Supreme Court New South Wales Medium Neutral Citation: Almona Pty Ltd v Parklea Corporation Pty Ltd (No 5) [2020] NSWSC 1514 Hearing dates: On the papers Date of orders: 30 October 2020 Decision date: 30 October 2020 Jurisdiction: Equity Before: Robb J Decision: (1) Grant leave to the third defendant to file in court the draft amended notice of motion provided to the Associate to Robb J on 5 June 2020. (2) Grant leave to the third defendant to file in court the affidavits of Felicity Louise Healy sworn on 2 June 2020 and 12 December 2018. (3) Order that the third defendant's amended notice of motion referred to in order 1 be dismissed. (4) Order the third defendant to pay the plaintiff's costs of the amended notice of motion, including the costs of the original notice of motion and the amended notice of motion before its filing, as well as the costs of the legal professional privilege claim made by the third defendant that was heard and determined on 5 June 2020. Catchwords: COSTS — Party/Party — Court's discretion — gross sum costs orders — where this is not an appropriate case for the Court to make a gross sum costs order — where, primarily, the Court is not able to make an estimate of costs that ought to be paid in a logical, fair and reasonable way Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868 Almona Pty Ltd v Parklea Corporation Pty Ltd (No 2) [2020] NSWSC 167 Almona Pty Ltd v Parklea Corporation Pty Ltd (No 3) [2020] NSWSC 226 Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553 Hamod v State of New South Wales [2011] NSWCA 375 Category: Costs Parties: Almona Pty Ltd (plaintiff) Parklea Corporation Pty Ltd (first defendant) Secured Asset Portfolio III Limited (second defendant) PT Limited (third defendant) Representation: Counsel: D Williams SC / E Bishop (plaintiff / respondent) M Izzo SC / J Taylor (third defendant / applicant) Solicitors: Bartier Perry (plaintiff / respondent) Corrs Chambers Westgarth (third defendant / applicant) File Number(s): 2018 / 317496 Judgment 1. This is the fifth judgment in a series arising out of proceedings by Almona Pty Ltd against Parklea Corporation Pty Ltd and two others [1] . 2. I will assume an understanding of the earlier judgments. I will use the same terms as in those judgments. 3. This judgment deals with PT's amended notice of motion, which was received by my Associate as an attachment to an email from the solicitors for PT on 5 June 2020. The relief sought by the amended notice of motion was in the following terms: ORDERS SOUGHT 1. The Notice of Motion be returnable on 5 June 2020. 2. Pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW), an order that the costs of the third defendant be assessed on a gross sum basis and fixed in the amount of $420,000.00 (or such other amount as the Court may determine). 3. In the alternative, pursuant to section 98(1) of the Civil Procedure Act 2005 (NSW), an order that the plaintiff pay the third defendant's costs as agreed or assessed. 4. An order pursuant to section 101(4) of the Civil Procedure Act 2005 (NSW) for interest on costs as and from the date on which each of the costs were paid by or on behalf of the third defendant. 5. [Deleted] 6. The plaintiff pay the third defendant's costs of this motion. 1. It appears that the Court was not asked to make an order giving leave to PT to file the amended notice of motion in court. That may have occurred because it was necessary for the Court to deal with the matters that were before the Court on 5 June 2020 remotely by an audio-visual hearing. I will make an order granting the necessary leave below. 2. At the hearing that took place on 5 June 2020, I made the following orders, insofar as the orders related to the dispute between Almona and PT: … (4) Order that the plaintiff's claims against the third defendant be dismissed. … (6) Order that the plaintiff pay the costs of the third defendant as agreed or assessed plus interest on the costs as and from the date on which each of the costs were paid by or on behalf of the third defendant provided such order is without prejudice to the third defendant's lump sum costs application. (7) Order that the amount of $140,000 paid by the plaintiff into Court as security for the third defendant's costs of the proceedings be released forthwith to the third defendant … 1. Relevantly for present purposes, the effect of these orders is that the Court has already made the orders sought in prayers 3 and 4 of the amended notice of motion, without prejudice to PT's right to pursue its claim in prayer 2. 2. PT has pursued its claim for a gross sum costs order. On 20 July 2020, I made certain case management orders, including by order 2 that Almona and PT inform my Associate whether they consented to the amended notice of motion being dealt with on the papers in chambers. On 24 July 2020, my Associate was advised on behalf of both parties that they consented to the matter being dealt with on the papers. 3. The subject matter of this judgment is now limited to the question whether the Court should make a gross sum costs order in favour of PT in accordance with prayer 1 of the amended notice of motion. 4. Almona's primary position was to oppose the Court making any gross sum costs order. Almona submitted that the present is not a proper case for the making of such an order, and instead PT should be required to have its costs assessed in the conventional way. Alternatively, Almona submitted that, if the Court decided that it should make a gross sum costs order, the quantum of that order should not be greater than the sum of $140,000 that Almona had paid into Court in performance of an order that it provide security in that amount for PT's costs of the proceedings. 5. Initially, by its notice of motion as originally filed, PT sought a gross sum costs order in the amount of $315,000 in respect of total legal costs and disbursements of $428,285.60. This claim was supported by an affidavit of PT's solicitor, Felicity Louise Healy, made on 8 April 2020. 6. As mentioned, PT now claims a gross sum costs order in the amount of $425,000. Ms Healy corrected her earlier affidavit in a further affidavit made on 2 June 2020. Ms Healy said in par 3 that she had "identified matters in my 8 April Affidavit that require amendment to reflect additional costs which have been incurred by the third defendant". Ms Healy increased the amount of professional fees from $291,598.00 to $382,190.60. Counsels' fees increased from $114,217.50 to $139,432.50. Disbursements increased from $22,470.10 to $23,610.47. The total became $545,143.57. It is unclear whether Ms Healy's affidavits have been filed. I will make an order giving leave for the affidavits to be filed in court. 7. Ms Healy said in par 10 of her 2 June 2020 affidavit that the further costs incurred by PT were recorded in the most recent invoice rendered on 8 May 2020. Ms Healy said that she had annexed to her affidavit, as annexure A, full copies of each invoice issued by her firm to PT in the proceedings. The invoice rendered on 8 May 2020 was not included in the annexure. The unexplained increase in PT's legal costs is perplexing (barring the noted inadvertent omission of GST). However, as Almona did not make any issue about the increase I have ignored the fact that it occurred, and have proceeded on the basis of the revised figures. 8. Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides: (1) Subject to rules of court and to this or any other Act— (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and … (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to— … (c) a specified gross sum instead of assessed costs… 1. The parties accepted, as I do, that, for present purposes, the principles that govern the making of a gross sum costs order are as set forth by Beazley JA (as her Excellency then was), with the agreement of Giles and Whealy JJA, in Hamod v State of New South Wales [2011] NSWCA 375, in the following terms: [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 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 (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. 1. Having regard to these principles, I am satisfied that Almona's primary submission is correct, and that the present is not an appropriate case for the Court to make a gross sum costs order, whether in the amount sought by PT, or some lesser amount. On the contrary, the present appears to me to be a case that calls for the application of the processes involved in a conventional costs assessment. 2. My primary reason for reaching this conclusion is that, from my vantage as the trial judge in these proceedings, I have formed the clear and positive view that I am not able to make an estimate of the costs that ought properly be paid by Almona to PT in a logical, fair and reasonable way. Accordingly, I am satisfied that any attempt by me to make such an estimate would be unlikely to produce a result that was fair between the parties. 3. The issues in the proceedings, as between Almona and PT, were dealt with in Almona (No 1) at [841] to [937]. The issues that were determinative of Almona's claim against PT were few in number, although highly technical and conceptually difficult. Although PT had a legitimate interest in the outcome of Almona's claims against Parklea and SAP, that outcome conceptually formed the basis of Almona's claim against PT; or perhaps more aptly, the context in which Almona's claim against PT arose. That PT was not required to engage in the contest between Almona and the other two parties was reflected in the strictness with which counsel for PT properly excluded themselves from that forensic exercise. 4. I acknowledge PT's submission that I observed in Almona No 4 at [209] that "the appearances for the parties has been orthodox and reasonable", and that: "So far as appearances before the Court have been concerned, these proceedings appear to have been conducted efficiently". Those observations were based upon my perception of what had happened in the courtroom and related to the work done in court by counsel. I cannot say that I was conscious of the level of instruction given to counsel by PT's solicitors on a day-to-day basis. My observations therefore concerned the component of PT's costs constituted by counsels' fees of $126,675. It did not apply to PT's solicitors' fees of $347,446. That amount is some 2.75 times the amount of counsels' fees. 5. From my perspective, there is considerable force in Almona's submission that, by reason of the fact that the issues that were required to be contested by PT were substantially limited to complex legal questions, PT's legal costs should reasonably have been expected to be weighted towards counsels' fees and not solicitors' fees. Further, given the involvement of senior counsel, it might be expected that PT's solicitors' fees would not have exhibited the weighting towards senior solicitors' fees that is in fact the case. 6. My impression is that the amount of legal costs incurred by PT is excessive, and is unlikely to be sustained on an assessment. However, I would characterise that impression as little more than prejudice, as it does not have a satisfactory, objective foundation. Although the need for PT's solicitors to engage in substantial forensic effort is not as apparent as was the case for the other parties' solicitors, it is the case that the litigious effort required of the solicitors for PT was invisible to the Court, just as was the case for the legal representatives of the other parties in relation to work done out of the courtroom: see Almona (No 4). As I said in that judgment, primarily in relation to the legal costs incurred by the parties other than PT: 224 I have different reasons for doubting the validity of my impressions concerning the relative 'litigious effort' required of the parties in these proceedings than did McDougall J in James. The essential problem is that, when I consider the 'litigious effort' that was visible to the Court, and I reflect upon the evidence received and the issues that emerged out of the pleadings, as I have discussed above, the greater part of the 'litigious effort' is invisible. I fully expect that the lawyers for the parties, who, on the one hand, have asserted relatively extreme claims on behalf of their clients concerning the costs orders that are fair and just, but who, I acknowledge, will know of the real 'litigious effort", will be more than surprised by the impressionistic and broad brush resolution to the dispute that is the only recourse available to the Court. The explanation arises out of differences in perspective. 1. These proceedings were exceedingly hard-fought. They were highly contentious. A great deal was at stake. The proceedings were fixed for an early final hearing. There were many interlocutory hearings over a short space of time. The issues were relatively fluid. I acknowledge PT's third submission, in its submissions in reply, that "the claim against the third defendant went through many permutations". One thing that was obvious to me was that much was being done by the parties' legal representatives out of court, to attempt to resolve intense disputes that the Court simply did not have time to hear. Although the other parties were the primary protagonists in those interlocutory disputes, PT was not a simple bystander, and its legal representatives were not required to stand aloof. Intuitively, I am persuaded that PT may be able to satisfy a costs assessor that the solicitors' fees that it has incurred were reasonable to a significantly greater degree than might be thought by an observer, who only had experience of the proceedings in the court and a knowledge of the technical legal issues that were required to be contested by PT. 2. I am fortified in my conclusion by the evidence given for Almona by Ms Peta Leslie Solomon, a highly experienced legal costs consultant, in her affidavit of 26 June 2020. It is not necessary to record the expert opinions given by Ms Solomon in detail. She expressed the opinion that the rates of charge by PT's solicitors were likely to be substantially reduced on assessment. She said that, on assessment, further reductions were likely to be made on a number of grounds, including for solicitor/client work, unreasonable time claims, duplication of tasks and excessive supervision and inter-office conferencing, unreasonable conferencing and liaison with other parties, and multiple fee earner attendances on the hearing. Ms Solomon also identified various costs that she opined were not claimable as costs of the proceedings. Of particular focus was the weighting of the solicitors' fees to more senior solicitors, in view of the fact that both senior and junior counsel were briefed. I add that Ms Solomon suggested that some reduction could be expected in the costs assessment process in relation to the allowance for counsels' fees. I acknowledge that possibility, notwithstanding my own observation, as recorded above, that the appearances for the parties had been orthodox and reasonable. 3. As there has been no opportunity for PT to contest Ms Solomon's opinions, I make no findings about their validity. However, Ms Solomon's evidence provides a firm foundation for a conclusion that, not only would a broad brush assessment of gross costs be unsuitable in this case, but that a conventional assessment process is necessary, and there is no proper basis for depriving Almona of the advantages of the usual procedure for the assessment of costs. 4. I have the following subsidiary reasons for declining to make a gross sum costs order in this case. 5. First, as stated in Hamod at [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 cost estimates or bills)…" In the present case, PT's costs claim was substantiated by the tax invoices annexed to Ms Healy's 2 June 2020 affidavit. A perusal of the explanation for the individual cost items contained in the tax invoices did not give me sufficient information to make a proper judgment, even on a broad brush basis, of the reasonableness of all of the fees incurred. The tax invoices are in a standard format that is generally accepted as being appropriate for the purposes of a solicitor's client. While that format establishes which lawyer engaged in an identified task and for how long and at what cost, it usually conveys virtually no information as to why the task was performed. The exceptions, such as where counsel claimed a daily brief fee for appearing in court, are relatively rare. I simply do not have the expertise to make reliable judgments about the reasonableness of the legal fees incurred by PT, having regard to the matters explained by Ms Solomon in par 11 of her affidavit, and in particular the Costs Assessment Rules Committee Guideline. 6. Secondly, Ms Solomon expressed the opinion that the assessment process would ordinarily be completed in about six months. I do not consider that this is an inordinate time in the context of the history of these proceedings. 7. Thirdly, PT's solicitor gave evidence that a costs assessment could cost PT approximately $10,000. If that is so, I do not think that the amount involved is sufficiently large to deprive Almona of the benefit of a conventional cost assessment. 8. Fourthly, relevantly to the argument, founded on Hamod at [813], that a gross sum costs order should be made, because it is unlikely that Almona will be able to pay the amount of costs that will be payable to PT following the costs assessment, the Court has already made an order releasing the $140,000 security paid into court by Almona to PT. I consider there is at least a substantial probability that the costs assessment process will determine an amount significantly less than $420,000. As matters stand, Almona has the benefit of judgments against both Parklea and SAP for over $5,000,000. While there is considerable room for doubt as to Almona's financial position in the longer term, this is not a case where that doubt is patent, and it is not sufficient to deprive Almona of the benefit of an ordinary costs assessment. 9. Finally, I have had regard to the observation in Hamod at [817] that the making of a gross sum costs order may be appropriate where "it is desirable to avoid the expense, delay and aggravation likely to be involved in [a] contested costs assessment". A factor that has sometimes strongly recommended to me the granting of an application for a gross sum costs order is where I have witnessed the parties conducting the litigation in such an acrimonious fashion that it is obvious that allowing a costs assessment would simply transform an ugly battle that was being conducted openly in the courtroom into a street fight in the costs assessment process. The manner in which Almona has conducted these proceedings gives no cause for concern in this regard. 10. Accordingly, I make the following orders on PT's amended notice of motion: 1. Grant leave to the third defendant to file in court the draft amended notice of motion provided to the Associate to Robb J on 5 June 2020. 2. Grant leave to the third defendant to file in court the affidavits of Felicity Louise Healy sworn on 2 June 2020 and 12 December 2018. 3. Order that the third defendant's amended notice of motion referred to in order 1 be dismissed. 4. Order the third defendant to pay the plaintiff's costs of the amended notice of motion, including the costs of the original notice of motion and the amended notice of motion before its filing, as well as the costs of the legal professional privilege claim made by the third defendant that was heard and determined on 5 June 2020. ********** Endnote 1. Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868 (Almona No 1); Almona Pty Ltd v Parklea Corporation Pty Ltd (No 2) [2020] NSWSC 167 (Almona No 2); Almona Pty Ltd v Parklea Corporation Pty Ltd (No 3) [2020] NSWSC 226 (Almona No 3); and Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553 (Almona No 4). 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