Supreme Court New South Wales Medium Neutral Citation: In the matter of Boss Constructions (NSW) Pty Ltd (No 2) [2019] NSWSC 554 Hearing dates: On the papers Decision date: 14 May 2019 Before: Rees J Decision: 1. Order the plaintiffs to pay the defendant's costs of the proceedings on an ordinary basis. 2. Pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW), order that the defendant is entitled to a specified gross sum instead of assessed costs in the amount of $6,000 plus GST. Catchwords: COSTS — Gross sum costs order — Successful defendant — Risk that plaintiffs unable to meet costs order — Modest costs in issue — Jurisdictional issue ought to have been taken by defendant — Discount warranted — Gross sum costs of 40% of solicitor party costs ordered. Legislation Cited: Corporations Act 2001 (Cth), s 459G Civil Procedure Act 2005 (NSW), s 98 Cases Cited: Hadid v Lenfest Communications Inc [2000] FCA 628 Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 In the matter of Boss Constructions (NSW) Pty Ltd [2019] NSWSC 543 In the matter of Cardinal Group Pty Ltd (in liq) (Lump Sum Costs) [2018] NSWSC 895 John Holland Construction and Engineering Pty Limited v Kilpatrick Green Pty Limited (1994) 14 ACSR 250; (1994) 12 ACLC 716 Lakis v Lardis (No 3) [2018] NSWSC 1296 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Sony Entertainment (Aust) Limited v Smith (2005) 215 ALR 788; [2005] FCA 228 Category: Costs Parties: Boss Constructions (NSW) Pty Ltd (First Plaintiff) Nicholas Bobos (Second Plaintiff) Council of the City of Broken Hill (Defendant) Representation: Counsel: J Martin (Plaintiffs) J Guzman (Defendant) Solicitors: Stewart & Associates (Plaintiffs) ECLS Pty Ltd (Defendant) File Number(s): 2018/381746 Judgment 1. HER HONOUR: On 2 May 2019, I dismissed the plaintiffs' application to set aside a statutory demand as the Court lacked power given that the application had not been made within 21 days of the demand being served as required by section 459G of the Corporations Act 2001 (Cth): In the matter of Boss Constructions (NSW) Pty Ltd [2019] NSWSC 543 (the principal judgment). At the request of the defendant, I made directions for the service of any submissions and affidavits seeking a special costs order, and the parties agreed that I could determine such an application on the papers. Defendant's submissions 1. The defendant seeks an order that its costs be paid on the ordinary basis and that the Court make a gross sum costs order under section 98(4)(c) of the Civil Procedure Act 2005 (NSW). The defendant's costs on a solicitor and client basis are $14,800 plus GST. The defendant submits that an appropriate lump sum is $12,000 plus GST having regard to the rates charged by the defendant's solicitor and counsel, the tasks involved in attending to this matter, the absence of duplication of work between solicitor and counsel, and that counsel undertook some of the solicitor's tasks which was reasonable given that counsel's hourly rate was less than that of the solicitor. 2. The defendant relied on the principles with respect to lump sum costs orders as summarised by Sackar J in Lakis v Lardis (No 3) [2018] NSWSC 1296 at [52]-[60], noting that the power to award a lump sum costs order may be exercised whenever the circumstances warrant: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21]-[22] per Giles JA. It was submitted that two factors warranted such an order here. First, the first plaintiff has failed to pay two judgments in the defendant's favour totalling some $31,000 and also owes the defendant some $56,000 for unpaid rates. As such, there is a real risk that the first plaintiff may not be able to meet a costs order. Compelling the defendant to incur the additional costs of an assessment would disadvantage the defendant, being the successful party, because of the likely inability of the first plaintiff to discharge the costs liability in any event: Sony Entertainment (Aust) Limited v Smith (2005) 215 ALR 788; [2005] FCA 228 at [190], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628. Second, the amount of costs in issue is modest and it is appropriate in those circumstances for the court to fix a lump sum to avoid the potential for unnecessary expense and delay associated with the process of costs assessment: In the matter of Cardinal Group Pty Ltd (in liq) (Lump Sum Costs) [2018] NSWSC 895 at [6] per Gleeson JA. Both factors, it seems to me, appear to have some application, but particularly the latter. Plaintiffs' submissions 1. The plaintiffs say that it was not appropriate for the defendant to issue a statutory demand at all given an ongoing dispute between the parties as statutory demands should not be used as a debt collection mechanism: John Holland Construction and Engineering Pty Limited v Kilpatrick Green Pty Limited (1994) 14 ACSR 250; (1994) 12 ACLC 716 per Young J. 2. Further, the plaintiffs were initially self-represented. The defendant was aware of the deficiency in service of the Originating Process as evidenced by the affidavit of the defendant's solicitor of 13 March 2019. The deficiency in service, it was submitted, should have been brought to the plaintiffs' attention and "it would have had no choice but to withdraw as the law with regard to want of jurisdiction is very clear. However, this was not the case and so the plaintiffs plodded along unsuspecting". When the Originating Process was dismissed at the hearing on 2 May 2019, "even at that point the original position of the defendant was to resist the matter being dismissed". 3. The plaintiffs submitted that, if the defendant had advised them of the deficiencies in the Originating Process, neither party would have incurred the cost which they have. "The costs incurred by the defendant were in essence due to their time being spent on resisting an application without jurisdiction. A deficiency of which they were well aware, their submissions were not relied on their costs are claimed for issues that were not determined by the court". Whilst noting McHugh J's comment in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [66], that "[b]y far the most important factor which courts have viewed as guiding the exercise of the court's discretion is the result of the litigation …", it was submitted that, whilst the defendants were the successful party, it was not by their design. 4. The plaintiffs submit that neither party should be entitled to their costs, or, alternatively, the defendant should only be entitled to its costs of reading the originating material, obtaining instructions and drafting a letter stating "the matter is out of time please withdraw", which it was submitted would amount to two to three billable hours including research. The defendants could have avoided its legal costs "instead of perpetuating the matter". Consideration 1. These proceedings commenced on 11 December 2018 although, as I explained in the principal judgment, the Originating Process did not come to the attention of the defendant's solicitor until 12 December 2018. On 6 February 2019, the matter first came before a Registrar for directions, and orders were made for evidence to be filed by the parties. 2. On 13 March 2019, the defendant's solicitor filed an affidavit deposing to the circumstances in which the Originating Process had been served in terms which made plain that the defendant took issue with whether it had been served within the 21 days required by the Corporations Act. The plaintiffs were on notice that this point was being taken. On 1 April 2019, the matter came before the Registrar again for further directions. The plaintiffs were legally represented on this occasion, and a notice of appointment of solicitors was filed later that day. If the point had been missed by the plaintiffs, as self-represented litigants, then any disadvantage suffered on that front was removed by the appointment of solicitors. I do not think it was necessary for the defendant to confirm by letter what was apparent from the defendant's evidence on an application such as this: compliance with section 459G was an issue in the proceedings. 3. On 8 April 2019, the matter was listed before Black J for further directions. The plaintiffs were legally represented. The plaintiffs did not withdraw their application, which was, instead, listed for hearing on 2 May 2019. The parties were directed to provide my associate with a court book by noon on 1 May 2019, to include an Outline of Submissions. The plaintiffs did not provide a court book, nor submissions. The plaintiffs only briefed counsel at 6.00 pm that evening for a hearing the next day. 4. A court book was provided by the defendant, together with its submissions. The defendant's submissions made no mention of the issue of service of the Originating Process. The plaintiffs would have been entitled to assume that the defendant was no longer taking the point. As much was confirmed by the defendant's counsel when the matter was called for hearing on 2 May 2019. 5. The plaintiffs have failed in these proceedings. Ordinarily, the plaintiffs should pay the defendant's costs of the proceedings. I do not accept that these proceedings would have been abandoned by the plaintiffs if their defective nature had been brought to the plaintiffs' attention sooner, as the defendant's evidence put them on notice of this issue by 13 March 2019 and the plaintiffs persisted nonetheless. I do think, however, that the hearing on 2 May 2019 would have taken less time if the defendant had maintained the position apparent from the affidavit of the defendant's solicitor rather than informing the Court that the defendant no longer took the point. This had the potential to lead the Court into error in making orders which it had no power to make and, indeed, may have had the result of ultimately prolonging these proceedings by entitling either party to lodge an appeal in respect of any substantive orders made in respect of the plaintiffs' alleged offsetting claim. 6. Given the relatively small amount of costs in issue which may be eclipsed by the further costs involved in a formal assessment process, I am minded to make a lump sum costs order. In my experience, costs on an ordinary basis are generally between 60 and 75% of a party's actual legal costs. However, I am disquieted by the defendant's reticence at the hearing to facilitate the prompt and correct disposition of these proceedings in respect of a want of jurisdiction, which the defendant had correctly identified but did not press for other strategic reasons: principal judgment at [2]. This could be done by discounting counsel's fees to allow for such a reduced hearing time or to reduce fees charged for time spent preparing for submissions on arguments which perhaps should not have been the main focus. Taking a global approach, to recognise this matter I am prepared to allow 40% of Council's costs being, with rounding, $6,000 plus GST. Orders 1. For these reasons, I make the following orders: 1. Order the plaintiffs to pay the defendant's costs of the proceedings on an ordinary basis. 2. Pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW), order that the defendant is entitled to a specified gross sum instead of assessed costs in the amount of $6,000 plus GST. ********** 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: 14 May 2019