Koonara Management Pty Ltd v Rockliff

Solicitor for the Respondents/ Cross-Claimants: Rockliff Snelgrove Lawyers

BETWEEN: KOONARA MANAGEMENT PTY LTD (ACN 082 883 323) First Applicant

ROCKY CASTLE FINANCE PTY LTD (ACN 082 858 160) Second Applicant

AND: STEPHEN JOHN ROCKLIFF First Respondent

MICHELLE RENEE ROCKLIFF Second Respondent

AND BETWEEN: STEPHEN JOHN ROCKLIFF Cross-Claimant

AND: BURKE ROBERT STANLEY RESCHKE (and others named in the Schedule) First Cross-Respondent

JUDGE: GLEESON J DATE OF ORDER: 23 April 2020

1. The costs payable by the first and second applicants to the second respondent pursuant to orders 1 and 2 of the orders made on 31 May 2019 be fixed in the lump sum of $115,000.00, with each of the first and second applicants to be jointly and severally liable to pay that amount.
2. The costs payable by the cross-claimant to the third cross-respondent pursuant to order 3 of the orders made on 31 May 2019 be fixed in the lump sum of $190,000.00.
3. The costs payable by the cross-claimant to the first cross-respondent pursuant to order 3 of the orders made on 31 May 2019 be fixed in the lump sum of $132,500.00.
4. The costs payable by the cross-claimant to the second cross-respondent pursuant to order 3 of the orders made on 31 May 2019 be fixed in the lump sum of $132,500.00.
5. The costs payable by the first applicant to the first respondent pursuant to order 1 of the orders made on 31 May 2019 be fixed at $nil.
6. The costs payable by the second applicant to the first respondent pursuant to order 2 of the orders made on 31 May 2019 be fixed at $nil.
7. The parties endeavour to agree on or before 7 May 2020 on appropriate costs orders, preferably a consolidated lump sum costs order or orders, reflecting the extent of their success or failure on the costs questions determined by these orders.
8. The parties file any agreed proposed orders pursuant to order 7 on or before 14 May 2020.
9. In the event that the parties cannot file agreed proposed orders, the parties are to file their proposed orders and any supporting evidence on or before 21 May 2020.
10. The issue of the costs of the parties' respective claims for indemnity, consolidated and lump sum costs will be determined on the papers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

GLEESON J: 1 In May 2019, the claims of the applicants (Koonara and RCF) against the first respondent (Mr Rockliff) and the second respondent (Ms Rockliff) were dismissed with costs and Mr Rockliff's cross-claim against Koonara, RCF and Burke Reschke (Reschke parties) was also dismissed with costs: Koonara Management Pty Ltd v Rockliff (No 2) [2019] FCA 808 (liability judgment). 2 In these reasons for judgment, I refer to the applicants' claims as the primary claims. 3 In relation to costs, these dismissals gave rise to the following various liabilities and entitlements: (1) Koonara is: (a) liable for the costs of Mr and Ms Rockliff on its claim; (b) entitled to be paid costs of the cross-claim by Mr Rockliff. (2) RCF is: (a) liable for the costs of Mr and Ms Rockliff on its claim; (b) entitled to be paid costs of the cross-claim by Mr Rockliff. (3) Mr Rockliff is: (a) liable for the costs of the Reschke parties on the cross-claim; (b) entitled to be paid his costs of the primary claims by Koonara and RCF; (4) Ms Rockliff is entitled to be paid her costs of the primary claims by Koonara and RCF. (5) Mr Reschke is entitled to be paid his costs of the cross-claim by Mr Rockliff. Section 43(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) relevantly confers jurisdiction on the Court to award costs in the proceeding. By s 43(3), without limiting the discretion of the Court or a judge in relation to costs, the Court or judge may relevantly order the parties to bear costs in specified proportions and award a party costs in a specified sum. 4 In accordance with the Court's Costs Practice Note (GPN-COSTS), and anticipating that the parties may be unable to negotiate a successful resolution of their entitlements under the competing costs orders, I sought submissions about whether the Court should make a consolidated costs order and/or whether the Court should make one or more lump sum costs orders with a view to ending disputation between the parties to the extent possible. 5 It turned out that the Rockliffs had made several offers to settle the proceedings. The Rockliffs described the relevant offers in the following terms, noting that there were some further elements of compromise offered by the vacation of other costs orders: The precise terms of the offers vary but each are expressed as in effect what might generally be referred to as a "walk away" offer: that is, dismissal of each of the claims with no orders as to costs. 6 In reliance on those offers, the Rockliffs principally sought an order that the May 2019 costs orders be replaced by an order that Koonara and RCF pay the Rockliffs' costs of the proceeding fixed in the sum of $742,934.38. This amount represented the whole of the legal costs incurred by the Rockliffs in the proceeding. Disbursements including counsels' fees comprised 90% of the total amount, while the Rockliffs incurred $76,881 exclusive of GST in solicitors' fees. This latter amount is relatively low having regard to the nature and complexity of the issues raised by the Rockliffs in their defence and by Mr Rockliff in his cross-claim. The Rockliffs are solicitors themselves and I infer that a substantial amount of the legal work undertaken on the case was done by one or other of them or their employed solicitors in house. 7 Thus, despite Mr Rockliff's failure on the cross-claim, the Rockliffs proposed that they be paid the whole of their costs of the proceeding. This proposal entailed not only that Mr Rockliff would not pay the costs incurred by the Reschke parties in their successful defence of the cross-claim (despite the May 2019 order to that effect) but also that Mr Rockliff would be paid his costs of prosecuting the unsuccessful cross-claim. 8 In effect, the Rockliffs sought an order which would have the effect of setting aside the May 2019 order that the cross-claim be dismissed with costs. The Rockliffs submitted that the Court may vary the May 2019 costs orders because they were not afforded an opportunity to make submissions on the issue of costs. Assuming in the Rockliffs' favour that the Court may vary the May 2019 orders, I decline to do so. There is no good reason why costs should not follow the event in relation to the cross-claim. 9 As explained below, the various settlement offers made by the Rockliffs do not warrant a different costs order in relation to the cross-claim and do not warrant an order for indemnity costs in relation to the primary claims. 10 Further, I reject the submission that adverse findings made against the Reschke parties concerning the conduct of the scheme justify an order for costs in Mr Rockliff's favour on the cross-claim. The Rockliffs contended that these findings represented a successful "event" in respect of which costs should follow. It is true that the "event" may be an issue, and not merely the final result of the proceeding. However, none of the findings made against the Reschke parties gave rise to a right to relief and the Rockliffs did not seek to explain how they could have given rise to a right to relief, but for some other consideration: cf. Howell v Dering [1915] 1 KB 54 at 62-63. Without more, I am not satisfied that any of the adverse findings was of sufficient moment in the context of this litigation to amount to an "event" in respect of which Mr Rockliff should have his costs. 11 The order proposed by the Rockliffs is manifestly unreasonable in the light of the May 2019 orders, and particularly Mr Rockliff's failure on the cross-claim, and should not have been propounded. 12 In the alternative, the Rockliffs proposed the following orders which were barely less unreasonable: (1) an order that Koonara and RCF pay the Rockliffs' costs on the primary claims on an indemnity basis; and (2) the Reschke parties pay Mr Rockliff's costs of the cross-claim on the ordinary basis. 13 The Rockliffs suggested that an appropriate consolidated costs order reflecting these alternative orders would be for the Reschke parties to pay 75% of the Rockliffs costs in the sum of $557,200.78. 14 In an affidavit sworn by their solicitor, Christopher Keane, on 26 August 2019, Mr Keane stated that the Reschke parties claimed a lump sum amount of about $590,670.46, comprising just over 50% of their total costs. However, the Reschke parties subsequently proposed a consolidated costs order comprising the following three elements: (1) Koonara and RCF pay to Ms Rockliff an amount of $115,037.73 (being 50% of a proposed lump sum amount for the costs of defending the primary claims); (2) Mr Rockliff pays Mr Reschke an amount of $196.890.15 (being 33.3% of a proposed lump sum amount for the costs of defending the cross-claim); (3) Mr Rockliff pays Koonara and RCF an amount of $278,742.58. 15 The Reschke parties explained that the sum of $278,742.58 in (3) above is derived by deducting the sum of $115,037.73 (the remaining 50% of the proposed lump sum amount for the costs of defending the primary claims) from the sum of $393,780.30 (the remaining 66.7% of the proposed lump sum amount for the costs of defending the cross-claim). 16 Ultimately, I have concluded that it is in the interests of justice to make orders that adopt the approach of the Reschke parties' proposed consolidated costs order.

Rockliffs 17 The Rockliffs relied on the following affidavits: (1) affidavit of John Snelgrove, solicitor sworn 13 September 2019; (2) affidavits of Stephen Rockliff sworn 1 July 2019 and 13 September 2019, together with exhibits "SJR-1" and "SJR-2"; (3) affidavit of Michelle Rockliff sworn 25 June 2019; and (4) affidavit of Bianca Williamson, employed solicitor of Rockliff Snelgrove Lawyers sworn 12 September 2019. 18 In addition, the Rockliffs tendered the following documents: (1) letter from Curwoods to Minter Ellison dated 20 April 2017; (2) notice to admit; and (3) further notice to admit. 19 Mr Snelgrove's affidavit sets out the quantum and basis for calculation of the lump sum costs order sought by the Rockliffs. The affidavit also identifies various costs orders that were made in the proceeding prior to May 2019, including orders that costs be costs in the cause, an order that Koonara and RCF pay the costs thrown away by reason of the further amended statement of claim (FASOC), an order that the Rockliff parties pay the costs of a hearing on 22 August 2017, an order that Mr Rockliff pay the costs thrown away by reason of the amendments to the further amended cross-claim and three orders that there be no order as to costs. 20 Mr Rockliff's 1 July 2019 affidavit refers to an offer made on 4 June 2019 to Mr Reschke proposing that all previous costs orders be vacated and there be no order as to costs. Such an offer indicates that Mr Rockliff does not accept the liability judgment. The 4 June 2019 communication also informed Mr Reschke of the Rockliffs' intention to make the application for an order for indemnity costs. As explained above, that intention conflicted with the order that Mr Rockliff pay the costs of the cross-claim. 21 The affidavit also identifies previous offers made in the proceeding. 22 The affidavit sets out facts concerning events prior to the final hearing, personal issues affecting Ms Rockliff, Mr Rockliff and Mr Rockliff's wife; refers to the Rockliffs' expectation that they will not recover any costs that may be awarded in their favour; and states that the Reschke parties' non-compliance with orders and directions has resulted in considerable unnecessary legal costs being incurred. The affidavit also stated that Mr Rockliff has paid disbursements (principally barristers fees) totalling $723,750.74. 23 The relevance of Mr Rockliff's 13 September 2019 affidavit is not obvious. It commences with a letter dated 13 August 2019 from Rockliff Snelgrove Lawyers to Minter Ellison requiring the production of a large volume of documents for reasons that are not clear. I am not satisfied that this affidavit contains material of relevance to the costs orders sought by the parties. 24 Ms Rockliff's 25 June 2019 affidavit sets out certain historical matters and refers to several offers to settle the proceeding. 25 Ms Williamson's affidavit sets out facts concerning the context in which various settlement offers were made. The affidavit also refers to two transfers of land by Reschke Vineyard Pty Ltd in August 2017 and January 2019.

Reschke parties 26 The Reschke parties relied on Mr Keane's 26 August 2019 affidavit. 27 Mr Keane's affidavit sets out the quantum and basis for calculation of the lump sum costs order sought by the Reschke parties. In summary, Mr Keane's evidence is that the Reschke parties incurred legal fees totalling $1,147,486.62 between 15 April 2016 and 22 May 2018. This amount was charged to the Reschke parties by: (1) forty-one invoices from Minter Ellison dated between 31 August 2016 and 31 May 2018; and (2) five invoices from Giles Stapleton, barrister, dated between 24 June 2016 and 12 August 2018, for work done prior to Minter Ellison's appointment. 28 Mr Keane's affidavit explains the deductions that he has made from the total legal fees to reach the total lump sum now claimed by the Reschke parties. 29 The Rockliffs objected to Mr Keane's evidence on the quantum of costs, arguing that there was significant overlap in the allegations and evidence relevant to the defences and Mr Rockliff's cross-claim. The Rockliffs asserted that the segregation of the costs of the defences and the cross-claim "would not be a simple matter", and submitted that the Reschke parties merely make an assertion as to which costs were incurred in relation to each claim without any proper basis. These submissions do not constitute objections to the admissibility of Mr Keane's evidence although they are relevant to the weight of the evidence. 30 Orally, counsel for the Rockliffs, Ms Avery-Williams, contended that the opinions expressed by Mr Keane concerning an appropriate lump sum costs order in favour of the Rockliffs had no proper basis because Mr Keane gave them without having reviewed the tax invoices that evidence the Rockliffs' actual costs. I do not accept that submission. The basis for Mr Keane's calculation was broadbrush, reflecting the fact that Mr Keane's evidence was responsive to the Rockliffs' claim. It was logical for Mr Keane to offer opinions based upon his experience of how the proceeding was conducted, particularly where the Rockliffs made no attempt to identify any costs that were referable only to the primary claims.

ROCKLIFFS' CLAIM FOR INDEMNITY COSTS 31 Plainly, there is no basis for the claim for indemnity costs insofar as those costs relate to Mr Rockliff's cross-claim: relevantly, the order already made is that Mr Rockliff must pay his own costs of the claim. 32 However, I have considered whether there is any basis for the Rockliffs to have their costs of the primary claims on an indemnity basis. For the reasons set out below, I reject the Rockliffs' claim for indemnity costs on the primary claims.

Legal principles 33 Orders for indemnity costs are not made unless there is some special or unusual feature of the case that justifies departure from the ordinary rule that costs follow the event: Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 (Anchorage). In Anchorage, the Full Court set out relevant principles in the following terms at [6] and [7]: [6] A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer to compromise (Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 233 per Sheppard J). In such cases, a key question is whether the offeree's refusal of the offer was "unreasonable" when viewed in light of the circumstances existing at the time the offer was rejected (Black v Lipovac & Ors [1998] FCA 699; (1998) 217 ALR 386 at 432 per Miles, Heerey and Madgwick JJ; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ). [7] The circumstances to be taken into account in determining whether rejection of an offer was "unreasonable" cannot be stated exhaustively but may include, for example: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it. (Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] per Mortimer J). 34 The Rockliffs argued that the relevant special feature of the case was the unreasonable or imprudent failure of Koonara and RCF to accept their various settlement offers and offers of compromise.

Calderbank offers 35 In Elite Protective Personnel Pty Ltd & Anor v Salmon [2007] NSWCA 322 at [97], Beazley J explained the elements of a "Calderbank offer "as follows: A Calderbank letter is the appellation given to a letter which conforms to the structure of that deployed in Calderbank v Calderbank [[1975] 3 All ER 333 (Calderbank)] namely one which is marked "without prejudice", makes an offer of settlement, and warns that the letter will be relied upon on the question of costs if and when that issue arises: Messiter v Hutchinson (1987) 10 NSWLR 525. "Calderbank offers" are well recognised means of making offers of settlement in circumstances where the party making the offer ultimately seeks a costs advantage if the offer is not accepted: Jones v Bradley (No 2) [2003] NSWCA 258 (at [5]).

"Walk away offers" 36 In Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd (No 4) [2009] FCA 803, Finkelstein J considered the effect of a walk away offer in general terms at [12]-[14] as follows: [12] … A "walk away" offer may or may not constitute an offer for purposes of O 23 and Calderbank. The starting point is that "an offer which does not involve a real and genuine element of compromise, will not be taken into account in relation to costs": The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; (2006) 67 NSWLR 706, 708; see also Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358, 368 ("Compromise connotes that a party gives something away. A plaintiff with a strong case, or a plaintiff with a firm belief in the strength of its case, is perfectly entitled to discount its claim by only a dollar, but it does not in any real sense give anything away, and I do not think that it can claim to have placed itself in a more favourable position in relation to costs unless it does so"). [13] It is therefore necessary to determine whether the defendants' "walk away" offer was a genuine offer of compromise. One can easily envisage circumstances where a "walk away" offer must be regarded as a genuine offer of compromise. Take for example a case that has progressed for some time and the parties' costs are quite high. In that event an offer to walk away may, in a business sense, be a significant offer: see for example Commissioner of Taxation v Evenfont (No 2) [2009] NSWSC 9; (2009) 223 FLR 28 at [31]. [14] Conversely there are circumstances, and this case is an example, where an offer to walk away does not involve any real give and take. Here the offer was made some 12 days after the last appearance was filed, and some allowance must be made for the Christmas period when little work is done. I accept that up to the time of the offer the defendants had incurred some costs. But probably not a lot. Certainly the amount was not proved in evidence. On this view indemnity costs should not be awarded. 37 In CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75], a Full Court said: From the tenor of claims which have come before the court in recent years, there appears to be a view abroad that the failure of a party who has rejected a Calderbank offer ultimately to achieve a better outcome than provided for in the offer leads to a presumptive entitlement to indemnity costs with respect to the period subsequent to the offer. Such a view would be mistaken. … It is not sufficient that the offer was a reasonable one: Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224; (2002) 190 ALR 121, 128 [35]; Dais Studio Pty Ltd v Bullet Creative Pty Ltd [2008] FCA 42, [11]. In considering this question in a particular case, the matter of unreasonableness will be judged by reference to the circumstances facing the offeree at the time of the offer. While the eventual outcome in the case may go part of the way in this regard, there is no presumption that ultimate success in the proceeding for the offeror necessarily renders the offeree's rejection unreasonable. 38 In Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 at [5], a Full Court said: The refusal of a Calderbank offer will not always attract an award of indemnity costs. The offeror must show that the rejection was unreasonable in the circumstances of the case: Black v Lipovac [1998] FCA 699; (1998) 217 ALR 386 at [217]-[218]. The respondents have not convinced us that the rejection was unreasonable. By the August 2008 offer all the respondents were offering to give up was any claim they may have to costs of the appeal. There was little in the offer that was attractive to the appellant. Of course the appellant was entirely unsuccessful on the appeal, for substantially the reasons explained by the respondents in their August letter. However the appeal was not on its face without any prospect of success. Counsel for the appellant was able, on the available material, to present arguments that required careful attention. It was only on a close examination of the documentation that the Court concluded that the appeal on liability should be dismissed. In retrospect, the appellant's case was never a strong one, but on the principal points argued (liability) the appellant's case was not so [weak] that it should be taken to have acted unreasonably in refusing the August offer, which offered little in the way of a genuine compromise.

Explanation supporting offer 39 In NMFM Property Pty Ltd and Ors v Citibank Ltd (No 2) [2001] FCA 480; (2001) 109 FCR 77 Lindgren J explained the significance of conveying to the offeree the unreasonableness of not accepting the offer, at [87] and [88]: [87] No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail, yet the latter does not recognise the inevitable, this will be a factor pointing to an award of indemnity costs… [88] The requirements of "sufficient particularity" and "inevitability of failure" are important. In their absence, it would be open to parties to put their respective cases to the opposing party urging it to recognise the merit of what is put in the hope that if it ultimately finds favour with the Court, an award of indemnity costs will follow. If this were correct, one might ask rhetorically, "Why write a letter as distinct from simply relying on the pleadings?"… 40 In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [8], this passage was cited by the Full Court with approval. Also at [8], their Honours observed: Whatever the position may be with an offer made under Order 23, a Calderbank offer, or any offer of compromise outside the regime in Order 23, is unlikely to serve its purpose of attracting an indemnity award of costs if the rejecting applicant fails to recover more than what is offered, unless the offer is a reasonable one and contains a statement of the reasons the offeror maintains that the application will fail.

Offers 41 The Rockliffs relied on five written offers, expressed in accordance with the principles set out in Calderbank and two notices of offer to compromise. The offers were made in February 2016, February 2017, September 2017, May 2018 and August 2018. The notices of offer to compromise were made in February 2017 and September 2017. 42 With the exception of the first offer (which was made before Mr Rockliff's cross-claim was filed), the offers and the notices of offer to compromise required the Reschke parties to give up their claim to recover the costs of defending the cross-claim, which was a cross-claim of notable length and complexity. Whatever Koonara and RCF might have gained by walking away from their primary claims was necessarily diminished by the requirement that they agree to pay their own costs of defending the cross-claim. I do not accept that any of the offers were made in circumstances or on terms that made it unreasonable for Koonara and RCF to refuse to accept that they should give up their claim for the costs of defending the cross-claim. The Rockliffs' position becomes even less tenable in relation to offers made later on and the costs incurred in defending the cross-claim increased. 43 By the complexity of their defences and Mr Rockliff's cross-claim, the Rockliffs made a forensic decision which they must have realised (or at the very least should have realised as legal practitioners) would require Koonara and RCF to address a case of much greater dimensions than the cases that had been instituted, and thereby would probably cause those companies to incur significant costs. In those circumstances, it was predictable that any of the Rockliffs' "walk away" offers would require the Reschke parties (that is, Koonara and RCF, but also Mr Reschke) to consider their prospects on the cross-claim including their prospects of an eventual costs order in their favour against Mr Rockliff. 44 Further, Koonara and RCF could only have accepted the offers, apart from the February 2016 offers, if Mr Reschke also agreed in his separate capacity as cross-respondent. Accordingly, the Rockliffs' argument must be that it was unreasonable of Koonara and RCF to have failed to secure that agreement. But there was no relevant unreasonableness on the part of Mr Reschke in failing to give up his claim for the costs of defending the cross-claim, and accordingly, Koonara and RCF cannot be said to have acted unreasonably in failing to secure that concession from Mr Reschke. 45 In connection with the offers made prior to the trial (that is, the offers other than the May 2018 and August 2018 offers), another factor militating against the contention that Koonara and RCF ought to have accepted the offers is that the offers made no attempt to explain why it would have been unreasonable for Koonara and RCF to fail to accept them. Such an explanation would have needed to grapple with the question of the price of foregoing a claim for the costs of defending the cross-claim. 46 The Rockliffs' contentions that Koonara and RCF achieved a worse outcome in the proceeding than they might have achieved by accepting any of their offers, or the "very same terms" as any of the offers, are wrong and fail to acknowledge the costs order on the cross-claim. The suggestion that the order is "cancelled out" by the costs orders against Koonara and RCF is also wrong because it begs the question of the quantum of costs payable pursuant to each order. 47 Finally, the observation that significant costs would not have been incurred (including the costs of the cross-claim in its entirety) had the offers been accepted does not bear on the assessment of Koonara and RCF's failure to accept the offers. Even assuming that Koonara and RCF could have anticipated the potential costs when they received the Rockliffs' various offers, in the circumstances of the litigation that did not render unreasonable a failure to accept the offers without more. They were entitled to assess the offers on the basis that the costs of the litigation would follow the event in the absence of some special or unusual feature, not that the risks of prosecuting their relatively modest debt recovery actions might include the costs of Mr Rockliff's complicated and ultimately unsuccessful cross-claim. In particular, they were not obliged to save Mr Rockliff from the costs of his decision to pursue the cross-claim. 48 The Rockliffs contended that the precarious financial position of the applicants and the various entities that gave the Court an undertaking to satisfy any adverse costs order were material circumstances which made it unreasonable for their offers to be refused. This submission was not adequately explained. Even if Koonara and RCF "exposed the [Rockliffs] to a risk that they might never recover any portion of their costs, and continued to prosecute their unsuccessful primary claims unburdened by any impending costs liability", that did not require Koonara or RCF to accept an offer which it was otherwise reasonable to reject. 49 The first offer requires separate consideration. It was made by a letter dated 25 February 2016, which referred to four proceedings brought variously by Koonara and RCF in the Local Court of New South Wales and the District Court of New South Wales. The letter also referred to a proceeding in the Magistrates Court in South Australia, which is not presently relevant. The proceedings referred to in the letter (apart from the South Australian proceeding) ultimately formed part of the proceeding in this Court. 50 The letter stated relevantly: We are instructed by the Defendants in each of the above proceedings to make the following open Calderbank offer: 1. In each of the above proceedings, by consent, verdict in favour of the Defendant in each of the proceedings; and 2. No order as to costs. Further in respect to the proceedings, RCF v Michelle Rockliff in the Magistrates Court of South Australia (Adelaide Registry), pursuant to consent orders being made: 1. Verdict for the Defendant. 2. The sum paid into the Court by RCF together with interest be paid out to Michelle Rockliff. 3. No further order as to costs. The above offers remain open for a period of 28 days from the date hereof. The above open Calderbank offers are made in accordance with the principles laid down in Calderbank v Calderbank and will be relied upon at the appropriate time in respect to costs. 51 As the Rockliffs noted, the letter contains several offers. 52 These offers were made very early in the proceeding: prior to the filing of any cross-claim and prior to the commencement of the proceeding in this Court. They were also made before the Rockliffs had filed their defences. The effect of the offers was that the Rockliffs would forego their claims for costs incurred in the relevant proceedings to that time in return for verdicts in their favour. The extent of the compromise that the Rockliffs proposed to give away by the offer is not identified on the face of the offer. At this stage, the proceedings were in lower cost jurisdictions than this Court. I am not persuaded that these offers involved any genuine element of compromise on the part of the Rockliffs. 53 Further, in the absence of any attempt at persuasion as to the unreasonableness of refusing the offer, I am not persuaded that it was unreasonable for Koonara to fail to accept the offers directed to it. The Rockliffs did not suggest that Koonara's claims were hopeless, or that Koonara should have known that they were hopeless at the time of this offer. 54 The Rockliffs contended that RCF should always have realised that its claims were hopeless having regard to the decision in Rocky Castle Finance Pty Ltd v Taylor; Rocky Castle Finance Pty Ltd v Gillen [2014] SASCFC 1 (Taylor). As the Rockliffs noted, ultimately RCF failed in its claims for the reasons given in Taylor. While I accept that there is force in this argument, in my view, it was not unreasonable for RCF to fail to accept the offers directed to it in the February 2016 letter without any reference to that decision or attempt at arguing the hopelessness of RCF's position.

LUMP SUM COSTS AND CONSOLIDATED COSTS ORDER 55 Rule 40.02(b) of the Federal Court Rules 2011 provides that a party who is entitled to costs may apply to the Court for an order that costs be awarded in a lump sum, instead of, or in addition to, any taxed costs. The Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump sum costs order: GPN-COSTS para 4.1. 56 A consolidated costs order has the effect of consolidating multiple or competing costs entitlements and future costs processes. As described in GPN-COSTS, para 3.7, the process of making a consolidated costs order may involve offsetting one party's costs entitlement against another party's costs entitlement and awarding the balance in one global costs order on a percentage basis, or making no order as to costs in respect of one or more costs entitlements. The practice note states that, wherever possible, the aim is to consolidate multiple or competing costs entitlements into one consolidated costs order to simplify any future costs process; and that consolidated costs orders may be awarded as lump sum costs orders where appropriate. 57 In effect, the Rockliffs argued for a consolidated costs order in which they would be entitled to their total costs of the proceeding, while the Reschke parties would be entitled to nothing. 58 For the reasons explained above, that submission is untenable. 59 For their part, the Reschke parties seek three orders: (1) a lump sum costs order in favour of Ms Rockliff against Koonara and RCF (reflecting her success in defending the proceeding against her); (2) a lump sum costs order in favour of Mr Reschke against Mr Rockliff to pay Mr Reschke (reflecting Mr Reschke's success in defending the cross-claim against him); and (3) a lump sum consolidated costs order requiring Mr Rockliff to pay Koonara and RCF (reflecting a set-off of the costs of Koonara and RCF in defending the cross-claim against Mr Rockliff's costs of defending the primary claims).

Framework governing lump sum costs orders 60 In Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 7) [2018] FCA 1217, McKerracher J stated the following relevant principles: (1) The purpose of the power to make lump sum costs orders is to avoid the expense, delay and aggravation involved in protracted litigation arising out of a taxation. The Court does not apply a process similar to a taxation of costs, but a much broader brush (at [49]). (2) The Court must be satisfied that any lump sum costs order is made on the basis of a logical, fair and reasonable estimate of costs and should be astute to avoid both overstating the recoverable costs and underestimating the appropriate account by applying some arbitrary discount to the amounts claimed. The onus is on the moving party to demonstrate that there is a logical, fair and reasonable basis for the order (at [50]). (3) It would be completely pointless if the evidence produced in a lump sum application was the same as the evidence and the taxation process. The object of avoiding the need to adduce all that evidence is to save the time and cost to the parties in the public's resource - the Court (at [52]). 61 Neither party disputed the utility of lump sum costs orders in the current case, to achieve the purpose identified above. On the Rockliffs' case as put, the issue does not arise, since they are simply entitled to the whole of their costs. If their primary position is not accepted, however, the Rockliffs contend that the evidence is insufficient to permit the court to fix the Reschke parties' costs in a lump sum amount. 62 In my view, the history of this proceeding makes it appropriate that the Court should fix the parties' costs in lump sum amounts, and make orders by reference to those amounts, to the extent that the evidence permits this to be done in a just manner. In particular, the Court should endeavour to do so to avoid the delay, expense and aggravation of a taxation in this proceeding which has already consumed excessive and disproportionate resources: cf. Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37 at [9]; Keen v Telstra Corporation Limited (No 2) [2006] FCA 930 at [6]-[8]. 63 In Paciocco and Another v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; 253 FCR 403 at [18] and [20], the Full Court (Allsop CJ, Besanko and Middleton JJ) said: [18] We emphasise that in making a lump sum award of costs, the Court in undertaking the task of assessing costs is not precluded from undertaking a close inquiry of costs relating to a particular issue or category of costs, should the Court consider it appropriate to do so: see e.g. Hudson v Sigalla (No 2) [2017] FCA 339 at [30] ('Sigalla'). The Court is able to adopt its own procedures in inquiring into costs, is able to be flexible in how it conducts that inquiry, including by the obtaining of suitable assistance whether by referee's report or other reporting, and is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable. ... [20] There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. 64 In Hislop v Paltar Petroleum Limited [2017] FCA 1632 at [6]-[9], I set out the following approach to fixing a lump sum amount for costs: [6] … Costs as between party and party are defined in the Dictionary (Sch 1 to the Rules) as "only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation". In contrast, an award of costs on an indemnity basis is intended to compensate a party fully for costs where it was unreasonable for the party to be subject to any expenditure of costs, such as where a hopeless proceeding is brought: see Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506; (2012) 290 ALR 288 ("Bitek") at [12]. [7] Specification of a lump sum is not the result of a process of taxation or assessment of costs; the sum can only be fixed broadly having regard to the information before the Court; the approach taken to estimate costs must be logical, fair and reasonable: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [22]. The task is one of estimation or assessment and not of arithmetic: Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2014] FCA 346 at [17(e)]. The sum of costs fixed should be proportionate to the nature, including the complexity, of the case: Bitek at [18]. [8] The starting point for the fixing of costs is the charges rendered by Mr Hislop's solicitors. Then, there may be an "impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment": Bitek at [18], citing Hamod v New South Wales [2011] NSWCA 375 at [820]. However, the court must be "astute not to cause an injustice": Bitek at [23]. [9] In Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640, Brereton J made the following observations concerning the application of a discount in determining a lump sum costs order, where costs were ordered to be paid on an indemnity basis: [56] The first defendant submits that there should be a further global percentage reduction of 15%, for two main reasons: first, because on assessment, even on the indemnity basis, a successful party invariably recovers something less than its actual costs, typically 15% where the assessment is on an indemnity basis; and secondly, the necessarily broad-brush approach of the court to assessment on a lump sum basis - involving some risk that the sum includes costs that would not be recovered on assessment - coupled with the savings to the costs creditor in time and costs through avoiding a detailed assessment, and the loss to the costs debtor of the opportunity to scrutinise and object to a detailed bill, has resulted in a practice of applying a discount on lump sum assessments. [57] 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. (Footnotes omitted)

Earlier costs orders 65 Costs orders were made in the proceeding on 21 September 2016, 7 October 2016, 11 November 2016, 17 February 2017, 22 August 2017 and 26 September 2017. 66 The 21 September 2016 order was that the costs of the originating process filed 17 August 2016 be costs in the cause. Although the originating process was filed by Koonara and RCF, the justification for the application was the Rockliffs' intention to raise issues that fell within this Court's jurisdiction and not within the jurisdiction of the District Court of New South Wales, where Koonara and RCF had commenced their proceedings. 67 The 7 October 2016 order was an order that costs of an application be Mr Rockliff's costs in the cause in relation to an application to set aside a subpoena issued at Mr Rockliff's request. 68 The 11 November orders require Koonara and RCF to pay: (1) the Rockliffs' costs thrown away by reason of the filing of the further amended statement of claim; and (2) the costs of an application for security for costs. 69 In addition, there was an order that a summons filed in the District Court be dismissed with the costs of the summons to be costs in the cause except in relation to the application for security for costs. 70 On 17 February 2017, the Court ordered that the costs of an interlocutory application filed 15 November 2016 be costs in the cause. The interlocutory application was filed by Koonara and RCF and sought, among other things, to have a subpoena and two notices to produce set aside. 71 On 22 August 2017, the Rockliffs were ordered to pay the costs of the interlocutory hearing that day. 72 On 26 September 2017, the following costs orders were made: 12. The respondents/cross claimant to pay the applicants'/cross respondents' costs thrown away by reason of the amendments to the further amended statement of cross claim. 13. The applicants' amended interlocutory process dated 11 August 2017 is dismissed and to the extent that costs have not already been ordered on 22 August 2017 or been dealt with by the following order, each party to bear his or its own costs. 14. The costs of the hearing on 26 September 2017 are costs in the cause. 15. The applicants' interlocutory application dated 12 September 2017 be dismissed with no order as to costs. 16. The respondents'/cross claimant's notice to produce dated 17 August 2017 and the applicants'/cross respondents' interlocutory application dated 12 September 2017 is stood over to 23 October 2017 with no order as to costs.

Apportionment of costs of proceeding as between primary claims and cross-claim 73 A premise of the Reschke parties' submissions is that it is generally appropriate to apportion costs incurred in the proceeding, 75% to the cross-claim and 25% to the primary claims. The Reschke parties sought to justify this apportionment by reference to the following matters, supported by the affidavit evidence of Mr Keane: (1) The final iteration of the pleadings which propounded the primary claims and the cross-claim. The further amended statement of claim comprised 18 pages, while the further amended statement of cross-claim comprised 72 pages. (2) The number of paragraphs in the liability judgment which deal exclusively with the primary claims (94) in comparison with the number of paragraphs dealing exclusively with the cross-claim (562); (3) The subject matter that comprised the oral evidence, said to be at least 80% exclusively concerned with the cross-claim; (4) The subject matter of the affidavit evidence, also said to be at least 80% exclusively concerned with the cross-claim. 74 In my view, the use of the proposed apportionment is reasonable for the following reasons: (1) The vast majority of the trial hearing was occupied with issues of concern to the cross-claim. As noted in the liability judgment at [109], by the cross-claim, Mr Rockliff ultimately sought 43 separate orders. In contrast, 12 orders are sought by the further amended statement of claim. (2) The relative significance of the primary claims and the cross-claim is reflected in the liability judgment and in the fact that paras [14]-[108] concern the primary claims, while paras [109]-[670] are concerned with the cross-claim. That is, the issues determined on the primary claims were substantially less complex than the issues involved in determination of the cross-claim. (3) While the Rockliffs were, of course, entitled to defend the primary claims, they were not entitled to defend them in the manner of their prolix and excessive defence (which was ultimately 85 pages long and comprised 104 paragraphs and numerous sub-paragraphs and sub-sub-paragraphs. The amounts claimed by Koonara and RCF were relatively modest: putting aside interest, Koonara claimed $62,861.99 from Mr Rockliff and $20,954.00 from Ms Rockliff. RCF claimed $37,440.00 from Mr Rockliff and $12,480.00 from Ms Rockliff. In this regard, I do not accept the Rockliffs' contention that time and resources were unnecessarily expended by a refusal or failure of the Reschke parties to respond "properly" to notices to admit served by the Rockliffs on 20 June 2017 and 14 November 2017. The first of these notices is prolix, unwieldy and oppressive, reflecting the case sought to be litigated by the Rockliffs. The second has no evident utility where it merely seeks admissions based on earlier evidence given by Mr Reschke, which could readily have been tendered as admissions (to the extent that the evidence was relevant). (4) Section 37N(1) of the FCA Act required the Rockliffs to conduct their defences in a way that was consistent with the "overarching purpose" identified in s 37M(1) to facilitate the just resolution of disputes according to law. The objectives of the "overarching purpose" include the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. On any view, the Rockliffs substantially failed to conduct their defence in a way that was consistent with the Court's achievement of this objective. This can be readily illustrated by comparing the Rockliffs' claim for costs of $742,934.38 against the primary claims (excluding interest), which were for debts in amounts totalling $133,735.99, raising no issues of special importance or notable complexity. (5) In these circumstances, care should be taken to ensure that the overlap between the issues raised on the defences and the issues raised on Mr Rockliff's cross-claim does not result in Koonara and RCF bearing an excessive amount of the costs of the proceeding. (6) Based on my experience of the trial, the Reschke parties' proposed apportionment is very favourable to the Rockliffs. (7) The Rockliffs have not attempted to adduce evidence of the actual costs of defending the primary claims, separate from Mr Rockliff's costs of propounding the cross-claim.

Costs order in favour of Ms Rockliff 75 Ms Rockliff did not attempt to identify her own costs of defending the primary claims. Instead, she stated that, if a lump sum costs order is made in her favour against RCF and Koonara, she will present a costs summary and supporting tax invoices and material on the question of quantum. In effect, Ms Rockliff is seeking two bites of the cherry: first, she seeks a lump sum costs order for the whole of her and her father's costs; if that does not succeed, she seeks a further opportunity to argue for a lump sum costs order referrable to a portion of those costs. 76 The Reschke parties submitted that an appropriate order in Ms Rockliff's favour is a lump sum costs order in the sum of $115,037.73 being 50% of Mr Keane's estimate of the Rockliffs' party and party costs in respect of the primary claims, calculated as follows: (a) for the period 1 December 2017 to 22 May 2018, 25% of the Rockliffs' total costs; (b) for the "pre-trial" period from 16 August 2016 to 30 November 2017, 50% of the Rockliffs' total costs; (c) a further reduction of $7,737.80 on account of the assumed costs of preparing the cross-claim filed on 10 August 2016; and (d) a reduction of the total of (a) to (c) reflecting costs on a party and party basis. 77 In response, the Rockliffs contended that there should be no reduction of the kind referred to in (d) above because, on the evidence, 90% of the costs incurred by them was in the form of disbursements (primarily, counsel's fees). 78 At the outset, there is the question whether a lump sum costs order in Ms Rockliff's favour should be discounted by 50%, as the Reschke parties propose, to take account of the fact that the costs of the primary claims are payable to the Rockliffs jointly. The proposed discount assumes that it is reasonable to attribute the costs orders in favour of the Rockliffs equally between Mr Rockliff and Ms Rockliff. I accept that this is a reasonable approach because the primary claims involved four separate debt claims, of which two were made against Mr Rockliff and two were made against Ms Rockliff. This approach also permits a set-off of 50% of the costs of the primary claims against Mr Rockliff's costs liability on the cross-claim. 79 Having accepted the general proposition that the overall costs of the proceeding may be apportioned as to 25% for the primary claims, in my view, reasoning towards an appropriate order or orders in Ms Rockliff's favour will start with 12.5% (50% x 25%) of the Rockliffs' total costs incurred in the proceedings, being $92,866.80. This amount does not include any reduction for the fact that Ms Rockliff is entitled only to costs on a party and party basis. 80 As to the "pre-trial" period costs, the Reschke parties contended for a proportion of actual costs more favourable to the Rockliffs having regard to the following three matters: (1) the work completed by the parties' legal representatives during that period; (2) the issues raised by the primary claims and the cross-claim, which support an apportionment of 25% of total costs to the primary claims; and (3) costs orders made during this period. 81 The costs orders which favour the Rockliffs are the orders made on 11 November 2016. The invoices provided to the Court on the Rockliffs' behalf do not clearly identify any amounts payable pursuant to those costs orders. 82 The Reschke parties noted that Mr Rockliff first filed a 90 page statement of cross-claim on 10 August 2016. Although costs should have been expended to ensure that the cross-claim was appropriate for filing, the evidence including the tax invoices do not reveal clearly what costs incurred prior to that time are attributable to the cross-claim. Even so, the filing of the cross-claim provided an indication as to the approximate time by which costs were incurred in prosecution of the cross-claim. 83 Once it is accepted that it is generally appropriate to apportion only 25% of costs incurred to the costs of the primary claims, the Reschke parties' contention is very favourable to the Rockliffs in the absence of any evidence from the Rockliffs to suggest otherwise. To the contrary, the matters identified by the Reschke parties do not appear to provide a sound basis for concluding that 50% of the costs during the "pre-trial" period are costs of the primary claims. 84 However, as the Reschke parties have expressly adopted a position more favourable to Ms Rockliff, it is reasonable to accept it. The Reschke parties proposed order is favourable to Ms Rockliff in that it provides for Koonara and RCF to be jointly and severally liable to her. 85 Thus, I am satisfied that it is appropriate to make a lump sum costs order in Ms Rockliff's favour that approximates the figure proposed by the Reschke parties, although I would otherwise have determined a lower figure. 86 Accordingly, I will order that the costs payable to Ms Rockliff pursuant to orders 1 and 2 of the liability judgment be fixed as a lump sum of $115,000.00.

Costs order in favour of Mr Reschke 87 The Reschke parties contended that Mr Rockliff should be ordered to pay Mr Reschke the sum of $196,890.15 being one/third of their party and party costs in defending the cross-claim, on the basis that Mr Reschke was one of three cross-respondents. 88 This contention requires the Court first to consider whether it can determine a lump sum costs order in favour of the Reschke parties on the cross-claim.

Reschke parties costs of the cross-claim 89 As mentioned earlier, the Reschke parties contended that their recoverable costs are $590,670.46. This amount is calculated as follows: (1) Gross total legal fees and disbursements incurred by the Reschke parties between 15 April 2016 and 22 May 2018 of $1,147,486.62; (2) LESS fees relating to work performed solely on the primary claims, incidental to the proceeding, the mediation in November 2017 or fees not recoverable due to existing costs orders adverse to the Reschke parties, which Mr Keane deposed amounted to $280,161.09; (3) LESS 25% in accordance with the apportionment of costs 25% to the primary claims and 75% to the cross-claim, being an amount of $102,783.25; (4) LESS an amount of $69,635.82 comprising all disbursements that are not counsel's fees other than portions of transcript fees, photocopying and printing expenses and search fees; (5) LESS 15% to reflect the entitlement only to costs on a party and party basis. In support of this deduction, which might otherwise be considered to be too favourable to the Reschke parties, they argued that it was reasonable where counsel fees comprised approximately 83% of the fees incurred. 90 The Reschke parties contended that their calculation was both prudent and conservative. 91 Mr Rockliff criticised Mr Keane's evidence in support of the calculation above, arguing that it lacks necessary detail. He contended that the Court cannot make a determination as to the Reschke parties recoverable costs on the present evidence. 92 Mr Rockliff provided a schedule identifying costs which, he argued, should not be included in the Reschke parties' total costs and contended that those submissions supported a conclusion that the amount claimed is too high. 93 I have considered Mr Rockliff's schedule and the Reschke parties' response to the schedule. 94 Taking the first invoice (from Minter Ellison dated 31 August 2016), the Reschke parties seek to recover $6,642.12 of a total invoice of $9,122.50. Mr Rockliff questioned nine narrations, in respect of which a total amount of $1,092.75. The narrations broadly concern work in connection with an offer by Mr Rockliff to abandon a component of the cross-claim around that time. Ultimately, the Reschkes did not respond to the offer. The absence of such a response does not require a conclusion that the costs of the work described in the narrations is not recoverable. 95 The second invoice is from Giles Stapleton, barrister, and dated 30 August 2016. Mr Rockliff raised the same issue concerning Mr Stapleton's work in connection with Mr Rockliff's offer. Again, I do not accept that the costs of that work is not recoverable. 96 The third invoice is from Minter Ellison, and dated 31 October 2016. The Reschke parties seek to recover only $2,398.75 of a total invoice of $20,744.00. Mr Rockliff's contention is not clear. So far as I understand it, the argument is that the amounts claimed relate to the application for security for costs for which the Reschke parties were ordered to pay the costs. However, with a few exceptions (particularly the narration dated 19 October 2016: amount claimed $223.25 of a total charge of $893.00), the narrations for the amounts sought to be recovered do not appear to concern that application. Rather, they appear to concern work arising out of a subpoena and a notice to produce from Mr Rockliff. In two cases (narrations dated 4 and 5 October 2016), the narration refers to the "application for security" and other matters and the amount claimed is discounted accordingly. 97 Having referred back to the transcript of the 19 October 2016 hearing, I am not satisfied that the hearing related solely to the issue of security for costs. However, based on the language of the 19 October 2016 narration, I accept Mr Rockliff's contention that this amount is not recoverable. 98 The fourth invoice is from Giles Stapleton, barrister, dated 19 October 2016. The Reschke parties seek to recover only $6,285.42 of a total bill of $22,575.00. Having reviewed the relevant narrations, I am satisfied that they concern recoverable costs and relate to matters apart from security for costs. For example, the work in the narration first identified in Mr Rockliff's schedule (dated 10 October 2016) is not claimed, while the charge for the work in the first narration dated 7 October 2016 is discounted. 99 The fifth, ninth and tenth invoices relate to the costs of Mr Keane flying from Adelaide to Sydney. Based on Mr Keane's evidence, I am satisfied that these amounts are not sought to be recovered by the Reschke parties. 100 The sixth invoice is an Auscript invoice for the hearing on 19 October 2016. Based on Mr Keane's evidence, I am satisfied that this amount is not sought to be recovered by the Reschke parties. 101 The seventh invoice is from Minter Ellison dated 4 November 2016, and relates to fees charged by Christopher Harris SC, barrister. Mr Rockliff submits that the fees appear to relate to work done in relation to the security for costs application. Having regard to Mr Keane's evidence that he has excluded charges that are subject to a costs order which precludes the Reschke parties from charging for them, I do not accept that the amounts charged relate to work of that kind. 102 The eighth invoice is from Minter Ellison dated 30 November 2016. The Reschke parties seek to recover $7,145.25 of a total invoice of $12,040.00. Based on Mr Keane's evidence, I accept that the expenses queried by Mr Rockliff are not sought to be recovered. As to the first narration queried by Mr Rockliff (dated 7 November 2016), the amount claimed is $23.25 of a total charge of $47.00. In my view, the amount claimed reflects a claim for a small proportion of the work covered by the narration which did not concern the security for costs application. The costs relating to the further amended statement of claim are not sought to be recovered. 103 Thus, having reviewed Mr Rockliff's submissions relating to the first ten invoices, I have identified a single amount of $223.25 which I have found is not recoverable. Based on this exercise, I am satisfied that I should accept Mr Keane's evidence as to the total relevant charges rendered by the Reschke parties' legal practitioners, being $694,906.43. 104 To reach the figure of $590,670.46, the Reschke's propose a discount of 15% of that figure (being $104,235.97), in the nature of the "impressionistic discount" referred to in the case law cited above. 105 The principal basis for the 15% figure (as opposed to a higher figure) is that 83% of the total charges are counsel's fee. The 83% figure was not disputed by Mr Rockliff. 106 The Court's National Guide to Counsel Fees effective from 1 July 2013, sets out the following rates: Junior Counsel Senior Counsel Applications/Appeals: $1,275-5,100 $2,100-7,650 Fee on Brief - Including: preparation at discretion of taxing officer and appearance on the first day of a hearing OR Appearance at hearing (daily rate including conference) $900-4,200 $2,060-6,400 Interlocutory Applications: $370-2,125 $425-3,185 Interlocutory hearing $690-4,140 $850-6,400 Short (up to 2 hours) Long (2 hours plus) Other: $265-530 $425-740 • Directions hearing • Preparation time • Conferences (not occurring on day of hearing) • Settling applications, statements of claim, affidavits, defence, other documents • Opinions, advice on evidence • Written submissions (where not allowed above) • Attending to receive judgment (where appropriate) • Not otherwise provided for

107 I have compared those rates with the rates claimed by the Reschke parties, as set out in Ex 1. The amounts claimed by the Reschke parties for each of their counsel fall within the rates set out in the Court's guide 108 I have also considered Mr Keane's evidence concerning the work undertaken by Minter Ellison. The rates charged for lawyers who undertook work in relation to the proceeding appear to me to be reasonable. A high proportion of the work was undertaken by Mr Keane (65%), however, I do not consider this to have been unreasonable having regard to the difficulties that must have attended a response to Mr Rockliff's Hydra-headed cross-claim. I also note the work was done with minimal participation of partners (approximately 16 hours). In my view, it is not realistic to expect more junior lawyers to be managed effectively to address a dispute that was vastly overcomplicated by reason of issues raised by Mr Rockliff in his cross-claim. 109 Overall, having regard to my understanding and experience of this litigation, the Reschke parties' figure for recoverable costs appears to me to be very reasonable. I will make a deduction on the basis that party and party costs for the solicitors work would probably be assessed below 85% of the total costs, although I do not consider that the discount should be substantial because of the minimal involvement of partners and my satisfaction that the time spent is proportionate to the nature of the cross-claim and the manner in which it was litigated by Mr Rockliff. 110 I conclude that an appropriate lump sum amount for the Reschke parties' total costs of the cross-claim is $570,000.

Apportionment of costs payable to Mr Reschke 111 I did not understand Mr Rockliff to argue against the Reschke parties' contention that their entitlement to costs should be apportioned equally between them for the purposes of identifying amounts payable by Mr Rockliff in respect of the costs of the cross-claim. No prejudice to Mr Rockliff was identified. 112 I accept that it is appropriate to apportion the Reschke parties' costs equally for the purpose of identifying an amount payable to Mr Reschke. 113 Accordingly, I will make an order that Mr Reschke's costs of defending the cross-claim be fixed in an amount of $190,000.00.

Consolidation of costs orders as between Koonara and RCF and Mr Rockliff 114 Following the approach above, the costs payable by each of Koonara and RCF to Mr Rockliff is $115,000 while the costs payable by Mr Rockliff to Koonara and RCF is $380,000. 115 It is just to consolidate these orders, with the result that Mr Rockliff will be liable to pay Koonara and RCF an amount of $265,000 for costs. No reason was identified why this liability should not be ordered to be paid in the manner proposed by the Reschke parties, that is, 50% to each company. Accordingly, I will make orders to that effect. 116 Consequently, the liability of each of Koonara and RCF for Mr Rockliff's costs of the primary claim should be fixed at $nil.

COSTS OF THE COSTS APPLICATIONS 117 The Rockliffs failed on their application for indemnity costs. 118 The Rockliffs have only succeeded in an amount that appears to have been conceded by Koonara and RCF. That degree of success does not warrant any costs order in their favour. 119 The Reschke parties have been substantially successful. 120 The parties should endeavour to agree on an appropriate costs order, preferably a consolidated lump sum costs order or orders reflecting the extent of their success or failure. 121 In the event that the parties cannot agree, the parties should submit competing proposed orders and supporting evidence and this final costs issue will be determined on the papers. I certify that the preceding one hundred and twenty-one (121) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

SCHEDULE OF PARTIES NSD 1357 of 2016 Cross-Respondents Second Cross-Respondent KOONARA MANAGEMENT PTY LTD (ACN 082 863 323) ATF KOONARA MANAGEMENT TRUST Third Cross-Respondent ROCKY CASTLE FINANCE PTY LTD (ACN 082 858 160) ATF ROCKY CASTLE FINANCE TRUST