GEORGINA HOPE RINEHART in her personal capacity and as trustee of the Hope Margaret Hancock Trust

Costs - Special costs order - Legal Profession Act 2008 (WA) s 280(2)(c) - Inadequacy of applicable costs determination - Complexity and importance

Commercial Arbitration Act 1985 (WA)

Evidence Act 1906 (WA)

Evidence and Public Interest Disclosure Legislation Amendment Act 2012 (WA)

International Arbitration Act 1974 (Cth)

Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA)

Legal Profession Act 2008 (WA)

1 PRITCHARD J: In March 2013, on the application of Hancock Prospecting Pty Ltd (HPPL), a subpoena was issued to Ms Adele Ferguson requiring her to produce certain documents said to be relevant to an arbitration or arbitrations between HPPL and the respondents. Ms Ferguson applied by chamber summons to set aside the subpoena (the Application). The subpoena was ultimately set aside without a substantive hearing.

2 I ordered that HPPL pay Ms Ferguson's costs of the Application, including any reserved costs, those costs to be taxed if not agreed. I also granted liberty to Ms Ferguson to apply for any special costs orders relating to the costs of, and incidental to, the Application.

3 Ms Ferguson has applied for an order that her 'costs of these proceedings be taxed without regard to any limits imposed by any applicable costs determination including any limit with respect to maximum hourly rates'. In the course of his submissions, counsel for Ms Ferguson clarified that the special costs order sought pertained to item 10 of the Supreme Court Scale of Costs (the Scale) which is contained in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA) (the Determination).

4 HPPL opposed the making of a special costs order.

5 For the reasons set out below, I am persuaded that a special costs order should be made.

6 Ordinarily the taxation of bills of costs charged by a legal practice is regulated by costs determinations made by the Legal Costs Committee established under the Legal Profession Act 2008 (WA) (the Act).[1] However, the applicable limits under the scale of costs approved by such costs determinations are able to be raised or removed by the Court pursuant to the power in s 280(2) of the Act, which provides:

[I]f a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -

(a) order the payment of costs above those fixed by the determination;

(b) fix higher limits of costs than those fixed in the determination;

(c) remove limits on costs fixed in the determination;

(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.

7 Ms Ferguson relies upon s 280(2)(c) of the Act in support of the special costs order which is sought. There was no dispute between Ms Ferguson and HPPL about the basis upon which a special costs order under s 280(2)(c) of the Act may be made. The Court must form an opinion which has two components. First, the Court must determine that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate. Secondly, the court must conclude that the inadequacy arises because of the unusual difficulty, complexity or importance of the matter.[2] The term 'unusual' in s 280(2) qualifies only the term 'difficulty' and not the terms 'complexity' or 'importance'.[3]

8 The Court is able to form this opinion as a matter of impression, rather than of science or mathematics, because it has heard the matter and is familiar with the way in which the case was conducted, and will be in a position to take account of the issues involved.[4]

9 The customary way of establishing that the amount of costs allowable under the applicable determination is inadequate is by establishing that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit imposed by that determination.[5] Accordingly, the affidavit filed in support of a special costs application should ordinarily annex a draft bill of costs that specifies the amounts proposed to be claimed under each discrete subitem of the determination and the total amount proposed to be claimed.[6]

10 Item 10 of the Scale sets out the allowance for proceedings in Chambers (other than those involving motions and originating process). The allowance under item 10 of the Scale is $10,560, which represents a maximum of two days of preparation and one day of hearing charged at the counsel rate under the Scale.

Whether the amount of costs allowable under item 10 is inadequate

11 Ms Ferguson's application for a special costs order was supported by an affidavit sworn by one of her solicitors, Mr Gough. Mr Gough did not attach a draft bill of costs to his affidavit. Despite the clear indications from the Court of Appeal that this should ordinarily be done, the approach advocated by the Court of Appeal seems more commonly honoured in the breach than the observance.

12 Counsel for HPPL submitted that the inadequacy of the Scale had not been demonstrated because Mr Gough's affidavit did not annexe a draft bill of costs specifying the amounts to be claimed under each item of the Scale.

13 Although the provision of a draft bill of costs will ordinarily be the best guide to whether the limits imposed by the applicable scale are inadequate, the conclusion that it is fairly arguable that the taxing officer might properly allow costs at an amount greater than the amount allowable under the relevant determination does not always require evidence of the costs actually incurred.[7] In some cases it will be apparent, on the basis of the number of hours apparently worked, and the maximum hourly rates permitted under the relevant scales, that the total amount which would be sought in a bill presented to the taxing officer would be likely to succeed the limit under the relevant determination.[8]

14 Mr Gough's affidavit set out the amount incurred in counsel's fees, the number of hours of legal work performed by some of those solicitors and the cost of that legal work, which would be claimed on a taxation. Mr Gough deposed that Ms Ferguson's solicitors would not seek to recover all fees charged. However, even if that is so, there is quite clearly a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit imposed by item 10 of the Scale, and accordingly, that the amount allowable is inadequate. That conclusion can be reached having regard to the fact that a senior and a junior counsel were retained on Ms Ferguson's behalf, to the amount of counsel's fees, which alone exceed the limit permitted by the scale, and to the number of hours of work performed by Ms Ferguson's solicitors, which also exceed the number of hours referred to in item 10 of the Scale.

Whether the inadequacy arises because of the unusual difficulty, complexity or importance of the matter

15 It was submitted on Ms Ferguson's behalf that the inadequacy of the amount under the Scale arose because of the complexity and importance of this case. The complexity was said to be attributable to four features of the case: first, the fact that the Application - together with HPPL's pursuit of a subpoena directed to Mr Pennells and to Western Australian Newspapers Limited[9] (the WAN proceedings) - raised for consideration for the first time the effect of amendments to the Evidence Act 1906 (WA) made by the Evidence and Public Interest Disclosure Legislation Amendment Act 2012 (WA) (the Shield Laws), secondly, the fact that Ms Ferguson resides in Melbourne and that it was necessary to retain solicitors in Melbourne and in Perth to work on the Application, thirdly, the terms of a confidentiality regime on which HPPL insisted before Ms Ferguson's solicitors were able to access documents in the arbitrations, and fourthly issues concerning a possible inconsistency between the International Arbitration Act 1974 (Cth) and the Commercial Arbitration Act 1985 (WA). Counsel for HPPL submitted that none of these factors should be given any weight.

16 Insofar as Ms Ferguson's residence in Melbourne was relied upon, I do not accept that that fact contributed to the complexity of the matter. It certainly did not have any bearing on its legal complexity. Even if it is assumed for present purposes that the term 'complexity' in s 280 of the Act pertains to practical complexity as well as legal complexity (a matter which it is unnecessary for me to decide), technological advances have overcome the difficulties that once accompanied litigation involving interstate parties.

17 I also do not accept that the issues which arose concerning the confidentiality regime contributed to the complexity of the case. The terms of the confidentiality regime were in large part resolved by agreement between the parties, save only in relation to a simple dispute about the number of lawyers acting for Ms Ferguson to whom access could be granted.

18 However, I am unable to accept HPPL's submission that the Application did not involve complexity, having regard to the relevance to the Application of the Shield Laws. The meaning and operation of the Shield Laws, and their relevance to the Application, involved novel and complex legal questions. It is no answer to say (as HPPL submits) that the operation of the Shield Laws was resolved in the WAN proceedings. The WAN proceedings had not been resolved at the time the subpoena was issued to Ms Ferguson, and although the substantive hearing of the Application was deferred until after the resolution of the WAN proceedings, the decision to deal with the Application in that way was not made for several weeks after the Application was brought. Furthermore, from the outset, it was apparent that the Shield Laws were relied upon in support of the Application.[10]

19 In view of this conclusion, it is unnecessary to consider whether the interaction between the International Arbitration Act and the Commercial Arbitration Act added to the complexity of the matter.

20 It is also unnecessary to deal with the alternative basis upon which the Scale limit was said to be inadequate, namely the importance of this matter to Ms Ferguson and to other journalists.

21 Accordingly, I am satisfied that a special costs order should be made in this case, pursuant to s 280(2)(c) of the Act.

22 It is, however, appropriate to make a final observation in response to a submission made by counsel for HPPL, to the effect that the fees incurred by Ms Ferguson, which were referred to in Mr Gough's affidavit, were 'excessive and highly disproportionate', given that the subpoena was set aside, in effect by consent, and without any substantive hearing, although there were five relatively short directions hearings in chambers. It is true that the fees referred to in Mr Gough's affidavit are substantial and exceed the limit under item 10 of the Scale by a very considerable margin. However, the making of a special costs order does not mean that all of those fees will be allowed on the taxation. The only effect of the special costs order is to free the taxing officer of the constraint otherwise imposed by the limit under the determination.[11] It is for the taxing officer to determine whether the costs set out in any bill of costs submitted for taxation were reasonably incurred.

23 A special costs order should be made. The terms of that order should reflect the fact that the special costs order which was sought was directed to item 10 of the Scale. The appropriate form of that order appears to be as follows:

1. Pursuant to s 280(2)(c) of the Legal Profession Act 2008 (WA) the costs payable pursuant to Order 2 made by the Hon Justice Pritchard on 24 September 2013 be taxed without regard to any limits imposed by item 10 of the Supreme Court Scale of Costs in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA), including any limit as to maximum hourly rates.

[1] Legal Profession Act 2008 (WA) s 280(1); see also s 275(1).

[2] Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [3], citing Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11] (Martin CJ).

[3] Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [4], citing Grundy v Cassar [No 2] [2012] WASC 103 [50].

[4] Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [3], citing EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [7] and Verdell Pty Ltd v F & G Nominees Pty Ltd [2002] WASC 58 (S2) [14]. See also Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S) [43] (Pullin J).

[5] Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [5], citing Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [16].

[6] Atwell v Roberts [2013] WASCA 37 (S) [23] (the Court).

[7] Frigger v Lean [2012] WASCA 66 [81] (Allanson J, Newnes & Murphy JJA agreeing).

[8] Atwell v Roberts [2013] WASCA 37 (S) [23] (the Court).

[9] Hancock Prospecting Pty Ltd v Hancock [2013] WASC 290.

[11] Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [26] (Martin CJ).