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