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[2018] FCAFC 1
Federal Court of Australia (Full Court)
2018-01-15
Farrell JJ
Original judgment source is linked above.
THE COURT: 1 On 21 November 2017 the Full Court delivered ex tempore reasons dismissing the Appellants' appeal in this matter. That litigation was one aspect of a complex suite of legal proceedings which have involved the respective parties. 2 The Court granted leave for the Respondent to make an application for a lump sum costs order on or before 28 November 2017. If no such application was made, the Appellants would be liable for the Respondent's costs of and incidental to the appeal and the extension of time application, to be taxed if not agreed. 3 On 27 November 2017 an affidavit of Ms Sally Susan Nash, Consultant Solicitor, was filed on behalf of the Respondent in that regard, followed by a formal interlocutory application seeking a lump sum costs order and accompanying submissions on 28 November 2017. Ms Nash is a solicitor employed by O'Neill Partners incorporating Sally Nash & Co (O'Neill Partners). 4 Ms Nash deposes that a lump sum costs order is sought. She opines (correctly in our view) that the appeal was straightforward. 5 Ms Nash annexed to her affidavit (a) a copy of O'Neill Partners' costs agreement with the Respondent (Schedule 2 of that agreement itemises the hourly rates - to be billed in six minute increments - agreed to be charged for the work of solicitors and others engaged in that regard); and (b) the fee note of Mr Johnson of counsel. 6 At [15] - [22] of her affidavit Ms Nash deposes: 15. I have reviewed each of the tax invoices issued by O'Neill Partners Commercial Lawyers incorporating Sally Nash & Co. to Mr Prentice and have checked that the work performed under my supervision and control is properly recorded and that the work was carried out by an appropriately qualified person. I set out below the qualifications of each person: • Sally Nash Consultant Solicitor admitted 1977, Hourly rate $600 • Megan Zhou Associate Solicitor admitted 2015, Hourly rate $320 • Olimpia Chodkiewicz Legal Secretary (10 years' experience), Hourly rate $85 • Christie Lonnon Legal Secretary, (10 years' experience), Hourly rate $85. • Cassandra McCracken Legal Secretary (1 years' experience), Hourly Rate $85. 16. By reason of the extensive number of pieces of litigation in matters involving the bankrupt estate of Robert Gilbert Coshott and Mr Prentice and other members of the Coshott family, I have reduced the Solicitor and client bill by 15% so as to avoid any assertion that there may have been duplication on other matters which run concurrently in the bankruptcy administration. I have instructed the accounts manager to ensure that this incurs on all of the accounts to Mr Prentice in relation to the Coshott bankruptcy. 17. With respect to the party and party costs I have reduced the total Solicitor and Client bill (already reduced by 15%) by 33% in accordance with accepted practice referred to in Palladium Consulting Pty Ltd (2013) NSWSC 92, allowing 2/3 of solicitor and client costs on a party and party basis. 18. The work performed and expenses incurred by O'Neill Partners Commercial Lawyers incorporating Sally Nash & Co. on behalf of Mr Maxwell Prentice are in my experience fair and reasonable. Because of the nature of the administration and the type of work involved in the matters the subject of the present application I have also been more heavily involved because of the corporate knowledge that I have had and experience that I have had than might generally have been the case. In my experience it may have in fact been more expensive to have a more junior solicitor carry out work who would have to become familiar with the history under the law involved. This was on Appeal in which I acted at all levels of the matter including the taxation of costs. 19. On the basis of the calculations made in relation to the matters which are the subject of the Judgment and the orders of the Full Court, I have calculated the claim for party/party costs [as] set out in the next paragraph. 20. The party and party costs claimed to be ordered on a lump sum basis by the Court are: Solicitor and client tax invoices after [deducting] 15%: $6,648.90 Less 33% (Re Palladium): -$2,194.13 Subtotal - Total Solicitor costs on party/[party] basis $4,454.77 Plus Counsel fees $10,858.34 Subtotal Costs and Disbursements $15,313.11 Plus GST (10%) $1,531.31 [Grand] Total $16,844.42 21. If the taxation of costs is to proceed the taxation that will be necessary to engage the assistance of a Cost Consultant to comply with the Federal Court rules in relation to preparation of the bill. The Federal Court scale is less than my hourly rate [and] is significantly less than the scale but allowing for the discounts my hourly rate is less than the scale. Notwithstanding this it would be an expense to Mr Prentice and the bankruptcy administration for the costs to be referred to a Taxing Officer, given the history of previous litigation involving taxed costs and cost estimates and the Appeal heard on 21 November 2017. 22. The Trustee is endeavouring to finalise the administration of the bankrupt estate and a prolonged taxation process in terms of the Federal Court Rules 2011 would delay such exercise as it would involve: firstly, the preparation of a detailed bill of costs; secondly, the referral to a Registrar/Taxing Officer for the issue of an estimate; and thirdly, if there is an objection to the estimate a prolonged taxation likely to extend the administration for a period of between 1 and 1.5 years. Given that the Appeal related to a taxation the Respondent seeks a fixed costs determination. 7 The Respondent submits (at [6] - [11] of his written submissions) that: 6. In determining the application, the Court is required to determine 2 questions, namely: firstly, is it appropriate to order a gross sum amount; and secondly, what is the appropriate specific gross sum in the circumstances? 7. In doing so the Court is entitled to consider all relevant information, including: (a) evidentiary material before it and the nature of the Appeal Book and Supplementary Appeal Book; (b) the Court's own observations of the proceeding apparent from the Court record; and (c) the relevant experience of the judicial officers involved in the decision-making process: Bobb v Wombat Securities Pty Limited (No 2) [2013] NSWSC 863. 8. So far as the first question to be determined is concerned it is apparent that the present proceeding involves a review of a judge on review in respect of a substantial taxation of costs in 2 proceedings and which have been substantially successful. It is therefore also relevant to have regard to the overriding purpose as to whether it is appropriate to bring an early end to the proceedings with apparent deduction in use of court resources and costs as between the parties: s. 37M and s. 37N Federal Court of Australia Act 1976. 9. So far as the appropriate way quantum is to be determined it is submitted that: (a) the starting point for the fixing of costs is the charges rendered by the legal practitioners on behalf of the party having the benefit of the costs order: Hamod v State of New South Wales and another [2011] NSWCA 375 at [820], assuming that the successful party satisfied the relevant indemnity [principle] and is able to establish the underlying foundation for that: Cf Practice Note (GPN- Costs) at [3.16]; (b) the sum of costs to be fixed is required to be proportionate to the nature, including the complexity, of the case: Canvas Graphics Pty Ltd v Kodak (Australasia) Pty Ltd [1999] FCA 23; (c) the specification of a gross sum is not the result of a formal taxation process under the Federal Court Rules 2011 and in this respect the Court will take a broad brush approach to the qualification of the gross sum: Harrison v Schipp (2002) 54 NSWLR 738 at 743 ([22]); (d) whilst it is accepted that the Courts have traditionally applied a discount against the contingencies of taxation in determining the way the discretion is being exercised the court would not act in a manner that is likely to cause injustice to a successful party by applying a unilateral discount; (e) the Court is entitled to consider evidence from the solicitor acting for the party having the benefit of the costs order: Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640; and does not necessarily require evidence from any independent costs consultant or expert: Practice Note GPN-Costs at [4.10] - [4.12]. 10. Evidence has been filed by the solicitor for the Applicant being a practitioner of considerable experience expressing a view as to: (a) liability on the part of the Respondent having the benefit of the costs order to pay costs and the terms upon which that liability are founded; (b) the quantum of the totality of the costs on an indemnity basis as between the Respondent and those providing legal advice to him; (c) the hourly rates applicable to the provision of services having regard to the schedule of charges provided for under the Federal Court Rules 2011 and the Guide for Counsel's fees; (d) the discounting of the totality of the costs according to the circumstances of the case. 11. In the circumstances it is submitted that this is an appropriate circumstance where: (a) the Court ought exercise its discretion to quantify the amount of costs of the Respondent having the benefit of the costs order on a lump sum basis; and (b) to fix the amount of the costs as set out in the affidavit of Sally Susan Nash filed in support of the application. 8 The Appellants filed no evidence in response. However on 11 December 2017 the Appellants' solicitor filed submissions on their behalf. Those submissions are as follows: 1. The respondent's application (affidavit of Sally Susan Nash sworn 27 November 2017) does not comply in numerous respects with GPN-Costs. It does not comply with any of the three requirements of Part A clause 3 of the practice note. It does not verify that the respondent is not claiming more than the Costs Applicant is liable to pay for costs and disbursements. It does not verify the calculations made are correct. It does not verify the matters noted are a fair and accurate summary of the costs and disbursements that the respondent is entitled to claim. 2. The respondent's application does not comply with Part A clause 4 of the practice note in that it does not verify the amounts claimed are capable of further verification through source material should such material be required by the Court to be produced. 3. The respondent's application swears that the respondent [is] entitled to claim input tax credits in respect of GST (paragraph 8 of Nash Affidavit). Yet the claim made includes credits in respect of GST (paragraphs 20 and 24 of Nash Affidavit). 4. The respondent's application/Costs Summary dies not comply with Part B clause 1 (a). It does not state whether the Costs Summary has been prepared with the assistance of an expert as to costs. 5. The respondent's application/Costs Summary does not comply with Part B clause 1 (b). It does not state who is liable to pay the costs claimed in the Costs Summary. 6. The respondent's application/Costs Summary does not comply with Part B clause 1 (f). It does not give a summary of the categories of the work fairly and reasonably incurred in the conduct of the litigation, including, an estimate (in percentage terms) of the proportion that each category of work constitutes of the total costs claimed. 7. The respondent's application/Costs Summary does not comply with Part B clause 1 (g). It does not set out the total hours worked by each person who did work in the matter, nor an estimate (in percentage terms) of the proportion of the total sum claimed attributable to that person. 8. The respondent's application/Costs Summary does not comply with Part B clause 1 (h). It does not set out a summary of the disbursements fairly and reasonably incurred in the conduct of the litigation, nor an estimate in percentage terms of the proportion of the total sum claimed attributable to counsel fees. 9. The respondent's application/Costs Summary does not comply with Part B clause 1 (k). It does not state whether the amounts claimed relevantly fall within or outside the amounts permissible for items under the Scale (National Guide to Counsel's Fees, National Guide to Discretionary Items Bill of Costs). 10. In addition to the inclusion of GST in the amount claimed, the hourly rates claimed for profit cost items exceed the maximum prescribed under Schedule 3 FCR. Further, claims are made for work done be secretaries. There is no provision in Schedule 3 FCR for allowances for work done by secretaries. There is no justification for maximum hourly rates. 11. The respondent has conceded percentage deductions for profit costs. There is no deduction conceded for counsel's fees. There is no basis on a party and party basis for 100% of counsel's fees to be allowed. They should be reduced by the GST and then by 30%. 12. The respondent has not complied with clause 3.16 of the practice note. There is no verification by a lawyer of costs consultant with a practising certificate of the accuracy of the claim for costs and compliance with the indemnity principle. 13. It is noted that the appellants are awaiting senior counsel's advice as to seeking leave to appeal to the High Court of Australia. 14. The appellants are prepared to accept a lump sum assessment, despite the non-compliances by the respondent in the sum of $10,000.000 provided enforcement thereof is stayed pending the determination of the appeal to the High Court.
consideration 9 The Appellants' submissions, almost wholly, fail to engage with the merits of what have been claimed for legal costs in this relatively simple matter. Most criticisms advanced are based on form rather than substance. Thus at [9] the Appellants submit that the Respondent has omitted to state whether the amounts claimed for disbursements relevantly fall within or outside the amounts permissible under the National Guide to Counsel's fees. The submission does not assert that the amounts so claimed fall outside that guidance. 10 Only at [10] and [11] do the Appellants suggest a deficiency of form has a substantive consequence. 11 As to the Appellants submission at [10] we accept that cl 1.1 of Sch 3 of the Federal Court Rules 2011 (Cth) (the Rules) prescribes a maximum of $58 for a six minute unit (equivalent to $580 per hour) as costs to be allowed for work done and services performed by a lawyer. Ms Nash's affidavit at [15] establishes that she billed the Respondent (as she was entitled under her retainer) at an hourly rate of $600. 12 We also accept that in respect of the work conducted by legal secretaries (which we take to be work performed by a clerk or paralegal for the purposes of Sch 3 cl 1.3), the Rules prescribe a maximum of $11 for a six minute unit (equivalent to $66 per hour) as costs to be allowed for such work whereas O'Neill Partners billed that work to the Respondent at an hourly rate of $85. 13 However those are maximum amounts allowable on taxation in an order for costs - the Rules do not purport to limit what a solicitor may charge his or her client. Party-party costs do not provide a full indemnity. 14 When regard is had to paragraphs [16] and [17] it can be seen that what the Respondent seeks as a lump sum (excluding disbursements) is not the amount which O'Neill Partners has charged him but a substantially lesser amount. That smaller amount is calculated from the actual solicitor-client costs initially being discounted by 15% (to avoid any suggestion of duplication on other matters in which the parties have been in dispute) and that reduced amount then being discounted by a further 33%. 15 That totals to a more than 40% discount on the base amount the composition of which is the subject of the Appellants' submission. We are satisfied that if a lump sum costs award is made with those discounts incorporated there will be no violation of the provisions of Sch 3 of the Rules. 16 Moreover we are satisfied that there is nothing in that quantum which is excessive. Having sat on the appeal we are entirely satisfied that the discounted amount claimed as a lump sum for costs (excluding disbursements) would sit on the lower end of the quantum which could be claimed. 17 Turning now to the Appellants' submission at [11], we do not accept that any adjustment in respect of GST is required; there is nothing before us to controvert Ms Nash's sworn evidence at [8] that the Respondent is entitled to claim input tax credits in respect of GST. We reject that there is a rule or sound principle that requires actual disbursements to be discounted by 30%. We have examined the tax invoice submitted by Mr Johnson (annexure B to Ms Nash's affidavit) and, with the following exception, we are satisfied that there is no proper basis for the amounts claimed as disbursements to be further reduced. 18 Mr Johnson is a 'senior junior'. The current National Guide to Counsel Fees (effective from 1 July 2013) provides that junior counsel may charge up to $5,100 for a fee on brief (including preparation and appearance on the first day of a hearing) or up to $4,200 per day for an appearance at a hearing and otherwise an hourly rate of up to $530. Mr Johnson charged at an hourly rate of $500 which, as a senior junior, he was well entitled to for conferences and preparation of submissions. In addition to that, he billed $1,666.67 for the preparation of the appeal and $4,400 for the first day of hearing. Understood as a fee on brief, those latter two amounts total $6,066.67. Having regard to the National Guide and that the matter was, as Ms Nash deposes to, straightforward, we are satisfied the costs claimed as disbursements for counsel fees in that respect should be reduced. We would do so by allowing recovery for disbursements only of a single fee on brief of $4,500. That is a reduction of $1,566.67. 19 The circumstances in which a lump sum order will be made are not confined to matters limited in complexity but often that will be appropriate. Moreover as was noted in LFDB v SM (No 2) [2017] FCAFC 207 it may be appropriate to avoid a lengthy and expensive taxation where there has been prior protracted "trench warfare" between the parties. We are satisfied that the occasion for the making of a lump sum costs order in this matter is established. 20 The lump sum sought by the Appellants is $16,844.42. We have indicated that the amount we would award in respect of disbursements claimed should be reduced by $1,566.67. The balance is $15,277.75 which we would round down to $15,275.00 21 The Court's Practice Note GPN-COSTS is to be understood as a guide rather than an inflexible set of rules as to how such applications are to be made. In the specific circumstances of this confined and unmeritorious appeal we are unpersuaded that any substantive injustice will be done by reason of the technical breaches the Appellants have asserted. Costs will only pile on costs if the Court does not grasp the nettle to proceed to make a lump sum order. To any extent necessary we dispense with compliance with any Rule which would prevent the Court ordering that costs be assessed for the Respondent in the sum of $15,275.00 I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Logan, Kerr and Farrell.
Coshott
Prentice