Supreme Court New South Wales Medium Neutral Citation: Gazal v Deputy Commissioner of Taxation (No. 2) [2024] NSWSC 293 Hearing dates: Hearing on the papers in chambers only Date of orders: 22 March 2024 Decision date: 22 March 2024 Jurisdiction: Equity Before: Slattery J Decision: A gross sum of $48,459.22 is fixed instead of assessed costs in respect of the defendant's costs of these proceedings pursuant to Civil Procedure Act 2005, s 98(4)(c). Catchwords: COSTS – specified gross sum costs order instead of assessed costs – Civil Procedure Act 2005, s 98(4)(c) – defendant, the Deputy Commissioner of Taxation, successfully opposes the plaintiff's appeal against a Departure Prohibition Order issued under the Taxation Administration Act 1953 (Cth), s 14S – plaintiff ordered to pay the defendant's costs of the proceedings – plaintiff has few assets in his own name – plaintiff advanced evidence of doubtful provenance in support of his claim – whether the conduct of a costs assessment would be aggravating or oppressive to the defendant in the circumstances – what is the appropriate specified gross sum to be fixed instead of assessed costs – whether a discount should be applied from the costs claimed by the defendant – consideration of the effect of proceedings being brought in vacation reducing the cost efficiencies that might otherwise have been employed by the legal representatives of the defendant. Legislation Cited: Civil Procedure Act 2005, ss 56(1), 57(1)(d), 60, 98(4)(c) Taxation Administration Act 1953 (Cth), s 14S Cases Cited: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 Bechara (t/as Bechara and Company) v Bates [2016] NSWCA 294 Gazal v Deputy Commissioner of Taxation [2024] NSWSC 1 Hadid v Lenfest Communications Inc [2000] FCA 628 Hamod v State of New South Wales [2011] NSWCA 375 Harrison v Schipp (2002) 54 NSWLR 738 Norfeld v Jones (No. 2) [2014] NSWSC 199 Penson v Titan National Pty Ltd (No.3) [2015] NSWCA 121 WLD Practice Holdings Pty Ltd v Stockham [2020] NSWSC 1354 Category: Costs Parties: Plaintiff: Nahi Nasri Gazal Defendant: Deputy Commissioner of Taxation Representation: Counsel: Plaintiff: M. Bateman Defendant: S. Scott Solicitors: Plaintiff: Claudette Gazi, Eden King Lawyers Defendant: Andrew Chambers, K&L Gates File Number(s): 2023/470210 Publication restriction: No JUDGMENT 1. This is the Court's second judgment in these proceedings. In the Court's first judgment the Court dismissed the plaintiff's Amended Summons, seeking to set aside a Departure Prohibition Order issued by the defendant Commissioner under the Taxation Administration Act 1953 (Cth) ("TAA"), s 14S: Gazal v Deputy Commissioner of Taxation [2024] NSWSC 1 ("the first judgment"). Upon dismissal of the Amended Summons, the Court ordered that Mr Gazal pay the Commissioner's costs of the proceedings and granted leave to the defendant to apply in chambers for the fixing of a specified gross sum instead of assessed costs pursuant to Civil Procedure Act 2005, s 98(4)(c). 2. This judgment should be read with the Court's first judgment. Events, matters and persons are referred to in both judgments in the same way. 3. The Commissioner applied in chambers on 8 February 2024 for a specified gross sum under s 98(4)(c), supported by written submissions and an affidavit of the solicitor for the Commissioner, Mr Andrew John Chambers of the same date, which the Court notes as read on the application which was brought in chambers. 4. Notice was given to Mr Gazal's legal representatives as to whether he wished to oppose the making of s 98(4)(c) order in the amount sought by the Commissioner. Mr Gazal's legal representatives provided written submissions opposing the quantum of the s 98(4)(c) order being sought. The Court has dealt with the matter in chambers. The Court indicated its reasons for granting liberty to apply for a s 98(4)(c) order at paragraph [110] of the first judgment, as follows: "[110] Mr Gazal has few assets in his own name. The Court's jurisdiction under Civil Procedure Act 2005 s98(4)(c) is therefore attracted. The Court can make an order fixing a specified gross sum instead of requiring the Commissioner to expend resources on a full costs assessment, costs which are unlikely to be recovered: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21] (per Giles JA). The Commissioner will be given liberty to apply in chambers and should do so after the law term commences on 29 January 2024 but by no later than Friday, 9 February 2024." 1. The Court did not decide in paragraph [110] whether it would make a s 98(4)(c) order but signalled an inclination to do so. 2. The principles for the making of specified gross sum costs orders instead of assessed costs are well settled. Civil Procedure Act, s 98(4)(c) is expressed in general terms and is not limited to cases of a particular type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act, s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation. The case law frequently emphasises the adaptability of the power and that it is not confined to previously defined classes of cases. 3. Probable inability to pay a costs order is but one example of a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered, then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 ("Schipp") at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 ("Hadid") (Lehane J). 4. But the adaptability of the power means it can be assessed for deployment in many situations. The specified gross sum can be fixed under s 98(4)(c) by the application of what has been described as a "broad brush" approach, having regard to all the information available to the Court: Schipp at [22] and Hadid at [27] and Penson v Titan National Pty Ltd (No.3) [2015] NSWCA 121 at [7] and [25] and Bechara (t/as Bechara and Company) v Bates [2016] NSWCA 294. The approach taken to the estimation of costs must be "logical, fair and reasonable" and the power should only be exercised when the Court considers it can do so "fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available": Schipp at [22] per Giles JA. 5. A definitive statement of the applicable law on the operation of s 98(4)(c) in this State appears in Hamod v State of New South Wales [2011] NSWCA 375 at [813] to [820] ("Hamod"). Some of the relevant principles stated in Hamod are: that before exercising the power the Court should be confident that the approach taken to estimating costs is fair, logical and reasonable; that the terms of s 98(4), together with the more general considerations reflected in Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include the degree of any disproportion between the issue litigated and the costs claimed and the complexity of proceedings in relation to their cost; that 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 proceeding; that 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; that 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; that 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); and that the approach taken to estimating the costs to be ordered 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. 6. The Commissioner seeks a s 98(4)(c) order for costs in the sum of $53,115.30 which is calculated as follows. Description Amount (inc GST) Counsel's fees - Ms Scott's invoice dated 21 January 2024 for attendances from 29 December 2023 to 4 January 2024 (inclusive) $6,412.50 Solicitors' fees - K&L Gates' invoice for work undertaken from 28 December 2023 to 8 January 2024 (inclusive) $42,160.80 Disbursements - Court fees for obtaining copies of the Orders $142.00 Solicitors' fees - K&L Gates' invoice for work undertaken in relation to this application for a GSO for costs $4,400.00 Total $53,115.30 1. The Court will make a s 98(4)(c) order in this case. As the Court indicated in the first judgment (at [110]) Mr Gazal has few assets in his name. His conduct of these proceedings, bringing a late appeal over the Court's vacation when the appeal could have been brought earlier and advancing some evidence of little probative value is a basis to infer that the conduct of a full cost assessment is likely to be aggravating and oppressive to the Commissioner. This is a classic case for the exercise of the s 98(4)(c) jurisdiction. 2. The Commissioner correctly acknowledges that Courts typically apply a 10 per cent to 30 per cent discount from the costs charged and claimed when fixing a specified gross sum instead of assessed costs. But the Commissioner submits that no discount should be applied in this case because the costs that are claimed are for a discrete period of time, and the surrounding circumstances make it reasonable for the Court to conclude that it can be sufficiently confident that the costs relate solely to "these proceedings including this costs application". The Commissioner further submits that the rates charged by counsel and solicitors for the Commissioner are not excessive, that it was appropriate to brief counsel to appear at the hearing and as the first judgment shows, the timeline of the hearing over the summer vacation was highly compressed and the work that might ordinarily have been delegated to more junior staff was undertaken by the only staff available at that time of year. 3. The Commissioner's submissions are generally but not wholly persuasive. This case is unusual in that the Commissioner's lawyers were not able to deploy their staff and resources to their best advantage to reduce costs because of the timing of Mr Gazal's application. The Court has observed in the first judgment that Mr Gazal could have brought these proceedings earlier, and at a time that would not have forced their hearing into the Court's vacation period. Given the quantity of work that was done at short notice by senior personnel at K&L Gates, the Commissioner's solicitors' costs mostly appear reasonable for this hard fought Supreme Court litigation. 4. The Court does typically apply a 10 to 30 per cent discount from claimed costs in fixing a specified gross sum: WLD Practice Holdings Pty Ltd v Stockham [2020] NSWSC 1354. But the appropriateness and the extent of any discount will necessarily depend upon the circumstances: Hammond at [819]-[820]. The Court is not required to apply a percentage discount to the sum sought by the successful party if an injustice would thereby be occasioned to the successful party: Norfeld v Jones (No. 2) [2014] NSWSC 199 at [7]-[9]. But there can be a risk of injustice being occasioned if the Court applies too heavy a broad blanket discount. Ordinarily counsel's fees and other disbursements would be undiscounted, and the discount would only apply to solicitors' professional costs. The Court is well apprised of the detail of the work that was done on behalf of the Commissioner in these proceedings. 5. But Mr Gazal's submissions make a compelling case that some discount should be applied here. Mr Gazal does not object to the costs of counsel in the sum of $6412.50 or the other disbursements. The issue is about the solicitors' costs of $42,160.80 and the $4,400 for preparing the application for costs. Thus, Mr Gazal takes issue with the total claimed amount of $46,560.80. 6. Mr Gazal puts a number of general submissions followed by specific criticisms of individual charges. As to the general submissions, Mr Gazal contends: the matter was not complex; the hearing was not lengthy and did not need extensive preparation; the costs of the Commissioner's solicitors and counsel were disproportionate; that the rates charged by the solicitors are at the higher end of the range; there is significant duplication in the solicitors' charges; and, the amount of work done for the costs application does not warrant total charges of $4,400. 7. Mr Gazal also takes issue with specific charges. It is not necessary to identify the precise charges put in issue. Some of the charges relate to small amounts of money. The Court does not treat the s 98(4)(c) jurisdiction as a mini costs assessment. But Mr Gazal's criticisms of these charges are discussed below. 8. Some of the early charges are said to be inconsistent with Mr Chambers' own representation that he was not involved in the matter at an early stage. But the charges are not inconsistent with Mr Chambers accelerating his knowledge of the matter upon becoming aware of it. 9. Mr Gazal complains of some duplication in charges. There is a little duplication, but it is less than Mr Gazal submits. Some duplication is to be expected in proceedings brought on for hearing as quickly as these proceedings were, a situation partially caused by Mr Gazal himself. 10. Rounding up of the calculation of charges is criticised. But this is only in respect of very small amounts. Charges in respect of dealing with irrelevant material are criticised. But in such an urgently conducted matter, some extra time would need to be expended by senior people in separating out the relevant from the irrelevant rapidly. Dealing with less relevant material at least for a period should be allowed. 11. The length of time for attendance upon counsel is criticised. But the times claimed are generally reasonable and acceptable in the Court's view in a matter where counsel had little space to become acquainted with the matter before the hearing. 12. Mr Gazal submits that in places the material actually relied upon on behalf of the Commissioner at the hearing was significantly less in volume than would be indicated by the allowance made for preparation and that time and legal effort have been wasted and the charges are excessive on top of duplicated charges. This submission is valid to a degree but it does not make sufficient allowance for the speed with which this matter came on for hearing. In such a compressed hearing timeframe a degree of allowance must be made for the lawyers to make investigations and reverse course and not to use some of the material that they have traversed. 13. Criticism is made of the solicitors for the Commissioner listening in remotely rather than attending Court for the hearing. It is said that the client should not be charged the full solicitors' rate for their presence by AVL. This submission misunderstands the economies that were achieved by Mr Chambers and the other solicitors for the Commissioner. Listening in online saved airfares and is a commonly utilised form of attendance in the modern era, where the principals of a firm are located interstate. AVL attendance is not always an appropriate course but it was both reasonable and justifiable in this case. 14. Finally, criticism is made of the need for analysis of the judgment on top of the barristers' attendance at the taking of judgment. But the time charged for this was generally reasonable, particularly as the Commissioner would have needed to be apprised of the Court's reasons quickly. In the event that an appeal was brought against the decision it would probably have been brought urgently. 15. These various considerations lead the Court to conclude the following. Mr Gazal's contention that the Commissioner's submission that no discount be applied, should not be accepted. Even with the pressure the Commissioner was under, some further economies were undoubtedly possible on the part of the Commissioner and may well have been allowed upon an assessment. On the other hand, Mr Gazal's criticisms fail in many cases because of a lack of appreciation of the pressure under which the Commissioner's lawyers were placed by his own conduct. 16. Doing the best that it can, the Court will apply a discount of 10 per cent to the solicitors' professional costs of the hearing and the preparation of the costs dispute, being the total sum of $46,560.80. Applying that 10 per cent discount to that sum reaches a figure of $41,904.72. To that there should be added $6,412.50 in counsel's fees and $142 in other disbursements, leading to a total of $48,459.22 as the specified gross sum to be awarded instead of assessed costs. Orders 1. For these reasons the Court makes the following orders: 1. Fix the sum of $48,459.22 as a specified gross sum instead of assessed costs pursuant to Civil Procedure Act 2005, s 98(4)(c) in respect of the defendant's costs of these proceedings. 2. Order that there be judgment for the defendant against the plaintiff in the sum of $48,459.22 upon the order for costs made in Order 2 of the Court's orders on 4 January 2024. ********** 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: 22 March 2024