the uplift fee or, if that is not reasonably practicable: (a) a range of estimates of the uplift fee, and (b) an explanation of the major variables that will affect the calculation of the uplift fee. (5) If a conditional costs agreement relates to a litigious matter, the uplift fee must not exceed 25% of the legal costs (excluding disbursements) otherwise payable. (6) A law practice must not enter into a costs agreement in contravention of this section. Maximum penalty: 100 penalty units." 15Section 324 provides a prohibition, in s 324(1) followed by exceptions to that prohibition. 16It is not in contest that these proceedings include a claim for damages by the plaintiff. The issue identified by Ms Ward and the defendants is that Mr Benson's costs agreement is one which, "Provides for the payment of an uplift fee on the successful outcome of the claim to which the fees relate" and therefore is made in contravention of s 324(1). 17Mr Benson seeks recovery of his fees from the plaintiff but the defendants submit that the legislation prohibits this course. I agree with the defendant's analysis of the way the legislation works. Although I have found this somewhat surprising, it is nevertheless in my view the law. 18The applicable provisions are contained in Division 4 of Part 3.2 and chapter 3 of the L egal Profession Act 2004. Mr Benson concedes that the costs agreement that he entered into was in contravention of s 324(1) of the Legal Profession Act. 19He submits that his fees are nevertheless recoverable on the basis of Legal Profession Act , s 319(1)(c), and that he is entitled to recover the fair and reasonable value of the legal service provided. Legal Profession Act , s 319 provides:- " 319 On what basis are legal costs recoverable? (1) Subject to the provisions of this Part, legal costs are recoverable: (a) in accordance with an applicable fixed costs provision, or (b) if paragraph (a) does not apply, under a costs agreement made in accordance with Division 5 or the corresponding provisions of a corresponding law, or (c) if neither paragraph (a) or (b) applies, according to the fair and reasonable value of the legal services provided. (2) However, the following kinds of costs are not recoverable: (a) the costs associated with the preparation of a bill for a client, (b) the costs associated with the making of disclosures for the purposes of Division 3, (c) the costs associated with the making of a costs agreement with a client." 20Mr Benson says that unless his fee agreements are regarded as exceptional or excessive, that his fee agreements should be regarded as some evidence of what is the fair and reasonable value of the legal service provided under s 319(1)(c). 21But for the provision to which I am about to come, I would agree with that submission. And I would agree that having seen the proceedings conducted, having seen the work that has done in them on the part of counsel on both sides, I would regard the contents of Mr Benson's fee agreements to be prima facie evidence of what was fair and reasonable value for the legal service he has provided without an uplift fee. 22Mr Benson submits that recovery is possible under Legal Profession Act, s 319(c), notwithstanding the voidness of the costs agreement under s 324, by reason of s 327(2). Legal Profession Act , s 327 provides:- " 327 Certain costs agreements are void (1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void. (2) Subject to this section and Division 11, legal costs under a void costs agreement are recoverable as set out in section 319 (1) (a) or (c) (On what basis are legal costs recoverable?). (3) However, a law practice is not entitled to recover any amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received. (3A) A law practice that has entered into a costs agreement in contravention of section 324 (2)-(5) (Conditional costs agreements involving uplift fees) is not entitled to recover the whole or any part of the uplift fee and must repay any amount received in respect of the uplift fee to the person from whom it was received. (4) A law practice that has entered into a costs agreement in contravention of section 324 (1) (Conditional costs agreements involving uplift fees) or 325 (Contingency fees are prohibited) is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related and must repay any amount received in respect of those services to the person from whom it was received. (5) If a law practice does not repay an amount required by subsection (3) or (4) to be repaid, the person entitled to be repaid may recover the amount from the law practice as a debt in a court of competent jurisdiction." 23But the difficulty for Mr Benson's argument is that Legal Profession Act, s 327(4) provides that where one law practice, relevantly in this case Mr Benson, has entered a costs agreement with another law practice, relevantly his instructing solicitors, has entered into a costs agreement in contravention of Legal Profession Act, s 324, Mr Benson, as a law practice, "...is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related...". 24In my view this statutory language is quite intractable. It wholly excludes, in my view, the possibility of recovering fees on a quantum meruit or any other restitutionary basis outside the costs agreement itself. 25I say that for two reasons. First, Legal Profession Act, s 327 (2) expressly contemplates that fees may be recoverable under a void costs agreement under Legal Profession Act, s 319(1)(c). Thus to a limited extent the legislation expressly preserves restitutionary remedies. But then in the same section, s 327, in the limited case of contravention of s 324, the legislation uses language that on any view covers and removes such restitutionary remedies. 26Also the words "any amount" and "in respect of" in s 327(4) are apt to cover any kind of restitutionary claim. The words "...the provision of legal services in the matter to which the costs agreement related..." clearly encompass any kind of work associated with the subject matter of these proceedings to which Mr Benson's costs agreement relates, whether or not under the costs agreement itself. 27The second reason for my conclusion is that the words "and must repay any amount received in respect of those services to the person from whom it was received" in s 327(4) leave no room to doubt that the legislation intends that restitutionary claims be wholly excluded. The maintenance of a restitutionary claim for services is inconsistent with requiring the repayment of moneys already paid for those services. 28It can only be inferred from this statutory language that the Legislature wished in the strongest possible terms to deter the making of costs agreements, which included uplift fees, for the conduct of damages claims. The Legislature has succeeded in producing that result in this case. 29That is the law and effect must be given to it. But it is unfortunate, at least for Mr Benson, who I will observe has conducted these proceedings with professionalism, with attention to detail and with determined effort in his client's interests. A mistake appears to have been made here by the inclusion of the uplift fee in the costs agreement, leading to a contravention of s 324(1). The benefit of that mistake will redound to a limited extent to the benefit of the plaintiff and to a major extent to the benefit of the defendants in these proceedings. 30The result of this reasoning is that I should approach the gross sum costs order on the basis that the headline figure to be used in the calculations is $225,334, which is, the total of the fees charged to the plaintiff minus Mr Benson's fees. 31I have not been referred to any specific authority on s 327 that deals precisely with this problem in the way it has arisen in this case. This matter may go on appeal. So I propose to at the conclusion of these reasons give an assessment not only in accordance with these reasons but one in the alternative in the event that another Court were to disagree with my views. It is desirable that I do this. As the trial judge I am the person most familiar with the way the case has been conducted.

Fixing a Gross Sum 32As to the second basket of issues, Mr Benson's submissions in effect say that the plaintiff's total costs of the litigation were $356,675 and that the Court should apply cases such as Idoport Pty Ltd v National Australia Bank [2005] NSWSC 1273, the decision of Barrett J in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11, and the decision of Ball J in Siteberg Pty Ltd v Maples [2010] NSWSC 307. Repetition of authority in this area is unnecessary. The decided principles are clear. 33There is much to be said in my view for Ball J's succinct statement in Siteberg at [25], t hat the Court takes a broad brush approach to the assessment of a gross sum provided it is logical, fair and reasonable . Ball J stated: "[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) 54 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." 34But to be logical, fair and reasonable it is important for the Court to take into account the principal matters the parties have raised to which I now turn. 35The defendants raise a number of points. The defendants firstly say that in the Court's second judgment of 24 November 2010 that the Court upheld the defendant's contention that the proportionate liability provisions of the Trade Practices Act did apply and that the defendants are entitled to their costs incurred in contesting this issue. Whilst I do not regard that as a particularly voluminous part of the proceedings, I nevertheless accept what the defendant says about this and take it into account in my assessment of gross sum costs. 36The defendant's second submission is that the outcome of the quantification of the plaintiff's damages was, as the defendant calls it, an "mixed bag." I am not sure the "bag" is as mixed as the defendant says. In my view quantum is a matter on which the plaintiff was still mainly successful. Such reductions in damages as have occurred in the defendant's favour were not substantial. 37The third issue the defendants raised is the question of whether the plaintiff was entitled to all of its costs, notwithstanding the defendant had been successful on a number of points at the hearing. The defendant says that on balance the judgment of 24 November 2010 represented a victory for the defendants because they succeeded both in getting an apportionment and in reducing the quantum claimed by the plaintiffs although not to the full extent that the defendants sought. The defendants' contention is that the defendants' costs incurred between the handing down of the judgment on 13 September 2010 and handing down of the second judgment should be paid by the plaintiff. There is a degree of overlap between this issue and the defendant's second submission. 38It does not follow from the degree of success which the defendant has had in relation to quantum that the plaintiff should pay the defendants' costs between the first and second judgments. Although I should observe that the defendants' third submission does not appear to me to be entirely consistent with the Court's previous orders. My judgment of 22 December 2010 ordered costs on an indemnity basis until, not just up to the first judgment, but up until the second judgment on 24 November 2010. Thus the plaintiff already has the benefit of a costs order for this period. 39I then come to a series of issues that are more closely associated with the gross sum costs order issue. The evidence of Ms Ward has been of considerable assistance in dealing with what might be recoverable in accordance with the indemnity principle. 40The following gross sum costs issues emerge. The plaintiff concedes there has been a duplication of costs, in the plaintiff changing solicitors and counsel a number of times. I accept the defendants' submission that a discount for that duplication of the order of 5 percent is somewhat arbitrary and not clearly justified. On the other hand some discount is appropriate. I would not expect from what I have seen in Court of the course of evidence and pleadings in this case for the duplication to be very much higher than a figure of that order. Precise calculations of such figures can be difficult and artificial. 41The other issue to which I should advert is the question of the appearances after 24 November 2010. In my view special resort is not required to UCPR Part 42 Rule 42.7 to claim the costs of the later appearances. The costs of these appearances can be determined upon my general impression as to the course of proceedings. In my view, the plaintiff should have its costs of that period. All that really happened over that time segment was the giving of effect to the plaintiff's prior success, including the making of the concession on the defendants' part that a gross sum costs order was not in contest, in answer to the plaintiff's application for such an order. 42Another issue which has emerged is whether or not the costs agreements were made with Ms Ventouris or the plaintiff company itself. But it seems to me on all the evidence in the proceedings that Ms Ventouris has clearly made any of those such agreements as the controlling mind of the plaintiff and on its behalf. That is not an issue that should trouble the Court any further. 43Thus, taking those matters into account, and the principles identified in cases such as Harrison v Schipp (2002) 54 NSWLR 738 and taking into account the indemnity costs order which has been made, which tends to increase the recoverability of costs over and above an ordinary costs order, but bearing in mind there are the discounts to which the defendants have pointed, I would calculate a gross sum for costs in the following way. 44The appropriate course, to start from the lesser figure of $225,334, that excludes counsel's fees. The 25 percent discount on recovery follows from my earlier orders, so the plaintiff should recover 75 percent of its recoverable costs of $225,334. Thus $169,005 is the maximum recoverable amount on an assessment. The question is what should now happen by way of a gross sum costs order? In my view an appropriate specified gross sum instead of assessed costs in the circumstances is $150,000. That is the gross sum costs order I will make. 45This figure has not taken into account, the calculation of interest the plaintiff has incurred on costs paid. The parties' submissions did not deal with question of interest on costs. The matter has now become complicated by the disallowance of Mr Benson's fees. 46I invite the parties to deal with that issue with the Court at their convenience. It can either be dealt with by way of written submissions with the parties pointing out what moneys have been paid and what interest is appropriate. Perhaps it can now be resolved by agreement. 47One way forward is simply to look at what has been actually paid by the plaintiff by way of costs. It seems to me that actual amounts the plaintiff has paid should be credited for the purpose of calculating interest, without any discount. They are amounts of money which have actually been incurred. That should lead to a readily ascertainable sum for interest. Complications will probably only arise if the amount already paid exceeds the $150,000 I have now assessed as an appropriate gross sum costs order. If the calculation can be provided to me, I will simply make orders in chambers. If not, I will deal with any contest in open Court. 48I indicated earlier that I would also state what my specified gross sum would have been upon the hypothesis that Mr Benson's fees were recoverable. The assessment is, of course, hypothetical. But it may be a guide to another Court, taking into account all the discretionary factors I have just mentioned. 49The plaintiff submitted that its total costs of the litigation were $356,675. And 75 percent of that is $267,506.77. Mr Benson invited the Court to take a blunt axe approach to the costs. Although not using quite a blunt axe, the assessment I would have made in the circumstances is of a gross sum of $240,000. 50Argument has also taken place about the costs of this application. It seems to me in circumstances where the plaintiff claimed $350,000 in costs and I have awarded a gross sum of $150,000 instead of assessed costs, which is less than half of what has been claimed, the appropriate order is for each party to bear its own costs of this application. 51The Court orders:-

1. Order the plaintiff is entitled to a gross sum in the amount of $150,000 instead of the assessed costs of the proceedings.
2. Order that each party bear its or his own costs relating to the making of this gross sum costs order. 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: 12 July 2011