Supreme Court New South Wales Medium Neutral Citation: Ellens v Fleming & Anor [2017] NSWSC 607 Hearing dates: 15 May 2017 Date of orders: 15 May 2017 Decision date: 15 May 2017 Jurisdiction: Equity Before: Slattery J Decision: Specified gross sum costs order made under Civil Procedure Act, s 98(4)(c). Directions given in relation to ascertaining the quantum of one outstanding liability of the estate represented by the second defendant. Catchwords: PROCEDURE – Costs – whether gross sum costs order to be made – proceedings settled under orders for administration of estates of plaintiff's parents –administration cannot be completed until costs of second defendant and other liabilities resolved - costs to be assessed on an indemnity basis pursuant to previous Court orders made – no evidence as to unreasonableness of costs incurred – plaintiff to continue discussions with NSW Trustee and Guardian in respect of amount due for management fees Legislation Cited: Civil Procedure Act 2005 (NSW) Legal Profession Uniform Law Application Regulation 2015 (NSW), Schedule 3 Cases Cited: Bouras v Grandelis (2005) 65 NSWLR 214 Hamod v New South Wales and Anor [2011] NSWCA 375 Kostov v Zhang (No 2) [2016] NSWCA 279 Category: Costs Parties: Plaintiff: Hugh Arthur John Ellens First Defendant: Rita Joan Fleming Second Defendant: Jennifer Margaret Walton Representation: Counsel: Second Defendant: Michael Klooster Solicitor: Plaintiff: Philip Beazley, Beazley Boorman Lawyers Second Defendant: David Lamb, Gilbert M. Johnstone & Co, Lawyers File Number(s): 2014/174282 Publication restriction: No EX TEMPORE Judgment 1. These proceedings were listed for hearing before me in September of last year. They settled on 2 September 2016 by means of complex orders for the administration of the estates of each of the plaintiff's parents, so that the plaintiff could ultimately receive a legacy in the form of the house in which he had been living for many years. In the settlement he still had to raise some funds to acquire the house from his mother's estate, which estate is represented by the second defendant. 2. The legal advices on all sides enabled complex settlement to be melded together to complete the administration of the parents' estates and allow the son, upon terms to which he consented, to obtain the property. 3. But there was a problem with the performance of one part of the settlement. The matter was listed on 28 April 2017 to see whether the problem could be resolved, and it was. But one residual issue between the parties was holding up the settlement of the transfer of the property from the second defendant to the plaintiff, the issue of the second defendant's costs. The plaintiff has raised the funds for the settlement. But administration of the estate of the mother and the property transfer, cannot be completed until the costs of her executor, the second defendant, deducted from the estate and certain other estate liabilities are resolved. 4. The matter was listed today to allow the costs aspect of those matters to be finalised. The orders made on 28 April to set the matter down for hearing today were that the matter be listed today to determine, whether the Court could make a gross sum costs order under Civil Procedure Act 2005, s 98(4)(c) in respect of the amount of costs payable by the plaintiff to the second defendant. 5. In support of that application, the second defendant's solicitor, Mr David John Lamb, has deposed by affidavit sworn on 4 May 2017 what his costs are. They are, according to paragraphs [2], [3] and [4] of his affidavit: "2. The outstanding liability of the deceased, Ethel Lucy Inez Ellens, remains as follows: 2.1 NSW Trustee and Guardian, as per Statement of Claim dated 4 December 2015, a copy of which is annexed and marked "A": $53,630.99 3. The testamentary expenses of the estate are as follows: 3.1 Gilbert M. Johnstone & Co, for acting on behalf of the second defendant in obtaining a grant of probate in the Estate of Ethel Lucy Inez Ellens, as per Tax Invoice dated 24 December 2014, a copy of which is annexed and marked "B": $7,430.60 3.2 Gilbert M. Johnstone & Co – contribution paid by Gilbert M. Johnstone & Co for Senior Counsel's fee for mediation paid to Mr Lo. Surdo, a copy of which is annexed and marked "C": $3,285.35 3.3 David John Lamb – insurance premium paid on 5 August 2015 to Defence Service Homes Insurance Scheme, for annual property insurance on estate property at 74 St Marks Road, Randwick, for the period from 4 July 2015 to 4 July 2016, a copy of which Building Reminder Notice and Commonwealth Bank Card Statement evidencing payment is annexed and marked "D" $695.05 3.4 Gilbert M Johnstone & Co, for fees for representing second defendant in these proceedings (excluding Counsel fees), including GST, in accordance with the Bill of Costs, a copy of which is annexed and marked "E": $42,579.40 3.5 Gilbert M Johnstone & Co, in relation to liability of Gilbert M Johnstone & Co for Cousel's fee payable to Mr M. Klooster, for acting on instructions from Gilbert M Johnstone & Co, on behalf of the second defendant in these proceedings, including GST, a copy of which Tax Invoices dated 12 September 2016 and 1 May 2017 are annexed and marked "F": $41,250.00 TOTAL Testamentary Expenses: $148,871.39 4. Commission claimed by the Executor, including out of pocket expenses for travel and accommodation in Sydney for the Hearing on 1 and 2 September 2016 ($1,881.30), to which the Plaintiff agreed that he would not dispute in terms of settlement approved by the Court on 2 September 2016 & noted in clause 36 of the Court's Orders and Directions made on that date by His Honour, Justice M. Slattery: $13,000.00" 1. The Court's jurisdiction to make gross sum costs orders is well established: Civil Procedure Act 2005 (NSW), s 98 (4)(c); Kostov v Zhang (No 2) [2016] NSWCA 279; Hamod v New South Wales and Anor [2011] NSWCA 375 ("Hamod") at [813] to [820] per Beazley JA (as her Honour then was). This is another application of that jurisdiction. 2. The circumstances here are that a family law property settlement was made in the early 1980s. Both parents of the plaintiff agreed as a term of their divorce to give to the plaintiff the house in which the family lived. But both parents died without fulfilling that promise. The first defendant, who is no longer involved in the proceedings represented the father's estate. The limited resources of the parties have been dedicated to trying to achieve and to execute this old family law settlement. In those circumstances the speed and low costs involved in having the Court make a specified gross sum costs order under Civil Procedure Act 2005, s 98(4)(c) are highly attractive. In the exercise of its discretion, the Court will make the order on this occasion. There is no either lay or expert evidence filed for the plaintiff in answer to Mr Lamb's affidavit. 3. The Court now needs to assess the gross sum costs order. The matter in issue today is governed by the original orders of 2 September 2016 which provide in clause 32 that "the second defendant's costs of these proceedings to be paid out of the Estate on the indemnity basis ". The fixing of the quantum of a specified gross sum costs order in this case must be moulded around the fact the costs are being assessed on an indemnity basis. 4. The general principles of the making of lump sum costs orders were helpfully summarised by Beazley JA's judgment in Hamod, which has since been cited with approval and applied in a number of cases in this Court. Beazley JA at [813] to [820] stated (Giles and Whealy JJA agreeing) as follows: "[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. In relation to the existing order for indemnity costs, were the matter to go to an assessment, the principle that would be applied is that the plaintiff would have to establish that the costs claimed have not been reasonably incurred before they would be disallowed: Bouras v Grandelis (2005) 65 NSWLR 214 at [117] to [119]. 2. The plaintiff is entitled to put submissions about reasonableness, which he has done through his solicitor, Mr Beazley. But no evidence has been put on to substantiate any claims of unreasonableness. Notwithstanding that, the Court has considered what has been put. I will now briefly deal with each of the items dealt with in submissions. The NSW Trustee and Guardian's Management Fees - $53,630.99 1. Firstly, Mr Beazley says with considerable justification that claim 2.1 is not a claim for costs at all. He submits that it cannot be assessed as part of the current motion. I agree and I decline to do so. The Court understands, both from Mr Klooster and Mr Beazley, that the amount payable to The NSW Trustee and Guardian apparently for management fees in the sum of $53,630.99 is an estate liability which the second defendant, understandably believes must be satisfied before the legacy arrangements of the consent orders are fulfilled. 2. The Court has suggested a way through this. The plaintiff can continue his discussions with The NSW Trustee and Guardian about the quantum of this liability. The Court will grant liberty to apply to both the plaintiff and the second defendant, if this matter cannot be resolved with The NSW Trustee and Guardian. It may be that if there is a dispute about the estate's liability for management fees to the NSW Trustee and Guardian that it can be resolved by an order being made in the course of the administration of the mother's estate. An appropriate application will need to be made in these proceedings for that to occur. But I see no reason why the Court cannot now lend its aid to resolving that issue, so that the settlement of these proceedings can take place sooner rather than later, but it is not a matter for the application today. 3. Moving to the other matters. There is no issue about the commission claimed by the executor of $13,000, which Mr Beazley conceded is agreed and follows from paragraph 36 of the Court's orders on 2 September. The remaining issues are about claimed items 3.1 to 3.5. The Probate Expenses of $7,430.60 1. Mr Beazley submits on behalf of the plaintiff that the $7,430.60 claimed is the cost of taking out probate in the proceedings in accordance with the amount of $1,670 plus $4.47 for each $1,000 in excess of $150,000 for an estate of this size of just under $1M, pursuant to Legal Profession Uniform Law Application Regulation 2015, Schedule 3. Mr Beazley says that the probate charges should only be allowed on an hourly rate for the hours taken to the effect the grant as the probate was, he says, only taken out for the purpose of these proceedings. 2. But there are two problems with this argument. The first is that Mr Beazley has not given any estimate of the number of hours that would be applicable if the Court were to undertake that exercise. And secondly, it is not accepted, and there is no proof advanced by Mr Beazley, that the probate was not taken out for ordinary purposes and rather than just for these proceedings, such as would warrant any modification of the usual rule. I will allow that sum in full. Mediation Costs - $3,285.35 1. Mr Beazley also questions the second defendant's claimed costs of the mediation of $3,285.35 and says that they are not costs payable under cl 32 of the orders of 2 September 2016, "The second defendant's costs of these proceedings to be paid out of the estate on the indemnity basis". 2. That argument is not persuasive. The Court ordered a mediation prior to the hearing under Civil Procedure Act 2005 (NSW), s 26. The mediation was unsuccessful. But in my view, because of these orders these costs can be classified as costs of these proceedings. I will include them within the assessment of the gross sum for the indemnity costs order. They are certainly not unreasonably incurred, if they were incurred in compliance with the Court's orders. Insurance Premium - $695 1. There is no issue about the insurance premium paid by Mr Lamb. It is an out-of-pocket expense that he paid on behalf of the second defendant. Solicitors and Counsels' Fees - $42,579.40 and $41,250 1. There are two amounts then remaining for consideration, the solicitor's and counsel's fees for these proceedings, respectively, $42,579.40 and $41,250. 2. Mr Beazley makes two points in respect of these amounts. The first is that there is a degree of duplication involved, whereby the presence of both counsel and solicitors at directions hearings has been charged for. The Court does not regard the presence of solicitors and counsel at a directions hearing as the unreasonable incurring of costs. In preparation of matters for hearing the Court is often assisted by the rapid responses to questions from the bench at directions hearings, which is facilitated if both solicitors and counsel are present. No criticism can reasonably be made of the second defendant for having both present. So I decline to offer any reduction in the amount of costs being claimed on that basis. 3. The second point Mr Beazley makes is that the costs of travel from Mr Lamb's North Shore office to the city for conferences and court appearances is included in Mr Lamb's bill. But the amount concerned is very marginal compared to the fees involved and, in my view, it is not unreasonable. The hourly rate for travel is $110, whereas the hourly rate for other work charged is $400 per hour. There is only 15 hours' travel charged in respect of the period after 1 February 2016, when Mr Lamb's North Shore office was opened up. I understand that the North Shore office is in Killara, so that is probably only about 12 to 14 or 15 train journeys, which is not something which is unreasonable in the context of this matter. 4. I see no reason in these circumstances not to allow all of these costs and out-of-pocket expenses as part of a gross sum costs order. Conclusion 1. Finally, I should say that the contest today will not cost the second defendant's estate anything. And the Court is giving judgment immediately to save the expenditure of further costs. The Court takes into account in making this order the fact that Mr Lamb has declared that there will be no charge for, and there will be no liability to the estate for the costs of the current application. It is also noted that Mr Lamb is entitled to charge interest for various amounts that he has paid out on behalf of the estate, but he is not charging interest to the estate for those amounts. 2. Those matters, in my view, are sufficient for the Court now to order that there may be recoverable under clause 32 of the orders made on 2 September 2016 the full amounts set out in paragraphs 3.1, 3.2, 3.3, 3.4, 3.5 and 4 of the affidavit of Mr Lamb. I will reserve for further consideration, if it is required upon the application of the parties within the next 28 days, the issue of the amount of $53,630.99 claimed to be due to The NSW Trustee and Guardian. 3. It is not necessary for a judgment for costs to be entered. There will be no issue about the enforcement of this costs order against the estate and judgment does not need to be entered against the plaintiff at this stage, unless someone requires it. So the Court will just make a declaration as to the entitlement. If more is wanted at any stage then liberty to apply to implement these orders will be granted. 4. Accordingly, the Court makes the following orders and directions: 1. Order that the indemnity costs payable to the second defendant under order 32 of the orders made on 2 September 2016 shall be the subject of a specified gross sum instead of assessed costs pursuant to Civil Procedure Act 2005, s 98(4)(c). 2. Fix the specified gross sum instead of assessed costs in the sum of $108,240.40. 3. The Court declares the entitlement for costs of the executrix of the estate of the second defendant against the estate as the sum of $108,240.40. 4. Reserved for further consideration the issue of whether the estate of the second defendant is liable to the NSW Trustee and Guardian in the amount of $53,630.99 5. Direct that upon notice to the NSW Trustee and Guardian issues concerning the estate of the second defendant's liability for the sum of $53,630.99 to the NSW Trustee and Guardian may be re-listed before the Court decision. 6. Grant liberty to apply to facilitate the implementation of these orders. ********** Amendments 18 May 2017 - deletion of hyperlinks 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 May 2017