Accor Australia & New Zealand Hospitality Pty Ltd v Liv Pty Ltd

1. The orders of the Court made on 31 July 2017 be varied by the addition of the following order:
2. The costs which are the subject of paragraphs 2(e), 4 and 5 above be the subject of a lump sum award of costs, such lump sum award to be fixed by the primary judge. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 This is an application made to the Court seeking orders varying previous orders made by the Court dealing with the costs of a trial and of an appeal. On 31 July 2017, the Court made a number of orders in an appeal brought by Accor Australia & New Zealand Hospitality Pty Ltd and Cairns Harbour Lights Pty Ltd against Liv Pty Ltd, Ms Ivana Patalano and Ms Elise Wyandra Warring also known as Ms Elise Bradnam. Ms Patalano and Ms Bradnam each brought a cross-appeal. The orders which the appellants seek to have varied are orders 2(e), 4 and 5. Those orders are in the following terms: 2. Orders 1, 2, 3, 4, 5, 7, 8 and 10 of the orders made on 21 July 2015 be set aside and, in their place, order that: … (e) The respondents/cross-claimants pay 65% of the applicants/cross-respondents' costs of the proceeding, including the cross-claim. 4. The respondents/cross-appellants pay 90% of the appellants/cross-respondents' costs of the appeal. 5. The respondents/cross-appellants pay the appellants/cross-respondents' costs of the cross-appeals. 2 In their interlocutory application, the appellants (costs applicants) seek a variation so that the respondents (costs respondents) pay the costs of the costs applicants fixed in an amount to be determined by the Court. They also seek an order that the costs respondents pay the costs applicants' costs of and incidental to this interlocutory application, fixed in an amount to be determined by the Court. 3 The Court invited the parties to make written submissions on the application directed to whether an order for lump sum costs should be made (not including submissions as to the quantum of any such costs). The costs applicants made written submissions and Ms Patalano and Ms Bradnam made joint written submissions. No submissions were received from Liv Pty Ltd. On receiving the submissions, the Court considered that the matter could be dealt with on the papers and invited the parties to make any submissions they wished to make to the contrary. The costs applicants advised the Court that they did not consider that an oral hearing was necessary. As far as the costs respondents were concerned, the Court received a response only from Ms Bradnam. She indicated that she was happy for the matter to be decided without an oral hearing. 4 Although the Court is not dealing with quantum at this stage, it is appropriate to consider the evidence adduced by the costs applicants by way of their costs' expert as it will inform our decision on whether an order for lump sum costs is appropriate. The costs applicants' application is supported by an affidavit sworn by Mr Paul Vernon Taylor. Mr Taylor describes himself as a solicitor director. He is a director of Pattison Hardman costs consultant. He was admitted as a solicitor of the Supreme Court of New South Wales in 1999. He is a Law Society of New South Wales accredited specialist in the area of advocacy and commercial litigation. He sets out his "specific experience" in an annexure to his affidavit. We are satisfied from Mr Taylor's curriculum vitae and the terms of his affidavit that he has appropriate experience. 5 Mr Taylor's methodology is as follows. The costs applicants engaged King & Wood Mallesons in the first instance proceedings. Webb Henderson acted for the costs applicants during the appeal. Those firms provided their tax invoices to Mr Taylor. Mr Taylor then read the relevant decisions of the primary judge and of this Court on appeal. Mr Taylor prepared a costs summary. He states that the costs applicants are seeking the sum of $748,498.12 excluding GST for the costs of the first instance proceedings and the appeal. They also seek their costs of the present application which Mr Taylor estimates to be approximately $15,000. 6 Mr Taylor explains how the lump sum amount of $449,520.42 with respect to the proceedings at first instance is calculated. The total solicitor/client costs of King & Wood Mallesons is $664,048.50 in relation to solicitor costs. King & Wood Mallesons applied a discount in the sum of $131,925.76 on their solicitor costs representing a 19.87% reduction on solicitor costs. Mr Taylor then applied a further discount of 5.13% (resulting in a total discount of 25%) to solicitor costs to arrive at what he considered to be a fair and reasonable assessment of party/party costs payable as part of a gross lump sum costs order. He states that this discount is consistent with comparable authorities. Mr Taylor said that disbursements were in the sum of $27,783.51 and $165,700 in relation to barristers' fees and that he had applied no discount to those disbursements. In accordance with order 2(e), Mr Taylor applied a discount to the amount of 35% to reflect the terms of the order. The total fair and reasonable lump sum costs in the first instance proceedings pursuant to order 2(e) was, in his opinion, $449,520.42. 7 With respect to the costs of the appeal, Mr Taylor said that the total solicitor/client costs of King & Wood Mallesons is $76,475.50 and the total solicitor/client costs invoiced by Webb Henderson was $80,640.00. King & Wood Mallesons applied a discount in the sum of $10,178.50 representing a 6.47% reduction of its total solicitor's costs. Mr Taylor then applied an 18.53% discount to arrive at what he considered to be a fair and reasonable assessment of party/party costs. Total disbursements were invoiced at $15,485.82 and the total barristers' fees invoiced were $198,875.00. Mr Taylor did not apply any discount to the disbursements. In accordance with order 4, Mr Taylor applied a 10% discount without seeking to discriminate between the appeal and the cross-appeal. Mr Taylor reached the view that the total fair and reasonable lump sum costs of the appeal pursuant to orders 4 and 5 were $298,977.70. 8 Mr Taylor is able to estimate the categories of work which have been fairly and reasonably incurred in the first instance proceedings and in the appeal proceedings respectively. He identified the people involved in carrying out the work and expresses the opinion in relation to both the proceedings at first instance and the appeal that the work was undertaken at the rates and levels of expertise which indicates that team practices were both efficient and reasonably distributed between all levels of professional expertise. He also expresses the opinion that the disbursements were generally fairly and reasonably incurred in the conduct of litigation, including the following fees charged by counsel, including proportion of the total, indicated the use of counsel was reasonable and there was no over-reliance on counsel. 9 Mr Taylor states that he has made no allowance for an amount to be added for "skill, care and responsibility". He states that in his experience, no other special or unusual costs arrangements apply that warrant any further reductions. He states that he has taken into account discretionary factors that would reasonably be considered by a taxing officer to fall within or outside the following: the amount permissible for any item under the scale; the Federal Court's National Guide to Counsel Fees; the Federal Court's National Guide to Discretionary Items to Bills of Costs; and any special features of the case that may influence the assessment of costs or any other relevant and important matters not mentioned above. 10 In Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403, the Full Court of this Court said (at [19]-[20]): Whilst the Costs Practice Note now suggests that most cases should have a lump sum costs order approach applied unless there is some characteristic that would make it unsuitable, a lump sum costs order is not mandated in all instances. In all cases it is a matter for the Court to exercise the discretion given to the Court by the Federal Court Act and the Rules as appropriate: see Sigalla at [18]-[19]. There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. (see also LFDB v SM (No 2) [2017] FCAFC 207; Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 3) [2018] FCA 1608.) 11 In support of the application, the costs applicants referred to the time and costs associated with preparing a bill of costs. They submit that preparing a bill of costs may involve further costs in excess of $100,000 and may not be completed before June 2019. 12 In response, the costs respondents submit that the matter is unlikely to go to a full taxation. They submit that the costs applicants' cross-claim of approximately $750,000 could be "comfortably assessed" as an itemised bill of costs by a Court Registrar because they effectively deal with bills in the $1 million to $2 million mark that do not need lump sum orders made by a judge. The costs respondents submit that the bill of costs would possibly only be in the 100 to 200 page range and managed by a Registrar. They submit that not having an itemised bill of costs deprives them of the chance to scrutinise the costs carefully and try to negotiate a settlement or to object to those costs. Furthermore, they submit that going to a hearing about a lump sum costs order will cost the respondents more money now as they would have to engage their own expert to meet the report from Mr Taylor and there may be additional costs of further experts reports in response as happened in the "Royal" case that the applicants refer to in their submission (Royal v Eli Ali (No 3) [2016] FCA 1573). The costs respondents submit that the Taylor report is insufficient and incomplete for the judge to fix costs because it fails to explain any methodology applied by him to reach the figures he applies, nor attaches the invoices examined. The costs respondents submit that the case referred to by the costs applicants of Idoport Pty Ltd v National Australia Bank Limited & Ors, Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23 is distinguishable from this case as it concerned a multi-million dollar cost liability. 13 In our opinion this is plainly an appropriate case for a lump sum award of costs. Such an award will eliminate the time and likely substantial costs associated with a full taxation of costs. The nature of the matter makes it appropriate that it be dealt with in that way and the conclusion is supported by the evidence of Mr Taylor. We would have been disposed to fix the amount ourselves, but the costs respondents have to be heard on quantum. We consider it appropriate that that be done by one judge, not three, and we consider that the primary judge is in the best position to undertake that task. There has been considerable delay in making this application and that is a matter to be weighed in the balance. In the normal case, these applications need to be made promptly. We are of the opinion that in this particular case, the delay is outweighed by the factors which we have identified and which provide strong support for a lump sum order for costs. 14 We will vary the orders of the Court made on 31 July 2017 by the addition of the following order: 6. The costs which are the subject of paragraphs 2(e), 4 and 5 above be the subject of a lump sum award of costs, such lump sum award to be fixed by the primary judge. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Greenwood, Besanko and Katzmann.