John Byrnes & Associates (Legal) Pty Ltd v Quinn (No 3)

1. [1]

   HER HONOUR: On 20 July 2021, I gave summary judgment for the plaintiff law firm: John Byrnes & Associates (Legal) Pty Ltd v Quinn (No 2) [2021] NSWSC 874. I ordered that the first defendant, being the law firm’s former client, Robert Quinn, pay certain only of the plaintiff’s costs, being the plaintiff’s filing fees, its costs of the hearing on 14 December 2020 and its costs from 22 December 2020 on.

2. [2]

   The law firm now seeks a specified gross sum costs order in respect of these costs and relied on an affidavit by its solicitor, John Byrnes. Mr Byrnes is the sole director and principal of the plaintiff law firm. Mr Byrnes said that the law firm’s costs of the proceedings were $30,838.78 exclusive of GST. After ‘carving out’ the specific items of those costs which I had ordered be paid by Mr Quinn, the law firm’s costs were $18,188.78 exclusive of GST. The law firm further discounted that amount to $15,000 plus GST, in respect of which a specified gross sum costs order was sought.

3. [3]

   The client relied on his affidavit which by and large re-agitated a number of subjects raised on previous occasions and the subject of earlier judgments.

Whether appropriate to make lump sum costs order

1. [4]

   Section 98(4)(c) of the Civil Procedure Act 2005 (NSW) provides:

2. [5]

   A specified gross costs order involves a departure from the usual process by which costs are assessed in accordance with the statutory procedures now found in the Legal Profession Uniform Law (NSW): eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [8] per Beazley P and Basten JA. The power to make a specified gross sum costs order 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: Hamod v State of New South Wales [2011] NSWCA 375 at [813] per Beazley JA (Giles and Whealy JJA agreeing).

3. [6]

   As Giles JA noted in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21]:

4. [7]

   It is a relevant consideration whether “the financial capacity of the party liable to pay costs is such that the additional cost of taxation will impose 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] FCA 228; (2005) 215 ALR 788.

5. [8]

   As I understand it, including from what Mr Quinn has told me on each occasion that I have heard the matter, his financial circumstances are limited. It is unclear whether Mr Quinn has the ability to pay the plaintiff’s costs. Placing an additional burden on the plaintiff to undertake a costs assessment process may be for no useful purpose. This favours the award of a lump sum costs order, thereby reducing wasted costs on any unnecessary costs assessment. I consider that this is an appropriate case to specify a gross sum instead of putting the plaintiff to the further time and expense involved in an assessment of its legal costs.

Fixing a sum

1. [9]

   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]:

2. [10]

   His Honour’s summary has been cited with approval in the Court of Appeal: Hamod at [793]. Beazley JA continued, at [816]:

3. [11]

   And at [820] (citations omitted):

4. [12]

   Further, as Ball J explained in Baychek v Baychek [2010] NSWSC 987 at [11]:

5. [13]

   The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod at [814]. A “broad brush” approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Kostov v Zhang (No 2) [2016] NSWCA 279 at [27] per Meagher and Payne JJA.

6. [14]

   There is a problem, however. The plaintiff claims the costs referrable to the time expended by its principal, Mr Byrnes, in performing work for the proceedings. For the plaintiff to be entitled to these costs they must, at least, be costs “payable” within the definition of “costs” in section 3(1) of the Civil Procedure Act. The law recognises that an incorporated legal practice and its principal are separate legal entities. Thus, in theory, a company and its principal may enter into a legally binding agreement under which the principal performs legal services for the company at cost. The company will be entitled to recover the costs (insofar as they conform to the relevant basis of recovery) as long as there is a binding agreement under which the company is liable to pay the principal: Spencer v Coshott [2021] NSWCA 235 at [86] and [104] per Simpson AJA (Bell P and Emmett AJA agreeing); at [10] per Emmett AJA.

7. [15]

   Here, there is no evidence of such an agreement. All I have are invoices prepared by the plaintiff for work undertaken by the principal, Mr Byrnes. There is no evidence that the plaintiff has a liability to pay the costs to Mr Byrnes. Further, whilst the fees rendered appear reasonable, the costs order made was for costs on the ordinary party and party basis, not on an indemnity basis. A 10% discount of the costs is more along the lines of an indemnity costs order.

8. [16]

   Given these difficulties, I consider it appropriate to approach the matter differently. I will allow the plaintiff’s court filing fees totalling $4,099 together with the claimed portion of counsel’s fees, being $11,200 exclusive of GST, being $15,299 exclusive of GST, so say $15,000 plus GST.

9. [17]

   For these reasons I make the following order:

   1. (1)

      Pursuant to section 98(4) of the Civil Procedure Act 2005 (NSW) order the first defendant to pay the plaintiff’s costs of the proceedings in the gross sum of $15,000 plus GST.