CMA Corporation Limited v McSorley

REASONS FOR JUDGMENT 1 On 4 July 2012, at the commencement of a three day hearing, the parties handed up consent orders disposing of the matter without admissions. Order 2 of those orders was that the defendant pay the plaintiffs' costs as agreed or taxed. Counsel for the plaintiffs indicated at that time that the plaintiffs may make a further application seeking a lump sum order under r 40.02 of the Federal Court Rules 2011. Such an application was filed on 6 July 2012 seeking an order that costs be awarded in a lump sum of $123,306.77, instead of any taxed costs. 2 The interlocutory application was supported by an affidavit sworn by Ann Louise Donohue on 5 July 2012, Ms Donohue being the supervising partner of the plaintiffs' solicitors in the substantive matter. 3 The approach Ms Donohue takes in her affidavit is to state, and annex the details of, the total costs of the plaintiffs in the proceedings, being the amount of $246,613.55 excluding GST. She says that based on her experience as a solicitor practising in the area of commercial litigation for 25 years the total amount likely to be recovered on an assessment of costs by an independent costs assessor is in the order of approximately $154,000 to $177,000 and then says that the amount of the lump sum order sought in the interlocutory application is 50 per cent of the total costs that I first referred to. 4 I am satisfied that the affidavit to which I have just referred conforms to Practice Note CM4, that is, it identifies the amount of the lump sum sought and how it was arrived at and justified. 5 Another matter that I am required to be satisfied of is that adequate opportunity has been given to the parties to make submissions in the matter and in particular I refer to exhibit A which is an email chain between the solicitors for the plaintiffs and Mr Manousaridis of counsel who was acting pro bono for the defendant in the substantive proceedings. The email from Mr Manousaridis to the plaintiffs' solicitors dated 9 July 2012 says that he is instructed that: Mr McSorley does not wish to say anything against your clients' application for a lump sum costs order. Accordingly there will be no appearance on Mr McSorley's behalf on the hearing of the application tomorrow. 6 The approach that has been taken in cases decided under the present lump sum costs rule and its predecessors is summarised in the decision of Kenny J in Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506. In particular her Honour says, at [15] by reference to the judgment of Mansfield J in Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 that factors which have been taken into account in exercising the discretion to make a lump sum costs order include where the delay, expense and inconvenience of taxing costs in the normal manner would be unduly protracted or unduly expensive and where the financial capacity of the party liable to pay costs is such that the additional cost of taxation will impose a significant burden on the party in whose favour costs are ordered without real prospects of recovering those costs. 7 That is the most apposite approach in the present case given that there was an interlocutory history of Mr McSorley being unable to afford to represent himself in the proceedings and Mr Manousaridis was acting as counsel pro bono. 8 Also the approach taken by von Doussa J in Beach Petroleum v Johnson (No 2) (1995) 57 FCR 119 is apposite. That was a case at the other end of the spectrum in terms of complexity but there are two observations of his Honour that I would adopt. One is the need to balance the interests of the party against whom the costs order is sought as against the interests of the party seeking the costs order. At page 123 and 124 his Honour refers to preventing prejudice to the unsuccessful party by over-estimating the costs and preventing injustice to the successful party by adopting an arbitrary fail safe discount on the costs estimate. 9 His Honour also said that the starting point for fixing the gross fee for indemnity costs which he was concerned with in that case was the charges rendered to the applicants by their solicitors. I am not presently dealing with an application for indemnity costs but of course the lump sum that is sought is a proportion, 50 per cent, of the solicitor/client costs. 10 Taking those matters into account, particularly with reference to Ms Donohue's evidence both as to the amount of solicitor/client costs and her estimate of what I will call party/party costs, and the appropriate broad-brush approach and the discount of 50%, I am satisfied that the order sought in the interlocutory application is an appropriate one. 11 I should also note that Mr Giles of counsel who appears for the plaintiffs said that the costs which were covered by the figure of $123,306.77 would include not only the costs of the defendant's unsuccessful interlocutory application to transfer the proceedings to the Western Australian District Registry of the Court but would also include the costs of the present interlocutory application. 12 The order I make is that the plaintiffs' costs be awarded in a lump sum of the amount of $123,306.77, instead of any taxed costs. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.