Abu-Mahmoud v Consolidated Lawyers Pty Ltd (No.2)

1. [1]

   On 18 May 2015, I delivered judgment in the principal proceedings. For the reasons which I then expressed, I ordered that there be judgment for the plaintiff. I directed the parties to bring in short minutes of order, including seeking any orders for costs: Abu-Mahmoud v Consolidated Lawyers Pty Ltd [2015] NSWSC 547.

2. [2]

   On 19 June 2015, I made a series of orders by consent, consequent upon the judgment delivered on 18 May 2015. Relevantly, those orders included:

Present Notices of Motion

1. [3]

   On 1 June 2015, the plaintiff served a Notice of Motion in which he sought the following orders:

2. [4]

   On 15 June 2015, the defendants served a Notice of Motion in which they sought the following orders:

3. [5]

   This judgment deals with these two Notices of Motion.

Evidence

1. [6]

   The evidence discloses that on 3 October 2013, the solicitors for the plaintiff served on the solicitors for the defendants, an Offer of Compromise pursuant to r 20.26 of the Uniform Civil Procedure Rules 2005 (“UCPR”), in the following terms:

2. [7]

   The offer was open for 28 days. It expired in the first week of November 2013.

3. [8]

   Mr Partridge, the solicitor for the defendants, filed an affidavit sworn on 15 June 2015. In that affidavit, Mr Partridge called attention to a series of directions given by the Court prior to trial.

4. [9]

   In particular, Mr Partridge noted the following chronology of directions:

5. [10]

   Mr Partridge notes that on 3 December 2013, which was less than a week before the commencement of the hearing, the plaintiff served a supplementary report by Mr Stephen Martin, dated 3 December 2013. Mr Martin is an expert solicitor who had prepared an earlier report on 26 July 2012, which had been served promptly. Mr Partridge asserts that Mr Martin’s second report dealt with a pleaded breach, which had not been covered by his earlier report, for the first time.

6. [11]

   On 9 December 2013, in the course of the hearing, the plaintiff sought to rely upon the report of Mr Martin. Objection was taken to paragraph 3(i) of that report on the grounds that it was not reply evidence, and had not been served in accordance with the timetable for evidence in chief. I allowed that paragraph of the report, and granted the defendants leave to adduce any expert evidence in reply.

7. [12]

   On 14 February 2014, the defendants served a report in reply of the expert retained by them, Mr Geoffrey Bartels, dated 13 February 2014.

Costs - Power

1. [13]

   Section 98(1) of the Civil Procedure Act 2005 bestows an ample power with respect to ordering costs. It provides, relevantly:

2. [14]

   It is necessary to consider a number of rules in the UCPR which deal with the question of costs. Rule 42.1 of the UCPR, provides as follows:

3. [15]

   Rule 42.2 of the UCPR provides that unless the Court otherwise orders, the costs ordered to be paid, are to be assessed on the ordinary basis.

4. [16]

   There are a series of rules which specifically deal with offers of compromise. Rule 42.14 of the UCPR deals with circumstances where an offer of compromise is not accepted and a plaintiff obtains a judgment which is no less favourable than the offer of compromise. It is in the following form:

5. [17]

   It can be seen by reference to the UCPR, that the Court should make the orders sought in the plaintiff’s Notice of Motion, unless persuaded by the defendants that it should “otherwise order”.

6. [18]

   So far as the defendants’ Notice of Motion is concerned, which raises a question of partial success, that is to say, success on some, but not all, of the issues litigated, the Court needs to be persuaded that “some other order should be made” within the meaning of r 42.1.

7. [19]

   It is necessary to examine the authorities which relate to these two issues.

Indemnity Costs – Legal Principles

1. [20]

   In circumstances where a proper offer of compromise has been made, not accepted, and the plaintiff has obtained a judgment no less favourable than the terms of the offer, as is here the case, then authorities provide that there is a clear onus on the defendant, to persuade the Court to “otherwise order”.

2. [21]

   In South Eastern Sydney Area Health Service v King [2006] NSWCA 2, at [83] per Hunt AJA (Mason P and McColl JA agreeing), the following appears:

3. [22]

   In Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109, McColl JA cited, with approval, this passage from King. In that case, her Honour found that there had been no attempt to explain why the offer was rejected in circumstances where the offer “cried out for serious consideration”. Her Honour noted, at [36]:

4. [23]

   Regard must be had to Hillier v Sheather (1995) 36 NSWLR 414, at 423, where Kirby P said:

5. [24]

   In 2011, the Court of Appeal revisited this issue. In Nominal Defendant v Hawkins [2011] NSWCA 93, Hodgson JA, Beazley JA and Sackville AJA agreeing, noted that the primary judge had accepted a submission from the defendant that at the time it refused the plaintiff’s offer, “… it did not know and could not have known of important evidence in this case”. He noted that the defendant submitted to the primary judge, and the primary judge accepted, that the defendant could not reasonably have anticipated the plaintiff’s success on that basis, and accordingly, acted reasonably in refusing the offer.

6. [25]

   Hodgson JA went on to note that he accepted that, with respect to the exercise of the Court’s power to “otherwise order”, under r 42.14(2) of the UCPR, that:

7. [26]

   His Honour went on to hold that he did not think that the decision of the primary judge displayed such error of principle as would be sufficient to justify appellate intervention. It is not in doubt that a significant change in a plaintiff’s case after the offer of compromise is made, and the trial, may be a sufficient circumstances to justify the Court otherwise ordering. That approach was followed in King, and by the primary judge in Hawkins. This last approach was not said to display any error of principle.

Indemnity Costs – Discernment

1. [27]

   The defendants submit that whilst they accept that the Offer of Compromise was a valid one in accordance with the UCPR and that it was open for an adequate time, and that the plaintiff has obtained a judgment no less favourable than the Offer, they point to two features which they submit are a basis for denying an order for indemnity costs.

2. [28]

   The first is that the Offer was made at a time shortly after the filing of a Further Amended Statement of Claim, highlighting a breach of duty of care with respect to the restructure of the plaintiffs affairs, upon which the plaintiff ultimately succeeded and that it was made before the plaintiff had served any expert evidence in support of that first breach of duty. The defendants note that the Offer also expired before the evidence was served. As well, the defendants note that the Offer was made and expired before the defendants had any opportunity to obtain responsive expert evidence. They obtained responsive evidence in February 2014.

3. [29]

   Accordingly, it is submitted by the defendants that they were not in a position to properly consider the merits of the plaintiff’s case on the first breach of duty during the period for which the Offer was open.

4. [30]

   In addition, by way of a second basis for the Court to “otherwise order”, the defendants submit that the plaintiff in fact failed on a significant variety of other issues in the proceedings, and that that is a matter which the Court could, and should, take into account in considering whether to “order otherwise”.

5. [31]

   There is little doubt that the expert opinion of Mr Martin contained in his report of December 2013, was an expert opinion properly to be regarded as a part of the evidence in chief to be relied upon by the plaintiff. It was an important feature of the plaintiff’s case against the defendants that not only would a solicitor acting reasonably have foreseen the relevant risks, but that the failure to advise the plaintiff of those relevant risks would constitute a breach of duty. It is surprising that an expert opinion about this fundamental aspect of the plaintiff’s case was not obtained earlier, and served earlier.

6. [32]

   Given that the expert opinion of Mr Martin, which was central to the plaintiff’s case, was not served until after the Offer of Compromise expired, I am satisfied that the defendants did not have a reasonable opportunity to consider the strength of the case being made against them by the plaintiff.

7. [33]

   True it is that there was a factual contest as to whether or not Mr Salem Kassem had given the requisite advice, as claimed by Mr Abu-Mahmoud. This was a factual issue which was resolved in the judgment.

8. [34]

   In my view, in accordance with the principles to which I have earlier referred, the late service of the principal expert report, which was not served until after the time for acceptance of the Offer had expired, is a circumstance which I would regard as exceptional.

9. [35]

   In my view, it is appropriate for the Court to otherwise order. I would not order the defendants to pay the plaintiff’s costs on an indemnity basis as and from 3 October 2013.

Multiple Issues – Legal Principles

1. [36]

   In Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, the Court of Appeal set out concisely the principles relevant to the exercise of the Court’s discretion with respect to costs where a question about success and failure on a number of issues arises. At [38] the Court (Beazley, Ipp and Basten JJA) said:

2. [37]

   Recently in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014] NSWCA 425, Macfarlan JA (with whom Meagher and Barrett JJA agreed) said at [26]-[27] the following:

3. [38]

   Most recently, the Court of Appeal reaffirmed these applicable principles: Cunneen v Independent Commission Against Corruption [2015] NSWCA 46 at [14], per Ward JA (Bathurst CJ and Basten JA agreeing).

4. [39]

   Applying these principles, I am not satisfied that a reduction in the costs ordered to be paid by the defendants to reflect any success by the defendants on any of the issues is sufficiently severable to justify the order of the kind which the defendants seek.

5. [40]

   On the contrary, it was necessary to examine all of the facts, including those referrable to the caveat, and the exchanges about the caveat including advice said to have been given, or not given, by Mr Kassem to Mr Abu-Mahmoud, to deal with the defendants’ submission, upon which they were ultimately unsuccessful, that even if there had been a breach of duty, which was denied, that breach did not cause the plaintiff’s loss.

6. [41]

   In the circumstances, I am not satisfied that it is appropriate to reduce the costs as contended for by the defendants.

7. [42]

   In summary, both Motions will be dismissed. In my view, the proper order is to be made is that the defendants should pay the plaintiff’s costs on the ordinary basis.

Orders

1. [43]

   I make the following orders:

   1. (1)

      Order the defendants to pay the plaintiff’s costs of the proceedings on the ordinary basis.

   2. (2)

      Notices of Motion otherwise dismissed.

   3. (3)

      Each party to pay their own costs of the Notices of Motion.