Djunaedi v Mohor, in the matter of Mohor

RESPONDENT'S submissions

The respondent sought costs in a lump sum of $26,000 plus $2,600 GST. In summary, the respondent relied on r 25.14 of the Federal Court Rules and claimed that the applicants be liable for costs on a party-party basis until 29 December 2023, and on an indemnity basis thereafter (including on the application for costs).
The respondent relied primarily on the evidence of her lawyer, Mr Gregory Finlayson. Of particular relevance is Mr Finlayson's affidavit affirmed 8 March 2024. In that affidavit Mr Finlayson referred to Annexure A of the Costs Practice Note (GPN-COSTS) (Costs Practice Note), and continued:
I have read the Federal Court Practice Note GPN-COSTS.
The costs applicant is not entitled to claim input tax credits in respect of any GST relevant to the claims in this Costs Summary and has complied with part 6 of the Costs Practice Note.
The respondent is not registered for GST.
The respondent is not claiming more than the respondent is liable to pay for costs and disbursements.
The calculations made are correct.
The matters noted are a fair and accurate summary of the costs and disbursements that the respondent is entitled to claim.
The amounts claimed are capable of further verification through source material (such as file records, tax invoices and receipts for payment) should such material be required by the Court to be produced.
This Costs Summary has not been prepared with the assistance of an expert as to costs (e.g. costs consultant).
The respondent made an offer of compromise to the applicants on 22 December 2023 that the applicants' petition be dismissed the respondent pay the applicants a nominal sum and that each party bear their own costs. That offer appears within annexure GJF-8 to my affidavit of 22 February 2024 at page 5.
The offer was not accepted by the applicants.
The applicants were made aware by correspondence from me which accompanied the offer of compromise within annexure GJF-8 to my affidavit of 22 February 2024 at page 4 that the applicants had not verified the statements in the creditors' petition by affidavit, there were a number of grounds of opposition and that if the respondent's opposition were to succeed then the applicants may be liable for a substantial costs order against them which may exceed the judgment debt in their favour (that debt being $31,000).
On 15 January 2024 I wrote to the solicitors for the applicants by email and stated to the effect that: (a) The creditors' petition did not make out a ground for a creditors' petition; and (b) Properly advised their clients would know that their petition had no reasonable prospects of success.
A further offer of compromise was provided to the applicants on 22 February 2024 (but incorrectly dated 22 December 2023) by which the respondent offered by way of compromise to accept the sum of $15,000 in settlement of her claim for costs. That offer and associated correspondence is annexed hereto and marked GJF9.
The applicants did not accept that offer. …
A review of the correspondence between the solicitors reveals that the applicants have not acted in accordance with their overarching obligations and the correspondence of the applicant's representatives is ridddled [sic] with irrelevancies and intemperate and gratuitous assertions which have not advanced resolution of the matter. The applicants did not comply with notices to produce and used affidavit material filed in these proceedings which had not been read in open court in order to advance an application in the Federal Circuit and Family Court of Australia Division 2 without the leave of the Federal Court of Australia. …
I have 123 items of inbound email correspondence on this matter.
I have 98 items of outbound email correspondence on the file.
The documents filed on behalf of the respondent are evident from the file.
In relation to the calculation of the lump sum sought by the respondent, Mr Finlayson relevantly deposed:
This lump sum is calculated on my time for attendance rate charged under the written retainer with my client dated 3 November 2021 of $65 plus GST of 10% per 6 minute unit for Federal Court matters. That was the attendance rate on the Federal Court Scale at that time and the fee has not been increased.
The categories of work fairly and reasonably incurred in the defence of the creditors' petition are as follows: (a) Initial perusal of the creditors' petition and documents filed by the applicants; (b) Drawing and filing of notice of acting, notice of opposition and first affidavit in support of opposition prior to first return date; (c) Attendance on first return date including discussions with counsel for applicants; (d) Drawing and service notice of compromise, notices to produce; (e) Dealing with breach of Hearne obligation and failure to comply with notices to produce by applicants; (f) Review of District Court file and Supreme Court file as to materials at hearing on grounds of opposition; (g) Drawing of Submissions and further affidavit in opposition and preparation for hearing of petition; (h) Seeking to negotiate on costs on discontinuance, affidavits, case management, offer of compromise on costs, costs summary and submissions on lump sum costs.
My hourly rate on this matter is $650 per hour plus GST. I have performed all the work on the file in this matter and worked in excess of 40 hours on this matter.
There are no disbursements claimed.
There has been no separate claim for skill care and responsibility however the work on this matter has involved the requisite level of care in making serious allegations which required care in attendance on my files in respect of the Supreme Court and District Court proceedings.
The rate was charged also in the context of the potential insolvency of the respondent and the associated risk in fee recovery.
There are no unusual features of any costs arrangement underpinning the costs claimed save and except that I have said to my client that I will not enforce my costs by way of enforcement action which seeks to evict her from her residence.
The application of the time based charge set at 2021 Federal Court Scale attendance rates is likely to result in some unders and overs when compared with item scale amounts at current scale rates but I would anticipate would generally fall outside the scale.
Mr Finlayson's affidavit also annexed screenshots of the program which recorded his time spent allocated to the matter as evidence of costs incurred by the respondent. Examples of those screenshots include the following:

consideration

Section 43(1) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) provides that the Court or a Judge has jurisdiction to award costs in all proceedings before the Court, other than in respect of exceptions which are not relevant here. Section 43(2) provides that, except as provided by any other Act, the award of costs is at the discretion of the Court or Judge. Notwithstanding this broad discretion, it is not unfettered, and the discretion must be exercised judicially.
The position in respect of an award of costs is modified by r 26.12(7) of the Federal Court Rules which I have set out above. The general effect of this rule (namely that the party who files a notice of discontinuance is liable for costs) is consistent with observations in cases such as Rickus v Motor Trades Association of Australia Superannuation Fund Pty Limited [2010] FCAFC 16 at [116].
The award of costs in Federal Court matters is also the subject of Costs Practice Note issued on 25 October 2016 which recognises at [3.5] that costs are usually determined either by a Judge pursuant to the lump sum costs procedure or by a Registrar pursuant to the taxation process under Part 40 of the Federal Court Rules. The Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump sum costs order: Costs Practice Note at [4.1]; see also Jenkins Sh v Australia Council for the Arts [2024] FCA 309 at [34]-[35] per Horan J (Jenkins).
As I observed earlier in these reasons, while both parties have sought that costs payable by the applicants to the respondent be fixed as a lump sum, the parties are far apart in respect of the quantum of such costs.
In Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403, the Full Court observed that the Costs Practice Note provides for the Court to: [17] …take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings. (emphasis added)
Similarly in Jenkins, Horan J observed: [46] In my view, two important considerations bearing on the exercise of the discretion to make a lump sum costs order in the present case are efficiency and fairness. In relation to efficiency, the issue is whether the lump sum costs process will minimize the time and costs incurred by the parties as compared to embarking on a taxation process. In relation to fairness, the issue is whether the lump sum costs process will provide an outcome that is logical and reasonable and sufficiently accurate to do justice between the parties. Each of those considerations must be balanced and considered in the context of the particular circumstances of the case, including the complexity of the litigation and the scope and magnitude of the costs involved. (emphasis added)
On 22 February 2024, I ordered that the parties file submissions and material in order that the Court would be in a position to make a costs determination and avoid the necessity for taxation.
Unfortunately, in my view the Court has not been assisted by the material filed by the parties to date, namely the:

Respondent's Outline of Submissions filed 8 March 2023;
Applicants' Submissions filed 21 March 2023; and
Affidavit of Gregory James Finlayson affirmed 8 March 2024.

Turning to that material I make the following findings.
The respondent's costs, as estimated by Mr Finlayson, appear to be a tally of his charges and disbursements referable to his charge out rate, based on information in his timesheets which he has provided to the Court. However, as Gleeson J observed in Hislop v Paltar Petroleum Ltd (No 4) [2017] FCA 1632: [6] The usual rule, which applies in this case, is that costs are payable on a party and party basis: rr 40.01 and 40.02. Costs as between party and party are defined in the Dictionary (Sch 1 to the Rules) as 'only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation'. In contrast, an award of costs on an indemnity basis is intended to compensate a party fully for costs where it was unreasonable for the party to be subject to any expenditure of costs, such as where a hopeless proceeding is brought: see Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506; (2012) 290 ALR 288 ('Bitek') at [12]. [7] Specification of a lump sum is not the result of a process of taxation or assessment of costs; the sum can only be fixed broadly having regard to the information before the Court; the approach taken to estimate costs must be logical, fair and reasonable: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [22]. The task is one of estimation or assessment and not of arithmetic: Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2014] FCA 346 at [17(e)]. The sum of costs fixed should be proportionate to the nature, including the complexity, of the case: Bitek at [18]. [8] The starting point for the fixing of costs is the charges rendered by Mr Hislop's solicitors. Then, there may be an 'impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment': Bitek at [18], citing Hamod v New South Wales [2011] NSWCA 375 at [820]. However, the court must be 'astute not to cause an injustice': Bitek at [23]. (emphasis added)
In the present case:

Mr Finlayson has produced no invoices for costs he claims referable to his work for the respondent;
I agree with the submission of the applicants that Mr Finlayson's timesheets, on their own, are inadequate evidence on which to base an order for costs. I contrast the evidence before the Court with, for example, the evidence before Williams J in Bespoke Recycling Industries Pty Ltd v Recycling Developments Pty Ltd [2022] QSC 118. In that case, the costs sought by the relevant respondents were supported by a detailed affidavit which identified the methodology that had been undertaken as background to the amount of costs claimed, and which exhibited invoices from the law firm to the client as well as disbursement invoices;
The costs the respondent sought ($26,000 plus GST) are very significant in light of the stage at which the proceedings were discontinued, and the amount of the debt claimed by the applicants in their Creditor's Petition (namely $31,000);
There was no suggestion of any discount of costs referable to the contingencies that would be relevant in any formal costs assessment; and
No evidence was adduced from any witness with expertise in respect of costs calculations.

On the other hand, I am also not persuaded that the approach taken by the applicants to estimate costs was logical, fair and reasonable. In particular:

The comparison between the present proceedings and those in Collins to which the applicants referred, is flawed. Unlike in the present case, the costs assessed in Collins followed a taxation of costs by a Master of the Supreme Court of South Australia, and the Court of Appeal found that it was in a position to estimate the likely costs reasonably incurred by the respondents in that case. I am not in that position in the present case;
No affidavit was filed by the applicants containing a Costs Response with respect to the costs sought by the respondent in Mr Finlayson's Costs Summary; and
Notwithstanding that the proceedings were discontinued by the applicants at a relatively early stage, their submissions failed to take into account the full extent of legal costs incurred by the respondent in her defence to the Creditor's Petition prior to the discontinuance. Such costs could properly include her briefing of Mr Finlayson and the work the law firm may have done in defending the respondent and preparing a response to that Creditor's Petition.

The range of costs before the Court is $1,500 to $26,000 plus GST, reflecting the relatively early stage of the litigation in respect of which costs should be assessed. I am not persuaded that costs in this relatively uncomplicated matter, in this range, warrant an order for taxation - rather, I consider a lump sum costs order to be appropriate. However, it is not feasible for me to make such an order at this stage on the material before the Court. I consider it would be inefficient for me to require the parties at this point to file further submissions and material to supplement the material they have already provided. Rather, in the interests of efficiency as contemplated by s 37M of the Federal Court Act, I consider that the appropriate course of action is to refer the costs dispute between the parties to a Registrar under s 54A of the Federal Court Act and div 28.6 of the Federal Court Rules, as contemplated by [4.9] of the Costs Practice Note.
In doing so, I have regard to the purpose and relevant principles underpinning s 54A, as explained by Lee J in Kadam v MiiResorts Group 1 Pty Ltd (No 4) [2017] FCA 1139 (by reference to an earlier judgment of White J in Linke v TT Builders Pty Ltd [2014] FCA 672). In particular, I note the following observations of his Honour: [61] First, it is obviously necessary that there be precision at to what is referred to a referee although, in appropriate circumstances, this does not require only granular questions to be referred; indeed s 54A(1)(a) of the FCAA expressly contemplates an entire proceeding being referred to a referee. Secondly, an overlap in the matters to be determined by the Court and by the referee can be avoided by careful calibration of the orders for reference. Thirdly, although the attitude of the parties may be a relevant consideration, the notion that the parties' views can rise to the level of being some form of veto or barrier has now been rejected (see [46] above). Fourthly, there is nothing either textually or contextually which would suggest that a referee is necessarily fettered, in appropriate cases, from enlisting the "assistance of further experts"; the involvement of additional experts in the reference depends on the order for reference and the nature of the reference. Indeed, pursuant to orthodox orders very regularly made, as specified in the Supreme Court of New South Wales by adoption of annexure 2 of Practice Note No. SC Eq 3 Supreme Court Equity Division - Commercial List and Technology and Construction List, references very commonly provide for a referee, in conducting proceedings under the reference in a manner as will, without undue formality or delay, enable a just determination, to communicate and engage with experts retained on behalf of the parties. (emphasis in original)
As I take the view that a lump sum costs order is appropriate, it is only the quantum of the lump sum that is left to be calculated by a Registrar, who will be in a position to do so once more credible evidence is adduced. The Court has already provided the parties with an opportunity to provide material referable to an assessment of costs. That material has proved to be unsatisfactory. In this context, I note the relatively unfettered powers of referees under r 28.65 of the Federal Court Rules to conduct an inquiry, obtain such material as the referee thinks fit, and on the basis of that material make an informed and independent calculation of costs.

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Cases Cited (14)