Aussie Hoist Property Pty Ltd v Mulqueen

Federal Court of Australia|2018-10-24|Before: Griffiths J, White JJ

The plaintiff pay the defendant costs in the lump sum of $16,014.80 (excl GST). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This judgment concerns an application by the defendant for the Court to fix lump sum costs following the dismissal of the plaintiff's application to set aside a statutory demand dated 1 March 2018 (see Aussie Hoist Property Pty Ltd v Mulqueen [2018] FCA 1493) (Aussie Hoist No 1). The defendant made the application for lump sum costs orally at the time the Court handed down its judgment in Aussie Hoist No 1. The Court ordered the parties to file and serve brief submissions on the appropriateness of making a lump sum costs order. The parties consented to the application being determined on the papers without a hearing. 2 Both parties have successfully obtained a costs order in these proceedings. (a) On 13 April 2018, the defendant filed an interlocutory application which sought an injunction to prevent Shaw McDonald Lawyers from acting for the plaintiff and an order that that Shaw McDonald Lawyers provide access to its files relating to the plaintiff (the Representation Issue). On 24 July 2018, that interlocutory application was dismissed by consent and the Court ordered by consent that that the defendant pay the plaintiff's costs of opposing the defendant's interlocutory application. (b) On 4 October 2018, the Court handed down its judgment in Aussie Hoist No 1 which dismissed the plaintiff's originating application to set aside the statutory demand, and ordered that the plaintiff pay the defendant's costs.

Relevant principles 3 The relevant principles as to whether the Court will order lump sum costs are helpfully set out in Innes v AAL Aviation Limited (No 2) [2018] FCAFC 130 (Innes) at [12]-[18] per Tracey, Bromberg and White JJ and can be summarised as follows. 4 Section 43(1) of the Federal Court of Australia Act 1976 (Cth) confers a general power on the Court to award costs. Section 43(3)(d) confers on the Court an express power to award a party costs "in a specified sum" and r 40.02 of the Federal Court Rules 2011 (Cth) (2011 FCRs) permits a person entitled to costs to apply for an order that the costs "be awarded in a lump sum, instead of, or in addition to, any taxed costs". The purpose of these provisions is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120; Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; 253 FCR 403 at [15]. 5 The Federal Court Costs Practice Note (GPN-Costs) issued by the Chief Justice on 25 October 2016 sets out the Court's preference to make a lump-sum costs order wherever it is practicable and appropriate to do so (see [3.3] and [4.1]). 6 Innes summarises the principles from relevant case law as follows: 15 In Paciocco, the Full Court noted a number of matters concerning the making of lump sum costs orders, including: (a) although the Court may assess the costs on a lump sum basis, this does not preclude it from undertaking a close assessment of the costs relating to a particular issue or a particular category of costs, should the Court consider it appropriate to do so, at [18]; and (b) the making of a lump sum order may be especially appropriate in a large and complex commercial matter, having regard to the time, trouble, expense and aggravation of a taxation, and with a view to achieving early finality, at [20]. 16 In Fewin Pty Ltd v Burke (No 3) [2017] FCA 693 at [10]-[14], Markovic J summarised a number of matters bearing upon the exercise of the Court's power to award lump sum costs. These included (in addition to those mentioned in Paciocco): (a) the discretion to award lump sum costs is unconfined and may be exercised whenever the circumstance is warranted; (b) the financial capacity of the party liable to pay the costs is pertinent because of the prospect that the additional costs of a taxation will impose a significant burden on the party in whose favour costs are ordered without real prospects of that party recovering those costs; and (c) the complexity of the proceedings may make it more efficient for the judge hearing the matter to determine the issue of costs rather than leaving it to a taxation before a Registrar. 17 Many of the authorities have recognised that the starting point for the fixing of lump sum costs is the charges rendered by the costs applicant's solicitors. However, the authorities also recognise that the costs fixed should be proportionate to the nature, including the complexity, of the case: Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506 at [18] (Kenny J). See also Hislop v Paltar Petroleum Ltd (No 4) [2017] FCA 1632 at [7] (Gleeson J). 18 Finally, we respectfully agree with the statement of Markovic J in Fewin v Burke (No 3) at [61] that, in assessing quantum, "the Court is entitled to take into account the evidence that is before it; its own observations of the proceedings and the judge's own assessment experience". …

The plaintiff's submissions 7 The plaintiff submitted that it is appropriate that there be lump sum costs orders in relation to the two costs orders made in these proceedings. It submitted that, given the relatively protracted nature of the defendant's interlocutory application and the relatively short nature of the hearing of the plaintiff's originating application, the parties' costs of both applications will be the same or close to each other and will offset each other. The plaintiff filed an affidavit dated 22 October 2018 by its instructing solicitor by way of response to the defendant's lump sum costs application. The affidavit provided a costs summary in relation to the costs order made in the plaintiff's favour on 24 July 2018. In effect, the plaintiff sought to have the costs payable to it pursuant to the 24 July order offset against its liability to the defendant under a lump sum costs order.

The defendant's submissions 8 The defendant submitted that the present case is a "simple" costs scenario, namely, a short and simple case where straightforward orders are sought on a simple party and party basis, citing GPN-Costs at [4.6]. As the plaintiff is potentially insolvent and the defendant has been owed money for some time, a lump sum order will avoid further cost and delays of a formal taxation process, so it was submitted.

Costs claimed by the defendant 9 The defendant filed a Costs Summary as required by GPN-Costs in the form of an affidavit of Kym David Ryder sworn on 11 October 2018. Mr Ryder is a partner in the firm of O'Loughlins Lawyers and had principal care and conduct of the matter on behalf of the defendant. His affidavit was described to be made "in support of an application for a lump sum consolidated costs order, i.e. for the costs owed to the defendant". 10 The defendant claims an amount of $30,963.60 as the lump sum cost recoverable by the defendant against the plaintiff, comprised of the following: (a) $15,692.6 (excl GST) in party-party costs; (b) $2,000 (excl GST) for work performed in connection with the application for lump-sum costs; (c) $1,500 (excl GST) representing an amount for "skill, care and responsibility" of Mr Ryder; and (d) $11,771 in disbursements (excl GST), including counsel's fees.

Solicitors' fees 11 Mr Ryder deposed that work performed by personnel at his firm were as follows: (a) 30 hours at $500/hour, performed by Mr Ryder, a Partner and lawyer with more than 10 years of experience post admission; (b) 16 hours at $400/hour, performed by Ms McIntyre, Senior Associate and lawyer with more than 10 years of experience post admission; (c) 16 hours at $290/hour, performed by Ms Harris, a lawyer with less than 1 year of experience post admission; and (d) the remaining 1% (or thereabouts) of work performed by lawyers and fee-earning support staff who had relatively minimal involvement with the matter. 12 Mr Ryder stated that there were three principal categories of work performed by his firm in this matter which incurred the following costs: (a) the principal dispute in respect of the plaintiff's application to set aside the defendant's statutory demand, on which the defendant succeeded: $21,368 (excl GST); (b) the Representation Issue in relation to the defendant's interlocutory application, on which the plaintiff succeeded: $2,546 (excl GST); and (c) items which were a combination of the principal dispute and Representation Issue: $2,100 (excl GST). 13 Mr Ryder claimed that the defendant is entitled to claim $22,418 in solicitors' fees from the plaintiff for the following work performed: (a) on the principal dispute: $21,368; plus (b) one-half of the items which were a combination of the principal dispute and Representation Issue: $1,050. 14 Mr Ryder then applied a 30% discount to calculate party-party costs in the amount of $15,692.6 (excl GST). As noted above, he also claimed $2,000 (excl GST) for work performed in connection with the application for lump sum costs (estimated 4 hours at Mr Ryder's charge rate of $500/hour) and $1,500 (excl GST) for "skill, care and responsibility" (estimated 3 hours at Mr Ryder's charge rage of $500/hour).

Disbursements 15 The $11,771 (excl GST) of disbursements claimed by the defendant comprised: (a) $11,375 (excl GST) in counsel's fees rendered by Mr Michael Heath at a rate of $500 per hour to a maximum of $4,000 a day; and (b) $396 in airfares for Mr Ryder's attendance at the hearing in Sydney on 26 September 2018.

Costs claimed by the plaintiff 16 As noted above, the plaintiff filed a Costs Response as required by GPN-Costs in the form of an affidavit dated 22 October 2018 by Mr Owen, who is a senior associate at Shaw McDonald Lawyers and had primary carriage of the matter on behalf of the plaintiff. 17 The plaintiff claimed an amount of $10,941.50 (excl GST) as the lump sum cost recoverable by the plaintiff against the defendant, comprised of the following: (a) Party-party costs: $3,741.50 (excl GST); (b) Mr Owen's skill, care and responsibility: $600 (excl GST); and (c) Disbursements: $6,600 (excl GST).

Solicitors' fees 18 Mr Owen deposed that work performed by personnel at his firm in respect of the Representation Issue were as follows: (a) $210 (excl GST) for Mr Lance Brennan, representing 0.6 hours at his charge rate of $350/hour. Mr Brennan is a director of Shaw McDonald Lawyers with approximately 40 years post-admission experience. Mr Owen described Mr Brennan's work on the matter as "nominal" and involving a brief review of the Representation Issue and some materials prepared by Mr Owen; (b) $4,030 (excl GST) for Mr Owen, representing 14.5 hours at his charge rate of $300/hour. Mr Owen is a senior associate with approximately 5 years post-admission experience and his work constituted approximately 85% of the total time spent on the Representation Issue; and (c) $405 (excl GST) for Mr Alex Carolan, representing 2.7 hours at his charge rate of $150/hour. Mr Carolan is a law clerk whose work was described as limited to the preparation of the list of authorities and court books for the purpose of the hearing of the Representation Issue. 19 Mr Owen also claimed $700 (excl GST), representing approximately 2.2 hours for his work in determining the costs of the plaintiff and preparing the Costs Response. 20 Thus, the total costs claimed by the plaintiff in respect of both the Representation Issue and the lump sum costs application is $5345 (excl GST). Mr Owen then applied a 30% discount to calculate party-party costs in the amount of $3,741.50 (excl GST). 21 Mr Owen also claimed $600 (excl GST) commensurate with 2 hours of his time for his "skill, care and responsibility". Mr Owen deposed that he sought this amount on the basis that the allegations of conflict giving rise to the Representation Issue were not particularised and thus required careful and extensive review of files dating back as far as six years, to ensure that the solicitors for the plaintiff had never possessed information which would give rise to the conflict alleged.

Disbursements 22 The $6,600 (excl GST) of disbursements claimed by the plaintiff was comprised solely of counsel's fees rendered by Mr Michael Bennett on the Representation Issue.

The plaintiff's response to the defendant's Costs Summary 23 Mr Owen disputed the $1050 claimed by the defendant as representing "one half of the combined representation/principal dispute issue" (see [13(b)] above), on the basis that it was not explained which items purportedly served to advance which of the disputes between the parties or how such items commonly related to disputes that were distinct in nature. 24 Mr Owen further submitted that the costs recoverable by the defendant should be reduced to reflect the fact that: (a) Mr Michael Mulqueen's affidavit filed on 13 April 2018 contains approximately 100 pages of irrelevant material (pp 108-209); and (b) Mr Michael Mulqueen's affidavit filed on 3 July 2018 does not appear to contain any material that was relevant to the issues required to be determined by the Court. 25 Annexed to Mr Owen's affidavit is a Schedule which sets out the plaintiff's calculations of the amounts payable as a result of the proceedings and the net result. That Schedule is as follows: Summary of costs claimed by defendant [as amended by the plaintiff] Principal Dispute Issues: $21,368.00 (less $10,941.50 payable to Plaintiff) = $10,426.50 [sic] One half of Mixed Issues: Disallowed Subtotal: $10,426.50 Less discount at 30%: $6,725.40 Subtotal: $3,701.10 Plus disbursements: $11,771.00 Plus care and consideration: $1,500.00 Plus preparation of Costs Claim: $2,000.00 Total: $18,872.10 (less say 5% for irrelevant material filed by defendant) Total: $17,929.10

Consideration and disposal of lump sum costs application

Should a lump sum costs order be made? 26 Both parties agreed that a lump sum costs order should be made. The Court considers that it is appropriate to proceed with a lump sum costs assessment to avoid further cost and delays of a formal taxation, given that the nature of these proceedings is relatively straightforward and the details provided by the parties are sufficient to enable the Court to make assessments on a lump sum basis.

Assessment of lump sum costs for the defendant 27 In assessing the appropriate lump sum costs which should be ordered, the Dictionary in Sch 1 of the 2011 FCRs defines "costs as between party and party" to mean only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation. The assessment of whether claimed costs should be so characterised should take into account factors including the nature and complexity of the litigation, the conduct of the parties, requirements of the Court and proportionality (see Innes at [37] and the principles summarised at [6] above). 28 In the present case, the nature of the litigation was straightforward with the hearing taking the course of half a day and not involving any cross-examination of witnesses. In these circumstances, I do not consider that all of the costs claimed by the defendant can be regarded as fair and reasonable. In particular, I consider that the costs claimed for the principal dispute issue are too high and are disproportionate to the relatively simple nature of the proceedings. I consider the 30% discount applied by Mr Ryder to be too low and will substitute a 40% discount, which allows the defendant to claim $13,450.80 in solicitors' fees with respect to the principal dispute. 29 Similarly, I will apply a 40% discount on the $2,000 (excl GST) claimed for work performed in connection with the application for lump-sum costs. I allow $1,200 in this respect. 30 With respect to the defendant's claim for "skill, care and responsibility", it is unclear on what basis this claim is made. GPN-Costs states at [5.15]: In appropriate cases, it is customary for bills to contain some very brief commentary regarding any loading for "skill, care and responsibility" or with respect to exceptional circumstances (eg. clarifying how costs have been claimed as part of an issue-based costs order). The Court is willing to permit such clarifications only if they are essential for the proper understanding of the bill and are stated concisely. Any abuse of this exception may result in the Costs Applicant being required to redraft and re-file the bill. 31 The Guide for Preparing a Bill of Costs contained in Annexure B to GPN-Costs contains the following information: Part B - Content 1. When preparing a Costs Summary the deponent should succinctly set out the following information (to the extent relevant) in the Costs Summary: … (i) a clarification of the amount of any "skill, care and responsibility" claimed and how it has been calculated (including any percentage applied) and the bases for it being claimed; … 32 There is no explanation in Mr Ryder's affidavit as to the basis for the claim for "skill, care and responsibility", nor why this claim had been quantified in the amount of $1,500 representing 3 hours at Mr Ryder's charge out rate. There is no evidence to support this claim. Further, given the simple nature of the present proceedings which is acknowledged by the defendant, I do not consider that there are any exceptional circumstances to warrant the application of a loading for "skill, care and responsibility". Accordingly, I reject this claim. 33 I will allow the defendant's claim for disbursements in the amount of $11,771 which includes counsel's fees and airfares for Mr Ryder's attendance at the hearing. I otherwise reject the plaintiff's objections to the costs claimed by the defendant. Hence, I will allow $26,421.80 (excl GST) as the total lump sum cost to which the defendant is entitled, without any offset for the plaintiff's entitled costs, to which I now turn.

Assessment of costs for the plaintiff 34 In my view, it is appropriate to discount the costs of $5,345 by 40% and not 30% as suggested by the plaintiff. I accept the plaintiff's claims in the amount of $600 for "skill, care and responsibility" in circumstances where Mr Owen's affidavit explained the basis for that claim. Otherwise, I accept that the elements of the plaintiff's claim for costs are reasonable, including the claim for disbursements. 35 I will therefore allow $10,407 (excl GST) as the total lump sum cost to which the plaintiff is entitled. This should be offset against the defendant's entitlement.

Conclusion 36 For these reasons, the Court considers that the defendant is entitled to lump sum costs in the amount of $16,014.80 (excl GST) which is arrived at as follows: (a) $26,421.80 (excl GST), being the lump sum cost to which the defendant is entitled, prior to applying any offset for the plaintiff's entitled costs (see [33] above); less (b) $10,407 (excl GST), being the lump sum cost to which the plaintiff is entitled (see [35] above). 37 Accordingly, the plaintiff must pay the defendant $16,014.80 (excl GST) in lump sum costs. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.

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