Bespoke Recycling Industries Pty Ltd v Recycling Developments Pty Ltd & Ors [2022] QSC 118 [2022] 24 QLR

SUPREME COURT OF QUEENSLAND CITATION: Bespoke Recycling Industries Pty Ltd v Recycling Developments Pty Ltd & Ors [2022] QSC 118 PARTIES: BESPOKE RECYCLING INDUSTRIES PTY LTD ACN 132 325 314 (applicant) v RECYCLING DEVELOPMENTS PTY LTD ACN 634 377 030 (first respondent) TEB ENTERPRISES PTY LTD ACN 142 685 372 ATF THE PERROTT FAMILY TRUST ABN 95 197 523 153 (second respondent) SHANE CUNNINGHAM (third respondent) FILE NO/S: BS No 660 of 2022 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED EX TEMPORE ON: 13 April 2022 DELIVERED AT: Brisbane HEARING DATE: 13 April 2022 JUDGE: Williams J ORDER: As per the initialled draft and placed with the papers CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – REGULATED COSTS: GROSS OR FIXED COSTS, LUMP SUM ORDERS OR CAPPING ORDERS AND LIKE MATTERS – POWER TO ORDER – where there is an application for discontinuance – where the first respondent seeks that costs be fixed – where the applicant seeks an order that costs be assessed if not agreed – whether it is appropriate to make a fixed costs order – whether approach taken to estimating the costs is logical, fair and reasonable PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERAL RULE: COSTS -- 1 of 6 -- 2 FOLLOW EVENT – GENERAL PRINCIPLES AND EXERCISE OF DISCRETION Civil Proceedings Act 2011 (Qld), s 15 Uniform Civil Procedure Rules 1999 (Qld), r 304, r 687, r 697 Amos v Wiltshire [2016] QCA 70 Idoport Pty Ltd v National Australia Bank Ltd [2005] NSWSC 1273 COUNSEL: M A Goldsworthy for the Applicant C Jennings QC for the First Respondent SOLICITORS: Origin Lawyers for the Applicant Clayton Utz for the First Respondent [1] This matter first came before the Court back in January, during the Court vacation period, for the hearing of an urgent application for an injunction. The hearing proceeded before me on 13 and 14 January for parts of those days, and returned the following Wednesday, 19 January, for a hearing which took up substantially the whole of that day in respect of the injunctive relief sought. [2] On 19 January 2022, orders were made refusing the interlocutory relief sought in the originating application, filed 13 January 2022. Subsequent orders were made, including that the parties attend a mediation by 15 February 2022, and that the proceeding otherwise continue as stated by claim. Directions were made for the filing and service of a statement of claim, a defence and a reply. [3] Subsequent to those directions being made, the parties attended a mediation, which was unsuccessful. Further, the date for the delivery for the statement of claim was extended by consent orders. [4] The application before the Court today is an application by the first and second respondents to dismiss the proceeding and seeking a fixed costs order. Events have overtaken that application. By application, which was filed today, the applicant applies to the Court to discontinue the proceeding, pursuant to rule 304(2) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). [5] The applicant accepts that it would be required to pay the first and second respondents’ costs of the proceedings on the standard basis. It is also common ground that there is to be no order as to costs between the applicant and the third respondent, or between the first and second respondent and the third respondent. In respect of the position of the third respondent, there is, in evidence, an email from the third respondent confirming that he consents to the discontinuance, and that he has not incurred legal costs on the matter. [6] The issue remains for determination by the Court whether this is a matter where it is appropriate to fix the first and second respondents’ costs in a certain amount, pursuant to rule 687(2)(c) of the UCPR. Submissions have been made in regard to the Court’s power and also the exercise of the discretion. Before the Court there is a detailed affidavit of Timothy George which identifies the methodology that has been -- 2 of 6 -- 3 undertaken as background to the amount of costs claimed, being the amount of $62,500, excluding GST. The affidavit of Mr George exhibits the invoices from Clayton Utz to their own client, and also the disbursement invoices. There is also evidence of an updated report dealing with costs up until the day that the affidavit was sworn. [7] Importantly, the costs claimed in the fixed sum of $62,500, excluding GST, is the amount claimed in respect of the proceedings to date. That is, the costs claimed cover the three days which the matter proceeded before this Court in January 2022, and also covers the preparation and attendance at the mediation. It does not cover the costs of today. However, the costs of today are not separately sought. [8] At paragraph 40 of the affidavit of Mr George, the costs of the first and second respondents of the proceeding to date are identified as being approximately $115,000, which consists of approximately $80,000 for Clayton Utz’s professional costs, including the costs of preparing but not attending the hearing today, and approximately $35,000 in disbursements, including $32,780 in Counsel’s fees, not including the costs of preparing or attending at the hearing of this application. [9] It is identified in submissions today that the fixed sum sought represents approximately 54 per cent of a solicitor and client costs as at 8 April 2022. [10] A consideration of the amount sought by reference to the two components also assists in the evaluation of the costs claimed. Counsel’s fees in the amount of $32,780 are a disbursement component of the fixed cost sum sought. That allows an amount of approximately $30,000 in respect of Clayton Utz’s professional costs. This is a significant reduction in the professional costs claimed, being less than 50 per cent of the actual costs. [11] The Court has a broad discretion to award costs in all proceedings as is evident from section 15 of the Civil Proceedings Act 2011 (Qld) and the relevant rules in the UCPR. Generally, under the UCPR, costs of the proceeding are in the discretion of the Court but follow the event unless the Court otherwise orders. As indicated here, it is not disputed that the applicant would be liable to pay the first and second respondents’ costs in the proceedings on the standard basis. What is disputed between the parties is whether this is an appropriate proceeding to make a fixed costs order, or whether the costs should be awarded to be assessed if not agreed. [12] The UCPR specifically provides, in rule 687(2)(c), that if a party is entitled to costs, rather than having to proceed to have those costs assessed, the Court may order that one party pay the other party’s costs in a fixed amount, and that amount may be fixed by the Court. Practice Direction 3 of 2007 provides that the Court will fix costs to avoid undue delay and expense, provided the Court is confident to fix costs on a reliable basis. [13] I have been referred to a number of authorities in respect of the Court’s power to fix costs. In the decision of Amos v Wiltshire [2016] QCA 70, Justice Gotterson was persuaded that in the circumstances of that case and in the interests of avoiding further disputation, a fixed costs order, pursuant to rule 697(2)(c) of the UCPR was appropriate. -- 3 of 6 -- 4 [14] I have also been referred to the decision of Idoport Pty Ltd v National Australia Bank Ltd [2005] NSWSC 1273, where Justice Einstein considered the principles concerning the making of a gross sum costs order. Those general principles, identified in paragraph 9 of that decision, provide some guidance as to the exercise to be undertaken in exercising the discretion, including whether it is appropriate to award costs in a fixed sum. In that case, his Honour recognised that: “The purpose of a gross sum costs award is to avoid the expense, delay and aggravation involved in protracted litigation arising out of a taxation, and by analogy an assessment.” [15] Further, it was recognised that: “Discretion to award a gross sum is not confined and may be exercised whenever the circumstances warrant its exercise.” [16] It was recognised that where an assessment of costs would be protracted and expensive, and also that 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 an assessment, then a fixed sum award may be appropriate. However, that is merely one of the circumstances in which it would be appropriate to exercise the discretion. The exercise to award a gross sum is not confined and is broad. The exercise of the discretion is accordingly to be exercised consistently with the requirements of the exercise of the general discretion of this Court. [17] Justice Einstein also recognised that the: “Specification of a gross sum is not the result of a taxation or assessment of costs.” [18] That is not the task that the Court is to undertake. The rule contemplates an application of what is described as: “A broader brush approach than would be applied on a taxation or assessment.” [19] It is also recognised that the costs are to be fixed broadly, having regard to the information before the Court, and also that to descend into the level of detail required on a taxation or assessment defeats the purpose of a gross sum order. [20] More generally, it is recognised that the power to award a gross sum 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. The approach taken to the estimate of costs must be logical, fair and reasonable. [21] The information before the Court in respect of the methodology applied in respect of the costs claimed is set out in detail in the affidavit of Mr George. The exercise undertaken on the face of the affidavit is logical, and it appears to be fair and reasonable. There has been a review of the costs incurred as recorded in the solicitor’s invoices and updated to take into account their work in progress, which has not yet been invoiced. It reflects a considered analysis of the costs which are associated with -- 4 of 6 -- 5 the proceeding. There is a sufficient level of transparency in respect of the costs claimed and the steps undertaken. [22] Counsel, on behalf of the applicant, has taken the Court to a number of entries in the narrations to the invoices, and suggested that those costs may not be fully recoverable on an assessment. However, the approach taken applies a discount in the professional costs claimed by an amount of greater than 50 per cent, which takes into account and acknowledges the reality on an assessment of costs that all costs incurred by a solicitor acting on behalf of a client are not generally recoverable under an assessment. [23] That general discount that has been applied to the total of the professional costs claimed takes into account the various items which are usually not recoverable. This includes the attendance by more than one person potentially at the hearing, and also time taken to peruse and consider documents. Generally, those are the items which are often the basis for reductions at an assessment. [24] The Court is not required to undertake the detailed item-by-item analysis which would be undertaken on an assessment. However, where there is due consideration of the total costs claimed, an identification of costs which are not relevant, and then also a deduction to be applied on a logical basis to the costs claimed, that is a reasonable and logical approach to the assessment of costs to arrive at a figure which is proposed to be the fixed amount. [25] It is further submitted that the particular circumstances of how this matter proceeded should be taken into account in the consideration of whether it is appropriate to exercise the discretion to fix the costs. It is submitted on behalf of the first and second respondents they should not be put to further expense and delay and aggravation in respect of the assessment of those costs. [26] The circumstances in which it arises are also that, whilst the applicant accepts that these proceedings will be discontinued, it is a distinct possibility that the dispute between the parties may continue, and that further proceedings could be brought. It appears, from paragraphs 11, 12 and 13 of the affidavit of Lisa Cox, sworn on 11 April 2022, that the applicant has been unable to reach a position in respect of the external audit that was to be undertaken to be in a position to be able to plead, and in the circumstances, a discontinuance is sought. [27] However, it leaves open that that analysis may be undertaken, and that the applicant may prepare a further claim which will continue. It is submitted on behalf of the first and second respondents that, in circumstances where there were allegations that funds were required to be paid, and this was relied upon to support the purported termination of the agreement the subject of the proceedings, that there has been a shift in the position. Paragraph 11 of Ms Cox’s affidavit states that: “The applicant must accept that the external review of the net profits might find the applicant is required to make further payment to the applicant and second respondent, and if that is the case, it may narrow the scope of the future claim by the applicant.” [28] It is in these particular circumstances that the submission is made that the history and context of the proceeding to date are such as to justify the making of the fixed costs order. It is submitted that the parties should not be distracted by the anticipated -- 5 of 6 -- 6 dispute over costs in circumstances where the overarching dispute between the parties remains. [29] In submissions on behalf of the applicant, the applicant submits that the current matter is not the case where it is appropriate to make a fixed costs order, as it is submitted that the Court cannot be satisfied on the material that the amount sought is a realistic estimate of the likely outcome of a formal assessment, and that it would be appropriate to order that costs be assessed if not agreed. [30] I disagree with that submission. The information which is before the Court provides an appropriate and satisfactory basis upon which to estimate the costs which may be recoverable if the matter proceeded to an assessment. I consider that the overall amount of costs incurred, and the subsequent amount sought by way of a fixed costs order, in the amount of $62,500, appears to be reasonable in the circumstances. This is particularly given the analysis, which I outlined before, where there has been a significant reduction in respect of the solicitor’s costs component of those costs sought. [31] I am also satisfied that the approach taken to estimating the costs is logical, fair and reasonable, and that the particular circumstances justify the making of the fixed costs award. I further consider that the policy of fixing costs to avoid the expense, delay and aggravation involved in undertaking an assessment process is also to be adopted where the Court is able to do so. [32] Accordingly, in the circumstances, I consider it appropriate to make an order that the first and second respondents’ costs in the proceeding be fixed to the amount of $62,500, excluding GST, pursuant to rule 687(2)(c) of the UCPR. [33] In respect of the orders sought more broadly, I have been provided with a draft order by the first and second respondents, which deals with the discontinuance of the proceeding, pursuant to rule 304(2) of the UCPR. It also provides that the applicant is to pay the first and second respondents’ costs in the proceeding on the standard basis, and also that there is no order as to costs as between the applicant and the third respondent, or between the first and second respondents and the third respondent. These orders substantially are in the form of the application brought by the applicant today, with the addition of the fixed costs order. In the circumstances, I am satisfied that it is appropriate to make the orders in the form of a draft provided to me, which I will initial and place with the papers. -- 6 of 6 --