District Court New South Wales Medium Neutral Citation: Vumbaca v Sultana (No. 2) [2013] NSWDC 195 Hearing dates: 17 September 2013 Decision date: 23 September 2013 Before: Gibson DCJ Decision: (1) Pursuant to s 98(4)(c) Civil Procedure Act 2005 (NSW) an order that the plaintiff pay the defendant's costs for a gross sum of $37,217.73 ($53,168.19 x 70%). Catchwords: COSTS - application for gross sum costs order pursuant to s 98(4) Civil Procedure Act 2005 (NSW) - defendant seeks gross sum costs order following plaintiff's unsuccessful appeal from Costs Review Panel - whether appropriate to make a gross sum costs order in the circumstances - quantification of the appropriate specific gross sum to be awarded Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56-62 and 98(4) Cases Cited: Australasian Performing Rights Association Limited v Marlin [1999] FCA 1006 Beach Petroleum NL v Johnson (1995) 57 FCR 119 Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863 Canvas Graphics Pty Ltd v Kodak (Australasia) Pty Ltd (Federal Court of Australia, O'Loughlin J, 23 January 1998) Cooper v Mulcahy; Mulcahy v Cooper (No 2) [2013] NSWCA 216 Cretazzo v Lombardi (1975) 13 SASR 4 CSR v Eddy (2005) 226 CLR 1 Datadot Technology Ltd v Alfa Microtech Pty Ltd [2003] FCA 1449 Harrison v Schipp [2002] NSWCA 213 Idoport Pty Ltd v National Australia Bank Ltd [2005] NSWSC 1273 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 In the matter of Palladium Consulting Pty Ltd [2013] NSWSC 92 Lambert v Jackson [2011] FAMCA 275 Lorenzato v Lorenzato (No 2) [2011] NSWSC 790 Nine Films and Television Pty Ltd v Nanox Television Ltd [2006] FCA 1046 O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36 Seven Network Limited v News Limited [2007] FCA 2059 Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228 Sparnon v Apand Pty Ltd (Federal Court of Australia, 4 March 1998) Starr-Diamond v Diamond (No 4) [2013] NSWSC 811 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11 Wentworth v Wentworth (Court of Appeal, New South Wales, 21 February 1996, unreported) Williams Advanced Materials Incorporated v Target Technology Co LLC [2004] FCA 1405 Texts Cited: Dal Pont, Law of Costs, 2nd edition, 2009 Category: Costs Parties: Plaintiff: Aldo Vumbaca Defendant: Antoinette Sultana Representation: Plaintiff: Mr S Russo (solicitor) Defendant: Ms M Castle Plaintiff: Russo & Partners Defendant: Turner Freeman Lawyers File Number(s): 2012/218606 Publication restriction: None Judgment The application before the court 1On 14 December 2012 I handed down judgment for the defendant in proceedings brought by summons filed on 25 October 2012, in which the plaintiff appealed from a decision of the costs review panel of 23 May 2012 affirming the certificate of determination of a costs assessor for costs in the sum of $17,112.81. 2I made an order that the plaintiff pay the defendant's costs. The defendant has brought an application for a gross sum costs order pursuant to s 98(4)(c) Civil Procedure Act 2005 (NSW). 3The applicable legal principles may briefly be stated as follows. Section 98(4) grants the Court the power to order a specified gross sum instead of an order for costs to be assessed. Although the power granted by s 98(4)(c) has been described as particularly suited to complex litigation, the rule is expressed in general terms and is not limited to cases of that type: Australasian Performing Rights Association Limited v Marlin [1999] FCA 1006. The power to order a specified gross sum instead of assessed costs may be exercised where the circumstances warrant it. The purpose of the rule is to avoid the "expense, delay and aggravation" (Starr-Diamond v Diamond (No 4) [2013] NSWSC 811 at [8] per Slattery J) to which an assessment may give rise: see Beach Petroleum NL v Johnson (1995) 57 FCR 119. 4Ms Castle in her outline of submissions identifies two questions which are asked by a Court when considering an application for a specified gross sum. The first is, is it appropriate to order a gross sum? The second is, what is the appropriate specific gross sum which should be awarded in the circumstances? Is it appropriate to order a gross sum? 5The principles are set out by Giles JA in Harrison v Schipp [2002] NSWCA 213 at paragraph [22]: "22. Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson at 124, the gross sum "can only be fixed broadly having regard to the information before the Court"; in Hadid v Lenfest Communications Inc at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates". The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson at 123; Hadid v Lenfest Communications Inc at [27]). 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 (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA)." 6The circumstances in which a specified gross sum will be awarded as opposed to the costs being assessed in the usual fashion are set out in Dal Pont, Law of Costs, 2nd edition, 2009 at [15.16] to [15.25] and in particular in the cases summarised at [15.21] fn 90. I agree that the Court's response to applications of this kind has been cautious, but analysis of cases where the application has been refused shows that this has often been the result of lack of appropriate evidence, rather than significant issues as to principle. 7Some of the circumstances in which Courts have considered it appropriate to make such orders include: (a)As noted in [3] above, where issues of "expense, delay and aggravation" would arise: Starr-Diamond v Diamond (No 4), supra; (b)where the party obliged to pay the costs would not be able to meet the assessment: Harrison v Schipp, supra; (c)where the proceedings are large and complex, or otherwise of the kind that Ms Castle referred to as "megalitigation": Idoport Pty Ltd v National Australia Bank Ltd [2005] NSWSC 1273; (d)where proceedings have been completed, or are otherwise at a stage where the making of such an order will not stultify the conduct of litigation by the party against whom such an order is made: Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11; Lorenzato v Lorenzato (No 2) [2011] NSWSC 790; (e)where the undesirability of "satellite litigation" or "parasitic litigation" (O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36) in the form of costs applications should be discouraged: Lambert v Jackson [2011] FAMCA 275 at [59] (lump sum costs orders made on an indemnity basis by reason of conduct of the litigation). 8In Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863, Beech-Jones J stated: "Further, it must be borne in mind that the substantive issue of the proceedings was a dispute over the costs assessment process. A further order requiring the re-engagement of that process has the risk that the substantive dispute between the parties will become wider rather than narrower." The submissions in support of the application 9The basis upon which the order is sought has been summarised in paragraph 15 of the defendant's outline of submissions as follows: (a)These proceedings are akin to "satellite litigation", in that the plaintiff brought a statutory appeal as to questions of law arising out of a costs assessment which had first been assessed by a costs assessor and then by the costs review panel; (b)the documents in question, which are the documents I examined for the purpose of handing down my judgment, fall within a narrow compass, in that they consist of a summons (as amended) and affidavits; (c)the costs in question are relatively modest, and pursuit of the costs assessment process may lead to further expense of the kind which may be "unnecessary", for the reasons explained by Beech-Jones J in Bobb v Wombat Securities Pty Ltd (No 2), supra; (d)the plaintiff's conduct of these proceedings, and in particular the remarks of O'Meally P in the Dust Diseases Tribunal, which were as follows: "As a result of the plaintiff's conduct in the DDT and the District Court, the Court could not have confidence that the plaintiff would act reasonably in any costs negotiation in relation to its own costs order. To order that costs be assessed has the potential [sic] could lead to another round of assessment, review of assessment and appeal to the District Court. This sort of "satellite litigation" is to be discouraged." (e)O'Meally P's comments as to the lack of merit of the plaintiff's claim: "... I was of the view that the [plaintiff's] refusal to allow inspection and the taking of a sample was unreasonable, particularly is that so in the light of the matters referred to in the correspondence passing between the solicitors for the applicant and the solicitors for the respondent ... this type of thing [inspection] happens over and over and over again. As I have said, in 22 or is it 21 years, I have been sitting here. This is the first time any such application [for access] has been resisted." 10Ms Castle also draws my attention to the manner in which the costs assessment was appealed and the manner in which the proceedings were conducted before me. While I have not taken these matters into account, it has not escaped my attention that there is a degree of combativeness directed by Mr Russo towards Ms Castle and Turner Freeman, the solicitors for the defendant. Slattery J's reference to "aggravation" (Starr-Diamond v Diamond (No 4), supra, at [8]) as a factor may have had such matters in mind, but I have been careful not to include this factor into account. The submissions in opposition to this application 11Mr Russo's submissions are as follows: (a)Courts do not make gross sum costs orders other than in exceptional circumstances, and generally on where "megalitigation" has occurred (Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [23]). I agree that the courts were cautious in relation to such applications, particularly prior to the Civil Procedure Act 2005 (NSW) but, as Professor Dal Pont points out at [15.22], the question of whether costs should be fixed operates "at each end of the costs spectrum", and the need for proportionality may justify a fixed sum where the amount in question is modest; (b)the costs sought are out of proportion to the small sum which was the subject of my judgment of 13 December 2012, namely $17,112.81. I consider this factor operates in favour of a gross sum order, particularly as it related to a disputed issue of legal costs; (c)substantial deductions need to be made for the reasons set out in Dal Pont at page 474 and in particular in the cases at fn 90. I agree with this submission and propose to make appropriate adjustments in relation to a number of the quantum issues raised by Mr Russo, including costs of travel, counsel's fees and whether or not the costs are at the upper level; (d)Mr Russo submitted that the costs in question amounted to a gross overcharging. Some of the costs claimed (such as costs of travel) cannot be claimed; the solicitors have grossly overcharged counsel's fees have not been reduced to an assessed figure but merely claimed in full, which Mr Russo states is contrary to the usual procedure. He also deplored the practice of updating the brief on a regular basis as not being cost-efficient. I have dealt with Mr Russo's objections on these issues in more detail below; (e)costs must be logical, fair and reasonable, and the bill in this case has been manipulated to place costs at the upper level by the costs assessor, who by reason of having carried out work for Turner Freeman in the past, is not truly independent and whose evidence should be treated with suspicion. The costs assessor was cross-examined at some length on these issues. Mr Russo particularly drew my attention to concessions he said the costs assessor had made about not checking the reasonableness of counsel's fees; 12Mr Russo's overall submission was that it is for the Court to determine whether it is appropriate for the matter to be the subject of a gross costs order instead of being sent to assessment. Mr Russo submitted that I would not do so by reason of the gross overcharging, the failure to provide the solicitor's costs agreement (CSR v Eddy (2005) 226 CLR 1), set-offs his client had in relation to the withdrawal of the challenge to jurisdiction by the defendant (in the 24 December 2012 judgment) and the failure of the defendant in the 16 September 2013 notice of motion to produce the solicitor's file. 13As to this last point, I note that the costs order made on 14 December 2012 was for the plaintiff to pay the defendant's costs with liberty to restore in relation to costs. That liberty was never exercised and, in the absence of submissions to the contrary, I decline to do so now. The notice of motion in relation to production of the costs agreement took a matter of minutes. The defendant has otherwise been successful in this application, and for the reasons explained in Cretazzo v Lombardi (1975) 13 SASR 4 at 12, a decision universally cited with approval (most recently by the NSW Court of Appeal in Cooper v Mulcahy; Mulcahy v Cooper (No 2) [2013] NSWCA 216 at [22] - [24]) on the undesirability of differentiating between issues on which a party has succeeded and failed for the purposes of costs orders. Accordingly, there is no set-off. The evidence before the court 14The evidence before me consisted of the affidavits of Judith Horobin of 8 August and 11 September 2013, and the expert reports of Christine Davitt of August and 10 September 2013. Both of these witnesses were cross-examined. 15Ms Horobin, a partner at Turner Freeman, has been a solicitor for 40 years. She is extensively experienced in litigation but stated frankly she knew little about costs appeals and was heavily reliant upon counsel in this regard. It was for this reason, she said in her evidence, that she had letters settled by counsel. By reason of Ms Horobin's frank concession that she relied upon counsel, it was submitted that it was inappropriate that her charge-out rate should be $500 per hour. 16However, litigation skills are skills which relate to the whole range of conduct of litigation. A skilled litigator may be unfamiliar with a particular area of the law, such as admiralty law, defamation, or costs assessments. However, a solicitor at Ms Horobin's level can draw upon her extensive litigation skills, and is entitled to charge a reasonable charge-out rate for the work she has done, particularly since the costs related to proceedings in her specialist area. It should not be the case that a solicitor should be obliged to put down his or her rate because the substantive law is unfamiliar, particularly where the skill the solicitor is bringing to bear relates to issues such as tactical conduct of the case. 17The principle evidence given was the evidence of Christine Davitt. Some of the matters put to her included: (a)In what circumstances, if any, can travel by a solicitor be charged for? Mr Russo submitted that it was not possible for solicitors to charge, citing Wentworth v Wentworth (Court of Appeal, New South Wales, 21 February 1996, unreported) at pp 23-24 where, Mr Russo told the court, he was the solicitor whose costs were disallowed. However, that was a case where the client opted to be represented by lawyers based some distance away, and turns on its own facts. The issue of allowance for travelling expenses is discussed in some detail in Dal Pont at [17.43]-[17.46]. The law in this area has changed considerably over the decade, with the gradual falling away of the practice of using city agents by reason of email, electronic filing and the like. Ms Davitt stated in her evidence that she followed a ruling by Mr David Hartstein, a costs assessor, who had made a ruling on this issue. That ruling is unavailable to me. However, the principles set out in Dal Pont make it clear that the question is one of whether or not the lawyer's personal attendance is necessary or proper in the circumstances. I consider the travel allowance, in the circumstances, was appropriate for a case where the solicitor's client was dying and the DDT case complex. (b)Estimates of future costs: These were included as an indication of what would happen in the event that the matter went to assessment. Ms Davitt explained that such costs were included on a future basis to enable parties to discuss what the costs would be if the matter proceeded to assessment. Judges routinely see orders for "costs as agreed or assessed" and for this reason, I have a degree of judicial awareness (as to which, see Bobb v Wombat Securities Pty Ltd (No 2), supra) as to how costs may be agreed instead of assessed. These costs have been removed from the gross sum costs order application and nothing more need be said about them. (c)Are the costs at the top of the range? The plaintiff had the opportunity to put evidence about costs ranges before me in the timetable for affidavits which I set down. This was not done. Ms Davitt said in her evidence, and I accept, that the rates charged by counsel and by the solicitors in this matter are within the reasonable range. I also accept her statements as to the change in role of the brief to counsel and the "running brief" approach to forwarding material to counsel on a regular basis. (d)As to counsel's fees, Ms Davitt said, and I accept, that the standard practice for costs assessments is for counsel's memoranda of fees to be provided without an item by item breakdown of their contents. That has certainly been the case in all the costs assessments which have come before me for hearing. I am unaware of there being a practice to the contrary, although Mr Russo assures me that this is the case. I have been unable to locate any authority to support this contention. However, counsel's fees are frequently marked down in assessment, as I have noted from the submissions of Mr Russo, and I propose to take this factor into account when arriving at an appropriate percentage to reduce from the sum in question. (e)Ms Davitt was cross-examined about how, where a solicitor had charged, for example, 1.25 hours for putting an affidavit together, she could increase this fee (or, for that matter, reduce it). Ms Davitt explained that her role as a costs assessor was to prepare a bill for such charges as were reasonable. There were times when a solicitor would overcharge and she would not put the full amount of time spent in the costs assessment as a claim; she would reduce it to what would be a reasonable figure. This was particularly the case in relation to time spent on issues such as research, or perusals. However, where the solicitor had undercharged, she would increase that figure. Mr Russo put to me that this was a blatant misuse of the costs assessor's role, and that the costs assessor should not interfere with the time costing in this manner. I do not accept this submission. Where a solicitor has noted spending an excessive amount of time on research, for example, or drafting an affidavit, a costs assessor not only could, but should, reduce this to a sum which would be reasonably likely to be assessed as being payable. Although costs assessors are not officers of the Court, they perform a valuable task in terms of filtering and rendering reasonable the costs in litigation. Similarly, where a solicitor has charged less than a reasonable amount, a costs assessor would be entitled to increase that sum. (f)Are the costs incurred in appointing a litigation guardian following the death of the defendant Mrs Sultana party/party or solicitor and client? I do not accept the submission of Mr Russo that the costs in relation to the death of Mrs Sultana were costs of a solicitor and client nature. The circumstances in which she died, and the executor of her estate needed to be appointed in her place, including the costs of notifying the Court, relisting the matter and delaying the hearing of this costs application, were matters which Ms Davitt stated to be party/party costs, a view with which I agree. (g)Is an allowance on the "rule of thumb" of 8-10% reduction for party and party costs too little? Ms Davitt said that the range likely to be reduces on assessment was between 5-20%, and that the percentage of 8-10% was based on the amount that was taxed on bills that she herself prepared. Her attention was drawn to costs which she had challenged in relation to a Notice of Objection of Costs in a defamation matter. Ms Davitt pointed out that she had been challenging another costs assessor's costs, and it was for that reason that she had challenged 30% of the costs. I also take into account that it was by no means likely that the whole of the 30% would have been successful on assessment, and also that the proceedings involved were defamation proceedings, where the absence of affidavits and the highly technical nature of the pleadings and complex nature of litigation means that such bills are not an appropriate comparison for costs in relation to a costs assessor's bill.I accept Mr Russo's contention that a sum of more than 8-10% should be deducted. Mr Russo put the percentage as 20-30%. What is important to take into account is that, not only must allowance be made for a percentage being deducted if the bill were to proceed to assessment, but also the savings from the assessment not proceeding (this being the purpose of Ms Davitt's "future costs" estimate) and the convenience of having a lump sum order. Conclusions concerning whether a specified gross sum should be awarded 18The submissions made by Mr Russo consisted largely of attacks on Ms Davitt's bill. The difficulty I have is that where costs orders of this kind are made, judges must be guided by expert evidence. Mr Russo has elected not to provide any evidence in reply to the costs assessment in question. This is surprising because, if the matter were to proceed to assessment, a set of objections would need to be prepared. It would have been a straightforward matter to retain a costs assessor for the purpose of having those objections prepared, in which case I might have had a clearer picture of the degree to which there was overcharging as alleged. 19Ms Davitt was an impressive witness who answered questions frankly and in a straightforward manner. I reject the submission that she has manipulated the costs in order to favour a client with whom she enjoys any form of improper relationship. 20Courts have been particularly careful in relation to gross sum costs orders, not to make such orders unless they are satisfied that expert evidence is available. This is available in the present circumstances. This brings me to the question of an appropriate specific gross sum in the circumstances of this case. The principles relevant to determining the specific gross sum 21The principles may shortly be stated as follows. The specification of a gross sum is not the result of a taxation or assessment process, and as a result the Court takes a "broad brush" approach to the quantification of a gross sum: Dal Pont at [15.20]. The Court does not aim for mathematical precision, in particular, it is unwise to extrapolate from the circumstances of one piece of litigation to those of another (Idoport Pty Ltd v National Australia Bank Ltd, supra, at [14]). The costs should be proportionate to the nature and importance of the case, but the fact that a small sum involved does not mean that a party should not be entitled to reasonable costs, unless there is some specific factor, such as a property dispute between the parties or Family Provision proceedings. Where there is such a provision, Courts may take into account the conduct of the parties in the litigation: see Lambert v Jackson, supra at [66]. The opportunity of procedural fairness or natural justice must be afforded, in that time for consideration of the costs assessment must be given. 22Mr Russo complained that the additional memorandum of costs was forwarded on Friday, 13 September 2013 without leave. He had not had an opportunity to read it properly because he had left his office early on Friday and had been too busy yesterday. However, by extending the time of the hearing on 17 September 2013, I am satisfied that he has had an opportunity to put all the matters he wished to put to Ms Davitt. In addition, I note that not only did the Plaintiff not comply with order 4 of my orders of 25 July, but that there is a prior history of non-compliance with orders by the plaintiff in the hearing before me. In determining whether there has been procedural fairness, I have had regard to the provisions of s 56, and in particular to the desirability of finality in proceedings over a comparatively small sum of money. 23In relation to the discount to be applied to the total sum of the bill ($53,168.19) Mr Russo draws my attention to: (a)Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119: 65% of the successful party's total costs and disbursements allowed; (b)Canvas Graphics Pty Ltd v Kodak (Australasia) Pty Ltd (Federal Court of Australia, O'Loughlin J, 23 January 1998) - 38% allowed (Dal Pont, [15.21] fn 90); (c)Sparnon v Apand Pty Ltd (Federal Court of Australia, 4 March 1998) - costs of $971,287.67 assessed as a gross sum of $634,320.54; (d)Datadot Technology Ltd v Alfa Microtech Pty Ltd [2003] FCA 1449 -59% allowed; (e)Williams Advanced Materials Incorporated v Target Technology Co LLC [2004] FCA 1405 - 65% allowed; (f)Nine Films and Television Pty Ltd v Nanox Television Ltd [2006] FCA 1046 - 67% allowed; (g)Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228 - 41% allowed; (h)Seven Network Limited v News Limited [2007] FCA 2059 - 63% allowed. 24However, not only are these decisions some years old, but they all relate to what Ms Castle called "megalitigation". More recent estimates include: (a)Bobb v Wombat Securities Pty Ltd (No 2), supra - 70%, with a 30% reduction under the "rule of thumb"; (b)Starr-Diamond v Diamond (No 4), supra - $294,226.36 (being 80% of $367,782.96), namely a 20% reduction; (c)In the matter of Palladium Consulting Pty Ltd [2013] NSWSC 92 - 15% reduction. 25The estimate of 30% in Bobb v Wombat Securities Pty Ltd (No 4), supra, is a particularly helpful analogy, for the reasons explained by Beech-Jones J at [8]. This also takes into account the 20% to 30% suggested by Mr Russo in relation to the "rule of thumb" at the upper limit. 26I have also taken into account the principles set out in ss 56-62 of the Civil Procedure Act 2005 (NSW). It is in the interests of both parties that these proceedings should be brought to an end. This is particularly the case for the plaintiff, who has been unsuccessful not only in the Dust Diseases Tribunal but before the costs assessor and the costs review panel, as well as before myself. By erring on the side of caution and deducting 30% from the costs claimed by the defendant, I have hopefully arrived at a figure which will make the ending of this litigation without the further burden of costs assessment, an additional source of delay and aggravation. Orders (1)Pursuant to s 98(4)(c) Civil Procedure Act 2005 (NSW) an order that the plaintiff pay the defendant's costs for a gross sum of $37,217.73 ($53,168.19 x 70%). ********** 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: 11 October 2013