The recent decision of Campbell AJA in Penson v Titan National Pty Limited (No. 3)  NSWCA 121 (Penson) handed down on 26 June 2015 is a timely reminder of the entitlement of a party to seek a gross sum costs order as an alternative to the conventional costs assessment process.
In Penson, the successful respondents sought a gross sum costs order against the applicant. In determining the issue, Campbell AJA acknowledged that section 98 of the Civil Procedure Act 2005 (NSW) confers on the court broad discretionary powers in respect of costs, including the ability to make an order in respect of gross sum costs orders.
WHEN ARE GROSS SUM COSTS ORDERS APPROPRIATE
Campbell AJA highlighted, with reference to some historical authorities on the issue, the circumstances in which it would generally be appropriate for a court to make a gross sum costs order. Those circumstances include proceedings where:
- the conduct of the proceedings were lengthy or where the issues in dispute are complex;
- a gross sum costs order is likely to avoid considerable expense, delay and aggravation that would otherwise be incurred in a contested costs assessment;
- a costs assessment may disadvantage a successful party because of the likely inability of the unsuccessful to discharge the costs liability in any event;
- in simple cases where the costs in issue are modest.
THE OUTCOME IN PENSON
In Penson, Campbell AJA ultimately agreed to make a gross sum costs order on the basis that, in his view, doing so was likely to prevent a protracted fight concerning costs. His Honour also noted that the costs in issue were comparatively small, and that there was a realistic risk that the costs assessment procedure could become very protracted and expensive.
In making a gross sum costs order, his Honour noted that the process was not designed to be a meticulous item-by-item examination or assessment of a bill of costs that would occurs in the course of an ordinary assessment. Instead, Campbell AJA adopted a "broad brush" approach, which his Honour explained was intended to arrive at a figure for which the Court could be "confident does justice between the parties".
The Court in Penson ultimately allowed 70% of the respondents' solicitor/client costs and 100% of their disbursements. In coming to that finding his Honour considered the respondents' memorandum of fees and noted that those fees did not "strike [his Honour] as unreasonable". His Honour also permitted interest on costs pursuant to section 101 of the Civil Procedure Act but, consistent with the "broad brush" approach adopted, ordered that interest would only be paid on and from the date on which the respondents had paid the totality of the memorandum of fees and not on a moving balance, which would ordinarily be the course in an assessment.
CASE IN POINT
The decision in Penson is a welcome reminder to practitioners to consider making an application for gross sum costs orders to avoid the time and costs involved in costs assessment process.
However, practitioners should keep in mind that, typically, a gross sum costs order results in a discount of the costs recoverable. This trend was acknowledged by Campbell AJA in Penson. Ultimately, successful parties should consider whether the circumstances of their case make it appropriate to seek a gross sum costs order and, if it is, whether they are prepared to risk a possible discount of the costs recoverable as a trade-off for avoiding the costs assessment process.
This article was co-written by Andrew Lacey, Principal and Joel Cook, Associate.