Supreme Court New South Wales

• Medium Neutral Citation: Chaina v Presbyterian Church (NSW) Property Trust (No. 26) [2014] NSWSC 1009
• Hearing dates: 28 July 2014
• Decision date: 31 July 2014
• Jurisdiction: Common Law
• Before: Davies J

Decision

1. I set aside all previous costs orders made in the proceedings.

2. Judgment for the Defendant against the Second, Third, Fourth and Fifth Plaintiffs for $7,770,869.00.

• Catchwords: COSTS - specified gross sum costs order - lengthy and complicated proceedings - Plaintiffs obtain amounts less than offered by Defendant - numerous interlocutory costs orders - Plaintiffs unrepresented - cost and delay of costs assessment process - Defendant's costs far outweigh verdicts in favour of Plaintiffs - gross sum ordered - set-off of judgments in favour of Plaintiffs and cost judgment in favour of Defendant.; DAMAGES - interest - offers by Defendant more favourable than Plaintiffs recover - whether interest payable beyond offers by Defendant - s 100(4) Civil Procedure Act.
• Legislation Cited: Civil Liability Act 2002 (NSW); Civil Procedure Act 2005 (NSW); Supreme Court Rules 1970 (NSW); Uniform Civil Procedure Rules 2005 (NSW)
• Cases Cited: Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560; Chaina v The Presbyterian Church (NSW) Property Trust and Others (No. 3) [2009] NSWSC 1243; Chaina v Presbyterian Church (NSW) Property Trust (No. 25) [2014] NSWSC 518; Corbett v Nguyen (No 2) [2012] NSWSC 673; Hamod v New South Wales (No 13) [2009] NSWSC 756; Hamod v State of New South Wales [2011] NSWCA 375; Harrison & Anor v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738; Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 1106; Young v Hones (No. 3) [2014] NSWSC 499; Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99
• Category: Costs
• Parties: George Chaina (Second Plaintiff); Rita Chaina (Third Plaintiff); Proton Technology Pty Ltd (Fourth Plaintiff); Deluxe Technology Pty Ltd (Fifth Plaintiff); The Presbyterian Church (New South Wales) Property Trust (Defendant)
• Representation: Counsel: Rita Chaina (Plaintiffs); R Stitt QC, G L Turner & H Stitt (Defendant); Solicitors: In person (Plaintiffs); Curwoods Lawyers (Defendant)
• File Number(s): 2002/69354

Judgment

1 I delivered my reasons for judgment in this matter on 23 May 2014: Chaina v Presbyterian Church (NSW) Property Trust (No. 25) [2014] NSWSC 518. I indicated the damages to which the Second, Third and Fourth Plaintiffs were entitled. However, as matters of interest had not been dealt with I did not enter judgment. Nor did I deal with the issue of costs.

2 The parties have now addressed on both interest and costs.

Relevant factual matters

3 The proceedings were commenced on 24 October 2002. Although the proceedings named a large number of Defendants associated with Scots College, proceedings against all but the First Defendant were discontinued on 6 October 2011. Although events before that date involved those multiple Defendants, I shall simply refer in this judgment to "the Defendant" (the original First Defendant) as if it had been the only one named.

4 On 10 June 2003 the Defendant filed a Defence which admitted that it owed a duty of care to the Plaintiffs, admitted breach of that duty of care and said that the amount of damages to which the Second Plaintiff was entitled was $350,000.

5 On 26 June 2003 in a Defence filed in respect of the Third Plaintiff's claim, the Defendant made similar admissions and asserted that the amount of damages to which the Third Plaintiff was entitled was also $350,000.

6 On 21 December 2007 the Defendant served an Offer of Compromise in respect of the Fourth Plaintiff's (Proton's) claim offering to pay $500,000. On the same day the Defendant served an Offer of Compromise in respect of the Fifth Plaintiff's (Deluxe's) claim offering to pay the same amount.

7 On 28 April 2009 the Defendant served a further Offer of Compromise in respect of Proton's claim offering to pay $2 million.

8 On 29 April 2010 the solicitors for the Defendant served a Calderbank letter offering to settle the claim of the Second, Third, Fourth and Fifth Plaintiffs for the sum of $9,856,000 plus costs. However, that was to be subject to deduction of costs ordered by Hoeben J on 23 November 2009 either in the sum of $2,664,000 or as determined by order of the Court, or as determined by a costs assessor. That offer was said to be in respect of the economic loss suffered by the Plaintiffs. The Defendant said that it was not in a position to know which of the Plaintiffs was entitled to that loss.

9 In addition, the letter offered the sum of $496,000 plus costs to Mr Chaina and $478,000 plus costs to Mrs Chaina for past and future medical, hospital and pharmaceutical expenses and their non-economic loss.

10 Costs orders have been made at various times during the proceedings as follows:

DATE	ORDER	JUDICIAL OFFICER	DESCRIPTION
01/09/03	Plaintiff to pay defendants' costs thrown away by reason of the amendment being the costs of preparing, filing and serving a Defence and DCM Doc.	Howe	Directions Hearing.
27/04/04	Plaintiff to pay costs of 20 April 2004.	Riznyczok	Status Conference.
17/05/04	1. Each party to bear its own costs of 6/8/03. 2. Plaintiffs are to pay the costs of, and incidental to, the defendants 'Notice of Motion of 4/7/03 as agreed or assessed.	Howe	Notice of Motion
08/11/04	Plaintiffs to pay costs of and associated with the hearing today.	Howe	Notice of Motion.
14/12/04	Plaintiffs to pay defendants' costs of Notice of Motion dated 17/11/04 including 01/12/04 and today.	Howe	Defendants' Notice of Motion
19/09/05	Plaintiffs are to pay the defendants' costs of the Notice of Motion.	Malpass	Notice of Motion.
28/11/05	Plaintiffs are to pay the defendants' costs of that application (Notice of Motion dated 21/11/05).	Howe	Notice of Motion.
12/07/07	Defendants to pay the plaintiffs' costs of and incidental to the Notice of Motion.	Howie	Decision handed down 12/07/07 from application for costs heard on 02/07/07 from Notice of Motion heard 24/04/07.
04/03/08	Plaintiffs to pay the costs thrown away or lost by the vacation of the hearing date of Tuesday, 25 March 2008.	Hoeben	Mention.
13/10/08	Second, fourth and fifth plaintiffs to pay the defendant's costs of the motion, including the costs associated with the form of the orders to be made. George and Rita in attendance -Supreme Court, Hospital Road, Ground Floor	Hoeben	Formula motion
18/11/08	Each party pay their own costs of today	Hoeben	Directions hearing
16/12/08	Costs of today be paid by the plaintiffs	Hoeben	Directions hearing
04/02/09	The plaintiffs are to pay the costs of the directions hearing before me today	Hoeben	Directions hearing
07/05/09	Plaintiffs are to pay the defendant's costs of the hearing before me on 1/5/09	Hoeben	Judgment
23/11/09	"The company plaintiffs are to pay 80% of the defendant's costs incurred from the date when the defendants accepted liability for the death of the deceased up to 21/8/09 being the date on which this motion was filed. This costs order is confined to the costs incurred by the defendants in defending the claim brought by the company plaintiffs and does not apply to the costs incurred in relation to any of the personal injury claims brought by the members of the Chaina family. This costs orders is subject to any other costs order previously made in relation to the claim brought by the company plaintiffs."	Hoeben	Judgment
23/11/09	The company plaintiffs are to pay the costs of this application	Hoeben	Judgment
11/10/10	No order as to costs	Hoeben	Directions Hearing
16/12/10	"Plaintiff to pay the defendants costs of the adjourned hearing. As to the basis on which the costs are paid, I defer making a decision as to whether it be on a party/party or indemnity basis until the plaintiffs legal advisers have been able to consider their position."	Hoeben	Motion
21/3/11	Plaintiffs to pay the defendants' costs	Hoeben	Motion
12/12/11	No order as to costs. George Chaina and Rita Chaina in attendance	Hoeben J	Mention
6/06/12	No order as to costs. George Chaina in attendance	Hoeben J	Directions Hearing
4/11/13	Plaintiffs to pay the whole of the costs of both the Plaintiffs' and the Defendant's Motions (decided in judgment No 16)	Davies J	Judgment

Interest

11 The Defendant accepts that interest should be awarded to Mr Chaina pursuant to s 18 of the Civil Liability Act 2002 (NSW) from 24 October 1999 up to 10 June 2003 but only on his past economic loss and superannuation. Similarly, the Defendant accepts interest should be awarded to Mrs Chaina from 24 October 1999 up to 26 June 2003 confined to her past economic loss and superannuation. The Defendant accepts also that interest should be paid on the amount awarded for funeral costs for the period 1 January 2000 to 30 June 2003.

12 The basis for confining the interest to the stipulated periods is to be found in s 100 Civil Procedure Act 2005 (NSW). That section relevantly provides:

(4) In any proceedings for damages, the court may not order the payment of interest under this section in respect of the period from when an appropriate settlement sum was offered (or first offered) by the defendant unless the special circumstances of the case warrant the making of such an order.

(5) For the purposes of subsection (4), appropriate settlement sum means a sum offered in settlement of proceedings in which the amount for which judgment is given (including interest accrued up to and including the date of the offer) does not exceed the sum offered by more than 10 per cent.

13 The Defendant submits that no interest should be payable on the out-of-pocket expenses unless payment and the date of payment are proved.

14 The out of pocket expenses that I allowed on the basis of Exhibit MMM were these:

(a) Dr Wever's fees: $5,231 for Mrs Chaina from 24 March 2000 to 2 July 2001 (Judgment at [709]).

(b) Solution Focussed Counselling of $3,600 for Mrs Chaina (Judgment at [710]).

(c) Costs of Pharmaceuticals (Cipramil) for Mrs Chaina of $131 from 21 February 2001 to 1 July 2001 (Judgment at [712]).

(d) Consultations with Dr Wever for Mr Chaina of $8,959 from 31 March 2000 to 31 August 2001 (Judgment at [714]).

(e) Solution Focussed Counselling of $3,600 for Mr Chaina (Judgment at [715]).

(f) Costs of Pharmaceuticals (Cipramil) for Mr Chaina of $484 (Judgment at [716]).

(g) Inquest costs $75,000 ((Judgment at [795]).

15 As I noted in Chaina (No 25) at [693] ff, the first time the material in Exhibit MMM was put forward as part of the Plaintiffs' evidence was on the last day of the hearing. Three weeks after I published my reasons in Chaina (No 25) I relisted the matter on 13 June 2014. The following exchange occurred:

HIS HONOUR: Mrs Chaina, can I give you this indication. I've been back through what's now become exhibit MMM in the matter which is your folder that contains your claim for out of expenses. It's on that basis that I allowed and disallowed those claims. In a few cases it's apparent that the out of pocket expenses have been paid. In only very few is it clear when the payments were made. In most cases it's not clear that that payment has been made of those expenses. What I've been given are tax invoices and not receipts.

If you want to claim interest on what I've allowed you, you are going to have to provide documentation showing when the payments were made in each case. Ordinarily, interest is calculated from the day you pay it at whatever the Supreme Court rate is.

THIRD PLAINTIFF: I'll have to go back and try and find the receipts or proof of payments. There's boxes and boxes. I have to go through it all. I will try and do that.

...

HIS HONOUR: Mrs Chaina, I think in the first place you've got to identify the documents and let the other side see copies of them of when the amounts were paid that I have allowed for your out of pocket expenses. That's the starting point for the interest claim. And then, I think after that time, the defendant should be required to give us their submissions about payment of interests and about costs.

...

HIS HONOUR: Is it reasonable to say that you should identify those documents within the next two to three weeks?

THIRD PLAINTIFF: Your Honour, I've got about 200 boxes at home that I've been trying to put into some sort of order since the case finished. I would have to go back and try and identify one of those payments, and try and locate the receipt for that. It's going to take me some time. It's not something that I've got already on the shelf that I can be pick up and photocopy, and hand it to you. That's the only thing. It's overwhelming for me. I don't have much help.

HIS HONOUR: I have to say I was a bit surprised that I was provided with documents showing what the costs of these things were but not the receipts for the payments. I would have expected them to be together and provided together.

THIRD PLAINTIFF: A lot of that problem is because that's what I had from the lawyers. That's what they put together over the years. Even at the last minute, we found that they weren't all - I can't remember. I think they were incorrect. They weren't even put together correctly. I had to go back over while we were doing submissions I think and try to put it together with the help of Louie Zuker(?)[scil. Lily Sukkar] and we tried to put it get together to hand up to give to you because it wasn't done previously or it was done incorrectly. I can't remember now. We tried to do that. I will have to go back and find them. It's a long time. Some of them from '99 or 2000. That's the only thing. I will do it and I will try hard to do it as quickly as I can.

16 On 4 July 2014 Mrs Chaina wrote to my Associate saying that she had not managed to find any further documents. By the time of the hearing in relation to interest and costs on 28 July 2014 no further documents had been produced by the Plaintiffs. The only evidence, therefore, was what was contained in Exhibit MMM .

17 Evidence relating to payment and date of payment for each of the categories in [14] above is as follows:

(a) The precise way that claims were made on Medicare for consultations with Dr Wever was left unclear. The evidence given by Dr Wever makes it clear that he is owed a very large sum of money by Mr and Mrs Chaina for consultations. Schedules, apparently from Medicare, show that benefits have been paid for various psychiatric consultations on specified dates. What they do not disclose are the circumstances that led to those benefits being paid. It is not clear if a larger sum was paid to Dr Wever with the Plaintiffs then making a claim on Medicare or whether Dr Wever bulk-billed Medicare and received additional payments from the Plaintiffs or at least rendered accounts for additional amounts which may form part of the fees that remain unpaid. There is, therefore, no evidence of payment or dates of payment in respect of these expenses. Mrs Chaina is not out of pocket at least to the extent of the benefit received from Medicare. She is only out of pocket for the difference between what she paid and that benefit. Whilst she may have to repay Medicare the benefit she received, that is not a relevant matter for the purpose of determining interest.

(b) There is no evidence of whether and when this was paid. I do not know who wrote the word "paid" on the document.

(c) There is a printout which appears to relate to Mrs Chaina's pharmacy in Double Bay which appears to show when various tablets were dispensed by the various pharmacists in the practice. Mrs Chaina had marked on that printout tablets that she claimed were for her. There is no evidence, however, of when and whether payment was made for these tablets.

(d) The position is the same as in (a).

(e) The position is the same as in (b).

(f) The position is the same as in (c).

(g) There is no evidence of whether and when amounts incurred in relation to the inquest were paid. The exhibit contains only tax invoices and bills from solicitors and counsel. I cannot assume that these have been paid because there was evidence of a number of firms of solicitors retained by the Plaintiffs who have not been paid for work carried out for the Plaintiffs.

18 Interest should not be allowed in respect of any of these out of pocket expenses of the Second and Third Plaintiffs.

19 In relation to their past economic loss including superannuation, interest should be limited in respect of the Second Plaintiff to 10 June 2003 and in respect of the Third Plaintiff to 26 June 2003, being the dates of the Defences in which the Defendant offered amounts which were significantly greater than have been awarded to the Second and Third Plaintiffs.

20 I also allowed the sum of $20,000 for funeral and headstone costs. As far as the funeral costs are concerned, there is no proof of payment. However, the Defendant has seemingly accepted that they were paid on or about 1 January 2000. The end date for interest on those costs is 30 June 2003 by reason of s 100(4).

21 In respect of the amounts in [19] and [20] above, there are no special circumstances for the purpose of s 100(4).

22 The total interest to be awarded to the Second Plaintiff is therefore $13,579, $7,443 for the Third Plaintiff, and $3,030 for the Second and Third Plaintiffs jointly,.

23 In relation to Proton I allowed the following amounts in respect of fees or wages paid to the following persons:

(i) David Redfern: $12,000 (Judgment at [743]);

(ii) Dr Ross Griffith: $35,000 (Judgment at [754]); and

(iii) Nigel Dique: $9,000 (Judgment at [763]).

24 Evidence relating to payment and date of payment for these persons is as follows:

(i) All that is provided in relation to Mr Redfern is an extract from a payroll document which is entitled "Payroll activity [summary] 1/01/2000 to 28/08/2012". There is no indication when the wages referred to on those pages were paid to Mr Redfern. Although it is known that Mr Redfern worked at Proton a year or so following Nathan's death there is no basis for assuming that he was paid at that time. Neither he nor anyone else gave evidence about the matter. There was, however, evidence in respect of a number of other persons who had worked for or with the Plaintiffs but had money outstanding to them. It is not appropriate to allow interest in respect of the amount allowed.

(ii) Included in the exhibit were a large number of tax invoices from Griffith Services (Consultants). These are dated from 3 October 1999 until 20 January 2009. I allowed some fees for Dr Griffiths from the time of Nathan's death until the end of June 2001. Of the invoices in that period one dated 3 October 1999 has written on it "Paid Cheque no: 000869 $2,110". A tax invoice dated 10 June 2001 has written on it "Cheque no: 201023 $6,000". I do not know whose handwriting is on the invoices. On the face of the invoices it does not appear when those amounts were paid, even if the handwriting is an accurate recording of that fact. Dr Griffith gave evidence that he thought he had been paid in full in respect of all of his invoices, but he said that he did not issue receipts (T 1643). I consider that Proton should be entitled to interest on the amounts I allowed for Dr Griffith from 30 June 2001 until 21 December 2007 when the offer to Proton was made. The amount allowed is $9,815 (6 years 174 days at 4.33%).

(iii) In relation to Nigel Dique I allowed an amount of $9,000 from a claim of $58,854.10. I did that because it was not clear from many of the invoices what work was carried out by Mr Dique and how much was properly incurred as a result of the need to employ Mr Dique in the roles he performed. Of the invoices I allowed (Judgment at [763]), four invoices (those from 31 July 2000, 31 August 2000, 30 November 2000 and 31 January 2001 totalling $2,860) have dates of payment on them. Such dates of payment were 5 December 2000, 30 January 2001, 29 March 2001 and 11 August 2001. The remainder simply have handwriting showing "paid" with cheque numbers. Mr Dique's evidence was that all of his invoices were paid (T 2717). I consider that Proton is entitled to interest on the allowance I made for Mr Dique's fees. From a starting date of 23 July 2000 (about halfway between the first and last invoices I allowed) to 23 December 2007 the amount allowed is $2,891 (7 years 153 days at 4.33%).

25 Proton is therefore entitled to interest totalling $12,706.

26 Accordingly, with interest added, the Plaintiffs are entitled to the following amounts:

Second Plaintiff: $216,065.00;

Third Plaintiff: $146,330.00;

Second and Third Plaintiffs jointly: $98,030.00;

Fourth Plaintiff: $68,706.00

Costs

27 The Defendant first submits that by reason of r 42.34 Uniform Civil Procedure Rules 2005 (NSW) none of the Plaintiffs should recover any costs. That Rule provides:

42.34 Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court

(1) This rule applies if:

(a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and

(b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants.

(2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted.

28 Although no Plaintiff recovered $500,000 or any figure close to that amount two matters are significant. First, with interest, the total amount recovered by the four remaining Plaintiffs exceeds the amount of $500,000. It would not have been reasonable for the Plaintiffs to have brought separate proceedings. There were many matters common to those Plaintiffs. Secondly, the proceedings as originally constituted, included claims by Matthew and Jean-Pierre Chaina. Their claims were settled with the Defendant some time ago. Breach of duty was in issue in all matters until the defences of June 2003 were filed. The potential liability issues were common to all Plaintiffs.

29 For those reasons, I consider that the commencement of the proceedings in this Court was warranted.

30 It is necessary to consider, next, the offers made by the Defendant at various stages during the proceedings. I note, at this point, that although I directed that the Plaintiffs serve any submissions on interest and costs by 24 July 2014 (three weeks after the Defendant's submissions were served) no submissions were served on the part of the Plaintiffs. At the hearing on these issues I endeavoured to explain to Mrs Chaina the main points being made by the Defendant in their detailed written submissions. I invited her to address me on these matters. Her only submission was that it was inappropriate for the Defendant to have three counsel from the time the Plaintiffs were unrepresented. I shall return to that matter presently.

31 The position overall is that the offers made to the Plaintiffs exceeded the awards they have received in the final judgment. As far as the Second Plaintiff, Mr Chaina, is concerned the Defence filed on 10 June 2003 made an open offer to pay $350,000 for his damages. As far as the Third Plaintiff, Mrs Chaina, is concerned the Defence filed 26 June 2003 made a similar offer for her.

32 On the assumption that the appropriate test to apply in relation to an open offer contained in a defence is concerned is the same test as is applied to a Calderbank offer, I consider that it was unreasonable of the Second and Third Plaintiffs not to have accepted the amount that was offered to them in those Defences. At that time there was a number of reports prepared by Dr Wever available demonstrating the extent of Mrs Chaina's psychiatric problems prior to Nathan's death. Further, if Mrs Chaina had made available to Dr Skinner when she first saw her in June 2003 all of the information that at least Dr Wever had, Dr Skinner's opinion would not have been favourable to Mrs Chaina. This can be seen when looking at Dr Skinner's later reports which take a different view in light of the full detail of the pre-incident material having by then been made available.

33 As far as Mr Chaina was concerned, he did not provide honest information to Dr Waters or to Dr Skinner who had seen him at a reasonably early period of time. Had he done so, Dr Skinner's opinion would have been unfavourable to Mr Chaina as was demonstrated by her later reports when she was aware of his full pre-incident history.

34 In those circumstances, it would (subject to matters later discussed) be appropriate to order that the Defendant pay the Second and Third Plaintiffs' costs to 10 June and 26 June 2003 respectively and that thereafter the Second and Third Plaintiffs should pay the Defendant's costs on an indemnity basis.

35 As far as Proton is concerned, an Offer of Compromise was served on 21 December 2007 offering Proton $500,000. The result for Proton was worse than that figure. All other things being equal, it would be appropriate to order that the Defendant pay Proton's costs until 21 December 2007 and that thereafter Proton pay the Defendant's costs on an indemnity basis.

36 Similarly, Deluxe was entirely unsuccessful in its claim. In that way it did not better the offer made to it on 21 December 2007. All other things being equal, Deluxe should pay the Defendant's costs on the ordinary basis until 21 December 2007 and thereafter on an indemnity basis.

37 However, all other things are not equal. On 23 November 2009 Hoeben J ordered that Proton and Deluxe pay 80% of the Defendant's costs from the date the Defendant accepted liability (10 June 2003) until 21 August 2009: Chaina v The Presbyterian Church (NSW) Property Trust and Others (No. 3) [2009] NSWSC 1243.

38 The Defendant further submits that all of the costs orders made in favour of the Defendant should be paid by the Second and Third Plaintiffs pursuant to the power in s 98 (1)(b) Civil Procedure Act. Section 98 relevantly provides:

98 Courts powers as to costs

(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

(2) ...

(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.

(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a) costs up to, or from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(c) a specified gross sum instead of assessed costs, or

(d) such proportion of the assessed costs as does not exceed a specified amount.

...

39 It is difficult to separate the position of the Plaintiffs from each other. Ultimately, Proton's claims were made out or not by an assessment of the nervous shock suffered by Mr and Mrs Chaina, and of their honesty and reliability about Proton's business including, particularly, the existence and authenticity of the formulae claimed by the Plaintiffs to have been in existence in 1999. It was only by reason of the positions Mr and Mrs Chaina held in the corporate Plaintiffs that there was a per quod claim. Except in a way that was almost de minimis, the per quod claim failed because the matters mentioned were determined adversely to Mr and Mrs Chaina in Chaina (No. 25).

40 The way the corporate Plaintiffs conducted the proceedings was governed entirely by the actions of Mr and Mrs Chaina, largely Mr Chaina. They were the sole shareholders and directors of those companies. Offers of settlement made to the corporate Plaintiffs were rejected by Mr and Mrs Chaina. There was evidence in the case that this was at least partly from Mr Chaina's desire for vengeance: Chaina (No 25) at [379] ff. Most significantly, the finalisation of the case was considerably delayed by the need for its reformulation arising from Mr Chaina's dishonesty about his qualifications.

41 It is not possible to separate out costs that are referable to any particular plaintiff except for a few specific items of expense. However, as I have said, the fate of the claim brought by the companies was always dependent upon the fate of the claim brought by the natural Plaintiffs. It was by reason of their positions with the companies that the per quod claims stood or fell. It was their evidence which decided whether and to what extent the corporate Plaintiffs were successful. Most of the costs orders to date have not distinguished amongst the Plaintiffs.

42 In that way, the costs order that is to be made in favour of the Defendant will be made against the Second, Third, Fourth and Fifth Plaintiffs jointly and severally.

43 The Defendant seeks in all the circumstances of this case an order under s 98(4) Civil Procedure Act for a specified gross sum instead of assessed costs. In Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 Giles JA said of the earlier equivalent provision to s 98(4) (Pt 52A r 6(2) Supreme Court Rules 1970 (NSW)):

[21] The power conferred by r 6(2) is not confined, and may be exercised whenever the circumstances warrant its exercise. It may appropriately be exercised where the assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment (Leary v Leary (1987) 1 WLR 72; Sparnon v Apand Pty Ltd (von Doussa J, 4 March 1998, unreported); Beach Petroleum NL v Johnson (1995) 57 FCR 119; Hadid v Lenfest Communications Inc [2000] FCA 628).

[22] Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson at 124, the gross sum "can only be fixed broadly having regard to the information before the Court"; in Hadid v Lenfest Communications Inc at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates". The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson at 123; Hadid v Lenfest Communications Inc at [27]). The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA).

44 In Hamod v State of New South Wales [2011] NSWCA 375 Beazley JA (with whom Giles and Whealy JJA agreed) said:

[813] I have already set out the relevant provisions of s 98. The discretion thereby conferred upon the court is not confined and may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Harrison & Anor v Schipp [2002] NSWCA 213; 54 NSWLR 738 per Giles JA at [21]-[22]. In Harrison v Schipp, Giles JA considered that the discretion in s 98(4) may be exercised where the assessment of costs would be protracted and expensive and, in particular, if it appeared that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment. However, his Honour stated, at [22]:

"The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available."

[814] See also Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported). The courts have typically applied a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW, LexisNexis, Sydney, 2005 to date, " Civil Procedure Act ", at [s 98.65]; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788; Idoport Pty Ltd v National Australia Bank Ltd; Lorenzato v Lorenzato & Anor (No 2) [2011] NSWSC 790 per Black J.

[815] In Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; 135 ALR 160, von Doussa J noted that the specified gross sum costs procedure was particularly useful in complex cases, that the power must be exercised judicially and only after giving the parties an adequate opportunity to make submissions, and that before exercising the power the court should be confident that the approach taken to estimate costs is fair, logical and reasonable.

[816] The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie's Uniform Civil Procedure NSW at [s 98.45].

[817] The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.

[818] The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261; Sony Entertainment (Aust) Ltd v Smith; Microsoft v Jiang (2003) 58 IPR 445; [2003] FCA 101; Ritchie's Uniform Civil Procedure NSW at [s 98.60]).

[819] The assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; the preparation for final hearing and the final hearing: Smoothpool v Pickering [2001] SASC 131. In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment: Harrison v Schipp at 743; Hadid v Lenfest Communications Inc at [35]; Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 at 5; [1999] FCA 673.

[820] The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills): Beach Petroleum NL v Johnson (No 2); Leary v Leary; Harrison v Schipp at 743 ; Sparnon v Apand Pty Ltd (FCA, 4 March 1998, unreported) . The approach taken to estimate the costs to be ordered must be logical, fair and reasonable: Beach Petroleum NL v Johnson at 164-165; Hadid v Lenfest Communications Inc at [27]; Harrison v Schipp at 743. This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment: Leary v Leary at WLR 76 per Purchas LJ; Beach Petroleum NL v Johnson (No 2) at 123; Auspine Ltd v Australian Newsprint Mills Ltd at 164-165.

45 The solicitor for the Defendant retained Ms Deborah Vine-Hall at DSA Legal Costs Consulting Pty Ltd, a well-known and experienced costs assessor and consultant. He provided her with a chronology of the proceedings, statistics concerned with the proceedings directed particularly to documentation of the proceedings, rates charged by his firm and counsel retained as well as Calderbank offers and Offers of Compromise made at various times during the proceedings.

46 Ms Vine-Hall was asked to answer the following questions:

(i) What is likely to be involved in an assessment under the LPA if costs orders were to be made in the Proceedings on an issue by issue basis, including the likely time frames which would be involved and the likely costs which would be incurred, and the complexities which would bear on the time and costs of such assessment/s, and

(ii) In the event that multiple costs orders were made, for example that a Plaintiff had its costs of a portion of the claim or the Defendant have its costs of another portion of the claim or orders are made against different Plaintiffs for different periods of time or on different issues, would the answers to question (i) change and if so in what respect, and

(iii) If the Court were to make an order on a specified gross sum basis:

a. What would be the savings, if any, in time by such an order?

b. What would be the savings in costs of such an order?

c. What if any complexities would be avoided?

(iv) in the event that the Court would order that George Chaina receive his costs on the ordinary basis from 24 October 1999 to 10 June 2003, is it possible to provide an indication of what those costs would be on assessment?

(v) In the event that the Court would order that Rita Chaina receive her costs on the ordinary basis from 24 October 1999 to 26 June 2003, is it possible to provide an indication of what those costs would be on assessment?

(vi) Whether the hourly and daily rates charged by Curwoods Lawyers and Counsel during their retainers are consistent with the market rates of experienced barristers and solicitors during the relevant periods and if so whether those rates would be allowed by assessors without reduction.

47 Ms Vine-Hall's answers were as follows:

16. In answer to question (i), if this matter were to proceed to assessment in respect of the costs of any party on an issue by issue basis, the process would likely take at least 26 months for each assessment (without allowances for the review or appeal procedures which are likely to add a further 24-48 months) and the parties involved would incur costs in the order of many hundreds of thousands of dollars.

17. In answer to question (ii), if this matter were to proceed to assessment in respect of separate assessments for the costs of any of the parties for part but not all of the matter, the process would probably not take longer because the same work would have to be undertaken identifying and separating the issues with the only difference being the truncating of the time periods in which the costs are to be allowed.

18. In answer to question (iii), an award of a gross sum by the judge who had an intimate knowledge of the manner in which the proceeding evolved and the time taken for each element of the claim/defence, would save all of the parties considerable time and costs and would avoid the difficulties which would be faced by the parties and any assessor in determining apportionment of costs between issues.

19. In answer to question (iv), on the basis of the material provided, it is not possible to estimate the costs which would be awarded to George Chaina if he were awarded his costs of his personal injury claims to 10 June 2003.

20. In answer to question (v), on the basis of the material provided, it is not possible to estimate the costs which would be awarded to Rita Chaina if she were awarded her costs of her personal injury claims to 26 June 2003.

21. In answer to question (vi), I consider that the rates charged by Curwoods Lawyers and Counsel are consistent with the market rates for experienced barristers and solicitors in the relevant periods and if the Defendant's costs were assessed would be likely to be allowed by an assessor without reduction.

48 The Defendant's solicitor has provided details of all payments made by the Defendant's insurer in respect of the matter. The total amount claimed is a figure of $13,021,417.09 in respect of which there are tax credits amounting to $1,173,048.38. The net cost to the Defendant is, therefore, $11,848,368.71.

49 In my opinion, it is appropriate to make a gross sum costs order.

50 I have taken into account the following matters in concluding that a specified gross sum for costs should be ordered:

(a) The time and delay in completing a formal costs assessment and the cost of doing so;

(b) The number of costs orders made to date, most of which favour the Defendant. The most significant of the costs orders was made by Hoeben J on 23 November 2009;

(c) The fact that the Plaintiffs are unrepresented, and are likely to remain unrepresented through any costs assessment process. The difficulties that attended the hearing of the substantive proceedings when the Plaintiffs were unrepresented were significant. The position would be magnified in any costs assessment process, not the least reason for which would be that the Plaintiffs are unlikely to be able to engage any form of advisor to assist them through the process;

(d) Although there was some evidence of assets owned by the Plaintiffs or some corporate vehicle which they controlled (their house in Vaucluse and a number of luxury cars) there is strong likelihood that the Plaintiffs will not be able to satisfy any costs judgment against them. In that regard, it should be mentioned that on 27 March 2014 my Associate received a letter from Berger Kordos, solicitors, which said that they acted for Ms Jacqueline Ayoub, a relative of Mr and Mrs Chaina. The letter said that Mr and Mrs Chaina were the Second Respondents in Family Court proceedings, and the solicitors enclosed orders made by the Family Court that required Mr and Mrs Chaina to pay to the husband and wife in the Family Law proceedings the sum of $1,213,241.70. Annexed to the letter was a "Charge and Irrevocable Authority to Receive" signed by Mr and Mrs Chaina. This document irrevocably authorised the Defendant in the present proceedings to pay from any judgment the Plaintiffs obtained against the Defendant that sum of money to Berger Kordos on behalf of Ms Ayoub;

(e) Mr and Mrs Chaina's conduct in the present proceedings has unnecessarily contributed to the costs of the proceedings in circumstances where those costs incurred by the Defendant have been disproportionate to the result of the proceedings.

51 When assessing the costs for the purpose of making a gross sum order a broad brush approach may be taken: Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99 at [31] and [38]; Hamod v New South Wales (No 13) [2009] NSWSC 756 at [31]; see also Hamod at [819]-[820] and Young v Hones (No. 3) [2014] NSWSC 499 at [28]-[30].

52 As mentioned earlier, Mrs Chaina submitted that it was not appropriate for the Defendant to engage three counsel at least from the time that Mr and Mrs Chaina commenced to represent themselves in the proceedings. She submitted that it was overkill.

53 It is apparent from the Schedule of Fees charged by counsel that the Defendant's second junior counsel only came into the matter a week before the hearing commenced in March 2013. He remained in the matter until its completion although he was not in attendance on every day the matter was heard.

54 This was an exceedingly large and complicated case. I have no doubt that, if costs were assessed, the costs of a second junior counsel would have been allowed to the successful party in whole or in part. The fact that the Plaintiffs commenced to represent themselves from the beginning of the second tranche of the hearing does not suggest a reason to me that it was inappropriate for the Defendant's second junior counsel to remain in the proceedings. In fact, on a number of occasions, the fact that the Plaintiffs appeared for themselves made the conduct of the proceedings more difficult for the Defendant and certainly for the Court. I made mention in Chaina (No. 25) at [35] of the assistance that both the Court and the Plaintiffs received from the lawyers acting for the Defendant because of difficulties encountered from time to time by the Plaintiffs in representing themselves.

55 When seen in proportion to the total legal costs on the Defendant's side, the fees of the second junior counsel are modest. Certainly, Ms Vine-Hall said that the rates charged by counsel for the Defendant generally were within, and at times at, the lower end of the range of market rates charged by counsel and allowed by most assessors. For what it is worth, that opinion coincides with my own assessment based on counsel's fees at the time I ceased to practise at the bar some five years ago.

56 The Defendant submits that it should receive 80% of its total incurred costs. In my opinion, the appropriate proportion is 70%. In coming to that proportion I have particularly taken into account the following matters:

(a) The Second and Third Plaintiffs were entitled to their costs until June 2003, and the Fourth Plaintiff was entitled to its costs until December 2007;

(b) As a broad rule of thumb, a successful party will recover 70% to 80% of costs assessed on the ordinary basis;

(c) After the dates in (a), the Defendant was entitled to indemnity costs. In respect of Proton that date was as late as December 2007. Proton's claim was undoubtedly the principal claim and produced the bulk of the evidence;

(d) The number and nature of the previous costs orders in the proceedings, especially the costs order made by Hoeben J on 23 November 2009;

(e) The principle that a discount is (regardless of the matters in (a), (b) and (c)) ordinarily applied: Hamod (CA) at [814].

57 I consider that a gross sum of $8,300,000 (approximately 70% of the Defendant's net costs after the tax credits) should be payable by the Second, Third, Fourth and Fifth Plaintiffs. All previous costs orders should be set aside.

58 The Defendant submits that the costs order in its favour should be set off against the judgments that would otherwise have been entered in favour of the Plaintiffs pursuant to s 90 Civil Procedure Act.

59 The principles relevant to the question of setting off judgments were summarised by White J in Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560; (2006) 58 ACSR 22. Although this decision was overturned on other grounds, these principles were not disapproved: Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374. White J said:

[68] Notwithstanding ABD's submissions to the contrary, set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings. The jurisdiction is explained in many cases dealing with claims by solicitors to assert a lien over a judgment for costs in favour of their client where the opposite party has obtained judgment against their client in the same or in other proceedings (Edwards v Hope (1885) 14 QBD 922 at 926-927; Reid v Cupper [1915] 2 KB 147; Puddephatt v Leith (No 2) [1916] 2 Ch 168 especially at 173-174; Re a Debtor No 21 of 1950 [1951] 1 Ch 612 at 617-618).

[69] This jurisdiction is accurately described in R Derham, The Law of Set-Off, 3 ed, 2003, at paras 2.71-2.83. Although in Edwards v Hope, Brett MR and Bowen LJ (at 926 and 927) described the jurisdiction as an equitable jurisdiction, in truth, it was not a creature of the Court of Chancery, but was applied by all courts. Indeed, it was applied more liberally in the Courts of law than in the Court of Chancery owing to Lord Eldon's care that solicitors should not be deprived of liens for their costs (Puddephatt v Leith (No 2) at 174-179).

[70] Dr Derham says at para 2.80 that: "The basis of the set-off is the general jurisdiction of the Court over the suitors in it", citing Mitchell v Oldfield (1791) 4 Term Rep 123; 100 ER 929. There, in a case where each party had recovered judgment against the other for separate debts in separate actions, Lord Kenyon CJ stated that the case did not depend on the statutes of set-off, but the general jurisdiction of the Court over the suitors in it.

60 Those principles were followed by Barrett J in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 1106 at [46] in a case involving an impecunious plaintiff where a defendant had costs orders amounting to significantly more than was owed to the Plaintiff by the Defendant. In addition, Windeyer AJ allowed such a set off in Corbett v Nguyen (No 2) [2012] NSWSC 673 at [13].

61 In my opinion, it is appropriate that the judgments to which the Plaintiffs are entitled should be set-off against the costs judgment to which the Defendant is entitled. In circumstances where the costs judgment has been quantified, there can be little reason for not setting-off the judgments to simplify issues relating to execution. The only matter that might weigh in the balance against a set-off is an appeal. However, I have clearly identified what each side is entitled to. Any stay arising from an appeal can be fashioned around those amounts.

62 I have given consideration to what ought to be done with respect to the joint entitlement of the Second and Third Plaintiffs to the proposed judgment in their favour for funeral and inquest costs together with interest. The reason for specifying the total of those amounts as a joint entitlement was because the Plaintiffs did not demonstrate who of them was liable for those amounts. Some tax invoices tendered for those heads of damage in Exhibit MMM were addressed to Mr Chaina and others were addressed to both Mr and Mrs Chaina.

63 I think the better course is that I should simply split the entitlement equally between Mr and Mrs Chaina. The position prior to any set-off would therefore be judgments for the Plaintiffs as follows:

Second Plaintiff: $265,080.00

Third Plaintiff: $195,345.00

Fourth Plaintiff: $ 68,706.00

64 There would also be judgment for the Defendant against the Second, Third, Fourth and Fifth Plaintiffs for $8,300,000.00

65 Although I have determined that those Plaintiffs should be jointly and severally liable for the Defendant's costs, there is the difficulty that each of the Second, Third and Fourth Plaintiffs is entitled to set-off a different amount against those costs. That would produce the result that, if the Defendant's judgment was set-off against each judgment to which the Plaintiffs were entitled, the Defendant would be entitled to the following judgments:

1. Judgment for the Defendant against the Second Plaintiff of $8,034,920.00;

2. Judgment for the Defendant against the Third Plaintiff of $8,104,655.00;

3. Judgment for the Defendant against the Fourth Plaintiff of $8,225,152.00.

66 Of course, these are not cumulative but largely concurrent.

67 Nevertheless, each exceeds the net figure for costs to which the Defendant is entitled ($8,300.000 - $529,131 = $7,770,869). The better course is, therefore for there simply to be judgment for the Defendant against each and all of the remaining Plaintiffs for $7,770,869.00

68 Accordingly,

(1) I set aside all previous costs orders made in the proceedings.

(2) Judgment for the Defendant against the Second, Third, Fourth and Fifth Plaintiffs for $7,770,869.00

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Decision last updated: 31 July 2014