Zepinic v Chateau Constructions

Judgment 1EMMETT JA: On 1 July 2014, for reasons that I then gave, I made orders in relation to four separate proceedings (see Zepinic v Chateau Constructions (Aust) Pty Ltd [2014] NSWCA 248). In these reasons, I shall use terms as defined in my earlier reasons. 2I ordered on 1 July 2014 that Dr Zepinic and Mrs Zepinic pay Chateau's costs of the various proceedings, such costs to be assessed in a gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW), that sum to be determined on the papers. Chateau had foreshadowed an application to that effect in notices of motion that it had filed and served. However, Chateau had not served affidavits relating to the quantification of the costs on Dr and Mrs Zepinic. Accordingly, I directed Chateau to serve the relevant affidavits at the addresses of Dr and Mrs Zepinic and by electronic means that had previously brought matters to their attention. On 10 September 2014, I made further orders providing, inter alia, for the service of additional affidavit evidence on the issue of costs. 3I am satisfied from the terms of four affidavits of Mr Andrew Loel, solicitor for Chateau, sworn on 29 September 2014 that Dr and Mrs Zepinic have now been provided with copies of all of the affidavit evidence relied on by Chateau as the basis for assessment of a lump sum for costs. Those affidavits disclose that the affidavit material was sent to Dr and Mrs Zepinic by ordinary airmail post addressed to them at addresses in London that are understood to be addresses where they are to be found. The materials have also been sent by email to addresses understood to be email addresses to which Dr and Mrs Zepinic have access. No affidavits or submissions have been filed in response to the materials relating to assessment of costs that have now been made available to Dr and Mrs Zepinic. 4The material relied on by Chateau in its application for assessment of costs on a lump sum basis consists of four affidavits sworn by Mr Loel, on 11 September 2014 in proceedings 2013/302149 and on 12 September 2014 in the three other proceedings described below. I have also had regard to two earlier affidavits sworn by Mr Loel, on 27 June 2014 and 30 June 2014, which deal, inter alia, with the reasons for Chateau's seeking orders for a gross sum of costs. 5Mr Loel is a partner in the legal practice known as Toomey Pegg Lawyers, the solicitors for Chateau. He has had the carriage for Chateau of two related sets of appeal proceedings. The first was an appeal commenced by notice of appeal filed on 13 November 2013 by Dr and Mrs Zepinic (proceedings 2013/302149), in which a summons seeking leave to appeal was filed on 30 April 2014 by Dr Zepinic (proceedings 2014/130563) (together, the 2013 Court of Appeal Proceedings). The second was an appeal commenced by notice of appeal filed on 13 February 2014 by Dr Zepinic (proceedings 2013/345739), in which a summons seeking leave to appeal was filed on 30 April 2014 by Dr Zepinic (proceedings 2014/130569) (together, the 2014 Court of Appeal Proceedings). On 1 July 2014, I ordered that both sets of appeals be dismissed. 6Mr Loel has reviewed tax invoices addressed to Chateau for its costs of and incidental to the four proceedings referred to above and has made estimates of costs incurred after the dates of those invoices. In the light of those reviews and estimates, Mr Loel considers that Chateau's total costs of and incidental to the four proceedings, excluding GST (which Chateau does not claim from Dr and Mrs Zepinic), will have been as follows: (1)In proceedings 2013/302149, $81,850.26; (2)In proceedings 2014/130563, $18,197.17; (3)In proceedings 2013/345739, $56,717.90; and (4)In proceedings 2014/130569, $19,648.08. 7Mr Loel accepts that those amounts are greater than would be expected for comparable proceedings at comparable stages. However, he says, many attendances and costs incurred by Chateau would not have been necessary had Dr and Mrs Zepinic been legally represented or appeared themselves at directions hearings, had they complied with the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) in the institution of their appeal proceedings, had they provided an address for service, and had they responded to communications from the Registrar of this Court. Mr Loel estimates that the additional attendances, legal advice given to Chateau, and costs and delays consequently incurred in the four proceedings have caused Chateau to incur more than double or triple the costs that it would otherwise have incurred in comparable proceedings. 8In his affidavits of 27 June 2014 and 30 June 2014, Mr Loel explains his reasons for seeking orders for a gross sum. He believes that Dr and Mrs Zepinic will seek to delay or prevent the process of any assessment of Chateau's costs. That belief is based on his experience in acting for Chateau for more than six years in matters involving Dr and Mrs Zepinic, including the assessment of Chateau's costs in earlier proceedings. Mr Loel gives examples of numerous instances of delays and increased costs being occasioned by Dr and Mrs Zepinic denying service or contesting service on receipt of relevant documents. Mr Loel considers that, if Chateau were required to have its costs assessed, Dr and Mrs Zepinic would act for themselves on the assessment and it would be very difficult and time-consuming for Chateau to serve Dr and Mrs Zepinic personally with applications for assessment and bills of costs. Mr Loel estimates that Chateau's costs of the assessments would be substantially higher than they would be in an assessment in which Dr and Mrs Zepinic were not involved, such as in an order for a specified gross sum. Those reasons for seeking orders for a gross sum are consistent with the principles summarised in Hamod v State of New South Wales [2011] NSWCA 375 at [813]-[820] (see especially at [818]); see also Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [28]-[29]. 9Chateau contends that its costs should be assessed on an indemnity basis. In relation to the 2013 Court of Appeal Proceedings, Chateau relies on a letter dated 5 December 2013 that offered to compromise the appeal on the terms that the appeal be dismissed and that there be no order as to the costs of the appeal (the 2013 Offer of Compromise). In relation to the 2014 Court of Appeal Proceedings, Chateau relies on letters dated 19 December 2013 and 4 March 2014 that offered to compromise that appeal on the same terms as offered in relation to the 2013 Court of Appeal Proceedings (the 2014 Offer of Compromise). In both sets of proceedings, Chateau made alternative offers on the same terms in accordance with the principles stated in Calderbank v Calderbank [1975] 3 All ER 333. None of the offers has apparently been accepted by Dr or Mrs Zepinic. 10The 2013 Offer of Compromise was expressed to be open for acceptance for approximately five weeks and the 2014 Offer of Compromise was expressed to be open for acceptance for two weeks. I consider that those periods of acceptance were reasonable in the circumstances (UCPR r 20.26(5)(b), as made applicable to appeals by r 51.47(2)(e)). The offers otherwise comply with the rules in those two Parts of the UCPR. 11However, although the regime in r 42.15A, providing for an order for costs on an indemnity basis, will prima facie apply if an offer of compromise is made in compliance with the requirements of the UCPR, that rule provides that the Court has a discretion to "order otherwise". In the present context, two further considerations are relevant. 12First, there is a question whether the offers involved a genuine element of compromise. In relation to the 2013 Offer of Compromise, Mr Loel's affidavits of 11 and 12 September 2014 disclose that, by 5 December 2013, Chateau had incurred approximately $1,300 in costs relating to the 2013 Court of Appeal Proceedings. Those costs would have been foregone had the 2013 Offer of Compromise been accepted. In relation to the 2014 Offer of Compromise, Mr Loel's affidavits of 12 September 2014 disclose that, by 4 March 2014, Chateau had incurred over $9,000 in costs relating to the 2014 Court of Appeal Proceedings, which costs would also have been foregone had the 2014 Offer of Compromise been accepted. Those figures were not indicated in the letters of compromise sent to Dr and Mrs Zepinic. 13Second, having regard to the fact that Dr and Mrs Zepinic have at all relevant times been unrepresented, there is a further question whether Chateau properly explained to them the basis on which Chateau asserted that the appeal proceedings brought by them were misconceived (see, in connection with related proceedings, Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [15], [22] and [26]). In relation to the 2013 Offer of Compromise, Mr Loel's letter dated 5 December 2013 stated that, first, Dr and Mrs Zepinic had not, contrary to r 4.5 of the UCPR, provided an address for service in New South Wales; second, Chateau had not received a notice of intention to appeal in advance of its receipt of the notice of appeal; and third, an affidavit sent to Chateau on 22 November 2013 did not annex the documents referred to as annexures in the affidavit. The letter then stated, before making the 2013 Offer of Compromise, the following: We consider that your appeal is misconceived and it is likely that the Court will dismiss it. In relation to the 2014 Offer of Compromise, Mr Loel's letter dated 4 March 2014 stated the following: 9. Given that your notice of intention to appeal was not served on our client within the time allowed pursuant to Rule 51.8 of the Uniform Civil Procedure Rules 2005, your notice of appeal has not been served on our client within the time required by Rule 51.16 of the Uniform Civil Procedure Rules 2005 (it should have been filed and served by 13 December 2013, being 28 days after the date of the orders of the Court made on 15 November 2013) and is, therefore, incompetent to commence the appeal. 10. Additionally, we note that: (a) you appear to have intentionally left out of your notice of appeal the section of the approved form of notice of appeal which sets out further details about the appellant, including the appellant's address for service; (b) your notice of appeal does not, contrary to Rule 4.2(1)(g) of the Uniform Civil Procedure Rules 2005, contain an address for service which complies with Rule 4.5 of the Uniform Civil Procedure Rules 2005; (c) your notice of appeal is an abuse of process as it does not identify with precision the order(s) and/or judgment(s) sought to be set aside, nor does it set out with precision any proper basis for setting aside those order(s) and/or judgment(s) (see Zepinic v Chateau Constructions (Aust) Limited [2014] NSWCA 27 at [14]); (d) finally, your notice of appeal is incompetent as each of the orders of the Court made on 15 November were interlocutory orders and, as noted in our letter to you of 19 December 2013, you must seek leave to appeal against those orders. 11. Even if it were not for these matters (that is, filing and service out of time, failure to seek leave to appeal, failure to identify with precision the orders to be set aside and the matters of form adverted to above), the prospects of success of an appeal against the orders made on 15 November 2013 is [sic] low in that you will not be able to demonstrate an error to the required legal standard to necessitate appellate intervention. Such low prospects of success will adversely affect any application for an extension of time or leave to appeal even if you decide to make them. 14Having regard to those two further considerations, I am not persuaded that the regime in r 42.15A should be exercised in relation to the 2013 Offer of Compromise. First, there was very little element of compromise in the letter dated 13 December 2013 in that Chateau's entitlement to costs that would have been foregone, had the offer been accepted, was small. Second, in circumstances where Dr and Mrs Zepinic were not legally represented, the basis on which Chateau asserted that the appeal proceedings were misconceived was not properly explained. Those considerations lead to the same result in respect of the alternative Calderbank offer. 15However, in relation to the 2014 Offer of Compromise, those two considerations lead to the opposite conclusion. Mr Loel's letter dated 4 March 2014 explains in detail the bases on which Chateau asserted that the 2014 Appeal Proceedings were misconceived and likely to fail, and the entitlement to costs that would have been foregone by Chateau, had that offer been accepted, was substantial. 16I therefore conclude that costs should be assessed on the ordinary basis in respect of the 2013 Court of Appeal Proceedings. In respect of the 2014 Court of Appeal Proceedings, the costs should be assessed on an indemnity basis (from 5 March 2014) and on the ordinary basis for costs incurred before that date. 17Mr Loel has had in excess of 17 years' experience as a solicitor specialising in commercial litigation and dispute resolution and has had the conduct of numerous costs assessments during that time. Based on his experience, he considers that, on an assessment of its costs, Chateau would be awarded between 77 percent and 85 percent of its solicitor-client costs on the ordinary basis, and between 90 percent and 95 percent of its solicitor-client costs on an indemnity basis. 18In all of the circumstances, I am satisfied that it is appropriate to order that Dr and Mrs Zepinic (in proceedings 2013/302149) and that Dr Zepinic (in the three other proceedings) pay the following amounts: (1)In proceedings 2013/302149, $67,000; (2)In proceedings 2014/130563, $15,000; (3)In proceedings 2013/345739, $50,000; and (4)In proceedings 2014/130569, $18,000.