Ambrose (Trustee) in the matter of Poumako (Bankrupt) v Poumako

REASONS FOR JUDGMENT 1 On 10 May 2013, I made orders that Legalese Pty Ltd trading as Scragg & Associates (Legalese) pay to Robin Brian Poumako the sum of $6000. By order made on 3 April 2012, I had ordered the sum of $6000 to be paid by Mr Poumako and others to the applicant for costs incurred by the applicant by the adjournment of the hearing of the application. 2 On 10 May 2013, I also ordered that Legalese may satisfy the obligation to Mr Poumako either by Mr Poumako within 21 days producing evidence to Legalese of him having paid that sum of $6000 to the applicant, so that he was entitled to recover it from Legalese, or alternatively, if Mr Poumako did not produce evidence of having paid that amount, by payment of that amount to the solicitors for the applicant on account of the applicant. 3 I gave the parties leave to apply within 21 days by written notice to vary or discharge that order relating to the means of payment. 4 No such application was made. 5 It also appears that Legalese has not paid the sum of $6000 either to Mr Poumako, or to the solicitors for the applicant, at all. Legalese on 23 August 2013 paid $3500 to the solicitors for Mr Poumako "in satisfaction of their obligation to pay the actual costs incurred by the applicant relating to the adjournment". Legalese disputes now that the costs incurred by the applicant to his solicitors by reason of the adjournment, giving rise to the liability for costs, were in fact in the sum of $6000 and so refuses to pay the additional $2500. It asserts that the solicitors for the applicant continue to demand payment of the additional $2500, and are seeking to enforce recovery of that sum from Legalese. 6 Whilst it is correct on the material before me that the solicitors for the applicant on 31 July 2013 apparently submitted to Legalese a tax invoice for the sum of $6000 for its fees, I do not think that the orders made on 10 May 2013 provide to the solicitors to the applicant the direct right to recover that sum from Legalese as the solicitors for Mr Poumako and others. That is simply because the orders did not so provide. The orders provide for the payment of that sum to Mr Poumako, but a process by which that sum, if directly paid to the solicitors for the applicant, would discharge Legalese's liability to Mr Poumako. The liability is to Mr Poumako. In the circumstances, the applicant himself may be entitled to recover that sum on behalf of Mr Poumako if he is still his trustee in bankruptcy or if Mr Poumako has assigned to the applicant his entitlement to recover that sum from Legalese. 7 By application of 20 September 2013, Legalese has applied for an order that the amount of costs that Legalese has to pay to Mr Poumako pursuant to the order of 10 May 2013 be reduced to $3500 or such other amount as is just. It is unclear whether the application has been served on Mr Poumako. He has not appeared on the application. There is no application to set aside the order made on 3 April 2012 that Mr Poumako pay to the applicant the costs of the adjournment, fixed at $6000. 8 The application does not, as it is required to do, specify the rule or rules under which the application is made, but it has been confirmed in oral submissions that the application is made under r 39.05 of the Federal Court Rules 2011 (Cth), in particular invoking the Court's power to vary or set aside a judgment or order after it has been entered if it was made in the absence of a party, or if it does not reflect the intention of the Court. 9 I do not accept that the order of 10 May 2013 was made in the absence of Mr Poumako or of Legalese. The transcript records that, when the issue as to the amount of costs ordered to be paid by Mr Poumako for the adjournment was determined on 3 April 2012, Legalese attended and was given the opportunity to make submissions as to whether that was an appropriate amount for costs. It did not seek to dispute then that it was an appropriate amount for costs. Legalese had the opportunity at that point either to make submissions on that topic or to seek an adjournment to seek a detailed bill, or in some other way to explore the appropriateness of the amount. Legalese has not applied to vary that order so its present application, if successful, will mean Mr Poumako remains liable to pay the sum of $6000 costs by reason of the adjournment, but he will only be entitled to recover from Legalese $3500. 10 Those observations are relevant to the discretion which I may have under r 39.05(e) to set aside or vary the order as sought. 11 Was the order in Mr Poumako's favour on 10 May 2013 one which does not reflect the intention of the Court? It is not contested that the Court intended to make an order that the solicitors reimburse Mr Poumako for the costs which he has been obliged to pay by reason of the adjournment. What is in issue is whether the amount of $6000 fixed on 3 April 2012 was the amount which the solicitors for the applicant had charged, or would charge, the applicant for costs thrown away by that adjournment. The affidavit of Peter Scragg of 17 September 2013 asserts why Legalese now says that the proper entitlement for costs was not $6000 but more likely the sum of $3500 thrown away by reason of the adjournment. He has exhibited a copy of a partial account apparently provided to him by the solicitors for the applicant. From that document he has identified certain work done prior to the adjournment of the matter and until the conclusion of the hearing, that is 15 May 2012. He has identified fee items for the day of the adjournment on 2 April 2012 of 16 units, for the following day of 14 units, and for 5 April 2012 of 17 units, totalling some 3 hours attendances. In addition, he accepts that the solicitors were entitled to re-read the brief in preparation for the trial then listed in May 2012. He notes that they have charged for 32 hours or 320 units for pre-trial preparation for that date. He has asked for, but not been given, a breakdown of what part of the account relates to re-reading the brief in preparation for the second trial. The hearing lasted two days. He has therefore allowed five hours or 50 units which, he contends, is a reasonable preparation for the additional costs. 12 For the purposes of this ruling, I am prepared to assume that it was the intention of the Court not simply to make an order against Mr Poumako in respect of the costs of the adjournment of $6000, but that it fixed a sum which indemnified the applicant for the costs thrown away by reason of that adjournment. In other words, I am prepared to revisit, to an extent, the question of whether the intention of the Court to indemnify the applicant in respect of the costs thrown away by the adjournment has been given proper effect by the order fixing those costs of $6000. 13 For the reasons referred to above, I am not sure that it is appropriate to make that assumption. Put shortly, the $6000 is a liability of Mr Poumako and neither he nor Legalese has sought to set aside that order. Strictly speaking, unless Legalese has discharged that obligation of Mr Poumako by paying that sum to the solicitors for the applicant (a course made available to it by the orders of 10 May 2013), it should not be permitted to step into his shoes to now dispute the quantum of his liability to the applicant except with his consent, especially when he accepted at the time the appropriateness of the amount. 14 In any event, when that sum was fixed, there was some discussion suggesting that sum as an appropriate amount as the matter had been then listed for some days for hearing, and the issues at that time were potentially significantly more extensive than those which ultimately came to be litigated. It was appropriate that allowance was made for preparation which would necessarily to some extent be duplicated for the resumed hearing date, as well as for counsel fees for a hearing of potentially several days. The material now presented does not show that the sum fixed at $6000 does not reflect the intention of the Court to award costs thrown away by the adjournment, or that the costs so recoverable were of that order. 15 In addition, even on the material now submitted, I am not satisfied that the figure so fixed did more than indemnify the applicant in respect of the costs of that adjournment. I have taken into account what Legalese through Mr Scragg says about that. However, there are additional cost items, namely an undescribed unit of 300 units (or $11,250) for work between 26 March and 1 April 2012 presumably for pre-trial preparation and for time set aside for the trial for counsel fees in addition to the items to which Mr Scragg has drawn attention, and there is a further item for preparation for the second trial, including updating notes, further drafting of closing submissions and reviewing file of $12,000 or 32 hours in the period immediately up to the commencement of the hearing which eventually took place on 14 May 2012. No doubt some of that work involved re-preparation for the trial. I suspect some of the earlier preparatory work was not of use for the later hearing as the issues had by then been confined. It is not possible on the material to be satisfied that, notwithstanding the points which Legalese through Mr Scragg has made, the costs incurred by the applicant by reason of the adjournment, and so which have been thrown away, are less than $6000. Indeed, they may be more. I do not comment upon the appropriateness of all the work done by the solicitors for the applicant at those two stages, simply because I have no basis for knowing the nature and extent of the work which was undertaken. The argument of Legalese does not seek to show the applicant was overcharged. It seeks to show on the basis of the documents that the work apparently done did not represent work (and therefore costs) thrown away by reason of the adjournment. There is one qualification to that. Mr Scragg at one point did suggest that the applicant and his solicitors did not prepare for the trial which was adjourned as they did not expect that trial to proceed. I do not accept that. There is no material to support it. The trial was scheduled to commence. Apart from pre-trial preparation, counsel fees would have been incurred. The material does not show that they were not charged. So, looking at the material now presented by Legalese, I am not satisfied that the figure of $6000 does not reasonably reflect the costs thrown away by reason of the adjournment, so the foundation for the present application must fail. 16 In addition, for the reasons which I referred to above, in my view Legalese had an opportunity on 3 April 2012 to comment about the amount of the proposed costs and did not take up that opportunity. I would not in that circumstance in any event exercise my discretion to accede to this application. The proper course was at that point to challenge the amount of costs sought. So it is clear, the timing of the present application is not of itself a reason for refusing it. The issue is when Legalese should have taken up the opportunity to challenge the proposed lump sum costs order. 17 For those reasons, the application is refused, even assuming it is competent. I also order that Legalese pay to the applicant its costs of the application of 20 September 2013. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.