Blackstone Brief Volume 9

Gross Sum Applications – Case Law Hot Off the Press!

Applications for assessment on a gross sum basis are becoming a more popular instrument in dealing with costs disputes for successful parties. But are these applications a positive way forward when determining costs, or are they simply the latest “fad” in the legal profession? In this month’s edition of the Blackstone Brief one of our Melbourne Associates, Chris Grisenti, looks at a recent decision made in the Victorian Supreme Court in which we were involved, relating to an application for a gross sum order.

What is a Gross Sum Application?
An application for costs to be determined on a gross sum basis is one which is open to a successful party, with the assessment conducted by the trial judge on the parties’ evidence. Alternatively, the matter is referred to formal assessment elsewhere (in the case of Victoria, to the Victorian Costs Court).

There are two ways in which a party can seek a gross sum assessment. Firstly, they can make the application and, if successful, file and serve expert reports as to quantum. Alternatively, the initial application can include evidence as to quantum with the application. There are benefits and drawbacks to both approaches.

When making an assessment on quantum, the Court will apply a broad brush approach to the figures claimed. Further, the Court must be confident that the approach taken is logical, fair and reasonable, and that arbitrary discounts to the claimed amounts are not made. The purpose of a gross sum assessment was explored in the case of Sheehan v Brett-Young[2016] VSC 521.

Wilson v Bauer Media Pty Ltd [2017] VSC 521 (13 September 2017)
Between 2016 and 2017, the Plaintiff, Ms Rebel Wilson, alleged the Defendant in these proceedings ran a series of articles which were defamatory to her. The matter was tried before a jury, and the Plaintiff was successful.

The Defendant subsequently agreed to pay the Plaintiff’s costs on an indemnity basis pursuant to s 40(2)(a) of the Defamation Act. On 3 October 2017, the Plaintiff’s lawyers provided a draft form of order which sought:
1. Costs in accordance with the terms of the retainer between the plaintiff and her legal representatives;
2. Costs to be assessed on a gross sum basis
3. Certification of counsel’s fees; and
4. Certification of one witness’ expenses.
The Defendant disputed the orders sought by the Plaintiff, and further orders were agreed to for the provision of expert reports and an interlocutory hearing.

The Plaintiff put forward an expert report by Ms Elizabeth Harris, which detailed the reasons why costs should be assessed on a gross sum basis (including the cost differences between the ordinary practice of taxation compared to a gross sum application). This report also explained the relevant methodologies for quantification, reductions to be made to the quantum of costs, and an amount which Ms Harris considered reasonable. Detailed submissions were also filed by the Plaintiff detailing why the Court ought to assess costs on a gross sum basis.

The Defendant engaged Mr Paul Linsdell of Blackstone Legal Costing to review the report of Ms Harris, advise whether the matter was one which warranted the making of a gross sum order, advise whether the Plaintiff’s costs could be quantified, and advise on any other relevant matter.

Mr Linsdell’s report the methodologies for calculation of costs on a gross sum basis, the issues with the Plaintiff’s expert report, and why the matter was not appropriate for assessment on a gross sum basis. The report also disagreed with the estimated costs of taxation and gross sum assessment which was contained in the Plaintiff’s report. The Defendant also filed written submissions on the issues in dispute between the parties.

On 8 March 2018, Dixon J heard the Plaintiff’s application, and reserved his decision. On 12 April 2018, in Wilson v Bauer Media Pty Ltd (Costs) [2018] VSC 161, His Honour handed down judgment, and ordered that a gross sum application was not appropriate for the matter.

Judgment
His Honour found, substantially for the reasons set out by the Defendant, that this was not a case appropriate for departure from the usual procedure of taxation. These reasons were:
1. It could not be assumed that a gross sum assessment will be more time and cost efficient than a taxation, or that it will be simpler;
2. There was contested opinion from expert costs consultants about taxation or gross sum assessment;
3. Substantial costs would be incurred in making an assessment on a gross sum basis, including further expert reports and several days of court time;
4. An appeal by the Defendants was not an indicator of the likely approach to taxation;
5. The competing expert opinion was highly relevant, and that may in itself be a reason not to depart from the ordinary process of taxation; and
6. That an appeal to the Court of Appeal would not cause any relevant delay to a taxation.
His Honour also noted that the level of disagreement between the costs experts showed a higher complexity in the assessment of a gross sum, and that this complexity would preclude his Honour from determining an appropriate sum without resorting to an unfair degree of arbitrariness.

The case of WM Wrigley JR Company v Cadbury Schweppes Pty Ltd [2006] FCA 1186 was compared, and the requirement to arrive “at an appropriate sum on a logical and reasonable basis, rather than selecting figures at random on the basis of an arbitrary preference for one expert’s view over another’s.”

The Plaintiff’s application was dismissed, and Dixon J also ordered that the Plaintiff pay the Defendant’s costs of the application.

Whilst some matters are appropriate for assessment on a gross sum basis, the vast majority of matters are more properly dealt with in the usual course of taxation or costs assessment.

For assistance with all your legal costing needs, including advice on whether a gross sum application may or may not be appropriate in your matter, contact Blackstone Legal Costing.