Supreme Court New South Wales Medium Neutral Citation: In the matter of K & K Property Solutions Pty Ltd [2018] NSWSC 293 Hearing dates: 20 February 2018 (last cost submissions 7 March 2018) Decision date: 09 March 2018 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders 2, 3 and 4 made on 20 February 2018 are set aside. The Defendant to pay the Plaintiffs' costs of the proceedings, quantified in a gross sum of $36,126, such costs to be payable to the Second Plaintiff. Catchwords: COSTS – gross sum costs order – where party applies, in accordance with previous order, to vary amount of costs ordered – whether Court will scrutinise individual cost attendances – whether Court will apply broad brush approach to fixing costs. Legislation Cited: - Corporations Act 2001 (Cth) ss 237, 459G Cases Cited: - Re Aquaqueen International Pty Ltd [2015] NSWSC 500 Category: Costs Parties: K & K Property Solutions Pty Ltd (First Plaintiff) Kieren Fitz-Gibbon (Second Plaintiff) Gabriella McConkey (Defendant) Representation: Counsel: K Josifoski (Plaintiffs) A G Martin (Defendant) Solicitors: Keystone Lawyers (Plaintiffs) Pidcock Fletcher (Defendant) File Number(s): 2017/228776 Judgment 1. On 20 February 2018, I made an order, by consent, that a creditor's statutory demand for payment of debt dated 5 July 2017 issued to K & K Property Solutions Pty Ltd ("Company") be set aside. The Defendant, Ms McConkey then accepted that she should be ordered to pay the costs of the application, on an ordinary basis, as agreed or as assessed on the basis that costs follow the event. It was then common ground that that costs order should be made in the Second Plaintiff's, Mr Fitz-Gibbon's favour, so far as he conducted the proceedings, by leave, on the Company's behalf. 2. By a first ex tempore judgment, I determined an application for indemnity costs brought by the Plaintiffs, the Company and Mr Fitz-Gibbon, and held that I was not satisfied that the claim for indemnity costs was established. By a second ex tempore judgment, I held that there was sufficient basis to make a gross sum costs order, discounting the amount of costs that would be recoverable on an assessment, but reserving liberty to Ms McConkey to apply to vary the amount set out in that order, by submissions and evidence served by 27 February 2018. Those costs were quantified on a gross sum basis as $39,750, rounded down from 70% of solicitor client costs of approximately $51,000 plus unbilled counsel fees of $4000. That was a conservative calculation because, as a result of the way in which the figures were presented by the parties, the discounting percentage was applied not only to solicitor/client costs but also to billed disbursements and counsel fees, to which it would not ordinarily be applied. 3. By application made on 27 February 2018, Ms McConkey sought to withdraw her previous consent to the order that she pay those costs to Mr Fitz-Gibbon, and sought to vary the amount of costs ordered. On receipt of those submissions, I made further orders extending a stay of the costs orders made on 20 February 2018 to 13 March 2018 and providing for evidence and submissions in reply by the Plaintiff. 4. First, as I noted above, Ms McConkey sought to withdraw her previous consent to the order that she pay the costs to Mr Fitz-Gibbon, on the basis that fee notes on which the Plaintiffs had relied in the costs application indicated that the Company incurred the obligation to pay the relevant fees. By their submissions in response, the Plaintiffs pointed out that, as I had noted in my judgment, it was common ground at the hearing before me that the order for costs should be made in favour of Mr Fitz-Gibbon. Second, the Plaintiffs pointed out that the attempt to vary that order extended beyond the liberty reserved to Ms McConkey by my orders made on 20 February 2018. Third, they lead evidence that the relevant invoices have in fact been paid personally by Mr Fitz-Gibbon, who conducted the proceedings by leave on the Company's behalf, thereby discharging the Company's obligation to pay costs. The first and second matters are sufficient reason not to permit Ms McConkey to reagitate the question whether costs should be paid to the Mr Fitz-Gibbon, where the order made was a consent order. The third is sufficient reason, if that matter had been reagitated, to continue that order in its existing form. I need not address two other submissions made by the Plaintiffs in support of that order. 5. By her application made on 27 February 2018, Ms McConkey also submitted that costs claimed by the Plaintiffs included a number of excessive, unreasonable or unnecessary attendances, as set out in her affidavit in support of that application. Ms McConkey's affidavit in turn attaches a schedule, which appears to contemplate that the Court will deal with numerous individual objections to costs claimed, as though it were a costs assessor. I will not take that approach, where it is inconsistent with the authorities and not necessary or appropriate where a global discount is applied in an application of this kind. Ms McConkey submits that, of the approximately $48,000 in costs claimed, to which a discount was applied in making a gross sum costs order, an amount of $18,316.73 was objectionable, although she would allow the amount of $3,271.59 for the relevant costs. The result would be to reduce the base figure on which the gross sum costs order was calculated by $15,045.14, which she contended would then be multiplied by the 70% figure that had been adopted to determine a gross sum costs amount. The Plaintiffs in turn seek to undertake a recalculation of their costs, accepting a minimal amount of the Defendant's objections. 6. Mr Josifoski, who appears for the Plaintiffs, submits that Ms McConkey's attempt to reduce the amount of costs to exclude specified amounts is not consistent with the Court's broad brush approach to fixing costs in respect of a gross sum costs order. It is well-established that the Court is not required to undertake a detailed examination and will apply a "broad brush" in making a gross sum costs order, and the Court should not closely scrutinise numerous individual attendances in the manner for which Ms McConkey contends. Mr Josikovski submits, and I accept, that Ms McConkey's approach would also involve an inappropriate double discounting of the costs claimed by the Plaintiffs, by both undertaking an analysis akin to an assessment of those costs, and then applying the discount that is ordinarily applied in making a gross sum costs order by reason that such an assessment has not occurred. Had the Court taken that approach, which it should not, it would not also apply an additional substantial discount in determining the amount of costs allowed. However, it does not follow that the Court would not exclude or reduce broad categories of costs that are not properly recoverable in making a gross sum costs order and I did so, for example, in making a gross sum costs order in Re Aquaqueen International Pty Ltd [2015] NSWSC 500. 7. Ms McConkey challenged claims for research as to various provisions under the Corporations Act 2001 (Cth) and offers of compromise, which she contended should not be allowed on a solicitor/client basis. The Plaintiffs respond to Ms McConkey's criticism of the time spent in researching provisions of the Corporations Act by pointing out that these proceedings required an application under s 237 of the Corporation Act, for leave to bring a derivative action to commence proceedings to set aside the creditor's statutory demand, and that work was directed to considering the requirements of s 237 of the Act, including whether an order could be made outside the 21 day period specified in s 459G of the Act granting such leave. The Plaintiffs also point out that research in respect of the question of offers of compromise was required, where an offer of compromise in an application to set aside a creditor's statutory demand is not straightforward, given the likely binary outcomes in such a matter. I accept that neither of those matters were so straightforward that research was not properly necessary in respect of them. I am not satisfied that Ms McConkey's attack on the claim for these costs is justified. 8. Ms McConkey also challenged a substantial claim in the amount of $6,000 for an appearance on 27 November 2017, when the matter was listed in the Corporation Judge's directions list, including travel costs of the solicitor from Newcastle to Sydney and time costs for both the Plaintiffs' solicitor and Counsel. The Plaintiffs respond by pointing to slippage in the timetable of the matter, when the Defendant had not served evidence, and to the fact that they were ready to have the matter referred to hearing on 27 November 2017, although that did not occur when Ms McConkey sought a revision to the timetable and Brereton J made a "guillotine order" in respect of her evidence and listed the matter for hearing. 9. I accept that these matters support the costs of attendance by both Counsel and a solicitor at the directions hearing on 27 November 2017. However, it does not seem to me to support an order for travelling time for the solicitor from Newcastle. It appears that 6.5 hours of the solicitor's time, with a solicitor/client cost of $2,470, together with Counsel's costs of drafting submissions and attendance at the direction hearing totalling $3,240 were charged in respect of that directions hearing. The invoice relating to that attendance makes clear that it does include travelling time. Putting aside any wider question as to whether travelling time can properly be charged by solicitors, it does not seem to me that Ms McConkey can reasonably be held liable for a substantially greater amount of costs, on the ordinary basis, simply because the Plaintiffs' solicitor practices in Newcastle rather than in Sydney. Doing the best I can on the information presently available, the solicitor/client costs referable to that attendance should be reduced from $2,470 to $1,140, representing three hours of that solicitor's time. 10. In her supporting affidavit, Ms McConkey also identified a claim for GST totalling $3,606.57 which she contended was incorrectly included in calculating the costs ordered in favour of the Plaintiffs. Mr Martin did not address that matter in his submissions for Ms McConkey. I had held that GST should be excluded in determining the amount of costs ordered, so far as costs were paid by Mr Fitz-Gibbon on the Company's behalf, and Mr Josikovski had accepted that an input credit for goods and services tax will or may be received by the Company. The parties had proceeded before me on the basis that, and my judgment had recorded that, GST was not included in the figure of $48,111 of invoiced costs which was a component in the calculation of the gross sum costs that were ordered. It is apparent, from the invoices annexed to the affidavit dated 20 February 2018 of Mr Richards, the Plaintiffs' solicitor, that Ms McConkey is correct and that GST was in fact included in that figure and should be excluded. 11. Accordingly, the gross sum costs order which I made on 20 February 2018, should be varied by reducing the amount of $39,750 in Order 2, to $36,126. That amount is calculated by deducting the amount of $280 which the Plaintiffs concede, reducing solicitor's costs referable to the directions hearing on 27 November from $2,470 to $1,140 and excluding GST of $3606, thereby reducing billed and unbilled solicitor/client costs and billed disbursements (exclusive of GST) to $45,895, discounting that amount to 70% to reflect that there will be no assessment of those costs, and adding unbilled Counsel's fees of $4000 in full. The stay of the costs order that I ordered on 20 February and extended on 27 February should not be continued. Where Ms McConkey has achieved only a modest reduction in the costs previously ordered, there should be no order as to the costs of submissions as to these matters. 12. I therefore order that: 1. Orders 2, 3 and 4 made on 20 February 2018 be set aside. 2. The Defendant pay the Plaintiffs' costs of the proceedings, quantified in a gross sum of $36,126, such costs to be payable to the Second Plaintiff. ********** 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: 12 March 2018