Beach Petroleum NL v Johnson

INTRODUCTION This is an application under O 62 r 4(2)(c) of the Federal Court Rules made by notice of motion by the respondent to the proceeding. The respondent seeks an order specifying that, as to the whole of the costs ordered by me on 8 February 1996 to be paid by the first applicant to the respondent, a gross sum be specified. Portion of the judgment at first instance in the principal proceeding is reported as Brookfield & Anor v Davey Products Pty Ltd & Ors [Extract] (1996) 14 ACLC 303. An appeal to the Full Court of this Court was dismissed (unreported, Full Court, 12 September 1996) as was an application to the High Court for special leave to appeal against the decision of the Full Court ((1997) 8 LegRep SL4a). The hearing at first instance occupied 24 days (or part days). Considerable technical as well as lay evidence was called on each side. Submissions were made orally and in writing. Complicated issues of fact and law were required to be determined. As the present application confirms, the costs of the hearing at first instance were substantial. On 8 February 1996, I delivered judgment in the proceeding dismissing the application and on the same day I made an order as follows: "That the applicant pay the respondent's costs of the application to be taxed if not agreed." During the course of the hearing, the first applicant sought the Court's authority to conduct the litigation using the name of the second applicant. The authority granted to Mr Brookfield was an authority to use the name of the second applicant "at his own expense and risk as to costs". The costs order is to be understood as an order against the first applicant. POWER TO VARY ORDER OF 8 FEBRUARY 1996 The respondent characterised the present application as an application for a further order with respect to the costs of the proceeding. In my view, it must be regarded as an application to vary the order for costs made on 8 February 1996. Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court jurisdiction to award costs in proceedings before the Court and a wide discretion as to the manner in which such jurisdiction is exercised. Order 62 rule 3(1) provides that the Court may exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding. On 8 February 1996, immediately after pronouncing the judgment of the Court, I exercised the Court's powers and discretions as to costs by making the order set out above. Order 62 rule 4 of the Federal Court Rules provides as follows: "(1) Subject to this Order, where by or under these Rules or any order of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs. (2) Where the Court orders that costs be paid to any person, the Court may further order that as to the whole or any part of the costs specified in the order, instead of taxed costs, that person shall be entitled to - (a) a proportion specified in the order of the taxed costs; (b) the taxed costs from or up to a stage of the proceeding specified in the order; (c) a gross sum specified in the order instead of the taxed costs; or (d) a sum in respect of costs to be ascertained in such manner as the Court may direct." The costs order made on 8 February 1996 had the effect that the respondent became entitled to its taxed costs (O 62 r 4(1)). Taxed costs within the meaning of O 62 r 4 are costs taxed on a party and party basis (O 62 r 12; Colgate-Palmolive Company v Cussons Pty Limited (1993)46 FCR 225)). What is now sought is an order that, instead of taxed costs, the respondent is entitled to a specified gross sum. Such an order will be inconsistent with the order of 8 February 1996. For such an order to be made, the costs order of 8 February 1996 will either have to be varied or terminated. Order 35 rule 7 of the Federal Court Rules specifies certain circumstances in which the Court may vary or set aside a judgment or order. One such circumstance is where the order has not been entered. It appears that the costs order of 8 February 1996 has not been entered. The Court thus has a discretion to vary or set aside the costs order of 8 February 1996. I note that in Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, von Doussa J made an order for the payment of a specified gross sum instead of taxed costs notwithstanding his earlier order in the proceeding that, as between certain of the parties, costs be paid on a party and party basis and, as between others, costs be paid on an indemnity basis. His Honour said at 120: "Pursuant to O 62 r 3(1) the Court may exercise its powers and discretions as to costs at any stage of the proceedings, or after the conclusion of the proceedings. In my opinion the Court has power to make a gross sum order at this stage notwithstanding that costs orders were earlier made which envisaged taxation in the ordinary way." IS THE CASE AN APPROPRIATE ONE FOR THE AWARDING OF COSTS IN A GROSS SUM? In Leary v Leary [1987] 1 All ER 261, the Court of Appeal gave consideration to a rule of court which relevantly provided: "(1) Subject to this Order, where by or under these rules or any order or direction of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs. ... (4) The Court in awarding costs to any person may direct that, instead of taxed costs, that person shall be entitled ... b) to a given sum so specified in lieu of taxed costs." Purchas LJ at 265 described the purpose of the above rule as being - "the avoidance of expense, delay and aggravation involved in a protracted litigation arising out of taxation" and concluded that the rule did not envisage that any process similar to that involved in a "taxation" should take place. In Beach Petroleum NL v Johnson, von Doussa J considered that the principles identified by the Court of Appeal in Leary v Leary as being those upon which the power to direct payment of a given sum should be exercised, were also those upon which the power given by O 62 r 4(2)(c) of the Federal Court Rules should be exercised. I take the same view. The evidence of Peter John Norman ("Mr Norman") is that the material which would have to be incorporated into a traditional bill for taxation in this matter is contained in: (a) the work-in-progress records ("the billing-guide") of the respondent's solicitors, which is a 111 page document referring to 1917 separate attendances and containing 1248 individual disbursement records; (b) nine manilla folders, each containing in the order of 500 pages, consisting of correspondence, cost entries, telephone notes, draft documents etc; (c) five lever arch volumes of exhibits; (d) six lever arch volumes containing discovered documents; (e) five lever arch volumes of transcript; (f) seven lever arch volumes containing court documents; and (g) other unspecified material. Mr Norman is an acknowledged expert on taxation of legal costs in South Australia. He estimates that a bill drawn in the traditional way in this matter would contain in the order of 3,000 items, be in the order of 400 pages long and take more than four weeks to draw. I see no reason to doubt Mr Norman's estimates. Mr Brookfield, who appeared personally on this application, opposed the fixing of a gross sum in lieu of taxed costs. He did so on the basis that - "... there are simply too many questions and too many points that I have raised in relation to the way the bill of costs is currently presented." It seems to me that the fact that any taxation of costs in this matter is likely to be controversial and protracted tends, in the circumstances, to favour, rather than tell against, the making of the order here sought. It is important to note that, whilst an order that costs be assessed in a gross sum will not result in the respondent's costs being scrutinised in the same detail as taxation would require, it will allow the points raised by Mr Brookfield to be taken into account in a more general way. Mr Brookfield has placed material before the Court which carefully identifies his concerns with the costs claimed by the respondent. I am satisfied that this is an appropriate case for the making of an order pursuant to O 62 r 4(2)(c) of the Federal Court Rules, and that the order of 8 February 1996 should be varied to provide for the payment of a gross sum. ASSESSMENT OF AN APPROPRIATE GROSS SUM The respondent has placed before the Court the billing-guide. I agree with the submission of the respondent that the billing-guide, together with the respondent's disbursement records, provide an appropriate base upon which consideration can be given to the fixing of a gross sum in lieu of taxed costs. By reference to such documents, the respondent has summarised its claim as follows: Claim for professional fees by the respondent's solicitors for trial .. $228,759.60 Claim for care and conduct at 25% on solicitors' costs but not including photocopying or facsimiles .. $ 57,189.90 Claim for office disbursements .. $ 68,955.44 Claim for counsel fees for trial .. $102,926.00 Claim for witness fees, expert reports, agents' fees and some out of pocket expenses for trial .. $ 92,029.12 Other disbursements for trial .. $ 20,996.79 Claim for counsel and other fees re estimating and reconciling costs .. $ 9,480.80