Mr Inglis
13 By way of background, we were told that the costs incurred by the Bank in retaining Mr Inglis were very substantial. To a point, we can see that ourselves from his reports and the nature of the extensive exercise he undertook. Plainly, the tasks carried out by Mr Inglis involved a major undertaking, and the costs incurred by the Bank in retaining him must be considerable. That said, it will be apparent from our earlier reasons that Mr Inglis' evidence was central to the Bank's defence and that ultimately acceptance of his evidence led to this Court upholding the Bank's appeal ([151]-[187]). In addition, it is to be noted that Mr Inglis' evidence was clearly relevant to other claims made by Mr Paciocco. These matters are to be considered in the context of a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("the Act") where the Bank, if unsuccessful, faced claims giving rise to a very substantial sum. On the face of it, the Bank is entitled to the costs of retaining Mr Inglis.
14 Despite the apparent force of these matters, Mr Paciocco submitted that there was a prima facie or arguable case that the Bank's costs should not include its costs of retaining Mr Inglis. We think that the submission was refined in the written submissions so that it was not that all of the Bank's costs of retaining Mr Inglis should be excluded, but rather a substantial portion of them because there came a point when the Bank should have instructed Mr Inglis to cease further work.
15 We say a prima facie or arguable case because the principal order sought by Mr Paciocco in relation to the Bank's costs of retaining Mr Inglis, was for an inquiry under r. 40.06 of the Federal Court Rules 2011 (Cth) ("the Rules") in relation to the Bank's costs of retaining Mr Inglis. That Rule is in the following terms:
40.06 Costs improperly, unreasonably or negligently incurred
A party may apply to the Court for an order:
(a) that any costs that have been improperly, unreasonably or negligently incurred be disallowed; or
(b) directing an inquiry whether any costs have been improperly, unreasonably or negligently incurred and providing for the costs of such inquiry.
Mr Paciocco asks that that inquiry be conducted by the primary judge.
16 In the alternative, Mr Paciocco seeks an order that the question of the Bank's costs of retaining Mr Inglis be referred to the primary judge. Although Mr Paciocco's submissions were largely directed to these two possibilities, he had a full opportunity to address the issue of the Bank's costs of retaining Mr Inglis should this Court deal with the issue.
17 Mr Paciocco developed his submission by reference to a number of events which took place before the primary judge in the associated or allied proceeding involving Mr Andrews (and others) and the Bank (VID 811 of 2010), and then in the proceeding commenced by Mr Paciocco. A summary of these events is as follows.
(1) The proceeding between Mr Andrews and the Bank was commenced on 22 September 2010 by a Fast Track Application and Fast Track Statement and, in paragraph 4 of the latter document, the applicants put forward a proposal for the preliminary determination of certain issues.
(2) On the same day the Fast Track Application and Fast Track Statement were served on the Bank, the solicitors for the applicants put forward a proposal for a conference between the parties before the initial directions hearing or scheduling conference.
(3) On 6 October 2010, the solicitors for the Bank wrote to the Court, with a copy sent to the applicants' solicitors, objecting on various grounds to the proceeding being in the Fast Track List, including an objection on the ground that the case would involve a substantial body of expert evidence.
(4) On 11 October 2010, the solicitors for the applicants wrote to the Bank's solicitors stating that there would not necessarily be a dispute requiring, as the Bank had asserted, "a considerable body of accounting, economic and other evidence, involving a number of experts on both sides".
(5) At the scheduling conference before a judge of this Court on 4 November 2014, counsel for the applicants said that his clients would be keen to avoid a "huge body of expert evidence" and would be asking the Court to consider the exercise of various powers to achieve that prospect (e.g., a Court appointed expert or a case management conference where admissions might be made).
(6) At a further scheduling conference before a judge of this Court on 15 December 2010, the applicants sought orders for the determination of separate questions and the appointment by the Court of an expert. The Bank opposed both proposed orders. The Bank foreshadowed that Mr Inglis might need up to 20 months to assess the operational costs, capital allocation and other funding costs which the Bank considered relevant to its defence of the applicants' claims. At the conference itself, counsel for the applicants suggested that there was unlikely to be a dispute about the quantum of the costs and that the dispute was likely to be about which costs should be brought to account. He suggested the appointment by the Court of an expert and the formulation of questions to be determined before hearing other matters.
(7) There was a directions hearing before a judge of this Court on 10 February 2011. Prior to the hearing, the applicants filed written submissions in which they contended:
(a) that the exercise to be undertaken by Mr Inglis would involve a great deal of time and money;
(b) the Court and the parties must have regard to ss 37M and 37N of the Act;
(c) the Court has a number of mechanisms available to it which if exercised would avoid the need for the exercise proposed by Mr Inglis, including the formulation of separate questions on the penalties issue;
(d) the types of costs incurred by the Bank which are relevant to the issues in the proceeding could be determined before embarking on the time-consuming and expensive process of calculating the quantum of such costs;
(e) if it became necessary to have detailed expert evidence, there should only be one expert and that expert should be appointed by the Court (O 34, r 2 of the Federal Court Rules 1979 (Cth) ("the 1979 Rules")), or the Court should appoint a referee (s 54A of the Act; O 72A of the 1979 Rules).
(8) On 10 February 2011, Mr Inglis was examined by the judge (not the primary judge) who then had the proceeding in his docket. It is fair to say that, at the hearing, counsel for the applicants said that, providing some basis was provided for it, the applicants may be prepared to admit the figures that were greater than the Exception Fees, but not that the particular costs, referred to as "full absorption costs" as distinct from "incremental costs", were relevant to the issues in the case.
(9) On 22 February 2011, the applicants filed a notice of motion in which they sought an order for the determination of separate questions.
(10) On 1 March 2011, the Bank filed an affidavit in the proceeding to which a letter from Mr Inglis dated 13 February 2011 was annexed. Mr Inglis gave an estimate of 13 months to complete his task.
(11) The primary judge (now the docket judge) heard submissions on the applicants' notice of motion on 7 March 2011, and judgment was handed down on 19 April 2011: Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 388; (2011) 281 ALR 113. The primary judge ordered the determination of separate questions, although they were different from the questions proposed by the applicants.
(12) At a directions hearing on 5 May 2011, counsel for the Bank told the primary judge that it proposed to instruct Mr Inglis to continue his work while the separate questions were being determined. The primary judge told counsel for the Bank that the Bank should rethink that approach.
(13) The primary judge answered the separate questions on 5 December 2011: Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 1376; (2011) 211 FCR 53. The applicants applied for leave to appeal from her Honour's orders and that application was removed into the High Court. Leave to appeal was granted and her Honour's orders were varied by the High Court on 6 September 2012: Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205.
(14) On 14 March 2013, Mr Paciocco commenced the proceeding from which the appeal to this Court was brought.
(15) At a directions hearing on 19 April 2013, counsel for Mr Paciocco told the Court that there was unlikely to be a dispute about Mr Inglis' figures as distinct from whether the costs in dispute should be taken into account.
(16) The proceeding commenced by Mr Paciocco was heard by the primary judge in December 2013.
18 It is not clear from the written submissions whether Mr Paciocco makes the submission that the Bank should be deprived of its costs of retaining Mr Inglis because an expert should have been appointed by the Court. If that submission is being put, we would reject it. The short answer to the submission is that the Court declined to make such an order.
19 As we have said, the gravamen of Mr Paciocco's challenge related to the scope of the exercise undertaken by Mr Inglis, not the fact that he was retained. Mr Paciocco put two propositions.
20 First, he contended that the Bank should have instructed Mr Inglis to do sufficient work to be able to provide an estimate of the "full absorption costs" and that, when that was done, it should have approached Mr Paciocco to see if the figures (or conclusions drawn from the figures) could be agreed. We reject that submission. As we have said, the Bank faced a very substantial claim. In fact, we note that counsel for Mr Paciocco told the judge at the hearing on 4 November 2010 that he understood that the proceeding was the largest closed-class action in this Court's history. We think that the Bank was entitled to take a careful and cautious approach, and obtain independent evidence central to its defence. Even if there might be circumstances where a party might be at risk as to costs if he or she did not act as Mr Paciocco suggested the Bank should have acted, this is not such a case. There is no evidence that Mr Inglis who, as the Bank submitted, was performing an original exercise, could have proceeded in the manner postulated. Furthermore, as the Bank pointed out, the applicants in the Andrews proceeding and Mr Paciocco in this proceeding never offered an unqualified undertaking to accept Mr Inglis' general conclusions and, in fact, challenged aspects of his conclusions at the trial (see, for example, [138] (use of 2009 financial year said by Mr Regan to be inappropriate) and [162] (challenge to methodology for calculation of collection costs) of the primary judge's reasons on the substantive issues).
21 Secondly, Mr Paciocco contended that Mr Inglis' work included "wasted costs". Insofar as wasted costs refer to the costs potentially saved had Mr Inglis proceeded in the manner postulated in Mr Paciocco's first argument, the argument is rejected for the reasons already given. Insofar as wasted costs might be costs which fall outside the definition of costs as between party and party in the Rules, Mr Paciocco is already protected by the definition and his rights on a taxation. Mr Paciocco did not identify any other wasted costs in his submissions.
22 We see no reason to order an inquiry or to refer the question back to the primary judge, or to exclude the Bank's costs of retaining Mr Inglis from the costs order in its favour.
23 Before concluding, we mention one other matter. Our conclusions and order clearly bind the parties and it is not open to Mr Paciocco to re-agitate those matters. However, we wish to make it clear that nothing we have said impinges on the normal rights of the parties on a taxation of costs. For example, we have already alluded to the definition of costs as between party and party which means only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation (Schedule 1 of the Rules), and we also note r 40.30 which provides that a taxing officer is not to allow costs that, in his or her opinion, have been incurred or increased through, among other things, unreasonableness. We are not suggesting these rules will or will not be engaged in this case, but simply that they are unaffected by our order and these reasons.