Almona Pty Ltd v Parklea Corporation Pty Ltd (No 5)

This is the fifth judgment in a series arising out of proceedings by Almona Pty Ltd against Parklea Corporation Pty Ltd and two others [1] .

I will assume an understanding of the earlier judgments. I will use the same terms as in those judgments.

This judgment deals with PT’s amended notice of motion, which was received by my Associate as an attachment to an email from the solicitors for PT on 5 June 2020. The relief sought by the amended notice of motion was in the following terms:

It appears that the Court was not asked to make an order giving leave to PT to file the amended notice of motion in court. That may have occurred because it was necessary for the Court to deal with the matters that were before the Court on 5 June 2020 remotely by an audio-visual hearing. I will make an order granting the necessary leave below.

At the hearing that took place on 5 June 2020, I made the following orders, insofar as the orders related to the dispute between Almona and PT:

Relevantly for present purposes, the effect of these orders is that the Court has already made the orders sought in prayers 3 and 4 of the amended notice of motion, without prejudice to PT’s right to pursue its claim in prayer 2.

PT has pursued its claim for a gross sum costs order. On 20 July 2020, I made certain case management orders, including by order 2 that Almona and PT inform my Associate whether they consented to the amended notice of motion being dealt with on the papers in chambers. On 24 July 2020, my Associate was advised on behalf of both parties that they consented to the matter being dealt with on the papers.

The subject matter of this judgment is now limited to the question whether the Court should make a gross sum costs order in favour of PT in accordance with prayer 1 of the amended notice of motion.

Almona’s primary position was to oppose the Court making any gross sum costs order. Almona submitted that the present is not a proper case for the making of such an order, and instead PT should be required to have its costs assessed in the conventional way. Alternatively, Almona submitted that, if the Court decided that it should make a gross sum costs order, the quantum of that order should not be greater than the sum of $140,000 that Almona had paid into Court in performance of an order that it provide security in that amount for PT’s costs of the proceedings.

Initially, by its notice of motion as originally filed, PT sought a gross sum costs order in the amount of $315,000 in respect of total legal costs and disbursements of $428,285.60. This claim was supported by an affidavit of PT’s solicitor, Felicity Louise Healy, made on 8 April 2020.

As mentioned, PT now claims a gross sum costs order in the amount of $425,000. Ms Healy corrected her earlier affidavit in a further affidavit made on 2 June 2020. Ms Healy said in par 3 that she had “identified matters in my 8 April Affidavit that require amendment to reflect additional costs which have been incurred by the third defendant”. Ms Healy increased the amount of professional fees from $291,598.00 to $382,190.60. Counsels’ fees increased from $114,217.50 to $139,432.50. Disbursements increased from $22,470.10 to $23,610.47. The total became $545,143.57. It is unclear whether Ms Healy’s affidavits have been filed. I will make an order giving leave for the affidavits to be filed in court.

Ms Healy said in par 10 of her 2 June 2020 affidavit that the further costs incurred by PT were recorded in the most recent invoice rendered on 8 May 2020. Ms Healy said that she had annexed to her affidavit, as annexure A, full copies of each invoice issued by her firm to PT in the proceedings. The invoice rendered on 8 May 2020 was not included in the annexure. The unexplained increase in PT’s legal costs is perplexing (barring the noted inadvertent omission of GST). However, as Almona did not make any issue about the increase I have ignored the fact that it occurred, and have proceeded on the basis of the revised figures.

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

The parties accepted, as I do, that, for present purposes, the principles that govern the making of a gross sum costs order are as set forth by Beazley JA (as her Excellency then was), with the agreement of Giles and Whealy JJA, in Hamod v State of New South Wales [2011] NSWCA 375, in the following terms:

Having regard to these principles, I am satisfied that Almona’s primary submission is correct, and that the present is not an appropriate case for the Court to make a gross sum costs order, whether in the amount sought by PT, or some lesser amount. On the contrary, the present appears to me to be a case that calls for the application of the processes involved in a conventional costs assessment.

My primary reason for reaching this conclusion is that, from my vantage as the trial judge in these proceedings, I have formed the clear and positive view that I am not able to make an estimate of the costs that ought properly be paid by Almona to PT in a logical, fair and reasonable way. Accordingly, I am satisfied that any attempt by me to make such an estimate would be unlikely to produce a result that was fair between the parties.

The issues in the proceedings, as between Almona and PT, were dealt with in Almona (No 1) at [841] to [937]. The issues that were determinative of Almona’s claim against PT were few in number, although highly technical and conceptually difficult. Although PT had a legitimate interest in the outcome of Almona’s claims against Parklea and SAP, that outcome conceptually formed the basis of Almona’s claim against PT; or perhaps more aptly, the context in which Almona’s claim against PT arose. That PT was not required to engage in the contest between Almona and the other two parties was reflected in the strictness with which counsel for PT properly excluded themselves from that forensic exercise.

I acknowledge PT’s submission that I observed in Almona No 4 at [209] that “the appearances for the parties has been orthodox and reasonable”, and that: “So far as appearances before the Court have been concerned, these proceedings appear to have been conducted efficiently”. Those observations were based upon my perception of what had happened in the courtroom and related to the work done in court by counsel. I cannot say that I was conscious of the level of instruction given to counsel by PT’s solicitors on a day-to-day basis. My observations therefore concerned the component of PT’s costs constituted by counsels’ fees of $126,675. It did not apply to PT’s solicitors’ fees of $347,446. That amount is some 2.75 times the amount of counsels’ fees.

From my perspective, there is considerable force in Almona’s submission that, by reason of the fact that the issues that were required to be contested by PT were substantially limited to complex legal questions, PT’s legal costs should reasonably have been expected to be weighted towards counsels’ fees and not solicitors’ fees. Further, given the involvement of senior counsel, it might be expected that PT’s solicitors’ fees would not have exhibited the weighting towards senior solicitors’ fees that is in fact the case.

My impression is that the amount of legal costs incurred by PT is excessive, and is unlikely to be sustained on an assessment. However, I would characterise that impression as little more than prejudice, as it does not have a satisfactory, objective foundation. Although the need for PT’s solicitors to engage in substantial forensic effort is not as apparent as was the case for the other parties’ solicitors, it is the case that the litigious effort required of the solicitors for PT was invisible to the Court, just as was the case for the legal representatives of the other parties in relation to work done out of the courtroom: see Almona (No 4). As I said in that judgment, primarily in relation to the legal costs incurred by the parties other than PT:

These proceedings were exceedingly hard-fought. They were highly contentious. A great deal was at stake. The proceedings were fixed for an early final hearing. There were many interlocutory hearings over a short space of time. The issues were relatively fluid. I acknowledge PT’s third submission, in its submissions in reply, that “the claim against the third defendant went through many permutations”. One thing that was obvious to me was that much was being done by the parties’ legal representatives out of court, to attempt to resolve intense disputes that the Court simply did not have time to hear. Although the other parties were the primary protagonists in those interlocutory disputes, PT was not a simple bystander, and its legal representatives were not required to stand aloof. Intuitively, I am persuaded that PT may be able to satisfy a costs assessor that the solicitors’ fees that it has incurred were reasonable to a significantly greater degree than might be thought by an observer, who only had experience of the proceedings in the court and a knowledge of the technical legal issues that were required to be contested by PT.

I am fortified in my conclusion by the evidence given for Almona by Ms Peta Leslie Solomon, a highly experienced legal costs consultant, in her affidavit of 26 June 2020. It is not necessary to record the expert opinions given by Ms Solomon in detail. She expressed the opinion that the rates of charge by PT’s solicitors were likely to be substantially reduced on assessment. She said that, on assessment, further reductions were likely to be made on a number of grounds, including for solicitor/client work, unreasonable time claims, duplication of tasks and excessive supervision and inter-office conferencing, unreasonable conferencing and liaison with other parties, and multiple fee earner attendances on the hearing. Ms Solomon also identified various costs that she opined were not claimable as costs of the proceedings. Of particular focus was the weighting of the solicitors’ fees to more senior solicitors, in view of the fact that both senior and junior counsel were briefed. I add that Ms Solomon suggested that some reduction could be expected in the costs assessment process in relation to the allowance for counsels’ fees. I acknowledge that possibility, notwithstanding my own observation, as recorded above, that the appearances for the parties had been orthodox and reasonable.

As there has been no opportunity for PT to contest Ms Solomon’s opinions, I make no findings about their validity. However, Ms Solomon’s evidence provides a firm foundation for a conclusion that, not only would a broad brush assessment of gross costs be unsuitable in this case, but that a conventional assessment process is necessary, and there is no proper basis for depriving Almona of the advantages of the usual procedure for the assessment of costs.

I have the following subsidiary reasons for declining to make a gross sum costs order in this case.

First, as stated in Hamod at [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 cost estimates or bills)…” In the present case, PT’s costs claim was substantiated by the tax invoices annexed to Ms Healy’s 2 June 2020 affidavit. A perusal of the explanation for the individual cost items contained in the tax invoices did not give me sufficient information to make a proper judgment, even on a broad brush basis, of the reasonableness of all of the fees incurred. The tax invoices are in a standard format that is generally accepted as being appropriate for the purposes of a solicitor’s client. While that format establishes which lawyer engaged in an identified task and for how long and at what cost, it usually conveys virtually no information as to why the task was performed. The exceptions, such as where counsel claimed a daily brief fee for appearing in court, are relatively rare. I simply do not have the expertise to make reliable judgments about the reasonableness of the legal fees incurred by PT, having regard to the matters explained by Ms Solomon in par 11 of her affidavit, and in particular the Costs Assessment Rules Committee Guideline.

Secondly, Ms Solomon expressed the opinion that the assessment process would ordinarily be completed in about six months. I do not consider that this is an inordinate time in the context of the history of these proceedings.

Thirdly, PT’s solicitor gave evidence that a costs assessment could cost PT approximately $10,000. If that is so, I do not think that the amount involved is sufficiently large to deprive Almona of the benefit of a conventional cost assessment.

Fourthly, relevantly to the argument, founded on Hamod at [813], that a gross sum costs order should be made, because it is unlikely that Almona will be able to pay the amount of costs that will be payable to PT following the costs assessment, the Court has already made an order releasing the $140,000 security paid into court by Almona to PT. I consider there is at least a substantial probability that the costs assessment process will determine an amount significantly less than $420,000. As matters stand, Almona has the benefit of judgments against both Parklea and SAP for over $5,000,000. While there is considerable room for doubt as to Almona’s financial position in the longer term, this is not a case where that doubt is patent, and it is not sufficient to deprive Almona of the benefit of an ordinary costs assessment.

Finally, I have had regard to the observation in Hamod at [817] that the making of a gross sum costs order may be appropriate where “it is desirable to avoid the expense, delay and aggravation likely to be involved in [a] contested costs assessment”. A factor that has sometimes strongly recommended to me the granting of an application for a gross sum costs order is where I have witnessed the parties conducting the litigation in such an acrimonious fashion that it is obvious that allowing a costs assessment would simply transform an ugly battle that was being conducted openly in the courtroom into a street fight in the costs assessment process. The manner in which Almona has conducted these proceedings gives no cause for concern in this regard.

Accordingly, I make the following orders on PT’s amended notice of motion: