Beach Petroleum NL v Johnson

I have not made any attempt to set out particulars of the costs orders in the Agfa proceedings as I do not believe that they would be of any assistance in resolving the issues that are in dispute between Canvas Graphics and Kodak. For instance, the Agfa proceedings occupied about 100 sitting days whereas the Kodak proceedings took 47 days. Canvas Graphics faced two opponents in the Agfa proceedings and was only successful against one at trial (although that position was reversed on appeal). Canvas Graphics was successful in the Agfa proceedings both at trial and on appeal, but its potential entitlement to full costs was lost when it was disclosed that it had received a "Calderbank letter" early in the trial and had rejected an offer of settlement in the sum of $200,000. As has earlier been pointed out, its judgment at trial was only increased to $184,630 on appeal. As a result, instead of obtaining an order for costs in its favour, it had to pay 25 per cent of its opponents' trial costs. Finally, the Court has been told repeatedly throughout the history of this litigation that Mr Knox, his family and his group of companies ("the Knox group") are in difficult financial circumstances. Therefore, I have allowed for the fact that the settlement that the parties struck in resolving the costs issues in the Agfa proceedings could have been influenced by the fact that the Knox group might not have had funds sufficient to pay any money that might have been payable by it. ORDER 62 RULE 4 Even though the Court is invited to proceed to determine a lump sum under O 62 r 4, and even though that allows a judge an exercise of discretionary powers, it still remains necessary for that discretion to be exercised judicially. Thus, it remains necessary to bear in mind certain fundamental principles, such as those contained in O 62 r 19: "On every taxation the taxing officer shall allow all such costs charges and expenses as appear to him to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party, but, except as against the party who incurred them, costs shall not be allowed which appear to the taxing officer to have been incurred or increased - (a) through over-caution, negligence or misconduct; (b) by payment of special fees to counsel or special charges or expenses to witnesses or other persons; or (c) by other unusual expenses." It is also necessary to bear in mind what Barwick CJ said in Stanley v Phillips (1966) 115 CLR 470: "The emphasis throughout is upon obtaining an adequate presentation to enable justice to be done: it is not upon the propriety of the steps taken by a litigant to ensure the maximum of success in his own cause. That of course he may do but not, in my opinion, at his opponent's expense."(at 478) Earlier Barton J expressed the same sentiments differently in Donohoe v Britz (No 2) (1904) 1 CLR 662 when he said: "It is a general rule that, as between party and party, the luxuries of litigation must be paid for by those who indulge in them, the necessaries only are to be paid for by the losing side."(at 666) These passages explain why there is, invariably, a substantial gap between party and party costs and solicitor and client costs. On the taxation of a bill of costs on a party and party basis, a taxing officer will allow all necessary and proper costs that have been incurred but not those costs which arise as a result of an overcautious or excessive investigative approach. On the other hand, one would expect that those costs would be allowed on the taxation of a bill that has been prepared on a solicitor/client basis, assuming always that the work was done in accordance with the client's instructions. MR KNOX AND MS JOHNSON Before turning to a consideration of the drafts of the three bills of costs it is appropriate to make mention of the assistance given by Mr Knox and Ms Johnson to Canvas Graphics' legal advisers in the preparation and prosecution of this litigation. It must be acknowledged that Mr Knox took a very active part in the prosecution of Canvas Graphics' case against Kodak. It was apparent to me, as the trial judge, and I do not understand it to be challenged, that Mr Knox actively participated as a "para legal", assisting counsel for Canvas Graphics and its solicitor. Much the same may be said - but with less emphasis - with respect to Ms Johnson, a former employee of one of the companies in the Knox group. I have no doubt that if employees of Messrs White Berman had performed the duties that Mr Knox and Ms Johnson performed many of their services would have properly found their way into an award of party and party costs. However, authority does not favour an award of costs for the work performed by them. In my opinion, the matter has been conclusively ruled upon by the High Court in Cachia v Hanes (1994) 120 ALR 385. In that case the appellant, who was not legally represented, had been awarded costs against the respondent in proceedings in the Supreme Court of New South Wales. On a taxation of his bill of costs, the appellant claimed compensation for the loss of his time spent in the preparation and conduct of his case and for his travelling expenses. These claims were disallowed but he obtained special leave to appeal to the High Court of Australia. The relevant rules that were considered by the High Court were the Rules of the Supreme Court of New South Wales, Pt 52, r 23(2) of which provided that on a taxation on a party and party basis "there shall be allowed all such costs as were necessary or proper for the attainment of justice or defending the rights of the party whose costs are being taxed". c.f. O 62 r 19 of the Federal Court Rules. The High Court, by a majority of five to two, dismissed the appeal holding that the "costs" provided for in the rules did not include time spent by a litigant who is not a lawyer in preparing and conducting his case. The Court held that the costs were confined to money paid or liabilities incurred for professional services. Although it is permissible for qualifying fees to be allowed in respect of a litigant's employees who are witnesses, no reimbursement should be allowed to that litigant for the time spent by his, her or its employees in providing instructions to solicitors: Dalgety Australia Operations Ltd v F F Seeley Nominees Pty Ltd (No 2) (1988) 49 SASR 75 at 92 per Bollen J. Mr Knox and Ms Johnson were not litigants, unlike the applicant in Cachia v Hanes; for practical purposes, they can be regarded as employees or agents of one or other of the companies in the Knox group. But, in my opinion the principles enunciated in Cachia v Hanes nevertheless apply; their work as para-legals is not recoverable. THE PLEADINGS COSTS I turn first to a consideration of the pleadings costs. I will then deal with the appeal costs and finally conclude with a consideration of the trial costs. Kodak submits - and I must say that I agree - that this appeal was a relatively simple matter. I have examined each of the 101 items of costs that are listed in this bill and, in my opinion, it is subject to two material criticisms. Firstly, I believe that items in respect of solicitors' charges should be substantially reduced because the time that has been charged appears excessive in the circumstances. In using the word "excessive" I must make it clear that I am not thereby suggesting any impropriety on the part of the solicitors; I use the word in the sense of the passages that I have quoted from the judgments in Stanley v Phillips and Donohoe v Britz. Secondly, the amount charged for counsel fees is out of all proportion to the relatively simple issue that was involved on the application for leave. The first item in respect of counsel charges was a fee to a Queen's Counsel for perusing the relevant notice of motion and "preparing submissions settling index and conference with client". For this a total of $1250 was charged for five hours work. Two days later the same senior counsel conferred with his instructing solicitor and Mr Knox for an hour at a further charge of $250. It would seem that the Queen's Counsel at about that time became unavailable because other counsel was then briefed in the matter. The next item of charging was a conference between the former counsel and the new counsel for which $160 was charged. Whilst this may be a proper costing to the client on a solicitor and client basis, it is not appropriate to charge it on a party and party costing. It was not Kodak's fault that Canvas Graphics was forced to change counsel Then followed a further seven entries for counsel fees all in respect of the same day, 6 July 1993, covering: · reading transcript; · preparation of arguments; · preparation of summary of arguments; · conference with former counsel; · considering matters raised in the other party's summary of argument · counsel fee; and · fee on brief, including travelling time and waiting time at Court. These counsel fees including the first mentioned fee of $160 amounted to $3,380. Whilst I have made no investigation into these charges at the solicitor and client level, it is obvious that they cannot be sustained at the party and party level. The total of all counsel fees to which reference has already been made total $4,880. Although it is not apparent from a perusal of the draft bill of costs, I was told by counsel for Kodak from the bar table and I accept that Canvas Graphics was represented on the hearing by senior counsel from the Melbourne Bar and junior counsel from the Adelaide Bar (the application for leave was heard in Melbourne). In my opinion the nature of the application for leave was sufficient to justify only junior counsel with a preliminary conference of an hour and a fee on brief including an additional conference of $1,200. With a measure of generosity these could be marked up to a total of $1,500. This would reduce the amount of the bill by $3,380 and when regard is had to my earlier observations that some of the solicitor's costs exceed that which would be reasonable on a party and party basis the amount of $4,000 proposed by Kodak becomes quite reasonable. I would allow a gross sum in respect of the pleadings costs at $4,000. THE APPEAL COSTS This appeal proceeded as a separate action (No SG 45 of 1994) whereas the application for leave was dealt with in Action No SG 22 of 1992. The draft bill of costs in this matter extends over forty eight pages of A4 paper. It must be acknowledged that it would have been a difficult appeal to control. It necessitated an identification of the facts that were or might be relevant to the issues that were ventilated, not only during the course of the appeal, but also on the cross appeal. However, those matters could well be reflected, if necessary, in a figure for "care and conduct". This bill, like the pleadings costs, shows that an immense amount of work was carried out in the course of the preparation for the appeal. Once again there is no need for me to comment on the extent of that work so far as solicitor and client costs are concerned but, as before, it is necessary to remember that in an assessment of party and party costs there is to be an objective assessment made only of that work which was necessary for the proper presentation of the litigant's case. Thus, for example, 12.5 hours were devoted by a Queen's Counsel in the preparation of the notice of appeal at a claimed cost of $1,562.50. I would think that these fees must be reduced by at least two-thirds on a party and party taxation. The subject of "security for costs" can be used as another random example; there were conferences on 21 July (2.75 hours), 24 July (2 hours), 25 July (2 hours) and 26 July 1994 (2.25 hours) on that limited subject. I would have thought one or maybe two hour's attendance by junior counsel would have been sufficient. Another example of counsel fees which, whilst no doubt properly chargeable on the solicitor and client basis, should not be charged on a party and party basis was a fee of $375 to senior counsel to settle the index of the appeal book; such a task is normally the role of junior counsel. Counsel fees, as itemised in the draft bill totalled about $30,000. Even after giving credit for some items that were not allowed by Kodak, such an amount cannot be justified on a party and party taxation. For example, in the period of eight days from 10 October to 17 October 1994 there are counsel fees totalling $9,845 identified only as costs of preparation of submissions. The Registrar of the High Court has rejected the "time-cost" method of charging fees by counsel: see The Legal Reporter Vol 7 No 7 15 April 1986. In a party and party taxation, such costs are covered by the fee of brief, which in appropriate cases, can be increased to make an allowance for cases of extreme complexity. In making a calculation of $25,000 for the appeal costs, Kodak made the following compilations (which are extrapolated from counsel's written submissions): "· The Appeal was heard over two days. Appropriate counsel fees it is suggested are: Mr Morcombe QC fee on brief ... $ 2,500.00 Refresher ... $ 2,000.00 Mr Berman fee on brief .... $ 1,350.00 Refresher .... $ 1,000.00 · An appropriate allowance should be made for conferences between Mr Berman and Mr Morcombe to get up the appeal and draw submissions. The Respondent allows 10 hours for each thus .... Mr Morcombe QC @ $250.00 $ 2,500.00 Mr Berman @ $200.00 $ 2,000.00 · Preparation of the Appeal Books was done by Ms L. Johnson, an employee of Mr Knox and not a legal practitioner. The Respondent assumes, however, that there was some checking by a solicitor and allows 10 hours @ $148.00 $ 1,500.00 · A commercial rate for relatively simple copying is 15˘ per page which for these Appeal Books would result in a charge of $4,797.50. The Respondent allows $ 5,000.00 · Drawing and engrossing of the Notice of Appeal, List of Authorities, affidavits of Knox and Berman, Index to the Appeal Books, Submissions and Reply to Kodak's Submissions being in total sum 800 folios allow $ 6,500.00 Total .... $22,740.00 Allow $25,000.00" In its calculation of the figures which it says should constitute the gross sum payable in respect of the appeal costs, Kodak appears to have been generous in the amounts of $6,850 that it has allowed for fees on brief and retainers; according to the advice given to me by the District Registrar, those figures exceed the amounts that he would have set. There are sixteen items of counsel fees that have been charged for conferences. In Ralkon Agricultural Company Pty Ltd v Aboriginal Development Commission (unreported: judgment delivered 11 July 1986) Forster J said: "In matters of greater complexity two or perhaps even three conferences would be allowed on taxation between party and party. The propriety of allowing any more than one, two or possibly three conferences would be examined very closely indeed." In allowing both senior and junior counsel fees for ten hours of conferences - $4,500 - Kodak has, in my opinion been generous. On the other hand, senior counsel performed other services for which no allowance has been made by Kodak - either at the senior or junior counsel level. Thus, amounts would be allowed on taxation for a counsel's involvement in settling the notice of appeal and taking instructions with respect to, and appearing on Kodak's application for security for costs. There was also a special matter that arose with respect to a confidential transcript; counsel's involvement in that issue would properly be a chargeable item. I am further of the opinion that the sums allowed by Kodak for the preparation of the appeal and for general solicitors' work are insufficient and should be increased. The biggest factor to be taken into consideration is the inadequate allowance by Kodak in its calculations for the basic solicitors' work involved in the preparation of Appeal Books and routine correspondence and attendances. It would defeat the exercise of assessing a lump sum if one were to make an individual analysis of the many entries in this draft bill that justify criticism. However, examples can be given in order to show that there must be a substantial mark down from $170,000. I have already mentioned counsel fees. Another example is the numerous entries dealing with a clerk's attendance for various reasons totalling many thousands of dollars. I do not understand these entries. An example of a bracket of such charges, taken an random, appears in the following extract from the draft bill: " 5/8/94 Clerk attendance to prepare preliminary notes for the appeal for counsel (2 hours) (31) 80.00 5/8/94 Clerk attendance to transcribe preliminary appeal notes (2 hours) (31) 80.00 7/8/94 Clerk attendance to prepare preliminary notes for appeal for counsel (4 hours) (31) 160.00 7/8/94 Clerk attendance to transcribe preliminary appeal notes (4 hours) (31) 160.00 7/8/94 Engrossing preliminary Appeal notes for counsel (392 folios) (15) 784.00 7/8/94 Photocopying Appeal notes for counsel (49 pages) (16) 49.00 8/8/94 Clerk attendance to prepare preliminary notes for the appeal for counsel (4 hours) (31) 160.00 8/8/94 Clerk attendance to transcribe preliminary appeal notes (4 hours) (31) 160.00 9/8/94 Clerk attendance to prepare preliminary notes for the appeal for counsel (4 hours) (31) 160.00 9/8/94 Clerk attendance to transcribe preliminary appeal notes (4 hours) (31) 160.00 10/8/94 Clerk attendance to prepare preliminary notes for the appeal for counsel (9 hours) (31) 360.00 10/8/94 Clerk attendance to transcribe preliminary appeal notes (9 hours) (31) 360.00" Another extreme example was: "6/10/94 Clerk attendance to prepare draft submissions for counsel (8 hours) (31) 1320.00 6/10/94 Clerk attendance to transcribe draft submissions (8 hours) (31) 320.00" There is only one reference in the draft bill of costs where an attempt is made to charge for work performed by Mr Knox; that was an entry marked as a disbursement dated 31 December 1994 which read as follows: "Fees payable to Mr Knox for preparation of appeal (21.5 hours at $40.00 per hour) $860.00." Ms Johnson's name does not appear in the draft at all. But it is my opinion that at least some of the entries that refer to a clerk's attendance are in fact references to work done, either by Mr Knox or Ms Johnson or both. Who, for example was the clerk who attended at the Federal Court to assist counsel on 17 and 18 November 1994? I very much doubt whether the amounts of $240 charged for each day would be allowed on taxation and they most certainly would not be allowed if the clerk was either Mr Knox or Ms Johnson. Counsel for Kodak raised this issue in his challenge to the size of the draft bill; the challenge was there to be met but neither Mr Knox nor Mr Daenke sought to meet it other than to give a general acknowledgment that Mr Knox and Ms Johnson did quite an amount of work throughout the trial and the appeal. These clerk's attendances are, to say the least, abnormal. From my examination of the draft bill, I counted over 140 such attendances for which charges of about $35,000 were claimed. These charges, or at least, the overwhelming majority of them, are not allowable on a party and party taxation. An out of pocket expense of $1,140 was charged to a Mr Lawrence for "marketing and consulting services" and conferences. It is not apparent that such a fee would be relevant to the appeal; it may have been relevant to the trial but that is, of course, a different matter. There is a fee of $19,092 for perusing the transcript of the trial. Despite my acknowledgment that the appeal would have been complex, such a fee cannot be sustained. It was particularised as a perusal of 3873 pages of transcript at two minutes per page or 129 hours. Such an extensive perusal would not have been necessary in any circumstances: the more so when, as was the case here, the same counsel who appeared in the trial appeared on the hearing of the appeal. On the other hand Kodak has made no allowance for the disbursement of $11,420 that is said to be payable to Messrs Chua Crase, a firm of chartered accountants. Mr Martin, a partner in that firm, had given expert evidence in the trial and acted as an adviser to Canvas Graphics throughout the litigation. The entry in the draft bill of costs is as follows: "1/3/95 Fees payable to Chua Crase for professional services for preparation for appeal including meetings with solicitor, counsel and client, reading transcript and decision of Justice O'Loughlin, preparing summaries of financial argument, reading draft submissions and calculations, preparation of information for counsel, review and comments on submissions by cross repellents in relation to financial matters" $11,420.00

It is difficult to express any view with confidence. I would have thought that Kodak would have advanced reasons for disputing this charge - or part of it - in its calculations - but no detail was forthcoming. In the circumstances, there being no particularity supplied in opposition to the charge, I will allow the greater part of this disbursement; my earlier comments about perusal of transcript would apply here also to reduce the bill to some degree. Balancing all these factors, I have come to the conclusion that the figure of $25,000 that has been offered by Kodak is inadequate but that there must be a substantial reduction of the amount claimed by Canvas Graphics. I would allow a gross sum of $65,000. In arriving at this figure I have deducted the disbursements of $860 and $1,140 claimed with respect to Mr Knox and Mr Lawrence, reduced Chua Crase's bill by $3,000 and reduced counsel fees to $17,000. I arrived at this last mentioned figure by taking the amount of $11,350, the total of all counsel fees allowed in Kodak's calculations: I then increased it arbitrarily to cover those areas for which there would have been additional counsel fees. In making my assessment of the solicitors' costs, I commenced by deducting $30,000 of the moneys that had been identified as "clerk's fees"; this immediately reduced the claim to about $90,000. I then further reduced this figure by a third to cover the solicitor/client elements of the bill and the other matters that I have identified. I arrived at a figure of $60,000. But I found it necessary to further reduce this figure of $60,000 for I found when assessing a gross sum for the trial costs, that in one calculation, I had arrived at a figure of $80,000 for the solicitor's costs on the trial. I came to that figure by this means. I commenced with the figure of $156,682 for solicitors' costs in the August 1996 bill. I allowed for the cost of preparing a bill of costs but I substantially reduced the amount claimed for solicitors' costs because of the many "clerk's" attendances. After making allowances for other complaints that I thought were justified, I arrived at a figure of $120,000 which I then reduced by a third because of the solicitor/client element. This would have meant an allowance of $60,000 for solicitor's costs of and incidental to a two-day appeal and an allowance of $80,000 for solicitor's costs of and incidental to a 47 day trial. I therefore reduced the figure of $60,000 to $40,000, to which I then added back counsel fees of $17,000 and other out of pocket expenses of about $10,000. I then rounded that figure down to $65,000. THE TRIAL COSTS PARTY AND PARTY OR SOLICITOR/CLIENT In my opinion, the draft bill of costs for the trial has been prepared on a solicitor and client basis. The detail of the work that was undertaken in preparing this case for trial is very impressive but it does not justify charging everything against the unsuccessful party. It is not a matter of looking at the number of hours work by the solicitors for Canvas Graphics or the extent of the detailed investigation that was undertaken; it is a matter of considering, objectively, what would be a reasonable allowance for the performance of the particular job in hand. The draft bill of costs that was the basis for the claim of costs against Kodak was summarised as follows: Costs $247,635.50 Disbursements $399,365.68 $647,001.18 On the other hand, Mr Daenke, handed up during the course of argument, the August 96 bill which contains details of Messrs White Berman's costs in taxable form. It contains a summary on its first page of costs in respect of eight areas or subject matters. Thereafter there is itemised information in respect of most of those subject matters. The summary is as follows: "Summary of costs and disbursements claimed by White Berman from Canvas Graphics Pty Ltd, Andrew Knox Productions Pty Ltd, Andrew Knox & Associates Pty Ltd, Andrew Knox Holdings Pty Ltd, Mr A McK Knox and Mrs J Knox Account sent by White Berman to the abovenamed on 8 August 1996 with Bills of Costs in taxable form, counsel fee notes and account's account TOTAL: $1,181,564.50 1. AGFA TRIAL 31/1/91 to 26/4/96 Including costs of preparation of Bill and $10,000 care and consideration for whole matter Costs $168,516.50 Disbursements $764.40 2. KODAK TRIAL 2/4/92 to 27/4/96 Including costs of preparation of Bill and $10,000 care and consideration for whole matter Costs $156,682.50 Disbursements $1,451.00 3. AGFA APPEAL 9/6/94 to 27/4/96 Costs $38,894.50 Disbursements $250.50 4. KODAK APPEAL 9/6/94 to 27/4/96 Costs $21,722.00 Disbursements $98.90 5. N MORCOMBE QC 14/11/91 to 29/11/95 Including High Court Special Leave Application Counsel fees $681,748.50 6. CHUA MARTIN (sic) Fees $111,431.80 TOTAL $1,181,554.50" In addition to that summary there was a notation that it had been served in accordance with the order of the Court of 20 December 1996. I do not understand that notation nor have I been able to reconcile this document with the three draft bills of costs. I attempted a reconciliation of the second section "Kodak Trial" showing costs of $156,682.50 with the draft bill of costs for the trial and after examining about the first 300 entries I was able to make the following observations: · generally the two calculations follow the same pattern and most entries in the August 96 bill appear in the draft bill; · however, on far too many occasions, there is an item of charging that is included in the draft bill that has not been included in the August 96 bill. This discrepancy explains why the draft bill claims costs in the sum of $247,635.50 whilst the other claims only $156,682.50. If solicitors submit a bill to their several clients for solicitor and client costs of $156,682.50 it is incomprehensible that one of those clients would be entitled to $247,635.50 on a party and party taxation. The same critical comment would be made even if the figure of $156,682.50 was only for party and party costs. But this cannot be so because the bill was submitted to the clients on 8 August 1996, well before the order of the Court on 20 December 1996. The only item that would partially explain this discrepancy would be the figure to be allowed for the preparation of the bill in taxable form but I know of no other explanations. Mr Daenke pointed out that the August 96 bill does not include any amount for the professional fees charged by Messrs Duesburys. They are included in the draft bills of costs and amount to many tens of thousands of dollars. But their inclusion in the August 96 bill would not explain the difference between solicitor's costs of $156,682.50 and solicitor's costs of $247,635.50 for those fees would have merely been identified as items of disbursements. COSTS OF PREPARATION OF THE BILL Mr Heywood-Smith, counsel for Kodak, raised numerous other complaints about the draft bill of costs for the trial. He complained of the charge of about $29,000 for the preparation of the bill of costs. He pointed out that on 20 December 1996, the Court had addressed the prospect of making an order for the payment of a gross sum for costs; for that purpose the Court had ordered the preparation of a detailed summary of the costs claimed but emphasised that it need not be in taxable form. However, Canvas Graphics long before that direction was given, had drafted its bill of costs and, as the successful party in the trial and on the appeal, it was within its rights to do so. Canvas Graphics is entitled to charge for the preparation of the draft bill but only to the extent that it includes items that are allowable on taxation. As the amount claimed must be materially reduced for reasons that are set out hereunder, so also must be the amount that is to be allowed for preparing the bill.

COSTS IN FAVOUR OF KODAK Mr Heywood-Smith next submitted that charges had been included in the draft bill in respect of which orders for costs had been made in favour of Kodak. There is substance in his complaint. In examining the Court file, I ascertained that in July 1992 Kodak had complained that Canvas Graphics was intending to publish a press release that was highly critical of Kodak's equipment. Kodak submitted that the release was defamatory and was successful in seeking injunctive relief. It also obtained an order for costs in respect of that issue. Notwithstanding, there have been included in the draft bill of costs for the period 15 to 18 July 1992, twenty items of charging that relate to this issue; they total $443. None of them is allowable on taxation. I located another occasion on which this complaint was justified occurred. On 11 December 1992 Kodak was successful in obtaining an order for the delivery up of certain equipment; it also obtained an order in its favour for costs. Yet, in the draft bill of costs, Canvas Graphics would seek to obtain on a taxation an award against Kodak of $1,875 being the fees charged by its counsel on that day in respect of that matter. These charges that I have identified would, of course, have only been some of the charges incurred in relation to these topics; all of them must be excised from the bill. There may have been other areas where this complaint was justified but counsel did not draw my attention to any of them and I do not consider it appropriate, in an exercise of this nature, to have the Court vouch for items of costing which only have the potential for dispute. Even when the object of an exercise is to fix a gross sum for costs, there is an obligation on a complaining party to give some particulars in support of its complaint. NO ORDER AS TO COSTS Mr Heywood-Smith submitted that costs have been included in the draft bill of costs in respect of directions hearings when, on those hearings, the Court had not made any order as to costs. He handed up a list (of three pages) showing the dates of attendances and a notation with respect to any costs order that might have been made. On several occasions the endorsement read "no order made as to costs". My associate checked the "Record of Proceedings" on the Court file and verified the accuracy of some, but not all, of the notations. For example, there was a directions hearing on 29 June 1992, the second of the entries in the list. The endorsement read "no order made as to costs". However, the Record of Proceedings shows that the order was "Costs in the Cause". When this was drawn to my attention, I examined by bench book; it also contained the entry "Costs in the Cause". What I have just described occurred again in respect of the directions hearing on 10 August 1992. Another error in the notations relates to a directions hearing on 10 February 1993. In Kodak's list there is an endorsement "no order made as to costs"; but the Record of Proceedings shows that costs were reserved on that date. As I have not attempted to check every entry that appeared in Kodak's list, I do not suggest that my commentary is complete. There were, however, several occasions when the subject of costs was not mentioned in the Record of Proceedings. In respect of those occasions I do not think that it is correct to assume, as Kodak has alleged, that these attendances and the costs relative to them are not to be addressed in the exercise that I am presently undertaking. On a strict taxation I would expect the taxing officer to examine each attendance and any associated charges. If, for example, it was part of or incidental to a subject matter in respect of which there was an order that one party pay the other party's costs, then I would expect the taxing officer to treat that item in favour of the party who enjoyed the order for costs. But subject to that observation, unless of course there was a positive order that there be "no order as to costs", then I would expect the costs of the hearing to follow the outcome of the trial. I do not propose to make any reduction under this particular heading. ACCOUNTANTS' CHARGES Kodak further complains about the amounts that have been included in the draft bill of costs in respect of accountants' charges. The written submissions of Kodak on these charges are as follows: "· A fee of $47,759.75 is claimed by way of expert fees for Chua Crase. Mr Martin was in the witness box for 3˝ days and a number of expert reports were prepared. The account is in no way particularised and is clearly excessive. · A further fee for experts is made in respect of Duesbury's of $35,720.00. This is exclusive of the witness fee of $900.00 claimed for Mr Ferguson to give evidence for one day. No particulars are provided." I do not know what the Court is expected to do. Is it expected to agree that the charges are excessive and allow some lesser figure? If so what figure? I would have expected Kodak to give notice that it was challenging these fees: that it wanted the accountants to verify them: perhaps to have them available for cross-examination: perhaps to call their own expert witnesses. Certainly I expect more than a mere assertion that the account is "clearly excessive". The Court is not equipped to make its own investigation of accountants' charges; it can perform this exercise with counsels' fees and solicitors' charges because of its familiarity with them over years of experience. Normally in assessing an expert's charge the Court would be assisted by having before it the professional body's rates of charge and evidence sufficient to form an opinion that the work charged for was reasonably necessary. Kodak has not attempted to supply any of this information. Indeed, I do not know whether Canvas Graphics knew, in advance, that these items of charging would be challenged. I will not reduce these claims. COUNSEL FEES Kodak has made a calculation of counsel fees on the basis of senior counsel being present during the trial for thirty six days and junior counsel being present for twenty seven days. Kodak has allowed $1,100 for a fee on brief and $825 for refreshers for senior counsel and $880 fee on brief and refreshers of $660 for junior counsel. These amounts are inadequate; they are based on the Supreme Court scale. For some years now, since the decision of Forster J in Ralkon (supra) it has been the practice of taxing officers in the Federal Court to allow larger fees for counsel than those appearing in the Supreme Court's guide. The District Registrar has informed me that the appropriate figures in 1993 would have been a fee on brief of $1,800 and refreshers of $1,200 for senior counsel and conference fees of $160 per hour. The counsel fees that have been charged for both counsel total about $300,000; they must be dramatically reduced, but not as much as Kodak have submitted. I propose to use the number of days that Kodak have supplied but to apply the rates given to me by the Registrar. According to my calculation that comes to $66,350 for both counsel. This compares with the figure of $48,015 that was advanced by Kodak. To this amount there should be added counsel fees for conferences, counsel fees for settling pleadings and other documents, and, finally counsel fees for attendances on disputed directions hearings and interlocutory applications. In this area I must be arbitrary. A great part of counsels' fees in this matter have been charged on a "time" basis as well as on the basis of "fee on brief". The traditional method is accepted as being that described by Fullagar J in Magna Alloys & Research Pty Ltd v Coffee (No 2) (1982) VR 97 at 112: "The time honoured basis of charging counsel's fees in respect of a court hearing remains the basis of a brief fee and refreshers of two-thirds of that fee, and prima facie this is the basis upon which counsel's fees will be taxed as between party and party. There must, in my opinion, be an onus upon the party who seeks a departure on taxation from that traditional and usual basis, and the onus must be one of satisfying the taxing officer that the traditional method of fee marking could not reasonably have been followed in all the circumstances of the case." Forster J quoted this passage with approval and followed it in Ralkon. But as Branson J noted in Brookfield v Davey Products Pty Ltd (unreported: judgment delivered 19 December 1997) there is a modern tendency for counsel to move towards the "time/cost" basis. Kodak allowed $900 for three early directions hearings but for no others; it also allowed for twenty conferences for senior counsel at $190 per hour but nothing for junior counsel. In my opinion, Kodak was liberal in its rates but otherwise inadequate in its allowances. I would allow a further $10,000 for counsel fees thereby allowing, in all $76,350. DISBURSEMENTS Mr Heywood-Smith next complained that in the draft bill of costs disbursements were said to total $399,365.68 whereas they only totalled $338,810, a discrepancy or excessive claim of about $60,000. The bill was divided into eight sections representing eight sequential periods of time. In each of the eight sections disbursements and out of pocket expenses were listed and tallied at the end of each section. No attempt was made by Kodak to justify this claim of overcharging; it would have been a simple matter to identify one or more of the sections in which the alleged errors occurred. It was left to the Court to make an independent investigation. The result of that investigation was that the figures claimed in the first six and the last section of the bill either tallied or were sufficiently close not to warrant rechecking. There was a material error in the seventh section. The amount claimed was $64,873.43 but the additions actually totalled $66,671.63, thereby favouring Canvas Graphics. There is no further information before the Court that would support the allegation that this charge is excessive. In those circumstances I do not intend to have any further regard to this complaint. ERROR IN CALCULATIONS Mr Knox claimed that in the exercise of its discretionary powers, the Court should take into account, in favour of Canvas Graphics, that the Full Court, in arriving at its decision, made an arithmetical error of $10,000. Counsel for Kodak would not concede that such an error had been made and submitted that I did not have jurisdiction to interfere - even indirectly - in a Full Court matter. If Canvas Graphics believed that it was entitled to a further $10,000 its only recourse, so it was claimed, was to apply to the Full Court to have the matter re-opened. It seems to me that I must accept the submission that has been made on Kodak's behalf. Even if it were apparent that a mistake has been made (as to which I express no opinion) I do not have the authority to interfere with an order of the Full Court. CLERK'S FEES Finally, there is the ubiquitous clerk whose attendances are said to total $32,700; the greater part of those must be excised; there are witness fees for Mr Knox that are said to be excessive. There are several items totalling about $10,000, claimed in respect of Mr Knox that would not be allowable. They include as well as a witness fee that would be allowable, attendances and costs of reports, none of which would be allowable. Some of the disbursements in respect of fees paid to witnesses for time spent in the preparation of witness proofs are also extravagant. CALCULATION OF A LUMP SUM Kodak, in presenting its written submissions on the composition of a lump sum bill conveniently listed subject matters such as drawing pleadings, giving and taking discovery and so on. It applied global figures to sixteen such headings. I have found that to be a convenient way in which to handle this matter. I am of the opinion that, with the following exceptions, the figures allowed by Kodak appear to be reasonable. The exceptions are as follows: · I would increase the allowance of $20,000 for accountancy fees by a further $63,279 because of Kodak's failure to challenge these fees in an appropriate manner. Kodak, in its written submissions, merely says that it "considers that an appropriate allowance" would be $15,000 and $5,000 respectively. I do not know how Kodak arrived at those figures. Perhaps the amounts claimed are excessive but there is nothing in the narrative in the bill which points to an entry or part of an entry not being allowable on a taxation. I would therefore allow both these disbursements. · I would increase the amount for counsel fees by $23,635 to $76,350. · Finally, I would allow an extra $12,000 to cover out-of-pocket expenses for which no allowance was given and for solicitors' work generally. As a result I would increase Kodak's figure - $145,000 - by (say) $99,000 to $224,000 and allow two-thirds of that, viz $162,650. To that sum I add $20,000 for "care and conduct" and deduct $18,325, the total of the amounts owing to Kodak. I therefore fix the resultant sum of $164,325 as a gross sum by way of costs payable by Kodak to Canvas Graphics. Those costs include all matters up to and including this day and all matters of and incidental to the orders this day made. CONCLUSION When one stands back and reflects upon the ultimate outcome of this matter, there is an applicant, successful on trial and on appeal in the sum of $273,591, quantifying its costs on a party and party basis for the trial at $647,001.18. Whilst there must always be provision made for special or unusual cases, in the majority of cases and this is one, the Court must exercise its discretionary powers so as to ensure that the costs that are awarded to a successful litigant bear some relationship to the measure of its success. It is essential that every effort be made to contain costs. Although the trial was complex - mainly because of the need to explore the technical attributes of the equipment that Kodak had sold to Canvas Graphics - it still remained a basic cause of action in which a dissatisfied purchaser sued its supplier because of faults in the equipment that had been supplied to it. In such a case, it is necessary to keep a firm control on costing issues. They must not be permitted to explode as they obviously have done in this case. In my opinion, in fixing a gross sum for costs in this matter, the Court should take these factors into account so as to ensure that the costs that are awarded bear some relationship to the size of the applicant's victory. THE RIGHTS OF MESSRS WHITE BERMAN The right of solicitors, who are not parties to the proceeding, to seek relief in the proceeding in respect of their costs was recently discussed by Lehane J in Roam Australia Pty Ltd v Telstra Corporation Limited (unreported: 22 September 1997). In that case the parties to the litigation had settled their differences on confidential terms but Telstra was required to make a payment to the applicant Roam. Roam's solicitors filed a notice of motion claiming an equitable interest in the sum payable by Telstra to Roam with respect to the amount outstanding on their costs. His Honour canvassed in detail the question of jurisdiction and the authorities on this subject and I see no point in merely repeating the helpful information contained in his Honour's judgment. I respectfully adopt his Honour's conclusions, adding only that the general principle upon which his Honour relied is that contained in Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96 at 100 per Jordan CJ: "A solicitor has no lien for his costs over any property which has not come into his possession. If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client's right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor. That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor's costs..." There is like authority in the United Kingdom: see the decision of Scarman J in In the Estate of Fuld, decd. (No 4) [1968] P.727. There is, however in the present case, an issue that was not before the Court in Roam v Telstra (supra). It is this: in the present case the Court has been made aware of the fact that the Knox group have instituted proceedings in the Supreme Court of South Australia alleging that Messrs White Berman are indebted to them in an unspecified sum but, perhaps, in a sum exceeding the amount of the costs presently owing to them. I do not feel that I should overlook the existence of the Supreme Court proceedings even though I cannot express any view on the likelihood of success or the amount that might be recovered. On the other hand I do not see that Kodak should be further embroiled in the dispute between the solicitors and their former clients. It has paid monies into Court to satisfy the original judgment debt and to satisfy the amount by which the Full Court increased the award of damages. It now has an obligation to pay the costs fixed pursuant to the orders this day made. The appropriate course of action is to order Kodak to pay the costs into Court. Those monies once deposited are, together with the judgment debt and accrued interest, to remain in Court pending the resolution of the Supreme Court proceedings or until the further order of the Court. However, leave will be granted to all interested parties to approach the Court at any time with respect to the ultimate disposition of the monies that have been paid into court. Although I have come to the conclusion that the solicitors have an interest in the judgment debt and costs to which their client is otherwise entitled, it would not be appropriate for me to make an order in these terms at this stage whilst the Supreme Court proceedings are still on foot. I will merely order that Kodak pay into Court forthwith the sums of $4,000, $65,000 and $164,325 in satisfaction of its liability for costs to this date. DISQUALIFICATION - BIAS During the course of submissions Mr Knox expressed concern about me continuing to preside in this matter. He claimed that in my judgments in the Agfa proceedings and also in the Kodak proceedings I had been critical of him and his conduct and that I had made some uncomplimentary remarks about him. His claims are correct. But I do not see those remarks as amounting to a cause for me to disqualify myself in these present proceedings. These proceedings do not require a consideration of Mr Knox's evidence nor of his character or his credibility. The issues that I must decide in these reasons are clinical forensic exercises. I therefore decline to disqualify myself. INTEREST There remains the question relating to Kodak's liability (if any) to pay interest on the sum of $102,538. I will list that matter for hearing after consulting with the parties. On 19 May 1994 various orders were made by the Court including an order that, conditional upon Kodak paying into Court the amount of the judgment debt of $171,053 within twenty one days, execution of the judgment be stayed pending the further order of the Court. Kodak paid the judgment debt into Court within that time. As a result there is no component of interest owing by Kodak in respect of that sum. Kodak paid a further sum of $102,538 into Court on 4 January 1996. That was the amount by which the Full Court increased the award of damages to which Canvas Graphics was entitled. The Full Court's order was dated 30 June 1995 and judgment was sealed on 22 September 1995. Unless there is agreement or authority to the contrary, it might be that Kodak is obliged to pay interest on $102,538 or some part of it as from the date on which judgment was pronounced: O 35 r 3. Order 35 r 8 provides that: "A judgment debt carries interest at the rate of 10.5% per annum unless in a particular case, the Court determines that justice requires that a lower rate should be applicable." The rate of 10.5 per cent came into force with effect as from 26 September 1997. Previously it was 12 per cent and had been so since 1 January 1996. But, for the most part of the period that is relevant to these proceedings, ie from June 1995 to 31 December 1995, the rate was 10 per cent. Although commercial rates of interest are not reflected in O 35 r 8: Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 119 ALR 187 at 188 per Davies J, some regard should, in my opinion, be had to the fact that commercial rates of interest have fallen substantially in recent years. That is reflected in the recent reduction of the interest rate to 10.5 per cent. If interest is payable by Kodak, then the parties may wish to make submissions on the appropriate rate. I will hear the parties further on this issue. I certify that this and the preceding (27) twenty-seven pages are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin

Associate: Dated: 23 January 1998 Mr A McK Knox addressed the Court on behalf of the Applicant

Counsel for the Respondent: Mr P Heywood-Smith

Solicitor for the Respondent: Messrs Thomson Playford

Counsel for Messrs White Berman Mr J Daenke

Solicitors for Messrs White Berman Messrs Daenke O'Donovan

Date of Hearing: 7 March 1997

Date of Judgment: 23 January 1998