Kalloghlian v Mitry Lawyers Pty Ltd (No 3)

1. [1]

   On 10 August 2022, I delivered judgment in this matter (Kalloghlian v Mitry Lawyers Pty Ltd (No 2) [2022] NSWSC 1071), dismissing the applicant’s motion seeking personal costs orders against the respondents.

2. [2]

   At [118] of my reasons, I ordered that the applicant pay the respondents’ costs on the ordinary basis as agreed or assessed, unless a party sought a different costs order.

3. [3]

   The respondents have now sought a special costs order to have their costs paid:

   1. (1)

      on an indemnity basis from 7 September 2021 onwards; and/or

   2. (2)

      as a specified gross sum pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW) (CPA).

4. [4]

   The applicant resists the application for a special costs order and submits that the respondents’ application for a special costs order should be dismissed with costs.

Background

1. [5]

   The relevant background facts and procedural history of the matter are set out in Kalloghlian v Mity Lawyers Pty Ltd (No 2) [2022] NSWSC 1071 at [10]-[80].

2. [6]

   By way of summary, in 2017, Mr Kalloghlian’s builder sued him for unpaid progress claims in the District Court and Mr Kalloghlian cross-claimed for defective works to operate by way of set off.

3. [7]

   In April 2019, Mr Kalloghlian’s claim against the builder for defects was transferred to this Court in an enlarged claim, that included claims against the architect. As part of the leave granted to expand and transfer his claim, Mr Kalloghlian was ordered to pay the builder the unpaid progress claims together with costs. Mr Kalloghlian’s substantive proceedings settled in November 2020.

4. [8]

   On 7 September 2021, Mr Kalloghlian filed a notice of motion in the then finalised substantive dispute, seeking personal costs orders against Mitry Lawyers Pty Ltd and, latterly, Mr Mitry (the respondents), which I dismissed.

Indemnity costs

1. [9]

   The respondents seek an order that the plaintiff pay their costs on an indemnity basis from 7 September 2021 on the basis that the motion ought never have been brought.

2. [10]

   Section 98(1)(c) of the CPA provides:

3. [11]

   In considering the respondents’ application for indemnity costs, I note the comments of Allsop P in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [5]:

4. [12]

   In Re Indoor Climate Technologies Pty Ltd [2019] NSWSC 356 at [8], Black J summarised the applicable principles relating to the making of indemnity costs orders:

5. [13]

   In this case, the respondents submitted that an order for indemnity costs should be made against the applicant because the applicant’s conduct in the proceedings unnecessarily caused the respondents to incur costs and that the applicant’s motion had no real prospects of success.

6. [14]

   The applicant submitted that there was nothing to support a finding that the applicant’s motion had no reasonable prospects of success. The applicant said that the motion was hotly contested, and the applicant was ultimately unsuccessful. Nevertheless, the case was not hopeless.

7. [15]

   An indemnity costs order may be made “where an action has been commenced or continued in circumstances where the moving party, properly advised, should have known that it had no chance of success”: Baulderstone Hornibrook Engineering (No 2) v Gordian Runoff Ltd [2009] NSWCA 12 at [4] (Allsop P, with whom Beazley and Campbell JJA agreed). For example, where a cause of action is clearly statute barred, such cause of action has no reasonable prospects of success: Hillebrand v Penrith Council [2000] NSWSC 1058 (Austin J).

8. [16]

   However, as Ward CJ in Eq (as her Honour then was) noted in Anderson v Canaccord Genuity Financial Ltd (No 2) [2022] NSWSC 649 at [96]:

9. [17]

   While the applicant’s motion sought to engage the summary disciplinary jurisdiction of the Court 10 months after the conclusion of the proceedings, which had never been determined on its merits, and this made it difficult to judge whether the respondents’ conduct could have caused the alleged loss, I do not consider this to be a ”pathological” case, such that it could be described as “hopeless”: see eg Sanelli v Sanelli [2010] VSC 78 at [30] (Mukhtar AsJ).

10. [18]

    Therefore, I do not consider it appropriate to make an order for indemnity costs.

Payment of costs in gross sum

1. [19]

   The respondents have also sought an order under s 98(4)(c) of the CPA that the applicant pay their costs fixed in the gross sum.

2. [20]

   Section 98(4)(c) of the CPA provides:

3. [21]

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

4. [22]

   Black J summarised the relevant principles in relation to gross sum costs orders in Saba v Plumb [2017] NSWSC 955 at [23]:

5. [23]

   In the present case, the respondents submitted that a gross sum costs order ought to be made because a formal assessment of costs would likely be delayed by the applicant. The respondents submitted that this is particularly so in circumstances where monies remain outstanding by the applicant in relation to Counsel’s fees of the substantive proceedings, and where an invoice issued to the applicant by the first respondent on 24 April 2019 remains unpaid and is the subject of Local Court debt recovery proceedings.

6. [24]

   While there is no clear evidence that the respondents will have difficulty enforcing a costs order against the applicant, the respondents raised the logical consequence of costs orders having an adverse impact on the applicant’s financial position. The respondents argued that, in such circumstances, it would be unjust for the respondents to be required to incur the further time and expense associated with the costs assessment process.

7. [25]

   I do not consider there to be sufficient grounds to make an order under s 98(4)(c) of the CPA that the applicant pay the respondents’ costs fixed in the gross sum, for the following reasons:

   1. (1)

      There is evidence that the applicant does have sufficient funds to comply with a costs order likely to result from a costs assessment.

   2. (2)

      The 24 April 2019 invoice is unpaid because the applicant is disputing it in the Local Court.

   3. (3)

      The applicant’s solicitor gave evidence on instructions that any costs assessment will not be delayed.

Order

1. [26]

   The respondents’ application for a special costs order is dismissed with costs.