Supreme Court New South Wales Medium Neutral Citation: Zarfati v McMillan [2023] NSWSC 839 Hearing dates: On the papers. Submissions closed 11 July 2023. Date of orders: 18 July 2023 Decision date: 18 July 2023 Jurisdiction: Common Law Before: Wright J Decision: (1) Pursuant to the Costs Order made on 21 April 2023, the plaintiff is to pay the defendants' costs of and incidental to the two notices of motion in the sum of $205,000.00 (inclusive of GST assuming, without deciding, that GST is payable in respect of all relevant services). (2) The amount to be provided under the Security for Costs Order made on 21 April 2023 is $155,000.00 (inclusive of GST assuming, without deciding, that GST is payable in respect of all relevant services). (3) The manner in which security under the Security for Costs Order is to be given is to be agreed between the parties within 35 days of these orders but, if agreement cannot be reached within that time, the parties have liberty to apply on two days' notice to have the manner in which such security is to be given determined by the Court. Catchwords: PRACTICE AND PROCEDURE – costs – gross sum costs order – security for costs order – no point of principle. Legislation Cited: Civil Procedure Act 2005 (NSW), ss 60, 98(4)(c) Legal Profession Uniform Law (NSW), s 172 Legal Profession Uniform Law Application Act 2014 (NSW), ss 63, 76 Cases Cited: Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 Eliezer v The Council of St Andrew's Cathedral School (No 2) [2021] NSWCA 227 Gabrielle v Abood (No 4) [2023] NSWCA 100 Hamod v State of New South Wales [2011] NSWCA 375 Haselhurst v Toyota Motor Corporation Australia Limited trading as Toyota Australia [2020] NSWSC 1607 Ohn v Walton (1995) 36 NSWLR 77 Re Niruzzi Pty Ltd [2012] NSWSC 773 Seafolly Pty Ltd v Maddern (No 6) [2015] FCA 1369 Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; 215 ALR 788 Zarfati v McMillan [2021] NSWSC 944 Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 Texts Cited: G E Dal Pont, Law of Costs (5th ed, 2021, LexisNexis) Category: Costs Parties: Frank Zarfati (Plaintiff) Robert McMillan (First Defendant) McMillan Investment Holdings Pty Limited (Second Defendant) Representation: Counsel: G Carolan (Plaintiff) A Bannon SC with J Svelha (Defendants) Solicitors: Pope & Spinks Solicitors (Plaintiff) Somerset Ryckmans (Defendants) File Number(s): 2020/00163152 Judgment Introduction 1. This matter has had a somewhat chequered procedural history and some of that history is recorded in Zarfati v McMillan [2021] NSWSC 944. It is not necessary to set out in detail the procedural history here. It is sufficient to note that, on 13 April 2023, the Court was hearing the plaintiff's notice of motion filed on 25 January 2023, seeking an extension of time to file his evidence, and the defendant's notice of motion filed on 27 January 2023, seeking to have the proceedings dismissed or permanently stayed, or alternatively, an order for security for costs in the sum of $350,000, and orders setting aside various subpoenas issued by the plaintiff. Part way through the hearing, the matter was adjourned to allow the parties time to consider an approach suggested by the Court in order to encourage useful progress in the proceedings. 2. On 21 April 2023, as a result of consideration and discussions between the parties, I was requested to make orders by consent, which I did. Those orders were as follows: "By consent, the Court orders that: 1 The Plaintiff pay the First and Second Defendants costs of, and incidental to: (a) The Plaintiff's Notice of Motion filed on 25 January 2023 (Plaintiff's Motion); and (b) The Defendants' Notice of Motion filed on 27 January 2023 (the Defendants' Motion), in a lump sum to be determined by Court (Costs Order). 2 The question of: (a) which of the 36 items or categories of goods and chattels identified in the schedule to the Amended Statement of Claim were located at 18 Euston Road Rydalmere in the State of New South Wales in about June to August 2015 and relocated to 26 Ferndell Street South Granville in the State of New South Wales in about August to September 2015 or thereabouts (Relevant Equipment); (b) whether the Plaintiff was the owner of all or any of the Relevant Equipment and/or had an immediate right to possession, alternatively right to possession, of all or any of the Relevant Equipment at the time of its relocation, be determined as a separate and preliminary question (Separate Question). 3 The Plaintiff provide security for the First and Second Defendants' costs of the Separate Question in the amount to be determined by the Court (Security for Costs Order) in such manner as the Court determines and [sic, should be "or"] the parties agree. 4 In relation to the determination of the quantum of the Costs Order and quantum of the Security for Costs Order: a) The Defendants to file and serve any evidence and written submissions by 19 May 2023; b) The Plaintiff to file and serve any evidence and written submissions in answer by 9 June 2023; c) The Defendants to file and serve any evidence and written submissions in reply by 23 June 2023. d) The quantum of the Costs Order and the quantum of the Security for Costs Order be determined on the papers by Justice Wright. 5 The Plaintiff: (a) to pay to the Defendants the quantum of the Costs Order determined by the Court within 42 days after such determination is delivered; and (b) to provide security for costs in the quantum and manner determined by the Court or agreed between the parties within 42 days after such determination is delivered, failing which the proceeding is dismissed and the Plaintiff otherwise pay the Defendants' costs. 6 Any further step to be taken by the Plaintiff, including but not limited to calling upon the subpoenas to produce issued by the plaintiff on 24 January 2023 or issuing any further subpoenas to produce or any notices to produce, is conditional upon the Plaintiff complying with Order 5 above. 7 If the proceeding has not been dismissed in the circumstances provided for in Order 5 above: (a) the subpoenas to produce issued by the plaintiff on 24 January 2023 be listed before the Registrar in the subpoena list 35 days after the determinations in Orders 4(c) and 4(d) above have been delivered; and (b) any further subpoenas to produce or any notices to produce issued by the plaintiff relating to the Separate Question may be issued within 30 days after the determinations in Orders 4(c) and 4(d) above have been delivered. 8 Leave be granted to the Plaintiff to: (a) file and serve all his evidence; and (b) serve all documents on which he relies, relating to the Separate Question within 49 days of the Plaintiff complying with Orders 5 and 6 above, failing which: (c) The proceeding is dismissed; and (d) The Plaintiff otherwise pay the Defendants' costs. 9 The proceeding be case managed by Justice Wright. 10 If the proceeding has not been dismissed in the circumstances provided for in Order 5 or Order 8 above, the proceeding be listed for directions before Justice Wright on Thursday 9 November 2023 at 10:00am. 11 Liberty to apply on two days notice." 1. This judgment concerns the determination of the quantum of the costs to be paid under the Costs Order and the quantum of the security for costs to be provided under the Security for Costs Order, in accordance with order 4 made on 21 April 2023. 2. After some minor extensions to the timetable in order 4(a) to (c) for the filing of evidence and submissions, the provision of the evidence and submissions of the parties on the questions of the quantum of costs and security was completed by the filing of the defendants' written submissions in reply on 11 July 2023. 3. Order 4(d) provided that the quantum of both the costs and the quantum of the security for costs were to be determined on the papers. 4. It can be noted at this point that at the directions hearing on 27 June 2023, the parties accepted that the material before the Court for the purpose of determining the quantum of those two items was sufficient for Court to be able to proceed on the basis envisaged and that the reasons to be provided by the Court might be suitably simple. In light of the parties' agreement to that course and the evidence and submissions provided, I was satisfied that there was sufficient material available to allow me to determine the gross sums fairly and that it was appropriate to determine the quantum of both the costs and the security for costs on the papers. 5. The evidence relied upon by the defendants included two affidavits of Mr Ryckmans, the solicitor for the defendants, each of 24 May 2023. The first related to the quantum of the Costs Order and the second to security for costs. It can be noted here that each of Mr Ryckmans' 24 May 2023 affidavits contained a significant number of paragraphs which repeated, word for word or with only very slight variations, paragraphs in the other affidavit. The need for this repetition was not explained. Furthermore, a high level review of the material relied upon by the defendants in relation to the two motions and the determination of the quantum of the Costs Order and the quantum of security, caused me to have some concerns that the preparation in this matter on the defendants' behalf was not limited in all cases to what was reasonable and proportionate, given the matters in issue on the two motions and the likely duration of any hearing. Costs Order 1. The costs to be quantified for the purposes of the Costs Order were the defendants' costs of, and incidental to: (a) the plaintiff's notice of motion filed on 25 January 2023; and, (b) the defendants' notice of motion filed on 27 January 2023. The Costs Order did not relate to any other costs in the proceedings. Applicable principles in relation to gross sum costs 1. The principles applicable to the quantification by a court of a gross sum, or lump sum, for costs were not generally in issue. They can be summarised for present purposes as relevantly including: 1. The Court has power to make a gross sum costs order: s 98(4)(c) of the Civil Procedure Act 2005 (NSW). 2. The principal purpose of a specified gross sum costs order under s 98(4)(c) is to avoid the expense, delay and aggravation likely to be involved in a contested costs assessment process: Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 (Ahern) at [15] (Meagher, White and Brereton JJA). 3. In determining the quantum of a gross sum costs order, the Court is not required to undertake a detailed examination of the kind that would be appropriate for a formal costs assessment: Hamod v State of New South Wales [2011] NSWCA 375 (Hamod) at [819] (Beazley JA, Giles and Whealy JJA agreeing); Gabrielle v Abood (No 4) [2023] NSWCA 100 (Gabrielle) at [6] (Bell CJ, Kirk and Adamson JJA). 4. The quantum of a gross sum costs order should be based on an informed assessment of the actual costs having regard to the information before the Court (for example, by way of costs estimates or bills) and the approach taken must be logical, fair and reasonable: Hamod at [820]; Ahern at [18]. 5. Where appropriate, the Court may adopt a "broad-brush" approach to quantification and typically an "impressionistic" discount to the costs actually incurred or estimated has been applied in order to take into account the contingencies that would be relevant in any formal costs assessment: Hamod at [814] and [820]; Ahern at [18]; Gabrielle at [6]. It has been held that on an assessment of costs on the ordinary basis, the costs recovered usually range from 60 to 85% of the total costs incurred: Ahern at [42]. Applying a broad-brush approach to the quantification of gross sum costs has resulted in the past in discounts of: 20% (Eliezer v The Council of St Andrew's Cathedral School (No 2) [2021] NSWCA 227 at [30]); 30% (Seafolly Pty Ltd v Maddern (No 6) [2015] FCA 1369 at [39]); 40.8% (Re Niruzzi Pty Ltd [2012] NSWSC 773 at [10] and [11]); and 60% (Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228 at [201] and see [196]; 215 ALR 788). The aptness and amount of a particular discount will, however, depend primarily on the accuracy and reliability of the costs evidence available to the Court and also on the particular circumstances of the case: Ahern at [18]; Hamod at [814]. 1. In addition, when determining the quantum of a gross sum costs order, a court may take into account the considerations which a costs assessor is required to apply when assessing "ordered costs" (as defined in s 63 of the Legal Profession Uniform Law Application Act 2014 (NSW)), namely "what is a fair and reasonable amount of costs for the work concerned": Legal Profession Uniform Law Application Act, s 76(1). Furthermore, and in light of s 76(2) of that Act, in determining what a fair and reasonable amount might be, a court may derive assistance from consideration of the factors in s 172(1) and (2) of the Legal Profession Uniform Law (NSW) to the extent that they are relevant in the particular case. Section 172(1) and (2) are in the following terms: "(1) A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are— (a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount. (2) In considering whether legal costs satisfy subsection (1), regard must be had to whether the legal costs reasonably reflect— (a) the level of skill, experience, specialisation and seniority of the lawyers concerned; and (b) the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and (c) the labour and responsibility involved; and (d) the circumstances in acting on the matter, including (for example) any or all of the following— (i) the urgency of the matter; (ii) the time spent on the matter; (iii) the time when business was transacted in the matter; (iv) the place where business was transacted in the matter; (v) the number and importance of any documents involved; and (e) the quality of the work done; and (f) the retainer and the instructions (express or implied) given in the matter." The defendants' position 1. In regard to the costs of the motions, the defendants relied in particular on the first affidavit of Mr Ryckmans, sworn on 24 May 2023, as well as other material identified in submissions including the evidence of an expert costs assessor, Ms Mossman. 2. The defendants in effect submitted that the gross sum for the purposes of the Costs Order should be $314,216.35 (GST excl) or $345,408.58 (GST incl). The methodology used to arrive at this figure was explained in the first affidavit of 24 May 2023, as involving the steps set out in the paragraphs which follow. 3. First, the defendants' actual legal costs and disbursements in relation to the two motions were calculated and were said to total $363,856.76 (GST excl) or $400,013.04 (GST incl). This figure was made up of the items set out in Table 1 to Mr Ryckman's first affidavit of 24 May 2023, which disclosed the following: Type of cost or disbursement Table 1 Amount (GST incl) Defendants' solicitors' costs $132,590.70 Counsel's fees (made up of: Senior Counsel: $55,000.00 $245,926.00 Junior Counsel: $182,016.00 Junior Counsel's fees incurred in preparing the submissions and affidavits for the quantification of the gross sum costs: $8,910.00) Expert costs consultant (Ms Mossman) $9,900.00 Disbursements in relation to the motions, including filing fees, process server fees and conduct money, and search fees. $8,870.17 Photocopying of the Court Book and Tender Bundle $2,726.17 Total actual costs and disbursements $400,013.04 1. Secondly, Mr Ryckmans reviewed the rates charged by himself and Ms Kutznetzova, to arrive at the figure of $132,590.70 (GST incl) for solicitors' costs. Based on Ms Mossman's evidence, Mr Ryckmans recalculated the solicitors' costs by maintaining his chargeout rate but reducing that of Ms Kutznetzova from $475 to $400 (GST excl) per hour. This reduced the solicitors' costs to $109,710.00 (GST excl) or $120,681.00 (GST incl). 2. Thirdly, taking into account Ms Mossman's evidence that it would be reasonable to apply a reduction of 15% to the costs estimated by Mr Ryckmans, the solicitors' costs were further reduced by that percentage to $93,253.50 (GST excl) or $102,578.85 (GST incl). 3. Fourthly, Mr Ryckmans dealt with the fees charged by counsel. It was contended in substance that Senior Counsel's retention was justified as reasonable and necessary in the present case and that his rates were appropriate, given his seniority, so that no reduction should be made in respect of the amount charged by him. Nonetheless, in light of Ms Mossman's evidence, it was accepted that a reduction of 10% could be applied to counsel's fees, yielding fees for Senior Counsel of $45,000.00 (GST excl) or $49,500.00 (GST incl) and for junior counsel fees totalling $156,212.18 (GST excl) or $171,833.39 (GST incl). 4. The result of all of the steps taken in this process by Mr Ryckmans was summarised in Table 4 in his affidavit. Table 4 in effect explained the amount claimed, $314,216.35 (GST excl) or $345,408.58 (GST incl), was being made up of the following: Type of cost or disbursement Table 4 Amount (GST incl) Defendants' solicitors' costs $102,578.85 Counsel's fees (made up of: $221,333.39 Senior Counsel: $49,500.00 Junior Counsel (including fees incurred preparing the submissions and affidavits for the quantification of the gross sum costs): $171,833.39) Expert costs consultant (Ms Mossman) $9,900.00 Disbursements in relation to the motions, including filing fees, process server fees and conduct money, and search fees. $8,870.17 Photocopying of the Court Book and Tender Bundle $2,726.17 Total costs and disbursements claimed $345,408.58 1. The figure of $345,408.58 (GST incl) claimed by the defendants reflected, in effect, a discount of approximately 13.7% applied to the amount said to have actually been charged. 2. In further support of the contention that the discounted costs of the two motions should be assessed in a gross sum of $345,408.58, it was submitted that, in addition to the factors already referred to and the apparent amount of the plaintiff's claim being in excess of $2 million, the plaintiff's conduct in the proceedings should be taken into account. The relevant aspects of the plaintiff's conduct which were identified included: "constant failure" to comply with orders and directions; failure to serve evidence in relation to his claim until two days prior to the hearing of the two notices of motion almost three years after commencement of proceedings; failure to produce documents until the hearing of the two motions; and, the difficult factual matrix which underpinned the plaintiff's claim and its quantum. These factors were submitted to have had the consequence that the defendants incurred significant costs, relied on eight affidavits and 1,063 pages of documents at the hearing of the motions and engaged eminent senior counsel to appear on their behalf. 3. The defendants' submissions in reply comprised 23 pages plus nine pages of tables. They contained a significant volume of material that amounted to background information or reiteration of what had already been previously relied upon or submitted, or even more detailed submissions and assertions as to particular items of work done or charges incurred. The principal contentions in those submissions could, however, be effectively summarised as follows: 1. the plaintiff had filed no evidence in relation to the quantification of costs and thus the Court should reject or give no weight to certain identified submissions of the plaintiff; 2. the plaintiff did not challenge the reasonableness of the rates said to have been charged by the solicitors and counsel and thus they should be accepted as fair and reasonable. 3. the plaintiff's specific objections should not be accepted because, without attempting to be exhaustive, the discounts applied by Mr Ryckmans were not taken into account, because the plaintiff's contentions were not supported by evidence, were misconceived for various reasons or mischaracterised the work done; and, because the defendants' submissions on the applicable legal principles and "usual discount range" should be accepted. The plaintiff's position 1. The plaintiff submitted that: 1. The costs claimed by the defendants far exceeded what was reasonable in respect of the two motions; 2. There was no independent evidence that the amounts claimed were reasonable and reflected the work done only for the two motions; 3. There was a "huge disproportion" between the issues litigated and the costs claimed and the complexity of the issues on the two motions did not warrant such a claim; 4. As to the plaintiff's "alleged delinquency", determination of those issues was encompassed in the orders made and the award of costs was compensatory not punitive: Ohn v Walton (1995) 36 NSWLR 77 at 79 (Gleeson CJ); 5. The opinion of the defendants' costs assessor, Ms Mossman, prior to the hearing of the two motions was a more realistic assessment. It is convenient to note here that Ms Mossman's relevant opinions [1] included those which are set out the table below: Type of cost or disbursement Amount claimed Reasonable costs Defendants' solicitors' costs of defendants' motion $7,359.00 [no opinion given by Ms Mossman as to the reasonable cost, as in her opinion, the costs of this application should not usually form part of the security sought and would be dealt with upon disposition of the motion.] Defendants' solicitors' costs of plaintiff's motion $5,830.00 $4,550.00 Counsel's fees for defendants' motion $6,600.00 [no opinion given by Ms Mossman as noted above.] Counsel's fees for plaintiff's motion $6,600.00 $6,000.00 Total for the two motions $26,389.00 If the costs relating to subpoenas were, as the defendants claimed, to be included in the assessment of the costs of the two motions, Ms Mossman's opinion was that, for the whole trial, the relevant costs relating to subpoenas should be assessed as set out in the table below. Type of cost or disbursement Amount claimed Reasonable costs Solicitors' fees in relation to subpoenas $31,350-$36,575 $24,000-$28,000 Counsel's fees in relation to subpoenas $8,250-$13,750 $7,500-$12,500 Total subpoena costs for the two motions $39,600-$50,325 $31,500-$40,500 1. It was held in Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [36]: "A client may choose to request and obtain more legal services than those necessary efficiently to dispose of litigation. However, for the purposes of the application, it is necessary to bear in mind what Barton J long ago said in Donohoe v Britz (No 2) (1904) 1 CLR 662 at 666: 'It is a general rule that, as between party and party, the luxuries of litigation must be paid for by those who indulge in them, the necessaries only are to be paid for by the losing side.'" 1. In addition, the plaintiff's submissions included more specific comments on solicitors' fees and other particular items claimed by the defendants as well as the appropriateness of retaining senior counsel for these motions. 2. It was submitted that regard may be had in this case to the comment of Prof Dal Pont in the Law of Costs (5th ed, 2021, LexisNexis at p 545) that the discount applied when a broad-brush approach is applied to the determination of a gross sum costs order is "commonly in the range of 25 to 40 per cent" and that the appropriate discount would be in the range of 40-50% in the circumstances identified. Determination of gross sum for the purposes of the costs order 1. In all the circumstances, there appears to me to be some force in the plaintiff's submissions set out above. In particular, on an appropriately high-level review of the material and the amounts claimed by the defendants, I formed the view that the costs claimed included: costs in relation to subpoenas, which will not be required to be incurred again for the purposes of any final hearing; costs of solicitors and junior counsel for other preparation which appeared to be particularly thorough and will also reduce the costs of preparation for any final hearing; and, the cost of retention of very eminent Senior Counsel for the two motions, which could legitimately be characterised as a luxury rather than a necessity, especially given the very extensive and obviously painstaking preparation undertaken and charged for by junior counsel for motions that were listed for a hearing lasting only one day. 2. I would respectfully adopt the comments made by Brereton J in Re Niruzzi Pty Ltd [2012] NSWSC 773 at [9]: "It is of course entirely a matter for … any litigant, what costs it wishes to incur with its own lawyers. But, an opposing party who might be subjected to a party/party costs order is not bound by the arrangements made between a litigant and its own lawyers. Nothing that I say is a reflection on the fees charged by counsel for the plaintiff, which I am sure as between the plaintiff and the plaintiff's lawyers are entirely appropriate, but an unsuccessful [party] is not necessarily to be visited with all the costs that [the other party] incurs in pursuing proceedings, particularly if the [other party] is more than ordinarily cautious, or more than ordinarily diligent in the preparation of a matter." 1. I did not accept that the plaintiff's submissions should be rejected because no evidence had been adduced on behalf of the plaintiff in relation to the quantification of costs. The bases for the plaintiff's submissions were identified and the Court was entitled to have regard to the evidence as a whole, as well as its own experience of legal work undertaken and costs incurred, in applying the broad-brush approach, which was appropriate in a case such as the present. 2. Nonetheless, I did accept that the way in which the plaintiff conducted the proceedings legitimately caused the defendants to undertake more lengthy and detailed preparation, and consequently incur greater costs, than might ordinarily be expected and, indeed, considerably greater costs than those estimated by Ms Mossman for the two motions. A principal, but not the only, reason for this was that it was appropriate, in the particular circumstances of the present case, for the defendants to seek to demonstrate on the application for summary dismissal that there would be little risk of injustice to the plaintiff if his claim were dismissed because the claim lacked reasonable prospects of success on the information available or likely to be available. It should be understood that the plaintiff is not thereby being punished for his conduct of the proceedings. Rather, the defendants are being compensated for the additional preparation and work undertaken on their behalf as a result of, and in response to, that conduct. 3. Furthermore, it is to be accepted the Court was, as required by s 60 of the Civil Procedure Act, to seek to ensure that the issues between the parties on the two motions were resolved "in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute". In these circumstances and in light of the relevant considerations in s 76 of the Legal Profession Uniform Law Application Act, it was also relevant in determining the quantum of costs for the purposes of the Costs Order to have regard to the issues raised by the two motions and what costs, in the Court's experience, were proportionately and reasonably incurred in resolution of those issues and proportionate and reasonable in amount. I have done this. 4. For these reasons, I formed the view that it was appropriate to apply a significant discount to the total costs claimed by the defendants for both motions, when taking a broad-brush approach, but it was also appropriate to take into account the circumstances, some of which were of the plaintiff's making, which made the incurring of considerable costs by the defendant reasonable. Furthermore, the discount is intended to take into account, not only the inevitable reduction in the amount awarded as a result of a taxation on a party/party basis, but also to recognise that no such taxation has occurred and that any estimate of its outcome is just that and that a further allowance may be necessary in order to ensure fairness to the party against whom the order is made: Seafolly Pty Ltd v Maddern (No 6) [2015] FCA 1369 at [38] (Tracey J). 5. As to the disbursements claimed by the defendants, they made up only a small proportion, less than about 5.5%, of the total amount claimed. In these circumstances, it was not necessary, when taking a broad-brush approach, to consider them separately. 6. Further, it appeared to me to be appropriate to proceed on the assumption that GST is payable in respect of all relevant services. No submissions, however, have been received on the issue of whether GST is to be included in respect of all or some of the services. In those circumstances, I propose to nominate a GST inclusive sum noting, however, that no decision has been made concerning the appropriateness of whether or to what extent GST should be included. 7. In my view, a reasonable, proportionate and fair assessment of the costs which the defendants should be entitled to recover by way of a gross sum costs order in respect of the two motions requires a discount in the order of 40% to be applied to the discounted costs claimed by the defendants of $345,408.58 (GST incl) and a discount in the order of 50% on the undiscounted amount of costs said to have been actually incurred of $400,013.04 (GST incl). This approach yields a sum that I have rounded to $205,000.00 (GST incl). 8. It can be noted that, to the extent that retention of senior counsel was a luxury and not a necessity for the two motions and the discounted amount of $49,500.00 for senior counsel's fees should not be included in any gross sum costs, the figure of $205,000.00 would reflect a discount of approximately 32% on the remaining discounted amount of costs claimed. 9. Before leaving the question of the quantum of costs for the Costs Order, it should also be noted that the costs covered by the gross sum include costs in relation to certain subpoenas and costs for preparation that should not need to be incurred again in preparing for any final hearing or a hearing of the Separate Question. This will be relevant to the determination of the appropriate amount to be ordered in relation to the Security for Costs order. 10. Accordingly, the quantum of costs to be paid under the Costs Order is $205,000.00 (inclusive of GST) assuming, without deciding, that GST is payable in respect of all relevant services. Security for Costs Order 1. Order 3, the Security for Costs Order, required the plaintiff to provide security for the defendants' costs of the hearing of the "Separate Question" in an amount to be determined by the Court in such manner as the Court determines or the parties agree. [2] 2. The "Separate Question" was defined in order 2 as follows: "2 The question of: (a) which of the 36 items or categories of goods and chattels identified in the schedule to the Amended Statement of Claim were located at 18 Euston Road Rydalmere in the State of New South Wales in about June to August 2015 and relocated to 26 Ferndell Street South Granville in the State of New South Wales in about August to September 2015 or thereabouts (Relevant Equipment); (b) whether the Plaintiff was the owner of all or any of the Relevant Equipment and/or had an immediate right to possession, alternatively right to possession, of all or any of the Relevant Equipment at the time of its relocation, be determined as a separate and preliminary question (Separate Question)" 1. As with the quantification of the costs to be paid under the Costs Order, the parties accepted that the quantum of security for the purposes of the Security for Costs Order should be determined by the Court on the papers. Once again, I was satisfied that, in the circumstances, this was an appropriate course. The defendants' position 1. In relation to security for costs, the defendants relied principally on the second affidavit of Mr Ryckmans of 24 May 2023 as well as the other material identified in the submissions. Mr Ryckmans "guesstimated" that the legal costs that the defendants will incur in relation to the determination of the Separate Question would be $338,072.50 (GST incl). In order to reflect the fact that not all solicitor/client costs would be recovered on a party/party assessment, Mr Ryckmans provided a further "guesstimate" of costs with the solicitors' costs reduced by 15% and counsel's fees reduced by 10%, as set out in Table 3A in his second 24 May 2023 affidavit, giving rise to a total of $295,685.88. "Guesstimated" disbursements were set out in Table 4 of that affidavit. Mr Ryckmans, an experienced solicitor, was effectively of the opinion that a fair and reasonable "guesstimate" of the defendants' costs of the Separate Question was a combination of what was in Tables 3A and 4, which can be summarised as follows: Type of cost or disbursement Tables 3A and 4 Amount (GST incl) Defendants' solicitors' costs $148,571.88 (made up of costs in relation to: determination of the quantum of security for costs - $3,319.25; subpoenas - $55,037.50; verified third party discovery - $9,350.00; an affidavit by Mr Ryckmans - $14,492.50; other lay witness's evidence - $27,068.25; directions hearings - $2,618.00; preparation for hearing - $20,429.75; appearance at the hearing of the Separate Question - $13,534.13; Mr Ryckmans' appearance as a witness - $2,722.50) Counsel's fees $147,114.00 (made up of costs in relation to: determination of the quantum of security for costs - $9,801.00; subpoenas - $12,919.50; verified third party discovery - $6,682.50; an affidavit by Mr Ryckmans - $4,455.00; other lay witness's evidence - $12,474.00; directions hearings - $1,782.00; preparation for hearing - $61,875.00; appearance at the hearing of the Separate Question - $37,125.00.) Disbursements in relation to the hearing of the Separate Question: filing fees - $1,100.00, filing fees, process server fees and conduct money in relation to 37 subpoenas - $14,245.00; a share of the Court Book cost - $1,500.00; photocopying - $1,430.00; five witnesses' expenses (excluding those of the first defendant and Mr Ryckmans) - $2,750.00; 3 days' transcript - $1,980.00 , and search fees. $23,005.00 Total security for costs and disbursements claimed $318,690.88 (GST incl) 1. In the defendants' reply submissions, the fact that the plaintiff did not adduce any evidence in relation to the quantification of security for costs, the lack of any challenge to the rates charged and other specific responses to the plaintiff's submissions were raised. The plaintiff's position 1. In response to the defendants' claim for security in the sum of $318,690.88, the plaintiff's submissions effectively included the following: 1. The time taken to prepare in relation to determination of the quantum of security for costs should be reduced by half, to reflect the realistic time that was required, especially as part of the preparation was already done for the security for costs aspect of the two motions; 2. The number of subpoenas would depend on the evidence relied on by the plaintiff and the very large number of subpoenas proposed to be issued by the defendants amounted to a "fishing expedition" and should be at the defendants' expense and not included in any security or at a substantially discounted allowance; 3. In so far as Mr Ryckmans' proposed affidavit for the Separate Question hearing would annex documents and provide an analysis of them, it would be essentially unnecessary and preparation of what was reasonably required would be likely to involve little time and expense; 4. As to the amount claimed for other witnesses, the number and nature of such witnesses would depend on the plaintiff's evidence and could not be ascertained at this stage. Accordingly, the amount claimed should be reduced by half; 5. Counsel's fees for preparation and a three day hearing were excessive, especially given the work junior counsel had already done, and a similar submission applied in relation to the solicitors' fees for preparation and hearing; and 6. Overall a discount of 40-50% should be applied and the payment of security should be staged. Determination of the quantum of security for costs 1. The principles to be applied in determining the quantum of the security for costs order were not generally in dispute. They were helpfully summarised by Sackar J in Louise Haselhurst v Toyota Motor Corporation Australia Limited trading as Toyota Australia [2020] NSWSC 1607 at [11]-[20]. Most relevantly for present purposes these principles included those set out in the following paragraphs of the judgment: "12. In determining the quantum of an order for security the Court does not set out to give a complete and certain indemnity to a defendant and there is no principle that entitles a defendant to be given security for the whole of its recoverable costs (CBX2 Pty Ltd v National Australia Bank (No 2) [2015] NSWSC 1969 at [54] and [55]). 13. Rather the Court embarks on a process of estimation which embodies to a considerable extent, necessary reliance on the "feel" of the case after considering relevant factors (see, e.g., Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 515 (French J)). 14. Whilst the Court requires some evidentiary basis for the estimate of costs, a precise estimate is not required. The Court is not fixing a gross sum amount, and should not decline to act on the evidence before it because the evidence was not the "best evidence" available to support the application (Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 at [35]-[38]; DIF III Global CoInvestment Fund LP v BBLP LLC [2015] VSC 484). Although a discount for exigencies may be required (see, e.g., Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 at [55]). 15. Further the Court is to stand back from the amounts claimed and the precise assessment of costs to consider the case on its particular facts and will make an order that is just and reasonable in the circumstances (Wollongong City Council v FPM Constructions Pty Ltd [2004] NSWSC 523 at [50]). 16. In embarking on such a process the Court is not required to attempt its own detailed costs assessment but can take a "broad brush" approach having regard to the information before it, seeking to prevent (on the one hand) prejudice to the party paying costs by overestimating the costs and (on the other hand) injustice to the party recovering costs by adopting an arbitrary "fail safe" discount across the board on the costs claimed (see, e.g., Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 134 ALR 187 at 199–201; Ashington Capital Pty Ltd v Parissen Capital (Project X) Pty Ltd [2012] NSWSC 410 at [17]–[18]; Pathway Investments Pty Ltd & Anor v National Australia Bank Limited [2012] VSC 97 at [25])." 1. In the present case, it is relevant that, in determining the quantum of security for costs, the defendants will have recovered substantial costs as a result of the Costs Order and those costs include a significant amount attributable to preparation on the questions of whether the plaintiff's case should be summarily dismissed and whether it had any reasonable prospects of success because of issues which included those raised by the Separate Question. I accepted that preparation by both solicitors and counsel in relation to those questions and in relation to subpoenas in effect justified, to a certain extent, what might otherwise have amounted to be costs for the two motions that were not reasonable and proportionate. As a consequence, the quantum of the Costs Order was higher than it would otherwise have been. That work having been carried out, however, in my view the need for preparation and subpoenas for the purposes of the hearing of the Separate Question was likely to be reduced. For these reasons, I am satisfied that the amounts claimed by the defendants in respect of preparation of, and subpoenas for, the Separate Question should be reduced for the purposes of determining the quantum of security. 2. I also accept that the number of subpoenas and the extent of any evidence of witnesses other than Mr Ryckmans required to be prepared by the defendants for the Separate Question will depend in large measure on what evidence is adduced by the plaintiff. I do not accept that it was appropriate to assume that it would be as extensive as the defendants have estimated. On the other hand, I would not accept that no significant preparation and no further subpoenas would be required. Accordingly, the amount of security claimed by the defendants should be reduced to some extent to take these matters into account. 3. As to Mr Ryckmans' proposed evidence on the Separate Question hearing, it did not appear that he could give any direct evidence of the transactions relating to the Relevant Equipment or the plaintiff's title to that equipment. I formed the view that any affidavit evidence which Mr Ryckmans could give relevant to determining the Separate Question was likely to be limited to exhibiting relevant documents, if that were necessary, and in all the circumstances, it was unlikely that it would be reasonable or proportionate to incur costs in the total amount "guesstimated" in this regard. 4. Although there was some substantial force in the plaintiff's submission that the payment of security should be staged, this was not consistent with the structure of the orders made by consent on 21 April 2023, especially order 5. 5. Applying the relevant principles, standing back from the amounts claimed and without attempting a precise assessment of the costs likely to be incurred, but taking into account my observations of the way in which the proceedings have been conducted on both sides, I am of the view that in all the circumstances, it would be just and reasonable to quantify the amount of security for the purposes of the Security for Costs Order in the sum of $155,000.00 (GST incl), which is approximately 50% of the amount claimed by the defendants, namely $318,690.88 (GST incl). In this regard, I note, in particular, that in determining the quantum of an order for security the Court does not set out to give a complete and certain indemnity to a party and there is no principle that entitles a party to be given security for the whole of its recoverable costs. 6. Once again, I propose to nominate a GST inclusive sum, noting however that no decision has been made concerning the appropriateness of whether or not GST should be included or to what extent. 7. For these reasons, the amount to be provided under the Security for Costs Order is $155,000.00 (inclusive of GST) assuming, without deciding, that GST is payable in respect of all relevant services. 8. In the first instance, I propose to leave it to the parties to agree on how the security required under the Security for Costs Order should be given. If, however, agreement cannot be reached within 35 days of these orders, either party may relist the matter on two days' notice for consideration by the Court of the question of the manner in which security is to be given. Orders 1. For these reasons, the orders of the Court are: 1. Pursuant to the Costs Order made on 21 April 2023, the plaintiff is to pay the defendants' costs of and incidental to the two notices of motion in the sum of $205,000.00 (inclusive of GST assuming, without deciding, that GST is payable in respect of all relevant services). 2. The amount to be provided under the Security for Costs Order made on 21 April 2023 is $155,000.00 (inclusive of GST assuming, without deciding, that GST is payable in respect of all relevant services). 3. The manner in which security under the Security for Costs Order is to be given is to be agreed between the parties within 35 days of these orders but, if agreement cannot be reached within that time, the parties have liberty to apply on two days' notice to have the manner in which such security is to be given determined by the Court. ********** Endnotes 1. The figures given by Ms Mossman appear to be exclusive of GST. 2. It can be noted that the word "and" between "determines" and "the parties" in order 3 is an error and it should read "or". This is demonstrated by reference to the terms of order 5(b) and common sense. Amendments 18 July 2023 - [11]: Typographical error 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: 18 July 2023