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[2022] FCA 900
Federal Court of Australia
2022-08-03
Jackson J
Original judgment source is linked above.
The application of the indemnity principle 21 There were two principal reasons why, the applicants said, the first respondent was not entitled to recover any costs: first, because all of the invoices rendered by the first respondent's lawyers, Carles Solicitors, were addressed not to the first respondent but to a firm, FTI Consulting (Australia) Pty Ltd; and second, because they submitted that the costs agreement between Carles Solicitors and the first respondent was void.
The addressee and payer of the invoices 22 The invoices were rendered to FTI Consulting in circumstances where the first respondent, Mrs Trenfield, gave evidence at trial that she is not a partner in or shareholder of that firm (which appears to be a subsidiary of a publicly listed company in the United States) but an employee, albeit with the title of Senior Managing Director. The applicants submitted that Mrs Trenfield could not be liable to pay liabilities of her employer, and so should be taken to have no liability for the costs. The applicants then proceed to submit that on the application of the indemnity principle, no award of costs in her favour should be made. 23 The factual basis of that contention is supported by the evidence. Mrs Trenfield did testify to that effect at trial. And the first applicant, Mrs Frigger, swore an affidavit on 23 May 2022 which annexed all the invoices that Carles Solicitors rendered in relation to the proceeding up until the end of 2021, and they are all addressed to FTI Consulting (Australia) Pty Ltd. 24 On the principles described above, however, that is beside the point. Mrs Frigger's affidavit also annexed the legal costs agreement with Carles Solicitors (Costs Agreement). It is dated 12 April 2019 and it names the clients as Kelly-Anne Trenfield and Paul Allen, both of whom were at that time the joint and several trustees in bankruptcy of the applicants' bankrupt estates (see Mrs Trenfield's affidavit sworn 28 June 2019 para 1). The Costs Agreement covered this proceeding, which is specified by its matter number, as well as 'other issues'. While the applicants submit that the fees actually rendered were unreasonable or unrelated to the proceeding, they did not suggest that they were rendered other than under the Costs Agreement (assuming it not to be void). 25 All of the invoices, while addressed to FTI Consulting, were marked to the attention of Mrs Trenfield and members of staff working with her. It may be inferred from her position as an employee that at no time has she drawn on her own personal funds to pay the invoices. But she undertook the liability to do so, and it does not detract from this that Carles Solicitors may have chosen to render the invoices to her employer as the likely payer, or that it can be inferred that it was the employer that paid them. There were speculative submissions on both sides about the arrangements between Mrs Trenfield, FTI Consulting and Carles Solicitors that might underlie the invoices, but there was no evidence of those arrangements. Nor did there need to be: once it was established that the first respondent was liable to pay her solicitors the costs of representing her in the proceeding, the onus of proving some departure from that fell on the applicants. 26 Support for that last proposition appears in the quote from Howard v Mechtler at [8] above, and also in Adams v London Improved Motor Coach Builders, Limited [1921] 1 KB 495, on which French J relied in Angor. In Adams, a successful plaintiff was held to be entitled to his costs even though there was no written retainer between him and the solicitors who acted for him and even though it was in fact his trade union that had retained the solicitors. At 501 Bankes LJ said: When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs. Atkin LJ agreed (at 504). See also Noye v Robbins at [318], [320]ff (Owen JA). 27 The present situation is analogous, save that Mrs Trenfield is in a stronger position to claim costs than Mr Adams was, because she entered into the Costs Agreement, a written retainer agreement under which she assumed liability to pay Carles Solicitors their fees and disbursements. The fact that the invoices were addressed to FTI Consulting, and were likely paid by that firm, is explicable on the basis that the first respondent was an employee of the firm. That explanation does not indicate that there was a bargain with Carles Solicitors that under no circumstances was Mrs Trenfield to be liable for costs. 28 Mrs Frigger appeared to submit (in connection with Noye v Robbins at [322]) that there was an agreement between the first respondent and Carles Solicitors that the costs liability could not be recovered from the first respondent. But the authorities cited above establish that the fact that the invoices were rendered to FTI Consulting and, it can be inferred, were paid by them, are insufficient to establish an agreement of that kind. In truth, a situation where a third party is invoiced for legal fees and pays them is commonplace in litigation, and without more it cannot result in denial of party-party costs to the successful litigant. 29 For completeness, I note that Mr Allen resigned as the applicants' trustee in bankruptcy with effect from 13 March 2020 and was removed as a party to this proceeding on 19 March 2020. The applicants point out that he has not made any claim for costs. He and Mrs Trenfield were joint and several trustees in bankruptcy, and evidently entered into the Costs Agreement in that capacity, and were expressed in it in the singular as 'the client'. There is a rebuttable presumption that where a number of parties to an action enter into a single retainer with a solicitor, each is presumed to be jointly liable for the costs incurred by that solicitor (Hancock v Rinehart at [51]), and no evidence before the Court contradicts that presumption. So on the proper construction of the agreement, Mrs Trenfield remained liable for all costs charged under it, even after Mr Allen's removal. The applicants did not submit otherwise.
Whether the Costs Agreement is void 30 The first invoice from Carles Solicitors to FTI Consulting that is in evidence, which is dated 2 October 2019, contains the following note: '(Balance of above work (i.e. $10,051.67 + GST) to be invoiced when sufficient funds recovered into bankrupt estate)'. Two subsequent invoices in evidence contain similar notes, although these refer to 'receipt of funds in bankrupt estate' as the event that will lead to a further invoice being rendered. The fourth and last invoice in evidence, dated 22 December 2021, invoices the remaining balances as foreshadowed in the previous invoices, as well as a sum for further work done. 31 The applicants submit that because the invoices 'purport to defer some "work" until "sufficient funds recovered into bankrupt estate"', the Costs Agreement (as varied or replaced as evidenced by the invoices) is void pursuant to s 287 of the Legal Profession Act 2008 (WA) (LPA). (Although it has since been replaced by the Legal Profession Uniform Law (WA), the LPA continues to apply to this matter, as the Costs Agreement was entered into prior to the commencement of the uniform law: see Legal Profession Uniform Law (WA) Schedule 4 cl 18(1)(b).) 32 Section 287 of the LPA relevantly provides: Certain costs agreements void (1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division [Pt 10 Div 6], is void. (2) Subject to this section and Division 8, legal costs under a void costs agreement are recoverable as set out in section 271(b) or (c). (3) However, a law practice is not entitled to recover any amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received … 33 The specific provision of Part 10 Division 6 of the LPA on which the applicants rely is s 283. That makes provision for conditional costs agreements, which are referred to in s 283(1) as agreements that 'provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate' (see also the definition of 'conditional costs agreement' in s 252). Section 283(3) requires that conditional costs agreements contain certain matters, for example they must set out the circumstances that constitute the successful outcome of the matter to which they relate. The Costs Agreement does not set any such circumstances out because it does not make payment conditional on a successful outcome. So if the invoices do mean that there was a conditional costs agreement, then by force of s 287(1), it would be void. 34 However, as counsel for the first respondent submitted, there are at least three reasons why those provisions do not apply here. 35 First, the notes on the invoices do not establish that the first respondent and Carles Solicitors reached any agreement, in the sense of a meeting of minds, that the payment of legal costs was conditional on recovery of sufficient funds into the bankrupt estate (that being the condition expressed in the notes). They are at least equally consistent with a situation in which the first respondent is liable for the full amount of Carles Solicitors' fees, but the firm is indicating forbearance on invoicing for part of that liability until sufficient funds are received. 36 In oral submissions, Mrs Frigger sought to combine the notes on the invoices with cl 3 of the Costs Agreement to produce the result that there was an agreement that payment was conditional on recovery of sufficient funds. But that clause simply provides: 'You will be sent bills at such times and intervals as we consider appropriate. Invoices will be payable within the time set out on the invoices (usually within 14 days)'. So, pursuant to that term, Carles Solicitors decided to defer some invoicing until a later event. That does not add up to an agreement not to charge unless that event occurs. 37 Second, even if there was a meeting of minds to that effect, there is no evidence of any consideration having been provided by the first respondent. As far as the evidence indicates, she has promised nothing and given nothing in return for Carles Solicitors' forbearance. So the invoices can only evidence forbearance. There is no consideration capable of making any meeting of minds on that point a legally binding agreement capable of varying (or replacing) the Costs Agreement. 38 Third, even if the notes on the invoices did evidence a legally binding agreement, it would not be an agreement that provides that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate. The notes do not say that. They say that further invoices will be rendered when funds, or sufficient funds, are received into the bankrupt estate. I was not referred to any case in which the meaning of the statutory phrase 'successful outcome' was considered. In Woodgate as Trustee of the Estate of the Late Mrs Marion McGuiness v Keddie [2007] FCAFC 129 at [2], Gyles J held, as to the construction of a costs agreement which used the term, that it meant 'obtaining an award or verdict in favour of the client, which survives an appeal'. Here, while judgment in the first respondent's favour in the current proceeding might lead to receipt of funds into the bankrupt estates, there may be any number of other circumstances that would produce funds. So invoicing the further amounts was not necessarily linked to judgments in the first respondent's favour. As has been indicated, the deferred amounts were in fact invoiced on 22 December 2021, judgment in the proceeding having been delivered on 1 December 2021. But the applicants made no submission that it should therefore be inferred that the true terms of any agreement made invoicing (let alone liability for costs) conditional on a favourable judgment. 39 I also accept the further submission by counsel for the first respondent that even if the Costs Agreement were to be void, that would not matter for the purposes of this lump sum costs assessment. The consequence of a costs agreement being void is not that the solicitors are unable to recover any costs. As s 287(2) of the LPA set out above provides, the consequence is that the costs are recoverable as set out in s 271(b) or (c). Those paragraphs provide, in effect, that if legal costs are not recoverable under a costs agreement, they are recoverable under 'an applicable costs determination' or, if there is none, 'according to the fair and reasonable value of the legal services provided'. A costs determination is a determination made by the Western Australian Legal Costs Committee under s 275 of the LPA (see s 252) but that Committee has no power to make costs determinations in relation to contentious business before the Federal Court: see s 275(1)(b) and Stevenson v Zafra [2021] WASCA 181 at [162] (Buss P, Murphy JA and Hill J). So if the Costs Agreement were to be void, Carles Solicitors would be entitled to recover from the first respondent the fair and reasonable value of the legal services provided. That corresponds to the value that a lump sum costs assessment would set in any event. 40 Therefore the contention that the Costs Agreement is void does not take the applicants anywhere. In any event, for the reasons given, the contention is rejected. 41 The applicants made an additional submission that the costs disclosure given at the time of entering into the Costs Agreement estimated costs of only $20,000 and gave no estimate of counsel fees. They say that no update to the costs disclosure was given. But there is no evidence of that. There was no order for general discovery of all material passing between the first respondent and Carles Solicitors pertaining to costs. The order for disclosure of documents made in the Costs Judgment required invoices and costs agreements, because they were the materials on which the first respondent was likely to rely. So no inference can be made by reason of the lack of evidence about further costs disclosure. Mrs Frigger submitted that any subsequent costs disclosure formed part of the Costs Agreement and so should have been provided under the orders anyway. But that is plainly not so: the disclosure is only an estimate and is subject to many variables and contingencies, and so would not be binding (as cl 2(b) and item 3 of the Schedule to the Costs Agreement makes clear). While the costs disclosure that is in evidence was made in the document that constituted the Costs Agreement, that does not mean that any subsequent disclosures would form part of the agreement. 42 In any event and once again, even if there was some deficiency in disclosure, the outcome would not be that the first respondent is not liable for any costs. It would mean that Carles Solicitors would have to have the costs assessed under Division 8 of Part 10 of the LPA: see s 268(1) and s 268(2). The taxing officer would consider, in broad terms, the reasonableness of the costs claimed: see s 301(1). Once again, that corresponds to the approach that will be taken in this lump sum costs assessment anyway.
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.
Frigger
Trenfield
JACKSON J: 1 In Frigger v Trenfield (No 11) [2022] FCA 326 (Costs Judgment) I made orders deciding a number of disputes about the costs of this proceeding. What the Costs Judgment did not determine was the quantum of costs that are to be payable. These reasons concern that determination. 2 In so far as they are relevant for present purposes, the orders made in the Costs Judgment were that: (a) the first applicant must pay the first respondent's costs of the proceeding from its commencement; (b) both applicants must pay the first respondent's costs of the proceeding from 14 June 2019 (because the second applicant only became a party on that date); (c) reserved costs of certain interlocutory applications were also to be paid by the applicants (with a discount of 50% to be applied to a particular set of hearings and interlocutory applications); (d) the first respondent's costs of the interlocutory hearing that resulted in the Costs Judgment were also to be paid by the applicants, subject to a discount of 75%; (e) all those costs were to be paid on a party-party basis; (f) the quantum of costs are to be assessed by the trial judge on a lump sum basis; and (g) the first respondent was required to serve on the applicants a copy of each costs agreement and invoice on which she relied in support of the 'Costs Summary' affidavit filed to support her position in the lump sum costs assessment. 3 Orders were also made programming the assessment of quantum to a hearing, which took place on 22 July 2022. 4 At that hearing, the first respondent relied principally on a costs summary affidavit prepared in accordance with the Court's Costs Practice Note (GPN-Costs). On the basis described below, the first respondent seeks a lump sum costs order of $435,853.45, comprised of total legal fees of $419,812 and disbursements of $16,041.45. All those figures are inclusive of GST. Counsel fees are included in the amount for legal fees, not disbursements. 5 The applicants, Mrs and Mr Frigger, oppose any award of costs on grounds that, in broad terms, invoke the indemnity principle and contend that the first respondent has no liability to pay her solicitors. They submitted in the alternative, for various specific reasons, that the award of costs should be no higher than $102,489 or, if a submission about the qualifications of the principal solicitor for the first respondent is accepted, $87,133. 6 For the reasons that follow, the total costs against the applicants will be assessed at $406,269 plus disbursements of $16,041.45 (both inclusive of GST).
Principles 7 In Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474 at [124] Basten JA approved the following statement of the indemnity rule or principle in GE Dal Pont, Law of Costs (LexisNexis Butterworths, 2003) 212 [7.6] (citations omitted): When a court makes an order for costs against a litigant, most commonly an unsuccessful litigant pursuant to the 'costs follow the event' principle, it does so with the object of providing to the opposing (successful) litigant an indemnity (but no more) for the costs liability the latter has incurred to his or her own legal representatives as a result of the litigation (hence often termed the 'indemnity rule'). 8 Similarly, in Wentworth v Rogers at [46], Santow JA approved the following statement in Howard v Mechtler [2000] NSWSC 455 at [11] (Master Malpass): … Under an order for costs, the paying party is only obliged to pay such costs as the receiving party was primarily and potentially legally obliged to pay to his solicitor. There is an indemnity only in respect of the costs covered by the order. A receiving party cannot recover a sum in excess of the liability to his own solicitor … It is necessary to prove that under no circumstances does the client have any liability to pay costs to his solicitors. 9 In both passages the principle is expressed in terms of the liability that the successful party has incurred. That legal liability will not depend upon the rendering of an invoice (or not upon that alone) but primarily upon the costs agreement between the party and their solicitor: eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd [2015] NSWCA 284; (2015) 90 NSWLR 451 at [25] (Basten JA, Beazley P agreeing). The principle does not require that the costs have been paid: Wentworth v Rogers at [126] (and see Costs Judgment at [79] and the authority cited there). The authorities do not appear to differentiate between an outstanding liability to pay and one that has been discharged before any order as to costs: Noye v Robbins [2010] WASCA 83 at [314]ff (Owen JA, Pullin and Buss JJA agreeing). It is clear from the authorities that the indemnity principle is satisfied where there is shown to be a liability in existence as between solicitor and client, even where the prospect of payment is remote: Angor Pty Ltd v Ilich Motor Company Pty Ltd (1992) 37 FCR 65 at 71 (French J). Nor is the indemnity rule inconsistent with the application of the principle that some other person is obliged to indemnify the successful party against the costs liability: Coshott v Burke (No 2) [2018] FCAFC 81 at [90]. 10 Here, the costs have been ordered to be assessed on a party-party basis. That means 'only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation' (Dictionary, Schedule 1 to the Federal Court Rules 2011 (Cth)), as distinct from indemnity costs, which are intended to compensate a party fully: see Hislop v Paltar Petroleum Limited (No 4) [2017] FCA 1632 at [6] (Gleeson J). 11 In a lump sum assessment, the court applies a broader brush than would be undertaken on taxation by reference to individual items of costs: Sandalwood Properties Ltd (Subject to a Deed of Company Arrangement) v Huntley Management Ltd (No 2) [2019] FCA 647 at [10] (Colvin J). 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)] (Foster J). It is not a detailed examination of the kind that would be appropriate to taxation, as that would defeat the purpose of a lump sum costs order of avoiding the expense, delay and aggravation involved in a formal taxation of costs and associated litigation: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120 (von Doussa J); Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506 at [14], [23] (Kenny J). 12 The approach taken must be logical, fair and reasonable: Beach Petroleum at 123; Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [22] (Giles JA). The sum fixed should be proportionate to the nature and complexity of the case: Bitek at [18]. The Court's guidelines are a relevant benchmark and regard should also be paid to the scale of costs in Schedule 3 of the Federal Court Rules and the National Guide to Counsel Fees: Zafra Legal Pty Ltd v Harris (Liquidator) (No 3) [2021] FCA 441 at [121] (Banks-Smith J). Dividing the costs claimed into relevant categories can enable the court to check the quantum for particular kinds of work against amounts generally claimed under lump sum assessments and to apply principles of proportionality in a logical way: Sandalwood Properties at [14]. As well as the evidence before it, the court is entitled to take into account its own observations of the proceeding and the judge's own experience: Fewin Pty Ltd v Burke (No 3) [2017] FCA 693 at [61] (Markovic J). 13 The starting point for fixing the costs is the charges actually rendered by the solicitors for the successful party. The court may apply an impressionistic discount to the costs actually incurred or estimated, to take into account the contingencies that would be relevant in any formal costs assessment: Bitek at [18]. In Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640 at [56]-[57], Brereton J noted the reasons for applying such a discount as including: that on assessment a successful party invariably recovers something less than its actual costs; also that the broad brush approach involves some risk that the sum allowed includes costs that would not have been recovered on a taxation; and also the lack of any taxation means that the successful party avoids the time and costs of detailed scrutiny while the unsuccessful party does not have the opportunity to scrutinise and object. 14 Those observations were made in the context of a submission (in the Supreme Court of New South Wales) that the typical discount was 15%. But in truth the case law evidences wide variations in the percentages of discounts which reflect the exigencies of the matter in question: Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051 at [24] (Finn J). The court must bring to account the circumstances of the particular case: Zafra Legal at [120]. Fixing the costs will involve consideration of the procedural course of the particular case, and is facilitated in many instances by the familiarity of the case managing judge with the course of the proceedings: Sandalwood Properties at [14]. 15 It must be recalled that in the end the task in most instances is to assess a reasonable amount of costs on a party and party basis: Sandalwood Properties at [14]. So while the application of a discount is common practice, it is not an invariable and rigid rule that a discount must be applied. In Hancock v Rinehart at [57] Brereton J said: While it is undoubtedly the usual practice of the court when making a lump sum costs order to apply a discount for the reasons mentioned, that does not mean that the Court must apply a percentage discount to the sum sought by the successful party, and the Court 'must be astute not to cause an injustice to the successful party' by applying 'an arbitrary "fail safe" discount on the costs estimate submitted to the court'. Thus if the court can be confident that there is little risk that the sum includes costs that might be disallowed on assessment, the case for a discount is seriously undermined. (citations omitted) See also Beach Petroleum at 123 and Zafra Legal at [119]. These passages show that the approach is ultimately one of balancing countervailing risks so as to minimise the risk of an injustice to either party. 16 It is necessary to emphasise certain points that arise from these principles because the approach the applicants sought to take to the assessment was inconsistent with them. The lump sum assessment process outlined above, of starting with the amount that the successful party has actually been charged, will usually require that party to add up the invoices that have been rendered. But it does not follow that the successful party must give a detailed line by line justification of the invoices; nor does it permit a detailed line by line objection to them by the unsuccessful party. It is not the invoices that are in issue; their purpose is to allow identification of the total amount charged to the successful party. That amount is a starting point for determining what is fair and reasonable. 17 The court must then assess the likelihood that the amount is higher than the sum that the party would have recovered on a detailed taxation of costs. The discount is usually applied in order to minimise that likelihood, without discounting too much so that the successful party is faced with under recovery. While the starting point - the total amount actually charged - can be set with precision, all the other steps are done on an impressionistic basis. The result is estimation, not arithmetic. That is the trade-off inherent in a lump sum costs order, which the court imposes in order to avoid the cost, time and aggravation of the satellite litigation involved in a detailed taxation. 18 The division of the total amount claimed into categories serves the same end. It helps the court assess whether the amount is fair, reasonable and proportionate to the case. That assessment must also be conducted impressionistically. The purpose of the breakdown is not to expose the amounts actually charged to detailed scrutiny. 19 The applicants cited Bank of New South Wales v Withers (1981) 35 ALR 21 at 28 in support of the proposition that the fixing of a lump sum is similar to the process of taxation and involves the examination of all relevant evidence to quantify the indemnity. But that case does not stand for that proposition. It was a case about the costs of compliance with a subpoena. Observations about the Court's practice in relation to that subject in 1981 provide no sound guide in relation to a contemporary lump sum assessment. 20 I will conduct the assessment, and consider the applicant's submissions as to quantum, with the above principles in mind. But first it is necessary to consider broader arguments the applicants put in support of the proposition that the first respondent is not entitled to recover any sum of money on this costs assessment. As has been said, these arguments centred on the indemnity principle.
[2010] WASCA 83
[2021] WASCA 181
(1992) 37 FCR 65
(1981) 35 ALR 21
(1995) 57 FCR 119
(2015) 90 NSWLR 451
(2002) 54 NSWLR 738
(2006) 66 NSWLR 474