Supreme Court New South Wales Medium Neutral Citation: In the matter of Tresdar Pty Ltd (No 3) [2019] NSWSC 1112 Hearing dates: On the papers Decision date: 27 August 2019 Jurisdiction: Equity - Corporations List Before: Rees J Decision: (1) Direct the plaintiff to notify the Court within seven days whether it wishes to file and serve any further evidence in support of the application for a gross sum costs order and, if so, when. (2) Failing which the application under section 98(4)(c) of the Civil Procedure Act 2005 (NSW) for a gross sum costs order is dismissed. Catchwords: COSTS — Application for indemnity costs to be fixed in a gross sum — Plaintiff should not be put to burden of assessment — Defendant unlikely to participate further in assessment process — Where evidence of costs incurred unparticularised total — Court not in a position to make informed assessment as to quantum of order Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Evidence Act 1995 (NSW), ss 118, 119 Cases Cited: Baychek v Baychek [2010] NSWSC 987 Beach Petroleum NL v Johnson (1995) 57 FCR 119; (1995) 135 ALR 160 Bitek Pty Ltd v iConnect Pty Ltd (2012) 290 ALR 288; [2012] FCA 506 Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 Hadid v Lenfest Communications Inc [2000] FCA 628 Hamod v New South Wales [2011] NSWCA 375 Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 Hodgson v Amcor Ltd; Amcor Ltd v Barnes (No 2) [2011] VSC 204 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 In the matter of Tresdar Pty Limited [2019] NSWSC 179 In the matter of Tresdar Pty Limited (No 2) [2019] NSWSC 544 Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd trading as Uncle Ben's of Australia (1994) 126 ALR 58 Packer v Deputy Commissioner of Taxation [1985] 1 Qd R 275 Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788; [2005] FCA 228 Sparnon v Apand Pty Ltd [1998] FCA 164 Category: Costs Parties: Brendan Leonard Samuels in his own right and in his capacity as trustee of the deceased estate of Fleur Samuels (Plaintiff) John Powell Keefe (First Defendant) Tresdar Pty Limited ACN 003 225 536 (Second Defendant) Representation: Solicitors: Keith Redenbach Legal (Plaintiff) The First Defendant did not make submissions on this application. File Number(s): 2017/384519 Judgment 1. On 1 March 2019, I gave judgment in favour of the plaintiff, Brendan Samuels; ordered that shares held by the first defendant, John Keefe, in the second defendant, Tresdar Pty Limited, were held on trust for Mr Samuels; ordered Mr Keefe to transfer those shares to Mr Samuels; and ordered Mr Keefe to repay dividends received in respect of those shares together with interest and costs: In the matter of Tresdar Pty Limited [2019] NSWSC 179. Mr Keefe did not execute the share transfer and further orders were made to enable a registrar of this Court to do so. 2. On 14 May 2019, I made an order that Mr Keefe pay Mr Samuels' costs of the proceedings on an indemnity basis: In the matter of Tresdar Pty Limited (No 2) [2019] NSWSC 544. As is apparent from that judgment, on 2 April 2019 Mr Keefe's solicitors filed a Notice of Ceasing to Act, necessitating further orders to be made to ensure that the application for indemnity costs was brought to Mr Keefe's attention. Indemnity costs were ordered, in short, because of the serious fraud engaged in by Mr Keefe which had the consequence of prolonging the proceedings and trial unnecessarily and leading to the plaintiff incurring further costs. 3. The plaintiff now seeks an order under section 98(4)(c) of the Civil Procedure Act 2005 (NSW) for his costs to be assessed in a lump sum. I directed the plaintiff to serve any affidavits or submissions in support of that application on Mr Keefe. No submissions or affidavits have been received from Mr Keefe in reply. Evidence in support of the application 1. The plaintiff's solicitor, Mr Redenbach, has sworn a short affidavit in support of the application, but has annexed no documents. Mr Redenbach was instructed by the plaintiff in about August 2017. In evidence in the substantive proceedings were letters from Mr Redenbach to Mr Keefe of 9 August 2017, 27 September 2017 and 4 October 2017 seeking to raise the matters which became the subject of the proceedings. In October 2017, Mr Keefe retained Banki Haddock Fiora Lawyers and Mr Redenbach wrote to this firm on 1 December 2017, 10 December 2017 and 30 December 2017. These proceedings were commenced in December 2017. 2. Since August 2017, Vincent's Accountants has rendered invoices totalling $156,997.46 inclusive of GST in respect of the matter. David Rose of Vincent's Accountants swore an affidavit in these proceedings and was required for cross-examination. It was apparent to me from Mr Rose's affidavit, accompanying documents recording his analysis and from cross-examination that he undertook the forensic investigation which uncovered the fraud prosecuted in these proceedings. It was also apparent during the course of the trial that Mr Keefe led Mr Rose a 'merry dance' and I am not surprised that Mr Rose's fees are in the order now sought. 3. Mr Samuels has directly paid court fees of $4,920. He is entitled to payment of those fees. 4. Since August 2017, Mr Redenbach has issued invoices to Mr Samuels totalling $1,216,578.92 inclusive of GST for solicitors' fees, counsel's fees and disbursements. I have not been provided with the invoices of Mr Redenbach's firm, nor counsel nor in respect of any disbursements. Apparently, this is because the invoices are the subject of claims for legal professional privilege. However, solicitors' and counsel's invoices are not subject to legal professional privilege, although portions of the fee notes may be privileged if disclosure of that portion would result in disclosure of a confidential communication made between the client and a lawyer for the dominant purpose of providing legal advice to the client or professional legal services in relation to proceedings: sections 118, 119 of the Evidence Act 1995 (NSW); Packer v Deputy Commissioner of Taxation [1985] 1 Qd R 275 at 282; Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd trading as Uncle Ben's of Australia (1994) 126 ALR 58 at 67–8; Hodgson v Amcor Ltd; Amcor Ltd v Barnes (No 2) [2011] VSC 204 at [53] ff. 5. Mr Redenbach says that, in accordance with the firm's pro bono policy, he has applied a 5% discount to all invoices issued throughout the course of the matter having regard to Mr Samuel's frequent expression of emotional and financial hardship in the face of vexatious and unnecessarily lengthy litigation. Whilst such a discount should not benefit Mr Keefe, Mr Redenbach suggests that this 5% discount should stand to allow for unrecoverable costs. Such a discount is ordinarily made in such applications, even where the costs in question are ordered on the indemnity basis: Beach Petroleum NL v Johnson (1995) 57 FCR 119; (1995) 135 ALR 160; Hadid v Lenfest Communications Inc [2000] FCA 628. Whether appropriate to make lump sum costs order 1. Section 98(4)(c) of the Civil Procedure Act provides: Courts powers as to costs In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: … (c) a specified gross sum instead of assessed costs … 1. As Giles JA noted in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21]: The power … of [section 98(4)] is not confined, and may be exercised whenever the circumstances warrant its exercise. It may appropriately be exercised where the assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment … 1. It is a relevant consideration "whether the financial capacity of the party liable to pay costs is such that the additional burden of taxation will import a significant burden on the party in whose favour costs are ordered without real prospects of recovering those costs": Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 at [24], citing Hadid v Lenfest Communications Inc [2000] FCA 628; Sparnon v Apand Pty Ltd [1998] FCA 164; Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788; [2005] FCA 228. The plaintiff submitted that was a relevant factor in this case, relying on Bitek Pty Ltd v iConnect Pty Ltd (2012) 290 ALR 288; [2012] FCA 506 at [17] per Kenny J: In the present case, the respondents have wasted the applicant's resources and time by their ongoing refusal to respond to the applicant's communications, the institution of this proceeding, and court orders. Moreover, the respondents' conduct, as evidenced by the affidavits sworn by the applicant's solicitor, Mr Tye, indicates that they are unlikely to co-operate in any further court processes and meet any liability for costs in an efficient and appropriate way. There is evidence, as in a further affidavit of Mr Tye sworn on 30 March 2012, that the respondents' failure to progress the litigation or to comply with court orders is on-going, notwithstanding the service of these orders and the applicant's continued attempts to communicate with the respondents. … In all the circumstances, in order to avoid a further waste of time and money that the applicant may not be able to recoup readily from the respondents or at all, I consider it appropriate to make a lump sum costs order. 1. The plaintiff points to Mr Keefe's non-response to the applications for an indemnity costs order, and for a lump sum costs order. The plaintiff submitted that, as Mr Keefe has not responded to efforts of the plaintiff to seek payment of costs ordered by the Court or submissions as to costs, I should infer that Mr Keefe cannot or will not pay the plaintiff. Mr Keefe's inability to pay any costs order made against him favours the award of a lump sum costs order thereby reducing wasted costs on any unnecessary costs process. 2. I consider that this is an appropriate case to specify a gross sum instead of putting Mr Samuels to the further time and expense involved in an assessment of his legal costs in circumstances where it is readily apparent that Mr Keefe is unlikely to participate in that process; it is unclear whether Mr Keefe has the ability to pay the costs order in any event; and, placing an additional burden on the plaintiff to undertake a costs assessment process may be for no useful purpose. Fixing a sum 1. In Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23, Einstein J summarised the principles which inform the exercise of the discretion to specify a gross sum, at [9]: ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16]; iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at [22] …; iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at [22]; v. the gross sum "can only be fixed broadly having regard to the information before the Court": Beach Petroleum at 124; [In Hadid v Lenfest Communications Inc [2000] FCA 628 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".] vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120; vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at [16]: "On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary "fail safe" discount on the cost estimates submitted to the Court: Leary v Leary at 265 …" 1. His Honour's summary has been cited with approval in the Court of Appeal: Hamod v New South Wales [2011] NSWCA 375 per Beazley JA, with whom Giles and Whealy JJA agreed, at [793]. Her Honour continued, at [816]: … the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred … 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… 1. And at [820] (citations omitted): 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). The approach taken to estimate the costs to be ordered must be logical, fair and reasonable. 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. 1. Further, as Ball J explained in Baychek v Baychek [2010] NSWSC 987at [11]: Implicit in this principle is that the gross sum bear a reasonable relationship to the actual costs of the party making the application, and to the costs that that party might reasonably be expected to recover on assessment. That means, among other things, that there must be a reasonable evidentiary basis for the order the court makes. That evidentiary basis is normally provided by the costs applicant in the form of an affidavit setting out the actual costs incurred and how they were calculated. Often, the evidence also includes evidence of the amount that is likely to be recovered on assessment. Consideration 1. The plaintiff submits that the Court is in a position to make a reasonably well-informed assessment as to the appropriate level of costs, given various observations I made in Tresdar (No 1), in particular, at [22]–[24], [153] and [157]. Whilst I am more than prepared to specify a gross sum, it seems to me that I am without the evidence to make an informed assessment and arrive at an appropriate sum with confidence. On the face of it, the amount sought is, with respect, very high. 2. Whilst I am satisfied, from having read Mr Rose's affidavit and seen him give evidence, that his fees are more than fair for the extensive work which he has clearly undertook in unravelling the fraud, I am not so satisfied in relation to the legal fees. There is no doubt that Mr Samuels should be indemnified for the costs of counsel: as I said in Tresdar (No 1), without experienced senior counsel, the trial would have taken much longer than it did. But what were senior counsel's fees? What were junior counsel's fees? I would be more inclined to specify a gross sum in respect of their fees when I know what they are. 3. A solicitor's fees often exceed those of counsel, generally because a solicitor's retainer covers a much longer period of time than that of counsel. The solicitor is frequently engaged in pre-litigation tasks such as preliminary correspondence, attempts to resolve the matter without the need for litigation and obtaining instructions and documents to enable counsel to settle pleadings. It is often the case that the solicitor undertakes the burden of preparing the matter for trial and briefs counsel shortly before the hearing, and the solicitor's costs are more than counsel's as a result. In some cases, however, and without any disrespect, solicitors perform more of an administrative or 'post box' role whereas counsel attends to all substantive drafting and preparations for trial. In that scenario, one might expect that counsel's fees will far exceed those of the solicitor. 4. Looked at broadly, this case took just over a year from commencement to trial. There were ten directions hearings. There was a substantive interlocutory application to strike out the claim, which was heard by Gleeson JA on 18 June 2018. There was a mediation. There was a four-day hearing. Experienced junior and senior counsel appear to have been involved from the outset. Counsel appeared on each occasion that the matter was before the Court from the first directions hearing on 29 January 2018. Senior counsel first appeared in the matter on 18 June 2018. Without more, and at the risk of doing him an injustice, all I can say is that Mr Redenbach's firm appears to be a small firm which, from what I saw at trial, performed more of a 'post box' role than undertaking the substantive conduct of the matter. I would expect, therefore, Mr Redenbach's fees to be less than those of counsel. But I simply do not know. I am not in a position to make an "informed assessment" of an appropriate gross sum on the basis of a two-page affidavit. The limited assessment I am able to make from having presided at trial is that the gross sum sought is excessive. 5. But my main concern is to ensure that Mr Samuels, who has already been the subject of fraud at the hands of Mr Keefe, is not left out of pocket by reason of any gap between what Mr Keefe is ordered to pay Mr Samuels in legal costs and what Mr Samuels is obliged to pay Mr Redenbach or his counsel. 6. The most practical way forward is for Mr Redenbach to submit further evidence in support of a specific sum being Mr Rose's invoices, counsel and solicitor's fee notes (redacted in respect of any entries which may otherwise amount to a waiver of legal professional privilege) and any invoices supporting disbursements. Until then, I am not prepared to accede to the application. Any further material should be supplied as soon as a possible as a request has been made for the Supreme Court's file by the Federal Circuit Court as Mr Keefe's wife has commenced legal proceedings in that court. Orders 1. For these reasons I make the following orders: 1. Direct the plaintiff to notify the Court within seven days whether it wishes to file and serve any further evidence in support of the application for a gross sum costs order and, if so, when. 2. Failing which the application under section 98(4)(c) of the Civil Procedure Act 2005 (NSW) for a gross sum costs order is dismissed. ********** Amendments 04 October 2019 - Coversheet - date of decision amended to 2019 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: 04 October 2019