Assessing lump sum costs in this case
43 I therefore proceed on the basis that the first respondent is indeed entitled to party-party costs assessed on a lump sum basis in the usual way. Before fixing a sum as a result of that assessment, though, it is necessary to consider two specific arguments made by the applicants that would bear upon the quantum, if they were accepted.
44 The first concerns GST. The applicants submitted that because FTI Consulting is registered for GST, it will be entitled to claim input tax credits, so GST should not be included in any award of costs. But uncontradicted affidavit evidence of Mr Carles (sworn 1 June 2022) indicates that while FTI Consulting is registered for GST, the first respondent is not, neither in her personal capacity nor in her capacity as trustee of the bankrupt estates. Nor are the bankrupt estates registered for GST, and the first respondent is not entitled to claim input tax credits in respect of any GST forming part of the claim for costs in this case.
45 So while FTI Consulting is registered for GST, no doubt because it is in the business of providing professional services and charging GST on them, input tax credits will not be claimed on the basis of any GST component of Carles Solicitors' fees as charged to the first respondent in her capacity as trustee of the bankrupt estates. This means that the GST component of those fees should be taken into account as part of the costs actually charged that form the starting point for the lump sum assessment as explained above. That is consistent with the guidance in part 6 of the Practice Note. In accordance with paragraph 6.6(b)(ii) of the Practice Note, however, I will take into account the fact that some items in the costs scale in Schedule 3 to the Federal Court Rules will specify flat rates or caps that do not add GST. Any discount adopted must take that into account.
46 The second specific argument made by the applicants concerned Mr Carles. Mrs Frigger says in an affidavit sworn on 23 May 2022: 'In June 2020 I paid $28.00 to search the High Court's register of practitioners. I was informed by a Sydney registrar, and verily believe, that Mr Carles' name does not appear on the register'. The applicants submit that because Mr Carles is not on the High Court's Roll of Practitioners, the costs of his work cannot be claimed except on the basis that he is a law clerk.
47 Whether or not that would follow, I do not accept the factual premise that Mr Carles is not on the High Court Roll. Mrs Frigger's affidavit provides no independent documentary verification of the oral statement of the registrar given by way of hearsay, nor any detail of the parameters of the search Mrs Frigger says she made. In contrast, Mr Carles has put into evidence (in an affidavit of 1 June 2022) an email from the Sydney Registry of the High Court of Australia dated 27 April 2022 (in response to an email from him in which he gave his full name and year of admission in Western Australia and approximate year of entry onto the High Court Roll), in which the registry said, 'I can confirm that you were entered on the Register of Practitioners on 4 June 1991'. I prefer that direct independent documentary evidence to the evidence of Mrs Frigger on the point. I find that at all material times Mr Carles was on the High Court Roll.
48 The balance of the applicants' arguments about the lump sum assessment consist of detailed comments on and objections to the amounts charged by Carles Solicitors, the amounts charged by counsel, and the disbursements that were incurred. I have had regard to those arguments in relation to the assessment and, to the extent appropriate, I comment on them below. However, in taking the approach explained at the beginning of these reasons, I have had regard to the arguments in the impressionistic way mandated by the authorities. I will not address each comment and objection in detail, because that would turn this process into a taxation of costs. For example, the applicants provided copies of counsel's invoices with line items said to be outside the costs of these proceedings highlighted, and they conducted word counts of affidavits filed. It is not appropriate to approach a lump sum assessment at that level of detail.
49 The basis of the lump sum claimed is set out in Mr Carles's Costs Summary affidavit of 26 April 2022. It was not prepared with the assistance of a costs expert. In overview, it says the following:
(1) The Costs Summary confirms the correctness of the calculations, confirms that the first respondent is not claiming more than she is liable to pay, and says that the matters noted are a fair and accurate summary of the costs she is entitled to claim.
(2) It says that the amounts are capable of further verification through source materials (including file records, tax invoices and receipts for payment) should such material be required by the Court to be produced. I mention that for two reasons. First, to note that, despite that evidence, the applicants have not called for any source materials further to the Costs Agreement and invoices that the first respondent had already produced. Second, because Mrs Frigger submitted that the lack of any mention of time sheets in the Costs Summary meant that no time sheets were kept, so the 'estimates' made by Mr Carles should be entirely rejected. There is no merit in that submission - the examples given of source materials were expressly inclusive, not exclusive, and time sheets come within the broader category of file records.
(3) All amounts claimed in the Cost Summary fall within the Federal Court's National Guide to Discretionary Items in Bills of Costs.
(4) The legal practitioners or paralegals who worked on the matter were Francois Carles, who has over 30 years experience in bankruptcy law; counsel for the first respondent, Simon Majteles; Matthew Price, who was a paralegal before completing his College of Law qualifications in October 2020 (after the trial of the proceeding) and being admitted to practice in March 2021; and another paralegal.
(5) There is a breakdown of the costs claimed into costs before 14 June 2019 and costs after that date, which is necessary because only on that date did the second applicant become a party. The claim for the earlier period is less than 4% of the total.
(6) There is a breakdown of legal fees between solicitor fees and counsel fees. The split is close to 50-50.
(7) The descriptions of work done in Carles Solicitors' invoices reveals that some of the work invoiced related to general issues or advice concerning the applicants' bankrupt estates rather than to these proceedings. Mr Carles estimates that less than 5% of the work did not relate to the proceedings.
(8) Counsel's hourly rate throughout was $385 inclusive of GST. That is within the range recommended in the Court's National Guide to Counsel Fees. Mr Carles's hourly rate throughout was $580 inclusive of GST. That was equal to the hourly rate allowed for in Schedule 3 until 2 May 2019, when that rate was increased to $650. Despite that increase, Mr Carles did not increase his rate throughout the proceeding.
(9) Mr Price's rate was $165 (presumably inclusive of GST) before he was admitted as a legal practitioner and $297 thereafter. No amount has been claimed for work done by Mr Price before and including 30 April 2020, which Mr Carles estimates was in excess of 60 hours.
(10) There were also disbursement invoices for printing/photocopying and transcript. The applicants made a detailed objection to one of the printing invoices, of a kind inappropriate to a lump sum assessment. The printing/photocopying invoices total $1,371.10, which is a modest amount in a complex matter like this, involving a small law firm which may be taken to have no in house bulk photocopying capability. As for the transcript invoices, while they cannot be reconciled with the amount claimed for them, the invoices are higher than the amount claimed, so the difference will benefit the applicants. The disbursements claimed (not including counsel's fees) will be allowed in full.
(11) The trial of this matter took place over the course of 12 days (including applications to reopen), some not full days in court, others longer than a standard court day. Mr Carles attended the first seven of those days. Mr Price attended afterwards. Full days of attendance by the solicitors were charged at daily rates equivalent to six hours (or just under in relation to Mr Carles).
(12) There is no claim for the 50 hours or more worked by the other paralegal I have mentioned.
(13) The total time claimed (paralegal/law graduate, solicitor and counsel) is 1,166 hours.
50 The Costs Summary annexes a schedule breaking the lump sum claimed into 19 categories. They do not represent conventional categories such as pleadings and discovery, because the matter proceeded on affidavits without pleadings, and there was not a great deal of discovery required. They are, instead, broken down into different interlocutory applications or groups of interlocutory applications, of which there were many in this proceeding. For example, there is a category for an application for an interlocutory injunction that the applicants made at the commencement of the proceeding, and a category for a contempt of court application they made later on. There are also categories for getting up for trial and attendance at trial and a modest amount for taking judgment. There is also a category for preparation of Mrs Trenfield's main affidavit, which was over 1,300 pages long including annexures, and was referred to extensively in Frigger v Trenfield (No 10) [2021] FCA 1500 (Main Judgment) as KAT 4.
51 I have reviewed the schedule and accept that it represents a sensible breakdown that helps the Court assess the reasonableness and proportionality of the different categories. For example, it reveals that $14,000 is claimed for the interlocutory injunction application (which took a whole day of hearing time) and $20,125 is claimed for the contempt application (which similarly took a whole day of hearing time). These represent in the order of 3% to 4% of the total claim. $140,000 is claimed for getting up for trial which is about 30% of the total. $61,065 is claimed for attendance at trial itself, which represents about 13% of the total. All of these amounts, and the others I have reviewed but not mentioned, are reasonable on their face and proportionate to the costs of the matter as a whole.
52 It is also relevant at this point to note two discounts that are applied in the schedule to arrive at the total claim for legal fees. One is a discount of 50% to a group of interlocutory applications and hearings, because the Costs Judgment required that discount to be applied. The other is that Mr Carles has applied a blanket discount of 7% to all legal fees (after the application of the 50% discount).
53 I will now consider the arguments advanced by the applicants about these figures. As I have indicated, that will mostly be done in an impressionistic, high level way appropriate to a lump sum assessment. First, the applicants said that because Mr Price was not admitted as a practitioner until March 2021, he can only be charged as a 'law clerk' at $80 per hour (that being the rate stipulated in the Costs Agreement). In fact, Schedule 3 draws a distinction between a 'law graduate or articled clerk', with an hourly rate of $240, and a 'clerk or paralegal', with an hourly rate of $110. There is no clear indication in the evidence of whether or when Mr Price became a law graduate but since he had gained the necessary qualifications to be a legal practitioner in October 2020, it is more likely than not that he had graduated before May 2020, which is when fees for his work commence to be claimed.
54 Accepting that Schedule 3 is only a useful guideline, in my view it is appropriate to proceed on the basis that Mr Price was entitled to be charged as a law graduate/articled clerk from May 2020, and of course a legal practitioner after his admission in March 2021.
55 The applicants say that the Costs Agreement does not permit Carles Solicitors to charge a daily rate, so the claims based on that rate during trial should not be allowed. But as has been said, the daily rate charged represents six hours or less. That only covers the time actually spent in trial, when, on each day, the paralegal or lawyer involved is likely to have spent much more time on the matter. In truth, the daily rate charged for the time of Mr Carles and his staff works in the applicants' favour.
56 The applicants say that there is no evidence in the invoices that the amount of less than 5% which Mr Carles attributes to matters other than the proceeding is an accurate one. To an extent I accept that, as Carles Solicitors' invoices are not itemised. But from the un-itemised work descriptions it does appear that the proceeding took up the vast majority of the work charged, and the total amount so claimed for Carles Solicitors' fees in respect of the proceeding, approximately $228,600, is eminently reasonable for a matter of this kind. It is unfortunate that the invoices relied on include work not attributable to the proceeding, especially since they are not itemised. The applicants are entitled to point that out and to complain about it. Nevertheless, I am confident that if Mr Carles has underestimated the discount that should be applied, it is not by much. The risk that he has underestimated will be taken into account below when I arrive at a discount figure.
57 The applicants have been through the schedule to the Costs Summary item by item and have provided their own schedule with the figures they say should be allowed. Once again, to go through the material like that is inappropriate. It is also revealing that the total amount they propose for Carles Solicitors' costs is $22,352 (or even less if Mr Carles had been found not to be on the High Court Roll). Experienced litigants, as the applicants are, must be aware that this is a ridiculously small total for litigation like this proceeding. The amount allocated for counsel fees of $80,137 is also unreasonably small.
58 The reasons given in the applicants' submissions for these deep discounts are a lack of information in Carles Solicitors' invoices (as already explained, that is not to the point), an assertion as to word count, the argument about daily rates that I have already addressed, an apparent assumption that all the work on written submissions and preparation for and appearance at hearings was done by counsel, and a submission that all the affidavits were compiled by the first respondent's staff.
59 None of these points provide sound reasons for discounting the fees that much, or at all. The assumption I have mentioned that counsel did all the work has not spared his fees from significant reduction in the applicants' schedule for many items. Even he has only been 'allowed' two days preparation for the trial that took place over 12 days, which is manifestly inadequate. As to the last point about affidavits, Mrs Trenfield did say in re-examination, 'The affidavits were compiled by staff and provided to my solicitor.' But that was in answer to a very specific question about a specific email annexed to KAT 4, and it is not at all clear that she meant that all 25 affidavits prepared by her side throughout the proceeding had been compiled by her staff. In any event, 'compiling' them may be taken to mean putting the documents together; there would still have been a great deal of legal work required to turn those compilations into finished affidavits. The figures in the applicants' schedule are manifestly unreasonable and I put no weight on them.
60 Finally, the applicants have provided a copy of Mrs Frigger's affidavit which identifies line items in counsel's itemised invoices which it is said are outside the costs order. According to the applicants' figures, the charges for these items total just under $5,000. Once again, I will not go through them line by line. It is enough to say that on their face, all but three of the 12 items challenged have a direct and obvious connection to the proceeding. Those three (items (e) to (g) in the applicants' submission) total $280 on the applicant's calculation. That provides no basis for supposing that any substantial proportion of counsel's fees are not related to the costs of the proceeding.
61 Bearing all the above matters in mind, and noting that the Costs Summary already applies a discount of 7% to the first respondent's claim for costs, I consider that it is appropriate to apply a further modest discount so as to bring the total discount to 10%. My essential reasons are as follows.
62 That any further discount should be modest or, arguably, non-existent, appears from the following matters:
(1) This proceeding was lengthy, time consuming and no doubt presented considerable challenges to all concerned. It was commenced in March 2019 with the main part of trial occurring in July 2020. But the trial exceeded the time originally listed so the Court sat on the main part of the trial over six more days in August and September, plus a further application to reopen in November of 2020.
(2) The substantive issues determined in the Main Judgment fell into three categories. One of those did not take up much time but the other two were complex and time consuming. As an admittedly imprecise measure of the complexity of the matter and the time it took to deal with it, the Main Judgment was over 750 paragraphs long.
(3) The value of the subject matter was substantial. While there was no need to value it precisely, it involved bank accounts which at one time held approximately $2.8 million, a share portfolio which, on one piece of evidence, was valued at approximately $2.5 million, as well as two pieces of residential real estate in suburbs of Perth. It also involved an unsuccessful attempt to have Mrs Trenfield removed as the applicants' trustee in bankruptcy, which involved an attack on her professional reputation. All of that was serious and it was reasonable for the first respondent to devote considerable legal resources to it.
(4) There were numerous interlocutory applications both before and after trial, most of which were initiated by the applicants and most of which were unsuccessful. These included applications (by the applicants) for summary judgment, and for an interlocutory injunction, and for reopening both before and after judgment was reserved. There was also an application for contempt of court against Mrs Trenfield which was significant to her reputation (and which failed).
(5) Judged against that background, total legal costs of $419,812 are reasonable. The applicants have advanced no real basis to think that there has been any significant inefficiency in the conduct of the matter by the small team of lawyers and paralegals. That is reflected in the fact that approximately half of the sum claimed represents junior counsel fees.
(6) The claim does not include any claim for the work of one paralegal and excludes a significant amount of time charged by another paralegal or law graduate before qualification.
(7) The rates are beneath the caps suggested by Schedule 3 and within the range set by the National Guide to Counsel Fees.
(8) The first respondent's claim does not include the allowance for the costs of the hearing that resulted in the Costs Judgment. That may have been due to inadvertence, but at the hearing on 22 July 2022 counsel for the first respondent expressly eschewed moving for those costs, and did not seek to reserve the right to do so later.
(9) Lastly, a discount of 7% has already been built in.
63 The matters which, nevertheless, lead me to apply a further modest discount are:
(1) Due regard must be had to the fact that experience shows that on taxations of costs, amounts are inevitably claimed that are disallowed: see Hancock v Rinehart (above at [13]).
(2) There is a real risk that Mr Carles has underestimated the 5% that he has deducted from his bills to reflect the fact that, regrettably, they cover some work not attributable to the proceeding. Mr Carles has not explained the basis for arriving at that particular figure.
(3) While for the most part the claim is appropriately inclusive of GST, there is a risk that GST has been charged on some amounts that would not be allowed on a taxation (see [45] above).
64 In the result, there will be a total sum of $406,269, inclusive of GST, assessed for legal costs and there will be allowance for disbursements of $16,041.45 inclusive of GST. The amount for legal costs represents a 10% discount on the $451,410 that was claimed after the application of the specific 50% discount that was ordered in relation to certain matters, but before the 7% applied by Mr Carles. That is, the final number for legal costs is $451,410, less Mr Carles's 7%, less the Court's further 3% on that original sum. I will divide that between pre-14 June 2019 (first applicant's sole liability) and afterwards (both applicants' liability) in the same proportion as appears from Mr Carles's proposed figures, that is, 3.4% for the pre-14 June 2019 component. The disbursements were all incurred after that date.
I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.