Antova v Bokan (No 2)

This judgment resolves further costs consequences arising from the Court’s judgment in Antova v Bokan [2016] NSWSC 115 (the “First Judgment”). These reasons should be read with the First Judgment. The defined terms in the First Judgment have the same meaning in this judgment. The appearances on the costs argument were the same as the earlier hearing before me: Mr M Sahade of Counsel appeared for Radmila and Vase. Lidija was represented by Mr M J Heath of Counsel.

The orders giving effect to the First Judgment included:

In these reasons, I shall refer to the costs in orders 2 and 5 just quoted as “Lidija’s costs”. Lidija’s Costs Motion Application (see order 7 just quoted) raised four questions which, with the Court’s answers, are:

In so far as he appeared for Radmila, Mr Sahade’s resistance to the orders sought against her was, with no disrespect intended, not strenuous. It could not have been otherwise. Radmila’s position in this litigation is now quite different to Vase’s. By reason of the First Judgment, her involvement in the case is, for all intents and purposes, at an end. There is no reason why Radmila’s obligation to pay Lidija’s costs and her costs of the Costs Motion Application should not now be assessed on a gross sum basis and be payable forthwith. Furthermore, while Lidija should be free to enforce her costs orders against Radmila in whatever way she chooses, the Court is also satisfied that Lidija should have the benefit of a charge and an order for payment of her costs (including of the Costs Motion Application) out of Radmila’s share of the deceased’s estate. This last entitlement will only be of any real value if Vase’s statement of claim is dismissed so that the deceased’s house is part of the estate.

In relation to Vase, the Court is satisfied that his liability to pay Lidija’s costs and the costs of the present Costs Motion Application should also be crystallised by a gross sum costs order. However, consistent with the Court’s decision in paragraph [75] of the First Judgment that Vase should be given the opportunity to prosecute his statement of claim, in the exercise of its discretion the Court declines to order that Vase pay Lidija’s costs forthwith or that his statement of claim be stayed pending payment of those costs by him.

I heard the Costs Motion Application on 4 April 2017. An important part of Lidija’s evidence was a bill of costs and expert report quantifying Lidija’s costs prepared by Mr Michael Dudman, an experienced costs lawyer. For reasons which I did not find at all persuasive, Vase did not take the opportunity provided by the timetable which the Court had ordered for the preparation of evidence to file any response to Mr Dudman’s report.

When, over Mr Sahade’s objection, Mr Dudman’s report was admitted into evidence, Mr Sahade then applied for an adjournment to enable Vase to file expert evidence in response to Mr Dudman. The Court refused that application and proceeded to hear the Costs Motion Application, but on the basis that Vase would be given an opportunity to file expert evidence that could then be the subject of brief written submissions between the parties.

At the conclusion of the hearing, directions were made to give effect to this arrangement. However, by email dated 11 April 2017, Vase’s lawyers informed Lidija and the Court:

As a result of that email, the Court has proceeded to determine the Costs Motion Application on the basis of the evidence and submissions as they stood at the conclusion of the hearing on 4 April 2017.

The Court’s power to make a gross sum costs order is conferred by s 98(4) of the Civil Procedure Act 2005 (NSW) (“CP Act”):

In accordance with ss 56(1) and 56(2) of the CP Act, the Court’s discretion to make a gross sum costs order is to be exercised having regard to the overriding purpose of the CP Act in civil proceedings to “facilitate the just, quick and cheap resolution of the real issues in the proceedings”.

The principles governing the application of s 98(4)(c) of the CP Act were summarised by Beazley JA (as her Honour then was) in Hamod v State of New South Wales [2011] NSWCA 375 (with whom Giles and Whealy JJA agreed):

In relation to the possibility of a discount, Mr Heath drew my attention to the observations of Brereton J in Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640, with which I respectfully agree (citations omitted):

The evidence was in narrow compass.

Lidija relied on Mr Dudman’s expert report. He had prepared a bill of Lidija’s costs and gave his opinion as to how it would be assessed. Mr Dudman applied a 20% reduction to professional fees, including Counsel’s fees, to arrive at what he considered to be a reasonable estimate of those costs likely to be allowed on assessment in relation to that part of her costs which the Court has ordered to be paid on the ordinary basis. Mr Dudman took what the Court accepts to be a conservative approach by applying a 5% reduction to professional fees, including Counsel’s fees, to arrive at what he considered to be a reasonable estimate of those costs likely to be allowed on assessment on the indemnity basis in relation to that part of her costs which the Court has ordered to be paid on the indemnity basis.

While, as the Court has already noted, Vase and Radmila did not file any evidence to answer Mr Dudman’s report, on their behalf Mr Sahade took objection to certain items in Mr Dudman’s bill of costs. With one minor exception, these were accepted by Mr Heath. All of those items were in relation to the period when costs were to be assessed on the ordinary basis and, after allowing for the 20% reduction, meant an abandonment by Lidija of $928 of the amount determined by Mr Dudman. Taking that reduction into account, Mr Dudman’s evidence was that the amount likely to be allowed on assessment for Lidija’s costs was $91,180.02. The Court accepts that evidence.

Vase filed an affidavit dated 21 March 2017 which, on its face, demonstrated that he and Radmila had few assets and were dependent upon his income of about $850 per week. His evidence was that after all of his and his mother’s expenses were deducted, he was left with little or no money from wages and had to rely on his savings. His current assets — including some superannuation and savings, and an apartment in Macedonia — amounted to approximately $100,000. Vase’s affidavit also referred to him owing outstanding legal fees of $80,000 and having received an estimate from his lawyers of $40,000 for the future costs and disbursements in relation to his statement of claim.

Vase’s evidence was criticised by Mr Heath, who drew attention to an affidavit of assets that Vase had sworn in November 2015 that disclosed savings of $142,000 in a Commonwealth Bank account. Vase’s most recent affidavit referred to there only being approximately $29,000 in his Commonwealth Bank account. It was not clear, so Mr Heath submitted, from Vase’s evidence, how he had spent approximately $110,000 in between swearing the two affidavits. In particular, Mr Heath submitted that it was not clear whether Vase had applied any of those funds to meet the legal fees which he listed as a current liability.

I declined Mr Sahade’s application for leave to adduce further oral evidence from Vase to meet Mr Heath’s criticisms. I did so because whatever doubt there was about how Vase may have spent his savings, it did not change the current position. If Vase had in fact paid the outstanding solicitors’ fees, then while that may have reduced his liabilities, it did not increase the asset position disclosed in his March 2017 affidavit. If he had not paid those fees, then it simply meant that he still had significant liabilities to meet out of those same, limited assets. On any view, the Court was left in no doubt that Vase would not be able to meet a costs order of approximately $90,000 determined by reference to Mr Dudman’s evidence.

Mr Sahade opposed the making of a gross sum costs order for three basic reasons:

For the reasons which follow, I do not accept that Lidija’s costs should be determined by a costs assessment. Insofar as objection was taken to particular items on the bill, Mr Heath either conceded these or explained them to the Court’s satisfaction. Nor do I consider the amount claimed to be excessive. The hearing of the two motions took up three days. The motions became a “case within a case” with substantial evidence being prepared and supported by extensive argument relating to four legal bases upon which the Agreement was challenged (of which three were abandoned at the hearing). There had been numerous directions hearings before Hallen J. Taking all those matters into account, the Court is not satisfied that it could be said that the amount claimed for Lidija’s costs is manifestly excessive.

Having regard to the principles set out in paragraphs [10] to [13] above, there are four reasons why the Court considers a gross sum costs order should be made in an amount based upon Mr Dudman’s evidence.

First, this aspect of the proceedings relates to the enforcement of a settlement. In other words, the Court has accepted that the parties resolved the main proceedings between them by agreement including in relation to the costs of those proceedings. This circumstance is a powerful reason in both policy and practice to avoid the possibility that the parties remain locked in litigation through the medium of a costs assessment. Where the parties agree that the main proceedings between them should come to an end, the Court should, where possible, use its power in relation to costs to conform with the parties’ agreement for finality by preventing further litigation over costs.

Second, it is clear that Radmila and Vase are unlikely to be able to meet the costs orders from their own resources as opposed to having recourse to their interest in the deceased’s house (depending on the outcome of Vase’s statement of claim).

Third, each side has had an adequate opportunity to make submissions about the quantum of those costs.

Fourth, Mr Dudman’s report provides a fair, logical and reasonable basis to determine the amount of Lidija’s costs.

The Court accepts Mr Dudman’s figure of $91,180.02 and assesses Lidija’s costs accordingly. Applying the observations of Brereton J in Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640 (see paragraph [13] above), I am not satisfied that this is a case where any further discount is required. Mr Dudman’s deductions in relation to both ordinary and indemnity costs are fair, reasonable and appropriately conservative. There is no reason which I can identify that would warrant a further discount.

Lidija’s costs are “costs of any application or other step” in these proceedings for the purposes of Pt 42, r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), which provides:

Lidija submitted that the Court should “order otherwise” for the purposes of UCPR Pt 42, r 42.7(2) with the result that her costs should be payable forthwith. The principles governing such an application where summarised by Barrett J (as his Honour then was) in Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 (“Morningstar”):

The effect of the First Judgment in upholding the Agreement means that, for all intents and purposes, the proceedings as between Lidija and Radmila are at an end. The only question, to be determined by the hearing of Vase’s statement of claim, is whether the deceased’s house is part of the estate. So understood, at least in relation to Radmila, the present case is a paradigmatic example of the first category identified by Barrett J in Morningstar.

Mr Sahade, correctly, acknowledged that little could be said against Radmila being required to pay Lidija’s costs forthwith other than to draw to attention that it might be useful to wait until it was known whether Radmila would materially benefit from the estate under the Agreement because Vase was unsuccessful in his statement of claim. I do not regard that as a sufficient reason to prevent Lidija taking such steps as she now may wish to recover Lidija’s costs from Radmila. However, against the possibility that Radmila receives a significant benefit from the estate because Vase’s statement of claim fails, Radmila’s share in the estate should be charged with the amount of costs which the Court will order Radmila to pay Lidija.

Insofar as Vase was concerned, Mr Heath submitted by reference to Barrett J’s judgment in Morningstar, that there were three reasons why Vase should also be ordered to pay Lidija’s costs forthwith:

While accepting that there is considerable force in Mr Heath’s submissions, the Court has concluded that, in the exercise of its discretion, it would not be in the interests of the just, quick and cheap resolution of the real issues in the proceedings, now being Vase’s statement of claim, to require Vase to pay Lidija’s costs forthwith. There are three reasons for this conclusion.

First, it would be inconsistent with and undermine the Court’s conclusion in the First Judgment that Vase should be entitled to have his statement of claim determined. Given the bitter relationship between the parties, I have no doubt that if, as the Court is satisfied is the case, Vase does not have the resources to pay Lidija’s costs immediately, Lidija would move to enforce those orders against Vase. All that would be achieved is that a new litigious battlefront would be opened as Vase sought to resist enforcement of the orders by reference to the statement of claim. I express no view as to what might happen in those circumstances. However, it is clear that to permit even the possibly of that occurring is inimical to what, in the interests of all the parties, really needs to be focused upon now: the prompt and cost effective determination of Vase’s statement of claim.

Second, the Court is satisfied on the evidence that, given Vase’s and Radmila’s (to the extent it might be thought that she could assist Vase) financial position, the making of such an order would give rise to a real risk of Vase’s statement of claim being stultified. That, again, is inimical to the fundamental conclusion reached in the First Judgment that Vase should be allowed to prosecute his statement of claim.

Third, if Vase is successful in his statement of claim (a matter about which I express no view), it is reasonable to hypothesise that he may also obtain an order for his costs of the statement of claim against Lidija in the same proceedings. This would give him the benefit of a set off against Lidija’s (and any other) costs. No submission was put (nor do I think it could have been), that Vase’s statement of claim is hopeless.

The result in relation to Vase is therefore that while he will be liable to pay Lidija’s costs (and the costs of the Costs Motion Application — see paragraph [42] below) as assessed by the Court, in accordance with UCPR Pt 42, r 42.7(2), they will not be payable until the proceedings are concluded by the determination of the statement of claim.

This part of Lidija’s application did not concern Radmila. Because the Court has concluded that Vase should not be required to pay Lidija’s costs forthwith, then the question of whether his statement of claim should be stayed pending those costs being paid does not arise. However, in any event, the Court would have refused this part of Lidija’s application against Vase for the same discretionary reasons set out in paragraphs [34] to [36] above.

Lidija has succeeded completely against Radmila on the Costs Motion Application. There is no reason why costs should not follow the event, such costs to be assessed on the ordinary basis. I accept Mr Dudman’s evidence that Lidija’s reasonable costs of the Costs Motion Application on the ordinary basis are $10,570 (inclusive of GST) and assess them accordingly. There is no reason why, for the avoidance of doubt, the Court should not also order those costs to be payable forthwith, for the same reasons set out in paragraphs [23] to [26] above.

There is also no reason why Vase should not pay Lidija’s costs of the Costs Motion Application. In reaching this conclusion, I have not overlooked the fact that Lidija has not had complete success against Vase. Nevertheless, the decisive factor to my mind is that, insofar as the Court has ordered Lidija’s costs to be paid on the indemnity basis, it was because of Vase’s failure to accept a settlement offer in relation to the two motions that were decided by the First Judgment. That order was made because the Court considered Vase’s refusal of that offer to be unreasonable.

Another consequence of that unreasonable refusal is that Lidija has been required to make the present application in relation to her costs. She would not have had to do so if Vase had accepted the offer. That circumstance is sufficient, in my view, to justify Vase also having to pay Lidija’s costs of the Costs Motion Application (albeit on the ordinary basis), notwithstanding that she did not enjoy complete success against Vase in relation to it.

The orders of the Court are: