Caratti v Commissioner of the Australian Federal Police [2021] FCA 1067 | Case summary

COLVIN J: 1 In late January 2015, the Australian Federal Police executed search warrants at premises linked to Mr Allen Bruce Caratti and certain companies with which he was associated along with Ms Tina Bazzo. As a result of a request made of the Australian Federal Police, hard drives with copies of the seized documents were provided initially to Wilson & Atkinson lawyers and then to Zafra Legal. An issue arose as to whether liquidators and the companies under their administration could obtain access to the hard drives. Mr Caratti maintained that the documents had been provided pursuant to a request made by him personally and were not held by the lawyers on behalf of the companies. 2 Zafra Legal brought interpleader proceedings in which it sought orders to deliver up to the Court the hard drives and for the Court to determine the competing claims to the hard drives as between Mr Caratti, the liquidators and the companies. In related proceedings, Mr Caratti sought an injunction restraining the Australian Federal Police from providing copies of the same documents directly to the liquidators and the companies and to restrain their inspection by the liquidators and the companies. Mr Caratti was unsuccessful in both proceedings. He brought appeals which were also unsuccessful. 3 Orders were made for Mr Caratti to bear the costs of both proceedings and for those costs to be assessed on a lump sum basis. By the orders of a Full Court made on 5 December 2019, the assessment of those lump sum costs was referred to a Registrar for determination. 4 By s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth), a power of the Court prescribed by the Federal Court Rules 2011 (Cth) may, if the Court or a Judge so directs, be exercised by a Registrar. By r 3.01(1) a power mentioned in Schedule 2 of the Rules is so prescribed. The power under r 40.02 to make an order about the amount of costs has been prescribed by Item 221 in Schedule 2. Rule 40.02 makes provision for a party who is entitled to costs to apply for an order that costs be awarded in a lump sum. 5 The order made by the Full Court exercised the power conferred by r 40.02 to determine that there should be an order for costs assessed on a lump sum basis but directed that the assessment of the quantum of those costs be delegated to a Registrar. Therefore, when the Registrar undertook that assessment, the Registrar was exercising delegated judicial power. 6 On 15 July 2020, the Registrar assessed the quantum of costs in the exercise of delegated judicial power. Mr Caratti sought a review of the eight lump sum costs assessments made by the Registrar. The nature of the review was a de novo exercise of the assessment of the quantum of those costs undertaken by a Judge. As was recently confirmed in Robson as former trustee of the estate of Samsakopoulos v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143 at [20], [58]-[70] the review was a rehearing undertaken without any need to demonstrate error in the decision by the Registrar. It was undertaken in order to satisfy a condition attaching to the exercise of delegated judicial power. Therefore, the determination of the review applications was a first instance decision by a Judge that concerned only the quantum of the lump sum costs. 7 The review applications were successful and the primary judge set aside the Registrar's assessments and made assessments in lesser amounts: Zafra Legal Pty Ltd v Harris (Liquidator) (No 3) [2021] FCA 441. Mr Caratti is still unsatisfied with the outcome. 8 It is accepted that the orders by the primary judge are interlocutory in nature and leave is sought to bring an appeal in which claims would be made that there should be a further reduction in the amount assessed. 9 I am satisfied that leave is necessary. It has been suggested in qualified terms that a costs order that forms part of the orders by which a proceeding is finally determined is a final order and may be the subject of an appeal without leave: Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 at [291]; and Probiotec Limited v The University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 at [79]. However, in the recent decision in ALDI Foods Pty Limited as General Partner of ALDI Stores (A Limited Partnership) v Transport Workers' Union of Australia [2020] FCAFC 231, it was said (without determining the point) that the 'prevailing view has been that a costs order, even when made as part of the final disposition of a proceeding, is interlocutory in nature': at [69]. 10 The uncertainty as to whether costs orders that form part of a final determination may be the subject of an appeal as of right even where the appeal is confined to the part of those orders that concerns costs (or is advanced even if the appeal is otherwise unsuccessful) has been addressed in some jurisdictions by statutory provision which limit the circumstances in which an appeal may be brought just about costs: see the observations concerning the position in New South Wales by Allsop CJ in Hacker v Weston [2015] FCA 790 at [3] and the discussion of the position in Western Australia by Martin CJ in Cardno BSD Pty Ltd v Water Corporation [No 2] [2011] WASCA 161 at [95]-[102]. There is no such provision in the Federal Court of Australia Act. 11 There is much to be said for the position that orders as to costs are always interlocutory. The usual test to be applied in determining whether an order is final or interlocutory 'is whether the order, as made, determines the rights of the parties in a principal cause pending between them': In the matter of an appeal by Gaye Alexandra Mary Luck [2003] HCA 70 at [4]. There is no substantive right to an order for costs. Costs orders are always discretionary. They are made to ensure fairness in procedure and to enable the Court to encourage the parties to confine the dispute to the real issues and to use the procedures of the Court for proper purposes. No one comes to the Court with a claim to costs. Therefore, the costs order made at the conclusion of proceedings is not aptly described as finally disposing of any rights of the parties to use the language in In the Matter of an Application by the Chief Commissioner of Police (Vic) [2005] HCA 18 at [28]. The making of costs orders (including such orders made at the time of pronouncing final orders) is a procedural incident of the conduct of the proceedings and does not involve the making of an order the legal effect of which is to finally determine a claim. 12 On an appeal, the discretion to make a costs order is re-enlivened if the appeal is successful so in such cases the possibility of a different costs order flows from substantive success in the appeal. Leave is not required in such cases in order to contend for a different costs order on appeal. However, if the appeal is unsuccessful and the appellant seeks nevertheless to over-turn a costs order then leave should be sought and obtained before the court is required to revisit the costs order. Other than in an instance where an appeal was otherwise successful, a costs order, like other interlocutory orders, may only be re-visited on appeal if a proper basis for leave to do so was demonstrated. It follows that costs orders made at the same time as final orders can be re-visited without the restrictions that would otherwise confine such circumstances and require an appeal. This approach appears to be consistent with the character of costs orders as orders that do not determine the substantive rights but are consequential procedural orders made in the exercise of discretion, albeit an important discretion for ensuring proper incentives as to the manner in which litigation is conducted. 13 There is support for the approach that costs orders are interlocutory in the reasoning of Jagot J in Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2019] FCA 1458 at [20]-[27]. 14 Further, in the present case, the final order made on appeal did not seek to quantify the lump sum costs. The terms of the final order disposing of the proceedings contemplated a subsequent process to be undertaken by a Registrar exercising delegated judicial power to assess quantum. The completion of that task on review by the primary judge was not a final determination of substantive rights. 15 For those reasons, the decision by the primary judge was interlocutory and leave is now required in order to appeal. 16 The principles to be applied where leave is sought are well established. Leave to appeal will only be granted where an applicant can demonstrate that the orders in question are attended by sufficient doubt that reconsideration on appeal is warranted and that substantial injustice would result if the orders were left uncorrected: Décor Corp Pty Ltd v Dart Industries Inc (1993) 33 FCR 397 at 398. 17 The applications for leave were listed for hearing on the basis that if, after hearing oral submissions in support of the applications for leave the Court considers it necessary or appropriate to hear submissions in opposition to the applications for leave the further hearing of the leave applications would be adjourned to a date to be fixed. 18 For the following reasons, I am not satisfied that substantial injustice would result even assuming that there is indeed sufficient doubt in the orders and such error was left uncorrected. Therefore, there is no need to call on the respondents and the applications for leave should be dismissed. 19 First, the total amount of costs claimed was $421,166.52 plus costs of assessment. The overall lump sum assessment made by the Registrar was for the total amount of $414,200 including costs of assessment. The primary judge reduced the overall assessment to $381,195. Mr Caratti claims that the lump sum assessment should be $300,605.22 including assessment costs. 20 Second, the applications for leave are not supported by any evidence to the effect that the amount that would be in dispute would be of significance to Mr Caratti personally. When that issue was raised, counsel advanced no submission to that effect. 21 Third, the reasons provided by the primary judge are detailed and there could be no suggestion that there has not been consideration given to the appropriate quantum that should be allowed on a lump sum assessment. In particular, there is no suggestion that the lump sum assessment was undertaken without consideration of matters to the requisite level of detail. 22 Fourth, the purpose of undertaking a lump sum assessment is to avoid satellite disputes of the kind that Mr Caratti seeks to pursue. The Court has adopted a practice of assessing costs on a lump sum basis in order to avoid the expense, delay and aggravation involved in protracted disputes about the quantum of costs: Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 at [19]-[20]. That purpose would be frustrated if leave were to be given in cases of the present kind. 23 Fifth, a major part of the contentions that are sought to be raised by Mr Caratti is to the effect that it is not appropriate to use the charges rendered by the solicitors acting for the party as the starting point for the assessment. To the extent that a proposition of that kind is the foundation of the appeal it is contrary to authority in this Court: Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506 at [18] (Kenny J). 24 Sixth, the further contention that a bill of costs was considered a necessary starting point for the lump sum assessment in Crescent Capital Partners Management Pty Limited v Crescent Funds Management (Aust) Limited [2019] FCA 1082 at [61] misstates what was said by Markovic J in that case. In that case there were estimates that had been produced by a Registrar and in those particular circumstances those estimates were considered by her Honour to be 'a starting point from which to consider any further adjustments'. It would defeat the purposes that are sought to be achieved in assessing costs on a lump sum basis in appropriate cases if in all instances the starting point was a bill of costs. No such proposition was stated in Crescent Capital. 25 Finally, on the materials before the Court, the actual costs incurred by the parties claiming costs was $476,688.92. The costs as assessed by the primary judge amount to 79.97% of those costs. It is not uncommon to assess the reasonableness of costs on party and party basis by reference to the relativity with costs incurred on a solicitor and own client basis. After allowing for the fact that the costs awarded by the primary judge included costs of their assessment, the relativity between the amounts is within the range of such assessments as usually undertaken. 26 It was submitted nevertheless that the appropriate course was not to determine the question of leave separately but rather for the question of leave and the merits of the appeal to be heard together. Having regard to the matters that I have just stated, it is obvious that leave should be refused. Therefore, this is not a case where the course suggested should be followed. Indeed it would be unjust for such an approach to adopted. 27 The applications for leave to appeal should be dismissed with costs. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.

WAD 110 of 2021 Respondents Fifth Respondent: ROBERT MICHAEL KIRMAN AS LIQUIDATOR OF ACN 142 745 337 (ACN 142 745 337) (IN LIQUIDATION) Sixth Respondent: GH1 PTY LTD ACN 099 191 714 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) Seventh Respondent: MNWA PTY LTD (ACN 101 717 177) (IN LIQUIDATION) Eighth Respondent: I.M.E. NOMINEES PTY LTD (ACN 107 942 058) (IN LIQUIDATION) Ninth Respondent: ACN 142 745 337 (ACN 142 745 337) (IN LIQUIDATION) Tenth Respondent: WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (ACN 115 233 193) Eleventh Respondent: WILLIAM HARRIS AND ROBERT KIRMAN AS JOINT AND SEVERAL LIQUIDATORS OF WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (ACN 115 233 193) WAD 112 of 2021 Respondents Fifth Respondent: ROBERT MICHAEL KIRMAN AS LIQUIDATOR OF ACN 142 745 337 (ACN 142 745 337) (IN LIQUIDATION) Sixth Respondent: GH1 PTY LTD (ACN 099 191 714) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) Seventh Respondent: MNWA PTY LTD (ACN 101 717 177) (IN LIQUIDATION) Eighth Respondent: I.M.E. NOMINEES PTY LTD (ACN 107 942 058) (IN LIQUIDATION) Ninth Respondent: ACN 142 745 337 (ACN 142 745 337) (IN LIQUIDATION) Tenth Respondent: WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (ACN 115 233 193) Eleventh Respondent: WILLIAM HARRIS AND ROBERT KIRMAN AS JOINT AND SEVERAL LIQUIDATORS OF WHITBY LAND COMPANY PTY LTD (IN LIQUIDATION) (ACN 115 233 193)

Caratti v Commissioner of the Australian Federal Police

At a glance

Court

Decision date

Before

Source

Judgment (14 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (17)

Cited By (8)