[2024] FCA 433
General information, not legal advice.
Federal Court of Australia
2024-04-30
Burley J
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REASONS FOR JUDGMENT 1 INTRODUCTION [1] 2 THE DECISION OF THE PRIMARY JUDGE [9] 3 THE RELEVANT LEGISLATION [11] 4 THE SUBMISSIONS [22] 5 CONSIDERATION [26] 5.1 The correct approach [26] 5.2 Re-exercise of the discretion [51] 6 DISPOSITION [62]
5.1 The correct approach 26 The present appeal involves a challenge to the exercise of the discretion of the primary judge. To make good the challenge, the appellant must establish that it falls within the principles set out in House v The King at 505. Given that the Minister has properly conceded error in relation to ground (2), that is sufficient to warrant a re-exercise of discretion. 27 Section 214(2) of the FCFC Act provides the jurisdiction for the FCFC to award costs. Section 214(3) provides that the award of costs is in the discretion of the FCFC. 28 In exercising the discretion conferred in s 214(3), the Court must consider whether there is a party in whose favour an award should be made and then the appropriate mechanism by which the quantum of that award should be calculated. The familiar orders made are that a party is ordered to pay "costs of the action", "costs of, and incidental to, the proceedings", "costs in the cause" or costs of a particular event in the hearing: Dal Pont GE, Law of Costs (LexisNexis, 5th ed, 2021) at 1.14 - 1.27. 29 It is inappropriate to read a provision such as s 214(3) by making conditions or imposing limitations which are not to be found in the words used; Oshlack v Richmond River Council (1998) 193 CLR 72 at [21] (Gaudron and Gummow JJ). 30 Section 214(3), like the section under consideration in Oshlack, contains no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. As the Court there observed, the power is to be exercised judicially, not arbitrarily or capriciously or so as to frustrate the legislative intent. The discretion may be seen to be unconfined, except insofar as the subject matter and the scope and purpose of the legislation may enable an appellate court to conclude that an exercise of the discretion is "definitely extraneous to any objects the legislature could have had in view"; Oschlack at [22]. 31 The submissions advanced by the Minister in the present case bear some similarity to the proposition rejected by Gaudron and Gummow JJ in Oshlack where their Honours said at [37]: Implicit in the submissions for the Council is the proposition that, so strongly determinative of a discretion conferred in broad terms by a provision such as s 69 of the Court Act are the considerations (i) that the court must determine the matter from the perspective of the successful party, (ii) that the successful party ordinarily should be compensated by the unsuccessful party for the expense of the litigation, and (iii) that the successful party will be deprived of costs only by disentitling conduct, that they are to be displaced only by specific legislative provision. … Their Honours held that modern provisions conferring discretion as to costs have "escaped arterial hardening" where provision was made for a broad discretion to confer costs; at [38]. 32 In an often-repeated passage, McHugh J observed at [67] (citations omitted): The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. 33 In a similar vein, Kirby J, who with Gaudron and Gummow JJ formed the majority in Oshlack, noted at [134(3)] that appellate courts should avoid the imposition of rigid requirements which would narrow the discretion afforded by the statutory power; whilst guidance may be afforded by referring in general terms to the considerations which the decision-maker may take into account, such considerations are not intended to confine the decision-maker to a rigidly mechanical approach, which would amount to an abdication of the discretion afforded to the decision-maker. His Honour went on to observe at [134(4)] (citations omitted): It is because the general purpose of an order for costs in favour of a successful party is to provide compensation in the form of a partial indemnity for the costs incurred that the ordinary principle… is that legal costs will usually be ordered in favour of the successful party… But the compensatory principle cannot be treated as an absolute rule. Otherwise, the discretion conferred in unqualified terms would indeed be shackled and confined. To permit this would be incompatible with statutory language expressed in such terms. Therefore, although there are "rules" or ordinary principles which will guide the donee of power in the exercise of the discretion, they cannot extinguish the element of discretion. They must not be allowed to harden into rigid or inflexible requirements. 34 Of course, it is not the case that the "indemnity" equates to the notion of "indemnity costs". Rather, as courts have come to recognise, the principle is that a party that is successful be permitted to recover so much of its costs as are reasonably incurred. This is often determined upon the award of "party-party costs" which are assessed by an independent assessor on taxation: Dal Pont at 16.14 - 16.17; see also Schedule 1 of the Federal Court Rules 2011 (Cth), which defines "costs as between party and party" as "only the costs that have been fairly and reasonably incurred by the party in the proceedings". The just resolution of disputes does not necessarily require that a successful party recover all of the party's costs and disbursements, or that a party be able to maximise the recovery thereof; awards of costs (even on an indemnity basis) do not always fully compensate a party: Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 at 410 - 411, 414 - 415 (Mason CJ, Brennan, Deane, Dawson and McHugh JJ); Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [98] - [100] (Gummow, Hayne, Crennan, Kiefel and Bell JJ); Colgate Palmolive v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 at 226 (Sheppard J); see also Dal Pont at 7.7, 15.4 - 15.6. 35 Once the Court decides that an order for costs should be made in favour of a particular party, the next question is the appropriate amount to award. The scheme set out in the FCFC Act and Rules provides several options for the award of costs by the court in migration cases, all of which must be understood to be subject to the principles set out above, which arise from the conferral of the general discretion to award costs in s 214(3). 36 Those options may be summarised as follows. 37 First, the Court may elect to do no more than indicate (in an unspecified manner) that a party is entitled to costs. 38 In that case, under rule 22.09 of the FCFC Rules, the default position is that the party is entitled to costs in accordance with Schedule 2, Part 1 of which concerns general federal law proceedings other than migration proceedings and Part 2 of which concerns migration proceedings. Rule 22.09 provides that, in addition to costs in accordance with these schedules, the party is entitled to "disbursements properly incurred". Part 1 of Schedule 2 makes allowance, in assessing costs for general law proceedings other than migration proceedings, for both an amount for costs and separately for daily hearing fees. In respect of disbursements, a specific amount is allowed for photocopying per page, agents' fees and travelling costs, and "court fees and other fees and payments to the extent that they have been reasonably incurred". Part 2 provides for the payment of a single amount in respect of an event, for example, where a proceeding has concluded at a final hearing, with no reference to fees or disbursements. 39 Secondly, if an application is made in accordance with rule 22.02(1), the Court may set the amount of the costs by reference to r 22.02(2)(a). 40 Thirdly, if an application is made in accordance with rule 22.02(1), the Court may set the method by which the costs are to be calculated; r 22.02(2)(b). As noted in CIQ17 at [12], this may be a determination that costs are to be paid on a "party-party", "solicitor-client" or "indemnity" basis, but may provide for another basis. 41 Fourthly, if an application is made in accordance with rule 22.02(1), the Court may refer the costs for taxation under Part 40 of the FCR; r 22.02(2)(c). Part 40 of the FCR is entitled "Costs" and within Division 40.2 makes provision for the taxation of costs. Schedule 3 to the FCR, to which reference is made in FCFC Rules 22.10, makes provision for costs allowable for work done and services performed by lawyers. It provides that counsel's fees may be allowed according to the circumstances of the case and are to be claimed as a disbursement (cl 16). It provides that all court fees and other fees and payments may be allowed in the amounts actually incurred (cl 18). Taxation is a method by which the fair and reasonable costs of a party are determined, depending on the particular basis of the award, for instance, whether it is "party/party costs" or "indemnity costs": see the definitions of "costs as between party and party" and "costs on an indemnity basis" in the Dictionary in Schedule 1 to the FCR. 42 Fifthly, the Court may order that an unsuccessful party is to pay the costs of a successful party in accordance with Division 1 of Part 2 of Schedule 2; r 29.13(1). This is a more specific mechanism than the first option identified above and requires the Court to specify the party to pay costs in accordance with the Schedule. 43 It is within this scheme that the dispute between the parties emerges. The Minister contends that the scale costs identified in r 29.13(1) are set to "put a break on rampant capitalism" and set a reasonable rate for legal fees that will avoid exorbitant charging in migration proceedings. He submits that the scale sets that rate and that it is to be assumed that this provides a benchmark for judges to award costs, deviation from which should only occur in cases where there is "good reason" to do so. For the following reasons I am unable to accept that submission. 44 The scheme of the FCFC Rules must be understood in the context of the discretion conferred pursuant to s 214(3) of the FCFC Act. The reasoning of the High Court in Oshlack to which I have referred above demonstrates that the broad jurisdiction to award costs empowers the Court to make orders that fairly indemnify the successful party. I respectfully agree with the analysis set out by Judge Manousaridis in CIQ17 at [25] - [26] in which he observes that none of the FCFC Rules is expressed in mandatory terms. It is within the discretion of the Court to determine which of the mechanisms for assessment of costs it will exercise in any given case. The rules in effect lay out a palette of choices for the Court and it will depend on the particular circumstances of the case which is the choice most apposite. As Judge Manousaridis said at [26]: If there is any overriding principle in relation to the assessment of costs, it is that costs should be set to provide the successful party a fair indemnity for the costs he or she has incurred in having had to litigate. 45 In a migration proceeding, if an application is made under r 22.02, then the Court must exercise its discretion to determine whether one of the other options in r 22.02(2) is more appropriate than the application of the Schedule 2 scale costs pursuant to r 29.13(1); see r 29.13(3). 46 I find no basis in the language of the FCFC Rules to conclude that in so doing there is any bias or weighting to be accorded in favour of scale costs such that there must be a "good reason", "exceptional circumstances" or a case of "unusual complexity" before one of the other options is selected. In this regard, whilst some decisions in the FCFC appear to have considered that such a threshold requirement exists (see, for instance, the detailed survey of cases in Gehlert at [33] - [51]), in my respectful view to take such an approach is inconsistent with the principles set out above. 47 The Minister emphasises statements made by the Supreme Court of Western Australia to the effect that the existence of scale costs is intended to ensure that costs remain within reasonable bounds, citing Kirwin at [20] and Frank Jasper Pty Ltd v Glew [No 3] [2012] WASC 24 at [33]. The difficulty with this submission is that the legislative scheme in that State involves the application of a mandatory rule, stating that costs "shall not exceed" the amounts set out in the scale; Kirwin at [10], [11]. By contrast, no such mandatory language is to be found in r 29.13 of the FCFC Rules. 48 I do not consider that either the Explanatory Statement or the Terms of Reference for the Joint Costs Advisory Committee provide support for the Minister's position. The Explanatory Statement simply indicates that the amendments update the scale of costs in Schedule 2 in line with the recommendations of the Joint Costs Advisory Committee. The committee has been established to advise justices and judges of the Federal Courts annually on variations in the quantum of costs for legal practitioners which may be fixed in the rules for which judges of each court are responsible. The committee is to inform itself by reference to previous decisions of the committee, written submissions from interested parties, the reasonable expenses incurred by solicitors in the conduct of their practices and any other relevant factors. A formula is set out that is used as an indicative mechanism to be adjusted according to available data (including Australian Bureau of Statistics data), taking into account wages, overheads and partners' salaries and profits adjusted by CPI and wages increases calculated by the ABS. 49 The workings of the committee and the figures in Schedule 2 are undoubtedly carefully calculated. However, r 29.13(1) provides one of several discretionary options to the Court to assess costs on the basis of the scale identified in Part 2 of Schedule 2. There is no statement to be discerned from either the FCFC Rules or the secondary material to which I was referred to indicate that the application of the scale may be considered to represent an assessment of costs of a migration case of "average complexity" (SZUVZ v Minister for Immigration and Border Protection [2015] FCCA 2346 at [4]) or a "standard unit equivalent migration proceeding which concludes at a final hearing" (AHE18 v Minister for Immigration, Citizenship and Multicultural Affairs (No 2) [2023] FedCFamC2G 257 at [4]). As noted in CIQ17 at [27], it is doubtful that one could assess what would constitute a case of average complexity. 50 In the present case, the appellant applied to the primary judge for an order that costs in his favour be "as agreed between the parties, or taxed under Part 40 of the Federal Court Rules 2001 (Cth)". This was an application under FCFC Rule 20.02(2)(b) or (c). It was supported by the costs affidavit. In refusing that application, the primary judge wrongly failed to consider whether the award of such costs would indemnify the appellant in the sense of permitting him to recover his costs as reasonably incurred. Instead he considered that there was "no good reason" to depart from scale costs, scale costs being "a good reflexion of what quantum of costs ought properly to be". This was an error of principle.
5.2 Re-exercise of the discretion 51 The appellant submits that this Court should re-exercise the discretion in relation to costs. The Minister opposes that course and submits that the application should be remitted to the primary judge for redetermination. In my view, it is more efficient to consider the appellant's application under FCFC Rule 20.02(2)(c). 52 In the costs affidavit, Mr Varess provides an itemised record of the solicitor-client costs incurred by the appellant totalling $4,038.98 while he was represented by a prior firm, which includes: (a) a $665 court filing fee; and (b) $983 in barrister's fees. 53 Mr Varess also provides an itemised record of solicitor-client costs incurred since he commenced to represent the appellant in December 2018 which amounts to $28,910.96, including: (a) an $835 court setting down fee; and (b) $12,100 in barrister's fees. 54 For each disbursement, he includes documentary evidence in support in the form of the court fee invoice or barristers fee invoices. 55 Mr Varess gives evidence that he has been practising as a solicitor in the field of immigration law since 2003, has since 2010 been accredited by the Law Society of New South Wales as a specialist in immigration law and has had carriage of over 506 judicial review matters. He has had experience in the process of taxation of costs under Part 40 of the FCR. He gives evidence to the effect that in matters in which he has been engaged where taxation has taken place, on average his bills of costs have been discounted to 78% of the total solicitor-client costs. Applying that percentage, on the basis of the itemised costs (and disbursements) in the present case, which total $32,949.94, he would expect that a Certificate of Taxation would be issued in the amount of $25,700.95. Mr Varess was not cross-examined. 56 The primary judge made several misplaced criticisms of the evidence at [7] - [9] because of his mistaken belief that he had the whole of the affidavit, when only every second page had been provided to the Court. He also correctly noted that nowhere in the affidavit did Mr Varess affirm that the charge out rate for any listed item was reasonable having regard to the nature of the work said to have been performed and nowhere was the Court supplied with material from a costs assessor. 57 Of further note is that the primary judge referred to an amendment made to the application for review more than three years after the original application was filed, which included the ground upheld by the Court. The primary judge inferred that for that period, the attention of the lawyers representing the appellant was directed towards obtaining relief which was ultimately abandoned in favour of the successful ground (at [6]). That observation was demonstrated on appeal to be incorrect. 58 I have otherwise set out relevant aspects of the reasoning of the primary judge at [9] - [10] above. 59 As I have noted, the correct approach to the question of costs is for the Court to consider whether it has been put into the position to assess what amount would represent a fair indemnity for the costs that the successful party has incurred. The appellant contends that it should be an amount as agreed or taxed. The Minister contends that it should be the scale amount of $7,852. It is open to the Court, notwithstanding the positions advanced by the parties, to select another amount or method of calculation. 60 In the present case, there is no dispute that the matter proceeded to hearing, counsel was retained and oral and written submissions were advanced on behalf of the appellant before the primary judge. The uncontested evidence of Mr Varess supports the submission that the scale fees are not likely to represent a fair indemnity. Indeed, even were a discount on actual costs upon taxation of 70% applied, the amount assessed by the primary judge would be an underestimate of a fair indemnity. The primary judge identified no other factors that would bear on the assessment of costs in the proceedings. 61 Whilst the assessment of costs by the Court is necessarily a broad-brush affair, the evidence indicates that an amount of costs fixed at $7,852 is unlikely to represent a fair indemnity for the appellant. It is not necessary for the Court to form a view as to an amount that would, although it can, where appropriate, choose to do so. There are matters that would no doubt have a bearing on the final amount to be awarded, however, in my view the correct course in the present case is to accede to the application of the appellant and order that the costs be taxed, if not agreed. It may be that the outcome of that process is a figure similar to the amount awarded by the primary judge, but the evidence available suggests that this is highly unlikely.
FJS18
Minister for Immigration, Citizenship and Multicultural Affairs
[1993] FCA 801
[2012] WASC 24
[2012] WASC 99
(2009) 239 CLR 175
(1994) 179 CLR 403
(1993) 46 FCR 225
(1936) 55 CLR 499
(1998) 193 CLR 72
[2009] HCA 27
[1936] HCA 40