Zugic v Vesuvius Australia Pty Ltd

Background

1. The background to the present application can be gleaned from the reasons published earlier this year on 21 February 2020 (Zugic v Vesuvius Australia Pty Ltd [2020] NSWSC 106) when the substantive dispute between the parties was determined.
2. Briefly, Mr Zugic's claim (which was not successful and in respect of which adverse costs orders were made in February this year) was based on a promissory estoppel said to arise out of dealings that took place in the period from 2006 to 2010 between V & M Davidovic Pty Ltd (V&M) and Vesuvius in relation to two parcels of land then owned by V&M in Unanderra, New South Wales. V&M was then a company owned by Mr Zugic's grandfather (Velibor Davidovic, referred to as Boris) and Mr Zugic's uncle (Miroslav Davidovic, known as Mick).
3. At the outset there was an issue in the proceedings as to Mr Zugic's standing to bring the claims that he had made since the relevant dealings involved the company, V&M, in which he has no interest. Mr Zugic relied on a series of assignments pursuant to which he claimed to be in a position to maintain the causes of action brought in these proceedings. In particular, Mr Zugic alleged that he was the ultimate assignee of the "interests and legal rights" of V&M in earlier proceedings commenced in this Court against Vesuvius in 2010 (2010/84991). Vesuvius contended that the cause of action in promissory estoppel on which Mr Zugic brought his claim for relief was not assignable. Ultimately, I considered that it was not necessary to determine that issue, since I considered that the promissory estoppel claim failed on its merits. Nevertheless, had it been necessary to determine, I would have concluded that Mr Zugic did not have the requisite genuine commercial interest in the outcome of the proceedings in the sense considered in Trendtex Trading Corporation v Credit Suisse [1982] AC 679; [1981] 3 All ER 520, and in Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 (see [246] of my reasons). Thus, as Vesuvius here notes, Mr Zugic's claim would have failed at the first hurdle in any event.
4. As it was, I concluded that the claim failed on its merits. I was not persuaded that either of the pleaded representations was sufficiently clear as to give rise to an estoppel; nor did I consider that reliance could reasonably have been placed on there being any binding representation as to entry into an agreement as had been alleged, in the absence of final documents. I thus concluded (see at [306]) that the estoppel case was not made good in either of the ways it had been pleaded.
5. Although it did not arise in light of that conclusion, I addressed the question of relief and concluded (at [313]) that the appropriate relief would, at its highest, have been to make good the costs thrown away in relation to the development application process that was undertaken in relation to one of the parcels of land (the Sylvester Avenue Land), bearing in mind that Vesuvius had already borne part of those costs, and I would have referred the matter to a referee to determine those costs. I made clear that I would not have ordered compensation by reference to the lease that had been surrendered by V&M of the other parcel of land (the Doyle Avenue Land).
6. I thus dismissed the claim by Mr Zugic with costs.
7. The present application is for a gross sum costs order in the amount of $486,044.67, that being the amount assessed by Ms Walker in respect of Vesuvius' costs of the proceedings. Additional orders are sought for the immediate release and payment to Vesuvius of moneys being held in a controlled money account as security for its costs in these proceedings (the Security Fund), and an order for Mr Zugic to pay Vesuvius' costs of the present notice of motion.

Relevant Principles

1. In Hamod v State of New South Wales [2011] NSWCA 375 (Hamod), Beazley JA (as Her Excellency then was), with whom Giles and Whealy JJA agreed (at [829]-[830]), summarised the relevant legal principles as to the discretion conferred by s 98(4)(c) of the Civil Procedure Act (see at [813]-[820]).
2. Relevantly, it may be noted that: the discretion is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision (see Hamod at [813]; citing Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 (Harrison v Schipp) at [21]-[22], per Giles JA); the discretion may be exercised where the assessment of costs would be protracted and expensive, and, particularly, if it appears 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 (see Hamod at [813]); but it should only be exercised where there is sufficient confidence as to the appropriate sum on the materials available (see Hamod at [813], citing Giles JA in Harrison v Schipp at [22]); a discount will typically be applied in assessing costs on a lump sum basis (see Hamod at [814]); the gross sum costs procedure is particularly useful in complex cases but must be exercised judicially and only after giving the parties an adequate opportunity to make submissions; and before exercising the power the court should be confident that the approach taken to estimate costs is fair, logical and reasonable (see Hamod at [815], citing Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119). Beazley JA (as Her Excellency then was) went on to say (at [816]): 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].
3. At [817], her Honour noted that the exercise of the power conferred by s 98(4) of the Civil Procedure Act was particularly appropriate where costs had been incurred in lengthy or complex cases. At [818], her Honour noted that the power might also be exercised where a party's conduct had unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings (her Honour there citing: Leary v Leary [1987] 1 All ER 261; [1987] 1 WLR 72; Microsoft Corporation v Jiang [2003] FCA 101; Ritchie's Uniform Civil Procedure NSW at [s 98.60]).
4. Finally, I note that her Honour said at [819] that in the exercise of the discretion the undertaking of a detailed examination of the kind appropriate on a formal costs assessment was not required (her Honour there citing Harrison v Schipp at [22], per Giles JA; Hadid v Lenfest Communications Inc [2000] FCA 628 at [35], per Lehane J; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5, per O'Loughlin J; [1999] FCA 673).

Vesuvius' submissions

1. Vesuvius relies upon the following matters as supporting the making of a gross sum order in the present case.
2. First, the length and complexity of the proceedings. Second, its success on all issues (including those on which I had indicated in obiter the conclusions I would have reached had they been necessary to determine), noting that I concluded that: the cause of action in promissory estoppel on which Mr Zugic relied was not assignable ([246]-[247]); none of the pleaded representations was sufficiently clear as to give rise to an estoppel; and reliance could not reasonably have been placed on there being any binding representation as to entry into an agreement in the absence of final documents and hence that there was no actionable representation capable of sustaining the pleaded assumptions on which the pleaded detrimental reliance was placed; and the estoppel case was not made good in either of the ways it was pleaded ([303]; [305]; [306]); and that even if liability had been made good the relief that would have been awarded would have been limited (as indicated at [310]; [313]).
3. Third, arising from the above, that legal costs were incurred in long and complex proceedings, which ultimately would have failed at the first hurdle (due to the non-assignability of the cause of action); but that even if Mr Zugic had been successful, his success would have resulted only in a relatively modest award of compensation.
4. Fourth, that the personal circumstances of Mr Zugic are such that it does not appear that he will have the financial resources or means beyond the Security Fund to satisfy the costs order (and hence any assessment of the costs order will likely result in Vesuvius incurring further costs which it will not be able to recover from Mr Zugic) (see at [3]-[4] of Ms Probert's affidavit).
5. Fifth, Ms Walker's expert opinion as a costs consultant, in her report dated 24 September 2020 annexed to her affidavit, as to the time and cost likely to be incurred in the costs assessment process. Relevantly, Ms Walker has opined that the total time which an assessment of the costs in the proceedings is likely to take is about 30 weeks or 7.5 months (assuming no delays by any party or unavailability of any party or of the costs assessor); but that, having regard to possible delays, in her experience it is not unusual for an assessment of costs to take closer to 9 months (see [20] of Ms Walker's report). Ms Walker has estimated that the total costs incurred by Vesuvius in the costs assessment process would be $38,000 (see [22] of her report). Ms Walker has opined that if there is any application for review or appeal in relation to the determination of the costs, there is likely to be a delay of a further 4 months in reaching an outcome (see [23] of her report). It is Ms Walker's opinion that it is likely that the greater part of Vesuvius' costs of assessment would be payable by Mr Zugic on the assessment (see [24] of her report).
6. At [26] of her report, Ms Walker notes that she has assumed that the costs incurred by Vesuvius have been paid, and that if the costs are assessed then Vesuvius will be out of pocket for the costs paid by it to its legal representatives until such time as the costs are determined. Further, Ms Walker notes that, as the proceeding commenced prior to 24 November 2015, the amendments to s 101 of the Civil Procedure Act mean that Vesuvius will not be entitled to interest on costs.
7. Ms Walker has calculated the total costs of Vesuvius falling within the scope of the costs order at $597,391.04, excluding GST (see [13], [48]-[49] of her report) and has estimated that the likely outcome (and minimum amount) on any costs assessment in favour of Vesuvius on the ordinary basis as being $486,044.67 (see [49]-[50] of her report). Ms Walker has also noted that those costs do not include any costs incurred after the delivery of judgment; but that in her experience some of those costs (particularly costs incurred in attempting to settle a costs claim) would be recovered on assessment (see [51] of her report).
8. The invoices of Pikes & Verekers Lawyers and of Senior and Junior Counsel upon which Ms Walker relied have been exhibited to Ms Probert's affidavit.
9. Vesuvius submits that Ms Walker's opinion sets out the logical, fair and reasonable basis for the gross sum costs order sought; and argues that, on the basis of Ms Walker's reasoning there is no need for any further "impressionistic" discount of the costs actually incurred or estimated (as might otherwise be necessary in order to take into account the contingencies that would be relevant in any formal costs assessment). Further, it is noted that, by letter dated 2 October 2020 (see Annexure A to Ms Probert's affidavit), Vesuvius offered to settle the costs claim in a lump sum of $400,000. It is submitted that if any further discount were to be applied it should not exceed the amount of the discount comprised by the offer contained in that letter (which offer was not accepted).
10. There is presently around $280,000 held in a controlled moneys account in the joint names of the parties' solicitors as security for Vesuvius' costs. Vesuvius seeks an order for the immediate release of the Security Fund in part payment of its costs; and claims the costs of this application.

Determination

1. I have summarised the relevant principles above. I consider that this is an appropriate case in which to exercise the gross sum costs order discretion having regard to the following matters: the issues in the proceedings had some complexity (including as to the basis on which relief was claimed, which varied over the course of the proceedings); the proceedings were commenced in 2013 and there was delay in the resolution of the proceedings (including as a result of the position of the initial plaintiff and the delay in relation to the assignment of the cause of action that ultimately I found not to be assignable); the likely costs and delay if there were to be a formal costs assessment process; and the likelihood that Mr Zugic will not be in a position to meet the costs orders.
2. I accept that Ms Walker has set out carefully a logical, fair and reasonable basis on which the estimated recoverable costs have been calculated. In view of the fact that Ms Walker has expressed her opinion as to the minimum amount likely to be recoverable on a formal costs assessment I see no reason to apply any further discount.
3. Accordingly I make the following orders, noting that the costs of this application should follow the event in accordance with the ordinary rule. 1. Order pursuant to s 98(4)(c) of the Civil Procedure Act that the costs ordered in favour of the defendant in these proceedings on 21 February 2020 be fixed as a gross sum of $486,044.67 and be payable forthwith. 2. Order that the sum of $275,000 together with all interest thereon, which is held in an interest-bearing controlled moneys account in the joint names of the solicitors for the parties as security for the defendant's costs of the proceedings be released and paid immediately to the defendant in part satisfaction of the costs order in order 1 above. 3. Order that the plaintiff pay the defendant's costs of and incidental to the notice of motion filed 21 October 2020.

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: 04 December 2020