Edward Ted Lakis and Anor v Michael Victor Lardis and Anor (No 3)

In this matter I handed down my reasons for judgment on 31 March 2017: Edward Ted Lakis v Michael Victor Lardis [2017] NSWSC 321 (principal judgment).

On 24 May 2018 the New South Wales Court of Appeal (Macfarlan, Meagher and White JJA) handed down judgment on the outcome of the appeal to my principal judgment: Lardis v Lakis [2018] NSWCA 113 (appeal judgment).

This judgment concerns the Plaintiffs’ application for a lump sum or gross sum costs order.

The principal proceedings were commenced on 25 August 2016 against initially four defendants (with related winding up proceedings heard by Black J in Re Amazon Pest Control Pty Ltd [2012] NSWSC 1568 who delivered judgment on 14 December 2012 and further related proceedings heard by Young AJA in Re Amazon Pest Control Pty Ltd [2016] NSWSC 609).

As outlined by Young AJA in Re Amazon Pest Control Pty Ltd [2016] NSWSC 609 (at [2]-[7]) up until 24 January 2013, Mr Michael Victor Lardis (First Defendant) and Mr Edward Ted Lakis (First Plaintiff) were directors and equal shareholders in Amazon Pest Control Pty Ltd (now the Second Plaintiff or Amazon).

The First Plaintiff moved the court for Amazon to be wound up. This succeeded before Black J who gave reasons on 14 December 2012 for orders that Amazon be wound up and appointed Stewart Free as liquidator.

His Honour stayed the order to 24 January 2013.

On 6 May 2014, the liquidator assigned by deed to the First Plaintiff Amazon’s claims against the First Defendant. The First Defendant challenged the effectiveness of the deed. Young AJA said (at [33]) it “cannot have been the parties’ intention to enter into a deed of assignment that would, from the outset, be ineffective to assign the claims identified therein”.

On 8 April 2014 by deed the liquidator assigned to the First Defendant Amazon’s claims against the First Plaintiff.

Therefore before Young AJA in Re Amazon Pest Control Pty Ltd [2016] NSWSC 609 were claims by Amazon against each of the First Plaintiff and First Defendant for breaches of their fiduciary or statutory duties as directors of Amazon. His Honour found that both the First Defendant and First Plaintiff were liable to refund monies to the company Amazon (at [118]).

In the current proceedings before me a Notice of Motion was filed by the First Plaintiff and Amazon on 25 August 2016 seeking freezing orders against four defendants: the First Defendant (Mr Lardis), his wife Athena Lardis (Second Defendant), Sfakia Pty Ltd (third defendant) and FLT Holdings Pty Ltd (in liq) (fourth defendant).

These freezing orders were made on 25 August 2016 by Pembroke J (and later varied).

These freezing orders were varied by Rein J on 30 August 2016, by Brereton J on 1 September 2016, by Stevenson J on 9 September 2016, by White J on 29 September 2016 and by me on 25 November 2016.

On 8 September 2016 the First Defendant became bankrupt by his own petition (principal judgment [64]).

On 23 September 2016 the Federal Court of Australia granted leave to continue the proceedings pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) (principal judgment [65]).

On 25 November 2016 I made various orders including that the proceedings against the third and fourth defendants be discontinued with the First Plaintiff to pay their costs as agreed or assessed, that the Plaintiffs had leave to file an Amended Statement of Claim and that there be a further variation to the freezing orders.

The proceedings were heard on 1, 2, 13 and 20 February 2017 and as indicated I handed down my principal judgment on 31 March 2017.

My principal judgment concerned whether the transfer of the First Defendant’s almost full one-half interest in his family property at 4 Skinners Avenue Dolls Point NSW (Dolls Point Property) to his wife the Second Defendant was with the intent to defraud creditors and should therefore be voided (principal judgment [1]).

The Plaintiffs alleged this transfer was an alienation of property with the intent to defraud creditors of the now liquidated Amazon (the Second Plaintiff). The First Plaintiff claimed he had been prejudiced by this alienation since he and the First Defendant were the directors and equal shareholders of the Second Plaintiff Amazon (principal judgment [2]).

The Plaintiffs sought a declaration that the transfer of the Dolls Point Property was void and set aside pursuant to s 37A of the Conveyancing Act 1919 (NSW) (“Conveyancing Act”) (principal judgment [3]).

However as is apparent from the above preliminary facts this claim was part of a much wider dispute between the parties who were former business partners. As the First Defendant had become bankrupt the question was whether his estate included the Dolls Point Property and more broadly the dispute between the erstwhile business partners.

I was satisfied that the First Defendant transferred his interest in the Dolls Point Property with an intent to defraud, hinder or delay prospective creditors of the Second Plaintiff Amazon, including the First Plaintiff. Further I was satisfied the Second Defendant was not just on notice of this intent but shared this intent with her husband (principal judgment [410]).

I was further satisfied the 49% Dolls Point Property transfer was voidable under s 37A of the Conveyancing Act and that the Second Defendant had failed to make out the elements of s 37A(3) of the Conveyancing Act (principal judgment [416]).

The Plaintiffs applied for costs on an indemnity basis and an order that the Second Defendant pay the First and Second Defendants’ costs. The application was heard on 5 May 2017 and I delivered my reasons on 10 May 2017: Edward Ted Lakis v Michael Victor Lardis [2017] NSWSC 561 (ordinary costs judgment).

I found that the circumstances of the case did not merit costs to be awarded on an indemnity basis (ordinary costs judgment [28]-[29]).

However I was satisfied that the Second Defendant should be ordered to pay the costs of the First Defendant (ordinary costs judgment [30]). I ordered that the Second Defendant pay the Plaintiffs’ costs of the proceedings as against the First and Second Defendants (ordinary costs judgment [37]).

On appeal the Court of Appeal held that the findings made at trial were open (appeal judgment [61]).

The Court of Appeal found it was not necessary for the evidence to establish that the apprehended likely claims would exceed the value of the First Defendant’s net assets otherwise available to creditors. It was held the fact of these claims, as well as a potential liability for legal costs, both in winding up and any subsequent proceedings, was sufficient evidence of motive to justify the findings at trial (appeal judgment [72]).

The appeal was dismissed with costs (appeal judgment [73]).

The Plaintiffs in a Notice of Motion filed 3 May 2018 now seek an order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) that the Second Defendant pay the Plaintiffs’ costs of the proceedings (plus interest) at first instance against the First and Second Defendant. The Plaintiffs also seek an order that the Second Defendant pay the Plaintiffs’ costs in relation to this notice of motion for gross sum costs (plus interest).

The Plaintiffs, in outlining the background to the proceedings and in seeking a gross sum costs order, submit that the evidence and summary sheet provided by the Defendants caused their legal representatives to undertake considerable pre-trial work including reviewing the summary sheet and comparing its entries against bank statements produced under subpoena (Submissions [1]-[12]).

The Plaintiffs also maintain the position taken by the Second Defendant in the proceedings caused the Plaintiffs to issue various notices to produce and serve various subpoenas issued by the Court, leading to a litany of correspondence between legal representatives and numerous attendances (Submissions [13]-[18]).

The Plaintiffs, with reference to the evidence of Ms Jennifer Ruth Ball solicitor and Ms Deborah Vine-Hall costs consultant and relevant legal principles, contend there is ample basis for a gross sum costs order. They submit the conduct of the litigation was rendered far more complex and expensive than necessary because of the approach of the Second Defendant to the preparation and presentation of her case in the proceedings (Submissions [19]-[33])

The Plaintiffs also submit and draw attention to the following costs orders made by the Court in the proceedings at first instance (Submissions [34]-[35]):

The Plaintiffs refer to the evidence of Ms Ball solicitor for the Plaintiffs who filed evidence as to the timing and nature of costs incurred by the Plaintiffs during the period 19 August 2016 to 5 May 2017. The Plaintiffs also summarise Ms Ball’s methodology in reducing the costs to reflect the costs incurred by the Plaintiffs in relation to the claims originally made against the third and fourth defendants. They thereby provide a table summarising the solicitor/client costs of the Plaintiffs (Submissions [36]-[38]):

The Plaintiffs refer to the evidence of Ms Vine-Hall to contend that Ms Ball’s methodology for analysing costs and reductions is fair and reasonable. Ms Vine-Hall concluded the sum which the Plaintiffs could expect to receive on the ordinary basis is between $540,583.65 and $563,220.21 (Submissions [39]-[45]).

The Plaintiffs further criticise the report of Ms Suzanne Maree Ward senior costs solicitor whose evidence was filed by the Second Defendant as relying only on a selection of cases, drawing incorrect conclusions and not wholly or substantially based upon her expert specialised knowledge (Submissions [46]-[57]).

The Plaintiffs in supplementary submissions conceded work performed in relation to Mr Scarcella and the trustee of the bankrupt estate of the First Defendant totalling $2,684 should not be pressed (Supplementary Submissions [1]-[3]). The Plaintiffs however pressed work done by Clayton Utz in relation to an analysis produced by the trustee for the First Defendant including corresponding with Mr Scarcella totalling $30,688 (Supplementary Submissions [4]-[5]). The Plaintiffs conceded that work done in paying and corresponding with Ferrier Hodgson in relation to valuation of the fourth defendant should not be pressed (Supplementary Submissions [6]-[7]). In total the Plaintiffs conceded costs and disbursements of the Plaintiffs sought against the Second Defendant should be reduced by $10,935.10 (Supplementary Submissions [8]). The Plaintiffs stated that the court should award the costs at the higher end of the range given by the expert Ms Vine-Hall less this amount, totalling $552,285.11 (Supplementary Submissions [10]).

The Plaintiffs sought costs on the gross sum awarded to the Plaintiffs from 26 July 2017 (Supplementary Submissions [11]-[12]).

The Second Defendant submits that there are a number of broad discretionary reasons why a lump sum or gross sum costs order should not be granted (Submission [1]-[3]).

In particular the Second Defendant contends the amount claimed by the Plaintiffs is extremely large relative to the length of the hearing, issues advanced and factual complexity of the proceeding. The Second Defendant submits the costs are not reasonable as they appear “luxurious”, apply an incorrect test of apportionment, and apply a discount less than might be expected in a case such as this (Submissions [4]).

The Second Defendant asserts the Plaintiffs sought a “Rolls Royce” treatment. This included duplication between Junior Counsel and Senior Counsel, considerable reporting involvement and correspondence between the First Plaintiff and his solicitors, efforts taken to limit the source of the Second Defendant’s income and costs in pursuing the former third defendant which were discontinued (Submissions [8]-[10]).

The Second Defendant submits an element of proportionality should be considered in this area, suggesting the proceedings were pursued with a vigour that reflects the acrimony of the dispute rather than the value of what was at issue (Submissions [11]). The costs, prima facie, appear extraordinary when considered that they relate to a 49% interest pursued under s 37A of the Conveyancing Act (Submissions [9]).

The Second Defendant further submits it is inappropriate to use a lump sum costs order in this case as it is a mechanism intended to be used sparingly on exceptional cases (Submissions [5]). Further the assessment of costs has been compromised by significant issues of duplication and cross-over between costs ordered in favour of the respective parties (Submissions [6]).

The Second Defendant contends the Plaintiffs have delayed in any event in seeking a lump sum or gross sum costs order (Submissions [7]).

In supplementary submissions the Second Defendant contends that the concessions made by the Plaintiffs are not satisfactory and further reductions should be made to Plaintiffs’ costs.

The first reduction the Second Defendant seeks is a reduction for the fees of Ms Nash employed by Clayton Utz, to reflect the fact that she was not admitted as a solicitor in New South Wales yet charged $620 per hour and billed total costs of $100,690. The Second Defendant submits her fees are not to be imposed on her, as Ms Nash should have been charged out as no more than an ordinary paralegal (Supplementary Submissions [1]).

The second reduction sought by the Second Defendant is a reduction to reflect the Second Defendant’s abandoned case against the third defendant (Supplementary Submissions [2]).

The Second Defendant submits that Ms Ball was in error to the extent that she said a general tendency case was raised in the proceedings (with respect to the third defendant) and to the extent that she made only a discount of 50% to costs in relation to an application to discharge a freezing order heard before White J (Supplementary Submissions [2]).

The Second Defendant submits that the freezing order motion heard before White J should not be imposed upon her because it related to the third defendant (Supplementary Submissions [3]).

A further reduction sought by the Second Defendant is to reflect the level of communication between solicitors for Clayton Utz and the Plaintiffs (Supplementary Submissions [4]). The Second Defendant further submits reductions should be made for costs incurred by the Plaintiffs in relation to the third defendant (Supplementary Submissions [5]) and in relation to the costs incurred by the Plaintiffs in engaging Ferrier Hodgson (Supplementary Submissions [6]).

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

In Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 Giles JA said (at [21]-[22]):

See also Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [8]-[9] per Einstein J. In this case Einstein J referenced (at [116]) the “appropriate broad brush approach that is logical, fair and reasonable”. His Honour also said (at [152]):

In April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd (2009) 75 NSWLR 619; [2009] NSWSC 867 White J said (at [26]):

In Hamod v The State of New South Wales [2011] NSWCA 375 Beazley JA (as her Honour then was) said (at [813]-[820]):

Importantly finality to the litigation is essential in everyone’s interest including the Court. In many cases that factor alone will weigh heavily on whether a Court should exercise discretion to order a lump sum assessment. If it assesses a lump sum the Court has routinely applied a discount to the lump sum figure so as to allow for contingencies: Hamod v The State of New South Wales [2011] NSWCA 375 at [820]; Ann Ross v John William Padget [2016] NSWSC 1851 at [16] and [21].

With respect to the so-called “rule of thumb” of apportioning costs to reflect work referable to two or more parties, Sackville AJA (with Macfarlan and Payne JJA agreeing) in Bookarelli Pty Ltd v Katanga Developments Pty Ltd [2017] NSWCA 69 said (at [48]-[50]) (citations omitted):

In Short v Crawley (No 45) [2013] NSWSC 1541 White J (as his Honour then was) said (at [36]-[38]):

By contrast in Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) [2018] NSWSC 431 Ball J delivered judgment on an application for lump sum costs in which the unsuccessful party at trial had lodged an appeal. His Honour considered whether the successful party Tzaneros (at trial and on appeal) in delaying in making an application for gross sum costs order should on discretionary grounds be refused said costs. His Honour said that the delay in making the application did provide a discretionary reason for refusing gross sum costs (at [36]-[40]):

For the Plaintiffs Ms Jennifer Ruth Ball swore two affidavits on 12 April 2018 and 9 July 2018. No objection was taken to her evidence save cross-examination.

In her first affidavit (12 April 2018) Ms Ball outlined how she is a partner of Clayton Utz the solicitors for the Plaintiffs and has had carriage of the matter since the commencement of proceedings. She has practised in the areas of commercial litigation, restructuring and insolvency since 1990.

After describing the outcome of the proceedings and orders made, Ms Ball outlined the complexity of the proceedings. She said the proceedings included:

Ms Ball said these applications and attendances led to an increased amount of time spent at court in addition to an increase in correspondences between solicitors for the parties and other third parties.

Further, Ms Ball said the Plaintiffs incurred costs arising from solicitors’ and counsels’ work done in preparing for and appearing at the final hearing above what ordinarily occurs due to the manner in which the Second Defendant conducted her defence in the proceedings.

Ms Ball then set out in detail the various freezing order applications which were made prior to the hearing of the trial, which resulted in variations to the freezing orders on 30 August 2016, 1 September 2016, 9 September 2016, 29 September 2016 and 25 November 2016. This included numerous communications between solicitors and court attendances. Ms Ball also recounted how the First Defendant advised the parties he had become bankrupt by his own petition on 8 September 2016.

Ms Ball further described the application of the Plaintiffs to the Federal Court of Australia successfully seeking leave to continue proceedings against the First Defendant pursuant to s 58(3) Bankruptcy Act 1966 (Cth).

Ms Ball outlined the Plaintiffs’ application for expedition before me on 10 October 2016 where I ordered that the proceedings be expedited. On 25 October 2016, she received a letter from Mr Dicembre, solicitor sent by email which attached a Summary Sheet which disclosed that the sum of $859,671 was spent by the First Defendant on legal fees, personal expenses and loans. However no particulars were provided by the Second Defendant in support of the alleged expenses and required significant work by Clayton Utz solicitors to expose a significant number of errors in the Summary Sheet.

Ms Ball said after she and her team spent time reviewing the financial records and evidence served by the Defendants, she formed the view that on the evidence it was impossible for the Plaintiffs to respond to the Second Defendant’s case and filed a Notice of Motion seeking further particulars to be provided by the First and Second Defendants on 21 November 2016. This Notice of Motion was heard on 25 November 2016, wherein the Defendants provided further affidavit evidence.

Ms Ball further outlined during the course of the proceedings the Plaintiffs issued the following Notices to Produce to the Defendants:

Ms Ball also said the Plaintiffs issued the following subpoenas to third parties:

Ms Ball said these subpoenas and notices to produce required correspondences and significant work, time and expense incurred by the Plaintiffs in issuing subpoenas (including delays on PT&W Law and NAB in answering subpoenas). Ms Ball also described how solicitors in her team attended court at the return of subpoena list or approached the Duty Registrar on numerous occasions.

Ms Ball said she considered that work undertaken by Clayton Utz and Junior Counsel was done in relation to the third and fourth defendants in:

She acknowledged it was difficult to distinguish between work done against the First and Second Defendants and third and fourth defendants in these issues. However she made a 50% discount to the First Issue, 100% discount to the Second Issue and 50% discount to the Third Issue.

Applying these discounts, Ms Ball summarised the solicitor/client costs of the Plaintiffs in relation to the application for a gross sum costs order against the First and Second Defendants to be $589,133.05 professional fees (including GST), $138,144.46 counsel fees (including GST) and $12,682.62 other disbursements (including GST). This made total costs $739,960.13.

In her second affidavit (9 July 2018) Ms Ball responded to the affidavit of Mr Dicembre sworn 21 June 2018 denying and disagreeing with the statements of Mr Dicembre for example in relation to the freezing orders and notices to produce and subpoenas for production.

Ms Ball also responded to the affidavit of Ms Ward sworn 28 June 2018, denying that she applied an inaccurate test to reach her conclusions or omitted and expressly misstated the “basic test of apportionment”. She reiterated she does not consider it is possible to precisely apportion or parse Clayton Utz’s professional fees and Junior Counsel’s fees attributed to work performed for the Plaintiffs in relation to solely the third and fourth defendants, as the costs were incurred in relation to all the defendants. She largely disagreed with Ms Ward’s assertions and calculations.

In cross-examination Ms Ball in relation to her work for the Plaintiffs said there were a number of matters she dealt with including attending court, service on parties, perusing documents and time spent digesting the broader history of dispute between the parties (T5/12-29).

In cross-examination she accepted her instructions related to two issues: the transfer of property from the First Defendant and Second Defendant and the acquisition of assets of the fourth defendant by the third defendant (T6/3-15). She said she did work on the transfer between the third and fourth defendant because that was part of the evidence of the First Defendant’s “tendency to dispose his assets” (T7/6-9).

Ms Ball accepted that on its face the case was not very complicated (T7/45-46). She also accepted the First Plaintiff was the type of client who wanted to be kept very involved in the proceedings (T10/3-8).

She did not accept that the work her firm conducted in relation to the s 37A Conveyancing Act case against the First and Second Defendants was simple, whereas the majority of costs were incurred in relation to the erstwhile third and fourth defendants (T10/25-34). She did not accept by failing to make any discount for work done in relation to the third and fourth defendants for the period 19 August 2016 to 29 August 2016 she underestimated the discount to be applied to Clayton Utz’s fees (T12/25-28). She denied her calculation of costs substantially underestimated the work Clayton Utz did in relation to the third defendant (T21/45-49).

Ms Ball accepted the Plaintiffs should not have to pay for Clayton Utz’s engagement with Ferrier Hodgson (T22/12-29). She accepted her calculation of costs did not provide any discount for Clayton Utz’s consideration of the third defendant’s filed defence (T24/4-35). She accepted Clayton Utz did work in relation to a Sydenham property with Mr Scarcella and that this was not something with which these proceedings are concerned (T30/13-36).

She denied Clayton Utz’s engagement of Junior Counsel involved far more time and effort that was reasonable, and that the firm spent too much time proportionally to a documentary case involving the transfer of a half interest in a house (T28/15-31).

Ms Ball accepted that Clayton Utz had herself, Mr Bender (Junior Counsel), Mr Newlinds (Senior Counsel), Mr Shum (researcher) and Ms Nash (solicitor from England not yet admitted) working on the matter (T30/38-T31/30). She however denied this was overkill for a matter of its relative complexity (T32/8-13).

For the Second Defendant Mr Dicembre swore one affidavit on 21 June 2018. Mr Dicembre was not required for cross-examination, objection was only made to paragraph 50 of his affidavit (T45/7-8).

He outlined how he is the principal of the legal firm McGrath, Dicembre & Company solicitors for the Second Defendant and third defendant in these proceedings, and has carriage of this matter.

He was admitted to practice as a solicitor in 1986 and has conducted his own practice since about 1988 including in areas of commercial litigation.

By way of background Mr Dicembre described how on about 25 August 2016 the Plaintiffs sought and obtained a number of orders from the court, including orders restraining the third defendant from disposing of or dealing with the business and assets acquired from the fourth defendant on or about 20 June 2016. He also described how the Plaintiffs sought a s 37A Conveyancing Act order, and orders restraining the Second Defendant from dealing with the 49% interest in the Dolls Point Property.

Mr Dicembre described in general terms the history of the proceedings. This included the various freezing orders obtained by the Plaintiffs as against the Second Defendant and the various amendments made to the freezing orders which required court attendance.

Mr Dicembre said that until a directions hearing on 27 September in his opinion the dispute at this stage resulted from restrictions placed on the third defendant by the freezing orders rather than restrictions on the Second Defendant. He said in any event the proceedings concerned the Second Defendant’s dealings with the third defendant and her interest in a property in Sydenham which was not the subject of the proceedings.

For the Plaintiffs Ms Vine-Hall swore two affidavits on 1 May 2018 and 3 July 2018. No objection was taken to her evidence save cross-examination.

In her first affidavit (1 May 2018) Ms Vine-Hall outlined her experience, including employment from 1984 to 1989 in litigation and employment at Blake Dawson Waldron, and in full time legal costing since October 1989. Since this time she has personally prepared many thousands of itemised costs or bills of costs. She provided a description of the assessment process, assumptions relied upon and procedure applied in her determination of the Plaintiffs’ costs.

She said if the Plaintiffs costs were to be assessed it is likely that the process would take at least 12 months. She also described the broad guidelines for professional fees and counsel fees developed by the Costs Assessment Rules Committee (CARC) and her experience of what fees are usually incurred by legal practitioners in practice.

Ms Vine-Hall concluded that the rates charged to the Plaintiffs over the course of the proceedings by the solicitors “are within the range of rates” described by her in relation to the rates of other firms of similar size and undertaking similar proceedings.

She concluded the rates charged to the Plaintiffs for counsel ($13,000 per day for Mr Newlinds SC and $3,900 per day for Mr Bender of counsel) and particularly the rates charged by Mr Newlinds SC are above the high end of the range of rates identified in the CARC guidelines. However, she said it was her experience an assessor may allow the rates charged by Mr Newlinds SC but also may reduce the rates to that of $8,000 per day. She said the rates charged by Mr Bender are within the range identified in the CARC Guideline and it is probable his rate would be allowed as charged.

She concluded the work conducted by the barristers was reasonable and there does not appear to have been an over reliance on counsel.

Ms Vine-Hall agreed with Ms Ball’s calculations of what is a fair and reasonable discount to reflect the Plaintiffs’ claims were made against the third and fourth defendants but eventually not pursued.

Ms Vine-Hall said the number of hours charged to the Plaintiffs does not present as exceptionally high or low having regard to the nature of the matter. She said if it were considered necessary to reduce the costs claimed at all there should not be a reduction that falls outside the “usual” percentage reduction and in her experience the vast majority of costs assessments on the ordinary basis return a result in the range of 65%-85% of the solicitors’ costs claimed.

She said the percentage reduction does not usually apply to disbursements.

Ms Vine-Hall said her assessment of the amount that the Plaintiffs should expect to recover in an assessment on the ordinary basis of costs would be $563,220.21. However she noted that if Mr Newlinds SC’s fees were reduced to the highest end of the range identified in the CARC Guideline (that is from $13,000 per day to $8,000 per day) the total recovery of costs in her assessment would be $540,583.65.

In Ms Vine-Hall’s second affidavit (3 July 2018) she attached a report in response to the affidavit of Ms Ward sworn 28 June 2018, an expert costs assessor for the Second Defendant.

Ms Vine-Hall asserted the provisions of the Legal Profession Act 2004 (NSW) have no relevance to considerations which might be brought in this proceeding, as an assessor would be bound to apply the provisions of the Legal Profession Uniform Law Application Act 2014 (NSW). She also said the legal cases referred to by Ms Ward are not comparable to this case and are not comparable to the precise evidence presented by the Plaintiffs in the present case.

She denied her report did not contain an appraisal of the solicitor/client starting point for a consideration of the amount of a gross sum award, and denied she did not provide a methodology for her calculation of what an assessor would regard as proportional and reasonable costs. She further denied her report did not address the possibility of reductions of counsel fees, and reiterated her opinion that the work undertaken by counsel was reasonable and did not show an overreliance on counsel by solicitors.

Ms Vine-Hall disagreed that disbursements are usually reduced. She disagreed with Ms Ward’s interpretation of the so-called “rule of thumb” and said the authorities cited by Ms Ward make it clear that this is not a rule which must be applied in each case.

Ms Vine-Hall said her assessment of costs was correct including costs which claim for GST. She also criticised the 17 cases summarised in a table by Ms Ward as inaccurate and incorrectly assuming each case allows for a general or average to be taken from the results.

Ms Vine-Hall disagreed that a reduction of 40% should be applied to solicitors’ fees, counsel fees and to general disbursements. She considered that the calculations which Ms Ward provided to support her figure of $297,974.88 were not explained as there was no methodology and they were not logical.

She said Ms Ward’s reduction of 40% to all costs was incorrect. She also said her reduction of 33% across all costs to reflect involvement of the third and fourth defendants was a misinterpretation of the authorities.

In cross-examination Ms Vine-Hall accepted when she considered the “pleadings” in relation to this matter she may have only considered the Statement of Claim not any Defence (T37/18-20).

Ms Vine-Hall said Ms Ball’s allocation of 50% of costs to work done on the third and fourth defendants behalf was “generous” (T38/4-26). She did not agree that the assumptions of fact she based her opinion upon were incorrect (T41/1-31). She did not agree that paralegals were necessarily always supervised (T42/1-25). She accepted however she would not accept paralegals to charge significantly more than $250 an hour (T42/44-50).

Ms Vine-Hall denied that a wholly documentary case for a two-day hearing did not justify an assessment of costs of $540,000 to $563,000 (T44/6-10). She denied she did not consider whether or not the work had to be done (T44/12-24). She said that her assessment of costs did not address reasonableness vis-à-vis a client, but vis-à-vis the person who is eventually going to be required to pay those costs (T44/31-36).

For the Second Defendant Ms Ward swore one affidavit on 28 June 2018. Ms Ward was not required for cross-examination, although counsel for the Plaintiffs made a number of detailed objections to her affidavit evidence, to which I will return in consideration on the weight I should give to her expert opinion.

She outlined she is a former long-term director and current senior costs lawyer of Pattison Hardman Pty Ltd and holds a current unrestricted practising certificate.

She said in her experience calculations in support of applications for gross lump sum costs orders need to comprehensively set out the way ordinary costs are calculated.

Ms Ward said in her experience courts typically consider that an order for lump sum costs need not be a complete indemnity for costs incurred in the proceedings. She further said courts typically assess whether the party applying for lump sum costs has adopted a realistic assessment of the complexity and scope of the party/party issues, referring to cases including Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 per Einstein J.

She also did a survey of in her view the former assessment criteria and new assessment criteria for assessing lump sum costs as modified by the Legal Profession Uniform Law 2014 (NSW). She said moreover recent case law has recently provided clear, strong and significant guidance for assessing costs, including the appropriateness of reductions of costs incurred in “reviewing” documents, internal firm communication and reflecting the “proportionality of costs”. She said there is no evidence this case law and principles have been considered by Ms Vine-Hall and Ms Ball.

Ms Ward asserted she disagrees with Ms Vine-Hall’s reduction of professional fees only, with no percentage reduction to disbursements. She also disagreed with Ms Vine-Hall’s “usual” reduction to professional fees of 30% as the appropriate reduction that would have occurred on a costs assessment. Ms Ward asserted Ms Vine-Hall incorrectly made no discount to general disbursements and incorrectly made a discount of only 5-6% to counsel fees/disbursements.

Ms Ward said that excessive pre-trial preparations that duplicated counsel and inadequate apportionment between the First and Second Defendants and third and fourth defendants meant that Ms Vine-Hall’s assessment of costs was inadequate.

She further said another point of departure from her assessment of costs was that she disagreed with Ms Vine-Hall and Ms Ball assessing costs inclusive of GST. She described her own ABN search which led her to conclude “[t]here is no indication on this search engine that the First Plaintiff is registered for the purposes of GST”.

Ms Ward said Ms Vine-Hall overestimates the quantum of costs that would reasonably be recoverable on a formal costs assessment basis. She attached a table of “leading lump sum assessment outcomes” outlining 17 cases from both the Federal Court of Australia and New South Wales Supreme Court from 1998 to 2017 and the percentage reduction in lump sum costs. Averaging this selection cases Ms Ward said an “average allowance in lump sum costs orders” is 64-65% and hence Ms Vine-Hall’s assessment of costs are “too luxurious, outside the scope of the party party assessment criteria and likely to suffer substantial disallowance on a party party costs assessment”.

Ms Ward concluded in her opinion there should be a 40% reduction of professional fees, 40% reduction of counsel disbursements and a 40% reduction of general disbursements for the Plaintiffs costs. She further reduced this sub-total by 1/3 to accommodate the discontinuance of the Plaintiffs against the third and fourth defendants and made further adjustments to exclude GST for the costs of the Second Plaintiff.

Ms Ward concluded a total combined allowance for the Plaintiffs for gross or lump sum costs should be $297,974.88.

My assessment of the witnesses is that Ms Ball was clearly a hugely experienced and competent lawyer. I accept her evidence. Ms Vine-Hall was likewise clearly expert in her field and I accept her evidence. I accept Mr Dicembre’s evidence in his general description of the proceedings. However I have considerable misgivings about Ms Ward’s findings. Although not cross-examined in my assessment her report displays an inability clearly to explain the basis of her opinion. Her report also lacked rigour.

Having had the benefit of hearing this proceeding, I am acquainted with the relative complexity and acrimony that has characterised this dispute between the parties and have outlined this in my principal judgment.

It is correct that this case was a documentary case for the Plaintiffs and one involving an application of s 37A of the Conveyancing Act. Cross-examination was not limited in the principal proceedings to only those of credit. Both prior to and during the trial a thorough examination of the Second Defendant and her husband’s conduct over the best part of a year had to be analysed and tested. It is true however the trial only took two days.

As I recorded in my principal judgment a s 37A case requires the Plaintiffs to discharge their burden of proof that there was an “intent to defraud” on the part of the Defendants (principal judgment [79]-[86]). More specifically at the core of the Plaintiffs’ case was that they needed to disprove the Second Defendant’s positive case that an alleged agreement was reached between the Defendants to transfer the Dolls Point Property (on their evidence) early in 2012 (principal judgment [291]-[294]). I was not satisfied that such an agreement was reached in early 2012 (principal judgment [293]). However this required the Plaintiffs to expend considerable time to obtain and digest any contemporaneous documents that could go to prove that the Defendants did not reach such an agreement and did have an intention to defraud.

The complexity and seriousness of this case was underlined to an extent by the fact that both sides chose to brief both Junior Counsel and Senior Counsel. There was in fact a great deal at stake financially on both sides.

Moreover this dispute occurred in the backdrop of a larger dispute between the parties and other proceedings which had gone before Black J and Young AJA. This undoubtedly influenced how the proceedings were run before me and the time and money expended by solicitors on both sides.

As I have said with respect to the lay evidence of the solicitors, I accept both the evidence of Ms Ball and the evidence of Mr Dicembre. That is, I accept their calculation of the costs each side incurred in the proceedings. I accept that it was difficult for Ms Ball to apportion Clayton Utz’s costs to reflect the fact that the Plaintiffs discontinued proceedings against the third and fourth defendants, and I accept in her assessment the discounts she applied were generous in her opinion. When cross-examined on the billing of the Plaintiffs in relation to engagement of Ferrier Hodgson and in relation to a Sydenham property with Mr Scarcella Ms Ball did accept that these bills were not something which concerned these proceedings, and the Plaintiffs clarified this in supplementary submissions. Whilst the costs incurred by Clayton Utz were substantial, I accept Ms Ball’s apportionment of costs and calculation of costs (subject to the concessions made in supplementary submissions) and her evidence that she rejected Clayton Utz’s fees and costs represented “overkill”.

With respect to the expert evidence relied upon by the Plaintiffs and the Second Defendant respectively, in my view the expert opinion of Ms Deborah Vine-Hall is to be preferred.

Ms Vine-Hall’s evidence was comprehensive and clear as to the approach she considered would be taken on a costs assessment basis and that may be awarded in these circumstances on the ordinary basis. I do however note my concern that in cross-examination Ms Vine-Hall said to her recollection she did not consider any Defences filed in this matter. I further note my concern that Ms Vine-Hall did not apply a discount to disbursements, as this is in my view not useful to this application, which requires a gross sum costs order with a broad brush approach where judges often apply discounts to account for contingencies.

However on balance I am inclined to accept Ms Vine-Hall’s analysis and assessment of costs on the ordinary basis to be between $563,220.21 and $540,583.65.

A number of objections were taken to the report of Ms Ward. Upon careful consideration and on balance each of the objections in my view related to weight not admissibility and I allowed Ms Ward’s report in its entirety into evidence. However there are a number of problems with it.

It is not entirely clear what methodology or reasoning Ms Ward has employed in her expert report. Most importantly upon reading her evidence and taking into account the Plaintiffs’ objections in my view it is not clear what reasoning substantiates her conclusion that the Plaintiffs’ costs were “luxurious”.

I am satisfied that the Plaintiffs’ list of objections to her evidence draw attention to a number of significant criticisms that influence the weight I should ascribe to Ms Ward’s evidence. To be specific, the Plaintiffs criticised in large part Ms Ward’s affidavit (paragraphs [29]-[33], [35]-[43], [46]-[51]) as providing insufficient detail to establish or elucidate how her conclusions were based wholly or substantially on her expert specialised knowledge.

In my view these criticisms are justified. For example Ms Ward’s affidavit did not adequately set out the facts, matters and circumstances she relied upon to determine that there is a “rule of thumb” approach taken by the authorities.

Further Ms Ward’s table of cases referring to 17 decisions of both the Federal Court of Australia and New South Wales Supreme Court merely provided an average of the percentage sum reduction applied by these cases. No attempt was made by her to explain why this selection of cases were in any way analogous, and anything other than examples of courts applying bespoke costs assessments on particular facts in the exercise of discretion. Such a table is not useful for determining how I should exercise my discretion and should be rejected. The average percentage arrived by Ms Ward is likewise not useful.

In general there was no attempt in Ms Ward’s affidavit to draw out in sufficient detail the basis upon which she concluded the Plaintiffs’ costs are likely to suffer substantial discount or involved a potentially unreasonable or disproportionate division of tasks.

In my view Ms Ward’s expert opinions do not go further than a series of dogmatic expressions of opinion not accompanied by an explanation of the basis upon which those opinions or conclusions are based. For these reasons I prefer the expert report of Ms Vine-Hall. I do not regard Ms Ward’s reasoning or conclusions as acceptable.

The element of delay is highlighted by the Second Defendant as a factor suggesting against the order of a gross sum costs order. I accept this is an important discretionary factor that may in the appropriate case warrant against making a gross sum costs order. This includes circumstances where a party has made a considered decision to delay a gross sum costs application pending the outcome of an appeal.

However, lateness depends on the circumstances and my exercise of discretion depends on the circumstances. In this case, I acknowledge the acrimony between the parties and the complexity of the case. I am not satisfied the lateness of the application on the facts militates against an order, however it does play a role in my assessment of the appropriate discount to be applied to the Plaintiffs’ costs.

In these circumstances I am of the view a lump sum or gross sum costs order is appropriate. I am familiar with the issues in this case. The court has been assisted by the evidence of the solicitors for both sides and two experts clearly practiced in their field together with all relevant fee notes providing ample material to assess the application for gross sum costs. Although the Second Defendant swore no evidence and her evidence was not tested in this application, annexed to the affidavit of Mr Dicembre was her affidavits of 31 August 2016 and 8 September 2016 outlining her concerns that at the date of those affidavits of the potential difficulty she may face in meeting her and her family’s living expenses. There is a real possibility she would be unable to pay the costs of the proceedings especially given the potential time and expense of a further costs assessment. The dispute between the parties has been acrimonious and that attitude would likely translate to a lengthy and acrimonious process of a formal costs assessment.

Further in my view given the state of modern litigation, a lump sum or gross sum order ought to reasonably be adverted to whenever a proper basis for doing so is exposed. As I have previously said the costs of litigation frequently becomes a tail wagging the dog in that it dominates the litigation often at the expense of issues in a case.

Whilst Ms Vine-Hall supports with a discount the evidence and calculations of Ms Ball, including the way in which Clayton Utz allocated resources and charged fees, my instinct and experience suggests the Plaintiffs could have run this case more cheaply. This is especially so in light of the costs of the Defendants. However a gross sum or lump sum costs order is not an exercise of simply comparing the costs of each party. The Plaintiffs are to an extent entitled to use the legal representatives of their own choosing, although the assessment of their costs must be logical, fair and reasonable. This was a two day case but not without the complexity I have outlined above.

The delay which has occurred in the bringing of this application and in fairness should be a factor in my assessment of the appropriate discount to be applied. Further another factor I take into account is the difficulty Ms Ball recognised in apportioning the Plaintiffs’ costs to accommodate the fact that proceedings were discontinued as against the third and fourth defendants, and that this will influence my assessment of the appropriate discount.

I am satisfied however where the Court is to take a broad brush approach to the quantification of a gross sum, that I should make a gross sum costs order in the sum of $540,583.65 being the lower amount provided by Ms Vine-Hall but apply a further discount of 20% to this amount to account for contingencies.

It is also appropriate the Second Defendant pay interest on this resultant amount pursuant to s 101 of the Civil Procedure Act 2005 (NSW) at the prescribed rate from 26 July 2017.

Choosing any discount rate in circumstances such as this is as broad brush as the exercise itself but it should act as a sufficient conservative safeguard.

I note this amount will be less than the amount of $552,285.11 sought by the Plaintiffs but in my view the logical, fair and reasonable discount is the lower amount estimated by Ms Vine-Hall less 20%.

I would propose to make an order that the Second Defendant pay the Plaintiffs’ costs of this gross sum costs application in the gross sum but apply a discount of 20% to this amount as well.

I would invite the parties to prepare short minutes to give effect to these reasons.