Reliance Financial Services Pty Ltd v Altair Investments Pty Ltd

1. [1]

   This judgment resolves the question of costs in relation to two applications brought in the context of much larger proceedings.

2. [2]

   The four plaintiffs (“Reliance”) sue a number of defendants, including the eighth and ninth defendants (the “Altair Parties”). By notice of motion dated 21 May 2020, the Altair Parties brought an application for summary dismissal of Reliance’s claim against them (the “Altair Motion”). In response, by notice of motion dated 29 May 2020, Reliance brought an application for summary judgment against the Altair Parties (the “Reliance Motion”).

3. [3]

   The Altair Parties succeeded with the result that Reliance was ordered to pay the Altair Parties’ costs of both motions.

4. [4]

   The Altair Parties have applied for orders that their costs of the motions should be paid forthwith on the indemnity basis and for a gross sum costs order.

5. [5]

   The Court’s conclusions are:

   1. (1)

      There was never any proper basis for the Reliance Motion such that the Altair Parties are entitled to their costs of that motion on the indemnity basis.

   2. (2)

      The Altair Parties are entitled to their costs of the Altair Motion on the ordinary basis up to and including 16 June 2020 and thereafter on the indemnity basis because Reliance unreasonably failed to accept the Altair Parties’ offer to settle the motions on terms substantially identical to the result which the Altair Parties obtained.

   3. (3)

      The Altair Parties are entitled to a gross sum costs order in the amount of $35,800 payable forthwith.

Procedural History

1. [6]

   Reliance’s claim against the Altair Parties was pleaded in an amended statement of claim filed on 14 January 2020:

2. [7]

   The $1,034,699.52 claimed by Reliance from the Altair Parties (the “Amount”) was being held by the seventh defendant, the Commissioner for Australian Capital Territory Revenue (the “Commissioner”). Sometime during April 2020, the Commissioner paid the Amount to Reliance.

3. [8]

   At a directions hearing on 12 May 2020, Counsel for Reliance informed the Court that the only claim left against the Altair Parties was for costs and for interest on the Amount. With that in mind, the Court made these orders:

   1. (1)

      The eighth and ninth defendants are to serve any request for particulars of the amended statement of claim dated 14 January 2020 on or before 15 May 2020; and

   2. (2)

      The plaintiffs are to provide a response to the request for particulars on or before 5.00pm on 18 May 2020.

4. [9]

   The Altair Parties’ solicitor made the request for particulars by letter dated 15 May 2020 (the “15 May Letter”). However, that letter began:

5. [10]

   At a further directions hearing on 19 May 2020, the Court was informed that Reliance would not be providing the particulars because they were said to be futile in the light of the pleading issues raised by the Altair Parties. The Court made orders including that the Altair Motion be filed on or before 22 May 2020 and that it would be fixed before me for hearing on 9 July 2020.

6. [11]

   On the same day, the Altair Parties’ solicitor wrote a letter to Reliance’s solicitor marked “Without Prejudice Save as to Costs” (the “19 May Letter”). That letter reiterated the Altair Parties’ complaints about Reliance’s claim, including:

7. [12]

   The 19 May Letter also included an offer in accordance with the principles in Calderbank v Calderbank [1975] 3 All Er 333, which if not accepted was to be relied upon in respect of an application for costs, including on the indemnity basis:

8. [13]

   The offer was expressed to be open until 5.00pm on 21 May 2020, on the basis that the Altair Motion was due to be filed on 22 May 2020.

9. [14]

   The Altair Motion was filed on 22 May 2020, claiming relief which included:

10. [15]

    The affidavit in support of the Altair Motion summarised the reasons for the orders sought in that motion as including:

11. [16]

    On 29 May 2020, Reliance filed the Reliance Motion, which claimed:

12. [17]

    On 5 June 2020, Reliance’s solicitor wrote to the Altair Parties’ solicitor, including:

13. [18]

    On 10 June 2020, the Altair Parties’ solicitor wrote to Reliance’s solicitors (the “10 June Offer)”. That letter reiterated the Altair Parties’ complaints concerning the adequacy of the pleading of Reliance’s claim against them, and after referring to the request for particulars (see paragraph [8] above), concluded:

14. [19]

    The 10 June Offer also went on to set out the reasons why the Altair Parties said the Reliance Motion was bound to fail. In summary, those reasons were that Reliance would be unable to demonstrate that the Altair Parties had no defence. As to this, the 10 May Offer said:

15. [20]

    The 10 June Offer concluded with:

16. [21]

    By letter from their solicitor dated 15 June 2020, Reliance rejected the 10 June Offer.

17. [22]

    At 5.29pm on 6 July 2020 (in effect, two business days before the motions were due to be heard), Reliance’s solicitor sent the Altair Parties’ solicitor an affidavit by Reliance’s solicitor, Mr Matthew Sibley, which included:

18. [23]

    As to the claim against the Altair Parties, the “Points of Claim” amended paragraphs 244 to 261 of the Amended Statement of Claim (see paragraph [6] above) to include specific references to Marginata. The “Points of Claim” continued:

19. [24]

    On 8 July 2020, the Altair Parties’ solicitor responded to the provision of the “Points of Claim” by a letter which included:

20. [25]

    In a response on the same day, Reliance’s solicitor took issue with the contentions referred to in the letter set out in the preceding paragraph.

21. [26]

    When the matter came on for hearing before me, Mr D Allen of Counsel appeared for Reliance and Mr M Karam of Counsel appeared for the Altair Parties.

22. [27]

    At the outset of the hearing I had this exchange with Mr Allen:

23. [28]

    The parties sensibly accepted that leave to amend to the effect of the “Points of Claim” should be granted, but with the particulars to paragraph 263 being properly pleaded as material facts. I invited Counsel to prepare short minutes and briefly adjourned the hearing.

24. [29]

    On the resumption of the hearing there was debate as to costs. At the outset of the hearing Mr Allen had described the Reliance Motion as “purely reactive” to the Altair Motion. Mr Allen accepted that, in the circumstances, the Reliance Motion should be dismissed and that his client should pay the Altair Parties’ costs of that motion. He was, with respect, entirely correct to do so.

25. [30]

    In relation to the Altair Motion, Mr Allen submitted that there should be no order as to costs because the basis of the Altair Motion was that there was no maintainable cause of action and the Altair Parties had failed to make that out. I did not accept that submission. As I put to Mr Allen in the course of argument, the main point of the claim against the Altair Parties in the amended statement of claim was to recover the Amount and that, by the time the Altair Motion was filed, Marginata had in fact received those funds. The claim to recover the Amount was therefore not maintainable. The extensive amendments foreshadowed in the Points of Claim was a belated recognition that, by reason of the receipt of the Amount, whatever claim Reliance had left against the Altair Parties (said to be for interests and costs) had to be recast and properly pleaded. I therefore concluded that Reliance should pay the Altair Parties’ costs of the Altair Motion.

26. [31]

    The Court resolved the motions on 9 July 2020 by making these orders:

27. [32]

    I did not consider it necessary to strike out the amended statement of claim as against the Altair Parties because Counsel were in agreement that a further pleading should be provided and I had been informed by Mr Karam that, provided the proposed particulars to paragraph 263 were pleaded as material facts, he did not expect there would be an objection to an amended pleading being filed, subject to his clients being given an opportunity to consider the final proposed form of the amendment.

28. [33]

    I also made directions for the filing and service of submissions and any evidence in relation to special costs orders foreshadowed by Mr Karam (being for indemnity costs, a gross sum costs order and costs payable forthwith). Those directions were complied with. The Court received written submissions from Mr Karam supported by a further affidavit from the Altair Parties’ solicitor and written submissions by Mr Allen in response, together with an affidavit from Reliance’s solicitor. When the matter came back before me on 7 August 2020, Counsel agreed that I should determine the costs applications on the papers.

Indemnity costs – submissions

1. [34]

   There was no issue between the parties as to the relevant principles, which were summarised by the Altair Parties as:

2. [35]

   The Altair Parties submitted that Reliance was on notice of the deficiencies in their pleaded case from at least the time of the 15 May Letter (see paragraph [9] above) and that, notwithstanding those matters, Reliance had persisted up to and included the hearing on 9 July 2020. This was said to constitute delinquent and unreasonable conduct justifying an order for indemnity costs in relation to the Altair Motion.

3. [36]

   In relation to the Reliance Motion, the Altair Parties submitted that it had been conceded (see paragraph [29] above) that the Reliance Motion had been brought for tactical reasons. It had accordingly been commenced for a collateral purpose, such that it was an abuse of process justifying an order for indemnity costs.

4. [37]

   In the alternative, the Altair Parties submitted that by reference to the 10 June Offer (see paragraph [20] above), an order for indemnity costs should be made in relation to both motions on and from 17 June 2020 (that offer having been open for acceptance until 16 June 2020). I note in passing that, in contending for this date, the Altair Parties seem to have overlooked that the 10 June Offer had in fact been rejected on 15 June. As the difference is immaterial and the Altair Parties’ evidence was based on the offer having been open until 16 June 2020 (see paragraph [49] below), I have dealt with their applications accordingly.

5. [38]

   It was submitted for Reliance that it was wrong to view the Altair Motion as anything other than an attempt to have Reliance’s (primarily Marginata’s) claim dismissed, a result which the Altair Parties had failed to achieve. There had always been a proper claim for interest and costs, the only issue being the need to amend the pleading. So understood, there was no relevant misconduct or delinquency that would warrant the making of indemnity costs orders. To order indemnity costs in this case would be to punish and not to compensate, which would not be a proper exercise of the Court’s discretion.

Indemnity costs – resolution

1. [39]

   The Court does not accept Reliance’s characterisation of what had occurred as summarised in paragraph [38] above. The Altair Parties’ attack on the claim against them had always been two pronged: that the claim for the Amount could no longer be pressed because it had been paid by the Commissioner (which was plainly correct) and that the claim for interest and costs had not been properly pleaded (which the Court accepts was correct and was in reality, if not in terms, acknowledged as such by Reliance’s last minute production of the “Points of Claim”).

2. [40]

   Insofar as the Reliance Motion is concerned, Mr Allen’s description of it as “purely reactive” (see paragraph [29] above) was, with respect, both candid and correct. The Altair Parties had an obvious defence to the claim for payment of the Amount. The inadequate pleading for interest and costs made it equally impossible for Reliance to demonstrate that the Altair Parties did not have a defence to that part of the claim. The Court therefore finds that the Reliance Motion never had any prospect of success and that, properly advised, Reliance ought to have understood that (if in fact it was not understood).

3. [41]

   The Court also accepts the Altair Parties’ submission that having been filed as nothing more than a tactical response, the Reliance Motion was not filed for a proper purpose. For all of these reasons, its filing was delinquency of a kind which warrants the Court making an order that Reliance pay the Altair Parties’ costs of the Reliance Motion on the indemnity basis.

4. [42]

   The outcome in relation to the Altair Motion is slightly different to the Reliance Motion.

5. [43]

   I do not accept Altair’s submission that Reliance’s persistence with its pleading in the face of the 15 May Letter (see paragraph [9] above) is sufficient to engage the jurisdiction to order indemnity costs. It was, in the events which have happened, wrong to have persisted, but in and of itself that conduct does not have the relevant character of delinquency or unreasonableness to support an order for indemnity costs. This is particularly the case when the option presented to Reliance in the 15 May Letter was to “take steps to withdraw their claim and the Proceedings as against” the Altair Parties. That is not the result which the Altair Parties have achieved as an outcome of the resolution of the motions.

6. [44]

   However, the Court accepts the Altair Parties’ submissions that they should have their costs on the indemnity basis by reason of the 10 June Offer (see paragraph [20] above). The reasons why the Altair Parties succeeded in relation to both motions were, with respect, correctly identified in the 10 June Offer. The orders which the Court ultimately made (see paragraph [31] above) were, with one irrelevant exception, identical to those proposed in the 10 June Offer. The irrelevant exception is that the Court has not made an order striking out the relevant part of the amended statement of claim, but in substance the same result has been achieved (see paragraph [32] above) by the Court making orders for the provision of a further amended statement of claim.

7. [45]

   The reasons advanced in the 10 June Offer were cogent, correct and have been vindicated in the outcome. Properly advised, Reliance should have accepted the force of what was said in the 10 June Offer. The Altair Parties have achieved a result in effect identical to that which they proposed in the 10 June Offer. For those reasons, Reliance’s rejection of that offer on 15 June 2020 was unreasonable. As submitted by the Altair Parties, the Court will order Reliance to pay the Altair Parties’ costs of the Altair Motion on the ordinary basis up to and including 16 June 2020 and thereafter on the indemnity basis.

Gross sum costs order – the parties’ submissions

1. [46]

   There was no dispute between the parties as to the applicable principles in relation to an application for a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) (the “CP Act”). A convenient summary is provided in the judgment of the Court of Appeal in Bechara trading as Bechara & Company v Bates [2016] NSWCA 294, which I respectfully adopt and apply:

2. [47]

   The Altair Parties relied on an affidavit sworn by their solicitor, Mr Alexander Haslam. This annexed invoices dated 31 May 2020 and 30 June 2020, and a work in progress report as at 22 July 2020, together with a copy of a tax invoice from Mr Karam of 12 July 2020 in the sum of $13,365 (GST inc). In what follows all figures are inclusive of GST. The invoices had been redacted, a matter which I consider in paragraphs [53] and [56(1)] below.

3. [48]

   Mr Haslam was appropriately qualified to express the opinions which he did. He undertook calculations by reference to the tax invoices and work in progress report applying his opinions, which the Court accepts, that on the ordinary basis approximately 70% of solicitor-client costs would be recoverable and 95-100% of counsel’s fees. On the indemnity basis, he was of the view that 90% of solicitor-client costs would be recoverable and 95-100% of counsel’s fees.

4. [49]

   The total solicitor-client costs (including disbursements such as Counsel’s fees) incurred by the Altair Parties which Mr Haslam said were referable to the Altair Motion and Reliance Motion were $52,299.83. After applying the various discounts to which he had deposed, the final figures which emerged from his evidence were:

   1. (1)

      Recoverable costs on a full indemnity basis: $48,430.00;

   2. (2)

      If awarded on the ordinary basis to 16 June 2020 and the indemnity basis on and from 17 June 2020: $44,754.00; and

   3. (3)

      Full ordinary basis: $40,690.00.

5. [50]

   The Altair Parties submitted that while a “broad brush” should be applied, the Court had sufficient material before it to assess their costs fairly in a fixed sum. Those costs were not unreasonably high. They had been incurred during a confined period of time on a discrete issue. It would be contrary to the overriding purpose to require the parties to go through the cost and delay of formal assessment.

6. [51]

   Reliance did not adduce any evidence in response to Mr Haslam’s calculations. It is sufficient to reproduce Mr Allen’s written submissions in full:

Gross sum costs order – resolution

1. [52]

   The first point to consider is Mr Allen’s objection to Mr Haslam’s reliance on redacted invoices. Mr Haslam explained this in his affidavit as: “The line entries that have been redacted is for work performed in respect of the substantive Proceedings and unrelated to the Altair Motion and Reliance Motion”.

2. [53]

   I reject Mr Allen’s objection as to the admissibility of the redacted tax invoices. However, the redactions do deprive the Court of the capacity to examine the basis, and be satisfied of the consistent application, of the reasons why Mr Haslam says that some costs are, and other costs are not, referable to the motions. I return to this point in paragraph [56(1)] below.

3. [54]

   Having regard to the overriding purpose under the CP Act, this is a case where, if it can be done fairly, it would be appropriate to make a gross sum costs order for the reasons advanced by the Altair Parties (see paragraph [50] above). The Court does not accept Mr Allen’s submission that the quantum of the amounts claimed by the Altair Parties is, on its face, unreasonably large. This is hard fought commercial litigation.

4. [55]

   However, there is some force in Mr Allen’s submission that the quantum does not readily appear to be confined to the costs of the motions as opposed to the costs of the proceeding generally, notwithstanding Mr Haslam’s assertion that his redactions have had that effect. This has given me some hesitation about whether on the basis of Mr Haslam’s affidavit, including the redacted invoices, the Court is in a position to be fair to both parties and to determine an appropriate sum.

5. [56]

   In this regard, I have taken into account the following matters:

   1. (1)

      The difficulty I have already adverted to in paragraph [53] above that, by reason of the redactions, the Court cannot check the internal logic or consistency of what Mr Haslam has concluded is or is not related to the motions as opposed to the proceedings generally.

   2. (2)

      I have read the narratives to the invoices and work in progress report. Without attempting to conduct a detailed costs assessment, which is not practical and would be contrary to authority, I am nevertheless concerned that items are claimed which are properly to be characterised as referable to the proceedings rather than the motions. These include a number of earlier attendances such as those on 11 May 2020 (e.g. “reviewing amended statement of claim to identify background and factual allegations against Altair/Mr Hi in preparation for directions hearing tomorrow”).

   3. (3)

      There are examples of attendances which, while relating to the request for particulars, also state that the task was undertaken “to assist with the preparation of Defence if the claim is not withdrawn” (entries on 14 May 2020).

   4. (4)

      Comparing the solicitors’ invoices between 13 and 16 June 2020 with Mr Karam’s invoice, there appears to be an overlapping of the task of drafting submissions which, in the Court’s experience, would be unlikely to survive assessment without reduction on either the ordinary or even the indemnity basis.

6. [57]

   Notwithstanding the matters to which I have just referred, given the amount claimed by the Altair Parties (not large in the context of litigation such as this) and the likely time and costs that will be taken up on an assessment, I remain of the view that, if it can be done fairly to both parties, this is a case where a gross sum costs order should be made. I am satisfied that fairness - neither undercompensating the Altair Parties nor overcharging Reliance - will be ensured by applying an overall discount of a kind which is commonly applied by the Court in arriving at a final figure in gross sum costs applications. Given the matters to which I have referred in the preceding paragraph, that discount should be applied even in relation to so much of the costs as has otherwise been calculated on the indemnity basis and to Counsel’s fees.

7. [58]

   I should also add for completeness that in undertaking this exercise, although the Court has determined that the Altair Parties are entitled to all of their costs of the Reliance Motion on the indemnity basis, the evidence does not permit the costs to be disaggregated to identify all such costs. However, given the way in which the arguments were presented, the Court finds that the Altair Parties’ costs solely referable to the Reliance Motion are likely to be de minimis when compared to the total costs to which the Altair Parties are entitled.

8. [59]

   The Court has determined (see paragraphs [41] and [45] above) that the Altair Parties are entitled to their costs of the motions on the indemnity basis on and from 17 June 2020. Mr Haslam’s calculation of his clients’ recoverable costs on the ordinary basis up to 16 June 2020 and on the indemnity costs thereafter is $44,754. The Court accepts that figure and applies a 20% discount for the reasons set out above, which with slight rounding gives a figure of $35,800. This is the amount that Reliance will be ordered to pay.

Costs payable forthwith

1. [60]

   Finally, the Altair Parties sought an order that any costs be payable forthwith by reference to the principles in Fiduciary Ltd v Morningstar (2002) 55 NSWLR 1; [2002] NSWSC 432 at [11]-[13]. Mr Allen made no submissions in opposition to such an order.

2. [61]

   The order should be made. The costs relate to a discrete or self-contained issue; the proceedings undoubtedly will not be finally determined for some time; and the Court is satisfied that a large majority of those costs was incurred because of Reliance’s unreasonable conduct, in particular failing to accept the 10 June Offer (see paragraph [45] above).

Conclusion

1. [62]

   The orders of the Court are:

   1. (1)

      Vacate order 4 made on 9 July 2020.

   2. (2)

      The plaintiffs are to pay forthwith the eighth and ninth defendants’ costs of: