Practice and Procedure Part 1: Gross Sum Costs Orders

Vikram Misra, Barrister at Clarence Chambers, begins a new series into practice and procedure. In his first article, he explores questions and decisions that need to be considered once proceedings have concluded, with a focus on gross sum costs orders. Follow his series here.

So you have successfully won a long and hard-fought case for your client. The question of costs has been deferred but you are confident that costs will follow the event in favour of your client. Your client then has the following conversation with you (with words to the following effect and expletives deleted!):

Section 98 of the Civil Procedure Act 2005 (NSW) (“the Act”) gives the court wide powers as regards the issue of costs. In particular, s 98(4)(c) of the Act states:

(4) …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:

(c) a specified gross sum instead of assessed costs.

An order seeking a specified gross sum is a procedure for summary assessment of costs by the court and is to be distinguished from a detailed assessment of costs by a costs assessor[1]. Subject to the proviso that it be exercised judicially[2], the court has an unlimited discretion when making an order pursuant to Section 98(4).[3] As such, when the time comes for an argument as to costs, legal practitioners should always consider whether such an order is sought depending on the circumstances of the matter. Sometimes, seeking a gross sum costs order can be significantly advantageous for the client in terms of time and money spent recovering costs.

The terms of Section 98(4)(c) are not subject to any express limitation, other than that an order may only be made before costs are referred for assessment. It has also been held that there is no apparent basis for imposing an implied qualification arising from the language of the whole of Section 98 or the surrounding statutory provisions or the evident purpose of Division 2 of the Act[4]. As such, a broader view of the applicability of the section is preferable, rather than a restrictive view merely to avoid the “expense, delay and aggravation” which the costs assessment process may give rise to[5]. In Ireland v Retallack (No 2) [2011] NSWSC 1096 (“Ireland”), Pembroke J held:

[42] I do not think the purpose of the power is simply to avoid the expense, delay or aggravation that may be involved in a protracted costs assessment. That would be an unjustified reading down of the statutory language. Nor do I think that there is any rational reason why the power should be exercised sparingly. The statutory language does not support such a qualification. Nor do I think that there is any reason in principle, or in the statutory language, why the power under Section 98(4)(c) should not be utilised to cap the recoverable costs of a party where the court considers that the claimed costs are excessive in the circumstances. See Sherborne Estate (No 2): Vanvalen v Neeves (2005) 65 NSWLR 268 at [42] – [44].

In addition to those circumstances raised in Ireland [2011] NSWSC 1096, applications for a gross sum costs order are also regularly advanced in the following situations:

1. where the subject matter of the litigation concerns modest sums of money;
2. where costs assessment would be “protracted and expensive”[6];
3. where there is a risk of “satellite litigation” if costs are assessed[7];
4. where the evidence reveals that the party awarded costs is unlikely, due to the financial position of the unsuccessful party, to be able to recover all its taxed costs in due course[8]; and
5. where the expense and delay of taxation is disproportionate to the amount of the costs recoverable[9].

The discretion to order a gross sum costs order is only exercised when the court considers that it can do so fairly between the parties, and that includes having sufficient confidence in arriving at an appropriate sum on the materials available”.[10] Any sum ordered to be paid pursuant to s 98(4)(c) should be based on an informed assessment of the actual costs incurred having regard to the available information, and that the estimate of costs should also be “fair, logical and reasonable”.[11] It must prevent prejudice to the unsuccessful party by overestimating the costs, while at the same time avoiding an injustice to the successful party by applying an arbitrary fail safe discount on the estimate submitted to it.[12] As such, a “broad-brush approach” to fixing costs is adopted for the purposes of calculation of quantum.

In applying a broad approach to gross sum awards, courts have invariably applied a discount to amounts claimed. For example, in Pritchard v Fryer (No 2) [2018] NSWSC 261, it was held:

[10] In determining the discount to be applied, relevant factors include the fact that the defendant compiled the court books with limited assistance from the plaintiff, that the plaintiff sought to raise a multiplicity of issues on the hearing of the Summons and the Notice of Motion filed within a short time of the hearing to which the defendant was required to respond; that the defendant’s counsel was briefed on a direct-access basis which reduced total legal costs but which required additional conferences and travel, and ultimately what I consider to be a reasonable sum claimed by counsel as the ultimate costs incurred by his client. I also note that Mr Sharrock has not furnished an invoice in respect of today’s appearance. In all the circumstances, I consider a reduction of 15 per cent of the defendant’s professional costs is appropriate. This discount is to allow for the likelihood of some reconsideration of materials the subject of proceedings in the Local Court where a costs order has been made in the defendant’s favour.

The advantages of seeking a gross sum costs order in the appropriate circumstances are also consistent with sections 56[13] and 60[14] of the Act[15]. In Ireland [2011] NSWSC 1096, Pembroke J held:

[43] I regard the power under Section 98(4)(c) as a helpful addition to the arsenal available to the court. Its use will only serve to enhance the interests of justice and further the overriding purpose in an appropriate case. After all, in exercising that power, the court is engaged, as a matter of principle, in a similar exercise to that which an assessor would undertake – designed to achieve the same objective but with broader powers, a wider discretion and at any earlier point in time. The court, just like an assessor, is seeking to determine what is a fair and reasonable amount for a party’s costs. In a real and practical sense, the party whose costs are capped under Section 98(4)(c) is not being disadvantaged. All that is happening is that the court is arriving at an appropriate result – faster and in a gross amount.

Key takeaways:

• When the issue of costs arises at the conclusion of proceedings, consider whether seeking a gross sum costs order is appropriate in the circumstances.
• Make sure that any affidavit material relied upon in support of a motion for a gross sum costs order contains enough information for the court to make a decision as to quantum.
• Note that section 98(4)(c) of the Act can also be utilised to cap the recoverable costs of a party where the court considers that the claimed costs are excessive in the circumstances: see Sherborne Estate (No 2): Vanvalen v Neeves (2005) 65 NSWLR 268.

In my next article for the series, I will consider the recent case of Chiu v Sheh [2021] NSWSC 19 regarding withdrawal of admissions.

[1] Although considerations that would be relevant to an assessment may be taken into account when applying a “broad-brush” approach to fixing costs: Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23, [117].

[2] The power to award a gross sum must be exercised judicially, by reference to the particular case before the court, and after giving the parties an adequate opportunity to make submissions on the matter: see Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23

[3] Ireland v Retallack (No 2) [2011] NSWSC 1096, [39].

[4] Ireland v Retallack (No 2) [2011] NSWSC 1096, [38].

[5] Starr-Diamond v Diamond (No 4) [2013] NSWSC 811, [8].

[6] Hamod v New South Wales [2011] NSWCA 375, [29].

[7] Pritchard v Fryer (No 2) [2018] NSWSC 261, [2].

[8] Dye v Commonwealth Securities Ltd (No. 2) [2012] FCA 407, [10].

[9] Ross v Ross (No 5) [2008] WASC 278, [33].

[10] Harrison v Schipp [2002] NSWCA 213; Pritchard v Fryer (No 2) [2018] NSWSC 261, [3].

[11] Hamod v New South Wales [2011] NSWCA 375; Pritchard v Fryer (No 2) [2018] NSWSC 261, [6].

[12] Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23.

[13] To facilitate the just, quick and cheap resolution of the real issues in the proceedings.

[14] Dealing with the principle of proportionality of costs.

[15] See Hall v Poolman [2007] NSWSC 1330, [392]; Royal Australian Naval Reserve Rifle Club Inc v New South Wales Rifle Association Inc [2010] NSWSC 351, [21].

Vikram Misra was admitted as a solicitor in 2012 and called to the NSW Bar in 2015. He maintains a broad commercial practice and is regularly briefed in matters relating to taxation law, property law, construction law and equity. Vikram has completed a Graduate Diploma in Taxation Law at the University of Sydney in 2015 and a Master of Laws majoring in construction law and contract law at the University of Melbourne in 2016. You may connect with Vikram via email counsel@vikrammisra.com or LinkedIn

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