Beau Timothy John Hartnett trading as Hartnett Lawyers v Anthony Robert Bell as Executor of the Estate of the late Mabel Dawn Deakin-Bell (No 2)

1. [1]

   THE COURT: On 12 October 2023, this Court (Bell CJ, Adamson JA and Griffiths AJA) dismissed the appeals brought by Beau Hartnett trading as Hartnett Lawyers (Mr Hartnett) in proceedings 2022/299298 and 2022/299327: Beau Timothy John Hartnett trading as Hartnett Lawyers v Anthony Robert Bell as Executor of the Estate of the late Mabel Dawn Deakin-Bell [2023] NSWCA 244. It also ordered the appellant to pay the costs of the respondent, Anthony Bell as executor of the estate of the late Mabel Deakin-Bell (the original order). The original order was entered on 12 October 2023.

2. [2]

   By notice of motion filed on 2 November 2023, 21 days after entry of the original order, Mr Bell seeks orders, including an order that his costs of the appeal be paid in a gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW).

3. [3]

   Ms King, who appeared on behalf of Mr Hartnett, submitted that Mr Bell’s application that the costs be specified in a gross sum was a variation of the original order and that he was out of time for making such an application under Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.16(3A). Further, she submitted that as Mr Hartnett had not been notified of the making of the application within the 14-day period, no extension of time ought be given.

4. [4]

   Ms King initially submitted that, as Mr Bell’s notice of motion was filed more than 14 days after the entry of the original order, the Court had no power to order that the costs be fixed in a gross sum. However, at the hearing of the motion, Ms King accepted that the Court had a discretion to extend time but that it ought not exercise its discretion in Mr Bell’s favour since he had not notified Mr Hartnett of his application within the period of 14 days of the original order, being the time allowed by UCPR, r 36.16(3A). In addition, she submitted that the order ought not be made because there was “no meaningful evidence as to the amount which would be recoverable on assessment”. These submissions will be addressed in turn.

5. [5]

   On 13 October 2023, the day after the original order was made and entered, Mr Bell’s solicitors sent an email to Mr Hartnett, attaching copies of this Court’s orders of 12 October 2023 and the orders made by Peden J (the primary judge). They asserted that, as the proceedings were concluded, the stay of the primary judge’s judgment no longer operated and that Mr Hartnett was required to pay the judgment sum of $311,356.47 within 28 days. They provided their bank account details for that purpose.

6. [6]

   In an email sent on 16 October 2023, Mr Bell’s solicitor foreshadowed an application, in the absence of agreement, for the costs ordered in the original order to be fixed in a gross sum of $72,193.44, comprising 65% of the solicitors professional fees and 100% of the disbursements, including counsel’s fees. Mr Hartnett did not respond to this letter although he received and read the email on that day.

7. [7]

   On 20 October 2023, Mr Bell’s solicitors tried to file a notice of motion in the Court’s online registry. However, difficulties were encountered with filing it online which led to the solicitors sending an email to the Registry, asking for a link which could be used for filing the notice of motion and supporting affidavit. This email was not copied to Mr Hartnett. When no response had been received from the Court by 26 October 2023, Mr Bell’s solicitors emailed the Registry again (and included their earlier email of 20 October 2023), asking for an “update as to filing”.

8. [8]

   On 1 November 2023, the Registry informed Mr Bell’s solicitors that the documents could not be accepted for filing in their current form since it was necessary that there be separate notices of motion and affidavits for each proceeding.

9. [9]

   On 2 November 2023, Mr Bell’s solicitors submitted the documents in the correct form for filing. It was not until 8 November 2023, that the Registry notified them that the documents had actually been filed on 2 November 2023. On the following day, 9 November 2023, Mr Bell’s solicitors served Mr Hartnett with the notices of motion and affidavits and confirmed as follows:

10. [10]

    These facts pertain to Mr Hartnett’s submission that Mr Bell’s application is out of time. Further facts are set out later in this judgment, which are relevant to the additional orders sought by Mr Bell.

11. [11]

    Mr Bell invokes this Court’s power under s 98(4)(c) of the Civil Procedure Act to specify costs in a gross sum rather than assessed costs. Section 98 relevantly provides:

12. [12]

    As referred to above, Mr Hartnett relied on UCPR, r 36.16, which relevantly provides:

13. [13]

    Whether r 36.16(3A), and, accordingly, r 36.16(3C), apply turns on whether an application that costs already ordered be fixed in a gross sum constitutes a “variation” of the original order. Ms King submitted that it did and that, accordingly, the application had to be made within 14 days, as specified in r 36.16(3B). As referred to above, she ultimately accepted that this Court had power under s 14 of the Civil Procedure Act to extend time for making an application for a variation (r 1.12 having been expressly excluded by r 36.16(3C)).

14. [14]

    Section 14 provides:

15. [15]

    However, Ms King submitted that the authorities establish that the power in s 14 should only be exercised to dispense with the 14-day time period in r 36.16(3A) in circumstances where notice of intention to make such an application has been given during the 14-day period. She relied on the authorities referred to in Foundas v Arambatzis (No 5) (2022) 109 NSWLR 73; [2022] NSWCA 113 (which did not concern an application that costs be specified in a gross sum) at [19] (White JA, Bell CJ and Basten AJA agreeing) in support of such a limitation.

16. [16]

    Ms King also relied on State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283 (Hollingsworth) in which Mr Hollingsworth made an application to vary costs orders including by varying an order that he pay the costs of the State of New South Wales and, instead making an order that costs be costs in the cause. This application was made within the 14-day period specified in r 36.16(3A). However, a further application was made outside the 14-day period. The Court held that the first application could be entertained but that the second application ought not be. Although the Court did not finally determine the question whether the power in s 14 could be used to extend the time stipulated in r 36.16(3A), it cited dicta to the effect that the power to extend time was limited to applications which had been made or indicated (to the Court) within the 14-day period since otherwise there would be an unlimited power in the Court to vary orders which had been entered. Such a result was considered to be inimical to the principle of finality of litigation. The effect of these provisions on an application that costs be specified in a gross sum did not arise in Hollingsworth.

17. [17]

    Ms King’s concession that the Court has a discretion to extend time and her acceptance that Mr Hartnett had suffered no prejudice as a consequence of the delay (such as it was) are significant. The reasons for extending time in the present case are persuasive, as the chronology set out above demonstrates. A mere four days after the making of the original order, Mr Bell foreshadowed an application for costs to be specified in a gross sum and set out the amount sought. But for a technical issue with filing, the notices of motion would have been filed on 20 November 2023, eight days after the original order. The day after Mr Bell’s solicitors were notified that the documents had been accepted for filing, the documents were served on Mr Hartnett.

18. [18]

    The only matter raised by Ms King against the granting of an extension was that Mr Hartnett had not been notified of the making of the application within 14 days of the original order. In circumstances where the making of the application had been expressly foreshadowed on 16 October 2023, we do not regard this matter as being of any consequence. It is insufficient to outweigh what we regard as the compelling reasons, in the interests of justice, to grant an extension for the filing of the notices of motion to 2 November 2023, if such an extension be required.

19. [19]

    We turn now to address the question whether an extension of time is required.

20. [20]

    The question whether r 36.16 applies in the present case depends on the following two matters:

    1. (1)

       whether an application that costs be specified in a gross sum is, relevantly, an application to vary the original order or an application for a further order; and

    2. (2)

       whether s 98 of the Civil Procedure Act provides a statutory authorisation for the specifying of a gross sum which displaces r 36.16.

21. [21]

    For the reasons which follow, we consider that the answer to question (1) is that, on the proper construction of r 36.16, such an application is an application for a further order and not an application to vary the original order. However, in any event, the answer to question (2) is either “yes” or, by reason of the answer to question (1), does not arise. In our view, s 98(4) enables a court to specify costs in a gross sum at any time before the costs assessment process has been undertaken.

22. [22]

    However, as this Court observed in Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 (Ahern) at [19] (Meagher, White and Brereton JJA), there is conflicting authority on these questions, to which we will turn.

23. [23]

    In Short v Crawley (No 45) [2013] NSWSC 1541 (Short v Crawley), White J (as his Honour then was) said, after hearing oral argument and reserving his decision, that if an application for costs to be fixed in a gross sum was a variation, the relevant power was r 36.16(3).

24. [24]

    His Honour said:

25. [25]

    His Honour reasoned that as there had been no determination of the plaintiff’s claim for costs to be fixed in a gross sum, r 36.16(3) was applicable.

26. [26]

    In Short v Crawley, White J also held, at [22] that the statutory power in s 98(3) expressly authorised the Court to make costs orders “after the conclusion of the proceedings” and, (at [30]), to that extent, expressed a contrary statutory intention to the principle of finality of judgments. His Honour followed the approach taken by von Doussa J in Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120 regarding Order 62, rr 3 and 4 of the Federal Court Rules 1979 (Cth) (which were in similar terms to s 98(3) and (4) of the Civil Procedure Act). At [30], White J cited with approval the following statement of von Doussa J at 120:

27. [27]

    At [28], White J explained why fixing costs in a gross sum would not “vary” the costs order except to the limited extent that it provided a different mode of assessment. His Honour said:

28. [28]

    White J followed this approach in his subsequent decisions in Livers v Legal Services Commissioner (No 2) [2021] NSWCA 164 at [5]-[8] (White JA) and Eliezer v The Council of St Andrew’s Cathedral School (No 2) [2021] NSWCA 227 at [44]-[45] (White JA) (Eliezer (No 2)). In Eliezer (No 2), the successful party notified the Court informally within the 14-day period of the intention to seek specification of the costs as a gross sum although the formal application was not filed within the 14-day period.

29. [29]

    A different view was expressed by Leeming JA in Riva NSW Pty Ltd v Mark A Fraser and Christopher P Clancy t/as Fraser Clancy Lawyers (No 4) [2018] NSWCA 327 (Riva), on which Ms King relied.

30. [30]

    In Riva, the question arose whether an application for indemnity costs and an application for the costs to be fixed in a gross sum were “variations” of existing orders such as to attract the operation of UCPR, r 36.16. This matter was dealt with on the papers without a hearing. In their written submissions, the parties in Riva referred neither to Beach Petroleum NL v Johnson (No 2) nor to Short v Crawley. Neither of these authorities was considered by Leeming JA in Riva.

31. [31]

    Leeming JA said:

32. [32]

    There is a distinction between an application that costs be paid on an indemnity basis following an order that one party pay another party’s costs and an application that costs, which have been ordered to be paid by one party to another party, be specified in a gross sum. The former is an application for a variation to an order which has been made since the effect of the order made is that costs are payable on the ordinary basis: UCPR, r 42.2. The latter category is not a variation of the basis on which costs are to be paid (ordinary or indemnity) but rather concerns how and by whom the costs are to be quantified. The implicit basis of costs orders is that the quantum of the costs is to be “as agreed or assessed”: see the references in UCPR, r 20.26 regarding offers of compromise; the definition of “ordinary basis” in s 3 of the Civil Procedure Act. An application for costs to be specified in a gross sum is an application for the Court itself to determine the amount of the costs payable, rather than the parties (if they are agreed) or a costs assessor (if they are not agreed).

33. [33]

    In so far as Leeming JA considered that “[an] application for an indemnity costs order is one to set aside or vary an existing costs order,” there is no inconsistency between Short v Crawley and Riva.

34. [34]

    The only relevant inconsistency between Short v Crawley and Riva is that in Riva Leeming JA considered that an application for costs to be specified in a gross sum was in the same category as an application for indemnity costs: that is, that it was a variation of an order that one party pay the other’s costs, implicitly on the ordinary basis. Indeed, his Honour held the 14-day time limit in r 36.16 (3A) applied and there was no power in the Court to extend it. Leeming JA did not address (and it would appear that no submission was made which raised it) the question whether s 98(3) and (4) of the Civil Procedure Act authorised the application to be made at any time before assessment of the costs.

35. [35]

    In Ahern, it was not necessary for this Court to resolve the question as the application for costs to be fixed in a gross sum had been made within the 14 day period specified in r 36.16(3A). However, the Court in Ahern, at [21], approved the statement by White JA at [45] of Eliezer (No 2) that s 98(3) of the Civil Procedure Act “provides a statutory qualification to the rule as to finality of judgments to permit the making of an order ‘as to costs’ after the conclusion of proceedings”.

36. [36]

    This construction of s 98 of the Civil Procedure Act tends to promote its purpose of providing a cheaper, quicker method of quantifying costs than is provided when costs are assessed and, as such, is to be preferred: s 33 of the Interpretation Act 1987 (NSW). It is reasonable to allow parties to proceedings (in respect of which a costs order has been made) some time to agree on a figure for the costs payable before a decision is made to apply for either an order that the costs be paid in a gross sum or an assessment of those costs. As White JA has pointed out, the availability of a process of quantification of costs which have been ordered to be paid which is quicker and cheaper than a costs assessment (which is yet to be undertaken) does not undermine the principal of finality.

37. [37]

    In these circumstances, we consider that s 98(3) and (4) empower this Court to entertain Mr Bell’s application for costs to be fixed in a gross sum, notwithstanding that his application was made outside the 14-day time limit in r 36.16(3A).

38. [38]

    Further, we agree with White JA’s analysis that an application for costs to be specified in a gross sum is not a variation of an order which would attract the operation of r 36.16. This analysis is reflected in this Court’s approach in Gabrielle v Abood (No 4) [2023] NSWCA 100, where this Court (Bell CJ, Kirk and Adamson JJA) said at [12] that it was not necessary for a costs order to be “varied” to specify that it be paid in a gross sum as the specification was an additional order (not a variation).

39. [39]

    For these reasons, Mr Bell does not require an extension of time to make the application that costs be specified in a gross sum pursuant to s 98(4)(c) of the Civil Procedure Act.

40. [40]

    In these circumstances, it is not necessary to determine whether s 14 empowers the Court to extend time beyond the 14-day period in UCPR, r 36.16(3A) and, if so, the extent of that power. Thus, further consideration of authorities such as Hollingsworth is not required.

41. [41]

    In support of his application that costs be specified in a gross sum, Mr Bell relied on affidavits of Deborah Pickering, his solicitor, from the firm of McVittie Legal (McVittie Legal), affirmed 20 October 2023 and 6 December 2023. Exhibited to these affidavits are the cost agreement between Mr Bell and McVittie Legal, as well as the tax invoices rendered by McVittie Legal to Mr Bell and those rendered by Sam Sykes, counsel briefed on behalf of Mr Bell by Ms Pickering.

42. [42]

    It is apparent from the evidence adduced by Mr Bell that Mr Sykes, who was admitted to the bar in 2015, charged $5,000 a day and $500 an hour (plus GST). The charge-out rate for Ms Pickering, who was admitted to practice in 2007, was also $500 an hour (plus GST). Mr Sykes was entitled to an uplift fee of 25% which reflected the circumstance that he was doing the legal work on the basis that he would not be paid if Mr Bell was not successful. The total counsel’s fees amounted to $67,203.13, calculated as follows:

43. [43]

    As Mr Bell does not seek that the 25% uplift be included in any gross sum awarded, the total of Mr Sykes’ fees, including GST, is $53,762. In addition, Mr Bell seeks disbursements relating to his solicitor’s travel to Sydney for the hearing of the appeal. The total disbursements claimed are $55,389.33.

44. [44]

    The total solicitors costs billed by McVittie Legal amount to $27,963. Of these Mr Bell claims 65% ($18,176.51) for the purposes of fixing a gross sum.

45. [45]

    In Gabrielle v Abood (No 4), this Court at [6] summarised the approach to be taken on an application for an order that costs be paid in a gross sum as follows:

46. [46]

    The principal purpose of such an order is to avoid the expense, delay and aggravation involved in a costs assessment process: Hamod v New South Wales [2011] NSWCA 375 at [816]-[817]. The making of an order also tends to further the fulfilment of the objective to ensure that the issues between the parties are resolved “in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute”: Civil Procedure Act, s 60; see James v Australia and New Zealand Banking Group Ltd [2017] NSWCA 84 at [3] (Basten JA).

47. [47]

    Typically, a discount is applied to the billed costs to ensure that the ultimate figure arrived at is fair to the person ordered to pay the costs. The level of the discount applied tends to be determined by reference to the detail in the invoices and the expert opinion of a solicitor or costs assessor as to the appropriate discount. For this reason, it is common in such applications for solicitors to opine as to what percentage of the billed costs would be likely to be recovered on assessment. In the present case, Ms Pickering has not expressed any view about the percentage claimed in such terms. Rather, Mr Sykes, in his written submissions, has indicated that Mr Bell claims 65% of the total of his solicitor’s fees and 100% of the disbursements (which include counsel’s fees).

48. [48]

    The common practice of obtaining opinion evidence as to the percentage of a total which may be allowed on taxation is one way, but not the only way, of proving that the figure claimed ought be ordered. We reject Ms King’s submission that such evidence is required before an order fixing costs in a gross sum can be made. The Court is entitled to apply a broad-brush approach by reviewing the tax invoices of the solicitors and counsel and determining what is fair between the parties.

49. [49]

    The factors which militate in favour of making the order sought include that there may be difficulty in enforcing the costs order and that, accordingly, the additional costs occasioned by the costs assessment process will not be recovered. There is insufficient evidence to establish that there may be such difficulty in the present case. However, the appeal to this Court, which was concerned exclusively with costs, was set down for two days. The issues raised for consideration the whole procedural history of the matter and indicated the extent to which the ascertainment of the amount of costs due to Mr Hartnett occupied the time and resources of the Court and the parties. Mr Hartnett was represented by experienced senior and junior counsel, whereas Mr Bell was represented by junior counsel. It may be inferred from the relative amounts charged by Mr Bell’s solicitors and counsel that counsel did the bulk of the work for the appeal, including the preparation of written submissions. The manner in which the litigation was conducted in the Court below, including the complexity of the pleadings, the number and duration of the interlocutory hearings, as well as the effort required for the preparation of the appeal, makes it appropriate to fix the costs payable by Mr Hartnett in a gross sum. It is desirable, in the interests of justice, that neither further time nor cost be spent and that the matter be brought to finality.

50. [50]

    We consider the charge-out rates of Mr Bell’s legal advisers to be reasonable. The time taken and tasks recorded in their respective tax invoices were reasonably required by the nature and complexity of the appeal. We apply a slight discount to the total claimed (which has already been partly discounted) in accordance with the “broad brush approach” which the authorities indicate ought be taken. We consider that the costs of the appeal ought be quantified in the gross sum of $70,000.

51. [51]

    Mr Bell also seeks that the costs of the present application be fixed in a gross sum of $5,000, which we consider to be reasonable, having regard to the evidence prepared, the written submissions and the half-day allocated for the hearing of the matter.

Other matters

1. [52]

   The judgment in the Court below has been quantified in the sum of $311,356.47 (being the sum of $251,255.53 plus pre-judgment interest) plus post-judgment interest pursuant to s 101 of the Civil Procedure Act of $28,162.99 (on the principal of $251,255.53). Orders have been made by the Court below.

2. [53]

   For reasons which follow, it is necessary for this Court to note the effect of payment on the following undertaking given by Mr Hartnett to the Court on 9 November 2022 (the Undertaking):

3. [54]

   On 20 November 2023, Mr Bell’s solicitors wrote to Mr Harnett as they had not received a response to their letters of 13 and 16 October 2023 (referred to above). They said, in part:

4. [55]

   Mr Bell’s solicitors foreshadowed issuing a bankruptcy notice if payment was not made by 4pm that day.

5. [56]

   Mr Hartnett responded by letter dated 21 November 2023 (this was his first communication to Mr Bell’s solicitors after the judgment of this Court was delivered on 12 October 2023). Mr Hartnett referred to the Undertaking and maintained that he was still bound by it. He said that the issue of a bankruptcy notice would constitute “an abuse of process.”

6. [57]

   On 22 November 2023, Mr Bell’s solicitors responded by email, to which were attached draft short minutes of order which included an order that Mr Hartnett would not be in breach of his Undertaking by paying the judgment sum into Mr Bell’s solicitors’ trust account. Further correspondence ensued in which Mr Bell’s solicitors set out further draft orders which they contended would bring the matter to finality. Mr Sykes sought that this Court make those orders.

7. [58]

   Mr Sykes confirmed that the judgment sum is $311,356.47, comprising $251,255.53 plus pre-judgment interest of $50,489.98. He also informed this Court that the primary judge has specified costs of the proceedings in a gross sum of $185,000 and specified costs of the application for such specification in a gross sum of $3,245. Mr Sykes indicated that post-judgment interest on the principal component of the judgment sum is $69.53 per day and that the figure was $28,162.99 as at 5 December 2023. Mr Sykes also sought release of the amount of $30,000 which was paid by Mr Hartnett as security for costs of the appeal.

8. [59]

   We did not understand Ms King to oppose the orders sought, on the basis that the Court makes clear that Mr Hartnett would not be in breach of the Undertaking if he paid the judgment sum.

9. [60]

   It is desirable that all issues between the parties as to the Undertaking, interest and costs be ultimately quelled. Accordingly, the orders sought by Mr Sykes ought be made. We note for completeness that s 136 of the Civil Procedure Act provides that, unless the court otherwise orders, any payment made on account of a judgment debt is to be appropriated, first, towards such part of the judgment debt as comprises post-judgment interest and, second, towards the balance of the judgment debt.

Orders

1. [61]

   For the reasons given above, the Court makes the following orders:

   1. (1)

      Order the appellant to pay the respondent’s costs, as ordered on 12 October 2023, in the gross sum of $70,000.

   2. (2)

      Order the appellant to pay the respondent’s costs of the notice of motion filed on 2 November 2023 in the gross sum of $5,000.

   3. (3)

      Order that the sum of $30,000 paid into court by the appellant and received by the Court on 8 December 2022 be released to the respondent forthwith to be applied in accordance with s 136 of the Civil Procedure Act 2005 (NSW).

   4. (4)

      Note that the appellant will not be in breach of the undertaking given to the court by his counsel on 9 November 2022 (the Undertaking) if he pays the following sums into the respondent’s solicitor’s trust account:

   5. (5)

      If and when the appellant pays the amounts set out in order (4) above, he is discharged from the Undertaking.