Nature of the cross-claim
14 While the cross-claim was far from straightforward, it did not approach the scale of the litigation discussed in Beach Petroleum and Seven Network Limited v News Limited [2007] FCA 2059 ("Seven Network"), where in both cases the Court, with the consent of the parties, was assisted by a Deputy Registrar of the Court experienced in the taxation of costs. Plainly enough, the cross-claim was also not a simple matter in respect of which a lump sum award might readily be determined. (I note that, in this case, the cross-claimants stated that, if I determined to proceed by way of a lump sum award, they did not consent to me being assisted by a Registrar experienced in the taxation of costs.) In the present context, the disproportionate delay, expense and inconvenience factor, though real, does not weigh as heavily as in Beach Petroleum and Seven Network or a relatively simple case.
15 Further, concern about capacity to pay is but one, albeit significant, factor, which I take into account on this lump sum costs application: compare ACN 074 971 109 (as trustee for the Argo Unit Trust) v National Mutual Life Association of Australasia Ltd [2013] VSC 137 ("ACN 074 971 109") at [57]. Mr Carey purported to depose to the existence of property that might enable the cross-claimants to meet a costs order, although I accept that the effect of his affidavit is equivocal and would not be thought to offer much comfort to the first respondent.
16 In this context, a failure to make a security for costs application has sometimes been mentioned: see ACN 074 971 109 at [52]-[56]. Whilst the question here is a different one from that arising on a security for costs application and the point is of limited, if any relevance, it may be observed that the first cross-respondent might earlier have brought a security for costs application but did not do so; the possibility that that might have been considered is apparent from the statements said to be made by the cross-claimants' solicitors prior to the commencement of the trial, to which Mr Tuohey referred in his affidavit. Mr Tuohey's own affidavit indicates that the first cross-respondent has been aware of relevant aspects of the cross-claimants' financial position for some time, including prior to the trial: compare ACN 074 971 109 at [52]-[56]. As indicated, however, I would not rely on this observation in determining this application.
17 It may be accepted, and the cross-claimants did not dispute, that a lump sum approach would "be quicker and cheaper than a full taxation", citing ACN 074 971 109 at [19]. As Wood AsJ said in that case at [19]:
There is no dispute that a gross sum exercise would invariably be quicker and cheaper than a full taxation. This would be so in all cases, not just in these proceedings. If that were the sole criteria there would be a gross sum sought and ordered in every case. In practice it is a rare event. There clearly needs to be more justification than the time/cost differential.
18 As already stated, the cross-claimants' complaint was that a lump sum award would not enable the Court to determine fairly the sum to be paid by the cross-claimants pursuant to the extant costs order.
19 Although the power conferred by rule 40.02(b) of the Rules must be exercised judicially and after giving the parties adequate opportunity to make submissions on the matter (Salfinger v Niugini Mining (Aust) Pty Ltd (No 5) [2008] FCA 1119 ("Salfinger") at [4] (Heerey J), citing Ualesi t/a Australian Empire Imports v Expeditors International Pty Ltd [2006] FCA 26) an order that costs be assessed as a lump sum does not require that any process similar to that involved in taxation should take place: see Salfinger at [4]; also Sony Entertainment at 813 [197], citing Beach Petroleum at 124. This can create its own difficulties and uncertainties. As Wood AsJ said in ACN 074 971 109 (at [58]):
The gross sum exercise would in some ways be more problematic than taxation as the types of principles that may or may not be applied and determined on a taxation would have to be factored into a gross sum on an arbitrary basis in the absence of considerable detail.
20 Bearing this in mind, it is unsurprising that, before the Court orders that a lump sum approach be adopted, it must be satisfied that a lump sum award can in fact be fairly determined via a process that is an alternative to that ordinarily adopted. In Sony Entertainment Jacobson J quoted (at 813 [199]) with approval the following passage from the judgment of Giles JA in Harrison v Schipp (2002) 54 NSWLR 738 at [22]:
The approach taken to estimate costs must be logical, fair and reasonable. The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available.
See also WM Wrigley JR Company v Cadbury Schweppes Proprietary Limited [2006] FCA 1186 at [5], [9] (Sundberg J).
21 The cross-claimants have pointed to various issues in this case that may give rise to significant contests on the matter of costs. This includes issues arising from the interaction of the principal claim and the cross-claims, the number and role of the parties and uncertainty about the division of work responsibility, the scope of discovery, the disposition of costs arising from interlocutory applications that involve numerous parties with possibly different interest and so on. The existence of these contentious matters leads me to conclude that I should not exercise the power to order a lump sum under rule 40.02(b), because I am not satisfied that I can do so fairly between the parties, and with sufficient confidence that I would be arriving at an appropriate sum on a logical and reasonable basis, rather than selecting figures on the basis of an arbitrary acceptance of one expert's view. In this context, I note too that, although I was the trial judge and the docket judge in what was apparently the most active pre-trial period, I was not the docket judge for this long-running proceeding from its inception.
22 The first cross-respondent drew attention to the fact that as a result of the appeal instituted by the cross-claimants, they would be placed in the invidious position of having to decide whether to proceed to taxation in expectation that the cross-claimants' appeal will be dismissed or to defer the preparation for the assessment of taxed costs until the determination of the appeal. I am not persuaded that a lump sum approach would overcome these difficulties; nor that the position to which the first respondent refers can justify a lump sum approach in circumstances mentioned, that is where I doubt that I can do so fairly between the parties, and have insufficient confidence that I would be arriving at an appropriate sum on a logical and reasonable basis.
23 In summary, I accept that the taxation in this case would, as in ACN 074 971 109, "be time consuming and have some complexity". I would no doubt be assisted by Ms Young's expert opinion (although, as indicated, I would have significant difficulty in fairly assessing her opinion in the circumstances of the case). I have taken into account these factors and the other factors to which the first respondent referred, including the first respondent's concerns about the cross-claimants' financial ability to meet the costs order. They have not persuaded me to depart from the view I have expressed at [21] above.
24 The taxation of costs regime is not inflexible. Once the first respondent files and serves a bill of costs under rules 40.17 and 40.19, the taxing officer will make an estimate under rule 40.20. Unless a party interested in the bill objects to the estimate, the estimate will be "the amount for which the certificate of taxation will be issued" (rule 40.20(4)). An objection to the estimate may, however, be made under rule 40.21. In this context, it is worth noting that rule 40.33 provides that the party who filed the objection must pay all parties' taxation costs in the circumstances set out in that rule. If an objection is filed, the Registrar has a discretion whether or not to direct: (a) the parties to attend a confidential conference; (b) a provisional taxation; or (c) that the bill proceed to taxation (rule 40.21(2)). It may be that, in the circumstances of this litigation, the Registrar will determine that the bill should be taxed, without either prior confidential conference or provisional taxation. This issue will no doubt be explored by the Registrar once an estimate has been made and any objection filed.
25 The taxation of costs regime is the one ordinarily applied in the Court. I consider it appropriate that it be engaged here. Accordingly, in the exercise of my discretion, I decline to award costs in a lump sum pursuant to rule 40.02(b). I would dismiss the application, with costs.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.