LFDB v MS S M

Federal Court of Australia|2018-12-20|Before: Reeves J, Allsop CJ, Middleton JJ, Markovic J

The applicant pay the respondent's costs on a lump sum basis in the sum of $20,950. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MARKOVIC J: 1 On 13 September 2018 the Court made orders dismissing LFDB's application to set aside a bankruptcy notice served on him by MS S M (Application) and ordering that LFDB pay MS S M's costs of that application: see LFDB v MS S M [2018] FCA 1397. MS S M has applied for an order that those costs be awarded in a lump sum. 2 In support of the application MS S M relies on an affidavit affirmed by her solicitor, Damian Bruce Sturzaker on 20 September 2018. In response, LFDB relies on an affidavit affirmed by him on 1 November 2018. The parties agreed that they would not provide submissions and that it was appropriate for the Court to proceed on the basis of their respective affidavits. 3 The parties also agreed that the issue of whether costs should be awarded on a lump sum basis and, if so, the quantification of those costs, should proceed on the papers. I was satisfied that these issues could be dealt with in that way: see s 20A(2)(c)(ii) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act).

Legal principles 4 Section 43(1) of the Federal Court Act empowers the Court to award costs in favour of a party and, relevantly, provides that the Court or a Judge may award a party costs in the specified sum: see s 43(3)(d). 5 Rule 40.02(b) of the Federal Court Rules 2011 (Cth) (Rules) provides that a party or a person 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. 6 The Court's power to order lump sum costs is discretionary and may be exercised whenever the circumstances warrant it: Su v Australian Fisheries Management Authority (No 3) [2008] FCA 2018 at [1] (Reeves J). 7 A Full Court of this Court (Allsop CJ, Besanko and Middleton JJ) in Paciocco v ANZ (No 2) (2017) 253 FCR 403 at [16]-[17] explained the following in relation to the Court making orders for lump sum costs: 16 On 25 October 2016 the Chief Justice issued the Central Practice Note: National Court Framework and Case Management (CPN-1) ('Central Practice Note') and the Costs Practice Note (GPN COSTS) ('Costs Practice Note'). The Central Practice Note states that the determination of the quantum of costs of a successful party (in a proceeding) should not be delayed and, to this end, the Court will, where appropriate, facilitate the making of lump sum costs orders. The Costs Practice Note provides that the Court's preference, wherever it is practicable and appropriate to do so, is to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings. It makes clear that the Court should now proceed on the basis that taxation "should be the exception" and confined to matters which are unable to be determined otherwise: Costs Practice Note at [3.3]. The guiding principles are to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1]. 17 The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3]. 8 In Bitek Pty Ltd v IConnect Pty Ltd (2012) 290 ALR 288; [2012] FCA 506 at [18] Kenny J said the following in relation to the determination of the appropriate quantum of a lump sum costs order: 18 The starting point for the fixing of costs is the charges rendered by the applicant's solicitors: Beach Petroleum at FCR 124; ALR 165 and Hamod v New South Wales [2011] NSWCA 375 at [820] per Beazley JA (with whom Giles and Whealy JJA agreed). The sum of costs fixed should also be proportionate to the nature, including the complexity, of the case: see Canvas Graphics Pty Ltd v Kodak (A'asia) Ptd Ltd [1998] FCA 23. As Beazley JA said in Hamod, at [820], citing, among others, Beach Petroleum at FCR 123; ALR 164: [820] The approach taken to estimate the costs to be ordered must be logical, fair and reasonable … This may involve 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 … [Citations omitted.]

Should costs be awarded in a lump sum? 9 It did not appear from his affidavit that LFDB in fact opposed the awarding of lump sum costs. Rather, his evidence went to the quantum that was claimed. But, even if I am wrong about that, in my opinion, this is a case where it is appropriate to make a lump sum costs order. 10 There are no particular characteristics that a case must possess in order for it to be suitable to make a lump sum costs order. In this case, given it involved a single application determined on an urgent basis after a half day hearing and was relatively simple in terms of the steps taken to have it brought before the Court and resolved, it is appropriate that a lump sum costs order be made. To do so will avoid the need for the parties to engage in a potentially lengthy and expensive taxation procedure and will lead to a more efficient resolution and completion of the proceeding.

The evidence 11 Mr Sturzaker is a partner of Marque Lawyers and has approximately 29 years' experience as a solicitor. He has been a partner since 2002 with experience primarily in the areas of commercial litigation and arbitration. Mr Sturzaker is accordingly aware of the costs incurred in a wide variety of proceedings in this Court and has been involved in a large number of costs assessment processes. 12 In Mr Sturzaker's experience advising and acting in the recovery of costs in this Court, he considers that it is common to recover on a party-party basis between 75% and 85% of solicitors' fees and 100% of disbursements, including counsel fees. 13 Mr Sturzaker has provided the names, experience and charge out rates of the solicitors who acted in the matter on behalf of MS S M as well as that of senior counsel retained to act for MS S M on the application, Dr Christopher Ward SC. Mr Sturzaker notes that save for his own rate, the rates charged by the solicitors are within the amounts permissible under Sch 3 of the Rules (Scale) and that Dr Ward's rate is within the range for senior counsel included in the National Guide to Counsel Fees (National Guide) in respect of fees on brief for applications and attendance at the first day of a hearing. 14 MS S M incurred a total of $19,719 in connection with the determination of the Application made up of $9,919 in professional fees for Marque Lawyers and $9,800 in counsel fees. The amount charged by Marque Lawyers has been broken down by percentage based on the time spent by each of the lawyers involved as follows: Mr Sturzaker - approximately 9% of the fees charged; Kiera Peacock, senior associate - approximately 78% of the fees charged; and John Oddy, lawyer - approximately 13% of the fees charged. 15 Mr Sturzaker has also provided a description of the nature of the work carried out by each of the lawyers involved in the matter and the proportion, by percentage, of each category of work. 16 Mr Sturzaker said that although the rates charged by him are outside the Scale and Dr Ward's fees are at the higher end of the range included in the National Guide, MS S M claims any difference by way of uplift to account for considerations of skill, care and responsibility as set out at item 11.1 of the Scale. He said that is so because the work was undertaken on an urgent basis; the dispute between LFDB and MS S M has a long and complex history involving several sets of proceedings; Dr Ward has been engaged in respect of other proceedings involving LFDB and MS S M; and in light of the urgency of the hearing of the Application and Dr Ward's availability to appear on short notice, it was reasonable to engage Dr Ward as counsel. 17 Mr Sturzaker concluded that, having regard to all relevant matters, in his opinion MS S M would recover at least 85% of Marque Lawyer's fees on a party-party basis and 100% of Dr Ward's fees, accordingly meaning that MS S M would recover at least $18,350.15 of her costs claimed. 18 MS S M also makes a claim for future costs incurred from the date of judgment on the Application until the determination of her application for a lump sum costs order. That claim is made on two alternative assumptions: that the quantification of costs is determined on the papers and no submissions are required by the Court or, in the alternative, where a hearing is required. 19 As the application for lump sums costs has been determined on the papers without the need for submissions or a hearing, the relevant amount claimed by MS S M is $5,000 for professional fees for preparing Mr Sturzaker's affidavit, reviewing LFDB's evidence and seeking instructions in relation to those matters. Given Mr Sturzaker's opinion that it is likely MS S M would recover 75% to 85% of professional fees, this would mean that she would recover between $3,750 and $4,250 for this component of work. 20 LFDB does not rely on expert evidence from a costs assessor or evidence of his own solicitor based on his experience to dispute the amount claimed by MS S M. Rather LFDB: (1) says that no evidence has been provided by MS S M to support the amount claimed by way of timesheets and that until that material is provided he cannot make any observations about the costs claimed; (2) asserts that no allowance has been made for secretarial or paralegal work leading him to conclude that work that could have been undertaken by a paralegal or secretary was undertaken by a lawyer, senior associate or partner; (3) disputes Dr Ward was retained to provide advice, as opposed to appearing on the hearing of the Application, and disputes that the matter was so complicated that it required senior counsel of Dr Ward's standing; (4) alleges that the work undertaken could have been undertaken by someone other than a lawyer or that it could have been undertaken by a lawyer and clerical staff; and (5) disputes the estimate claimed for future costs in connection with the application for lump sum costs asserting that, in relation to the claim for $5,000 to prepare Mr Sturzaker's affidavit, no detailed explanation was given as to who prepared the affidavit and how long it took.

Consideration 21 In my opinion, MS S M is entitled to recover $20,950 on a lump sum basis for her costs of the Application comprising the following: (1) $7,400 for professional fees incurred in connection with the Application; (2) $9,800 in counsel fees; and (3) $3,750 for costs in relation to the application for a lump sum costs order. 22 My reasons for reaching this conclusion follow. 23 First, Mr Sturzaker's evidence is that the calculations in respect of the costs claimed by MS S M are correct and capable of verification if required by the Court via the timesheets of the lawyers involved in the matter and invoices rendered to MS S M. I did not require that verification to be provided and had no reason to doubt that Mr Sturzaker had properly set out the amount incurred. LFDB said that he could not verify the amounts claimed without the underlying material but there is no evidence that he sought that material from MS S M's lawyers and was refused access to it nor was any application made for that material to be provided. 24 Secondly, I was satisfied that, given the urgency with which this matter was dealt and his knowledge of the issues as a result of his prior involvement, it was appropriate that Dr Ward be retained to act for MS S M on the application. 25 Thirdly, Mr Sturzaker's evidence is that in his experience it is common to recover on a party-party basis between 75% and 85% of solicitors' fees and 100% of disbursements, including counsel's fees. However, he goes on to say, without providing any particular justification, that MS S M would in this case recover 85% of Marque Lawyers' fees. Given the lack of fulsome explanation for that conclusion, in my opinion, it is appropriate that the recovery of professional fees on the Application be assessed at 75%, rather than 85%, an amount which is approximately $7,400. I accept Mr Sturzaker's evidence that it is common to recover 100% of disbursements, including counsel's fees. 26 In relation to the costs of the application for a lump sum costs order, I accept the estimate of $5,000 in professional fees on the basis that the application has been determined on the papers. Once again, in light of Mr Sturzaker's evidence of usual recovery on a party-party basis of between 75% and 85% of solicitors' fees and given there was no further explanation as to why a higher percentage should be recovered in the circumstances of this case, it is appropriate to award an amount of $3,750 for that aspect of the matter, representing 75% of the total costs estimate.

conclusion 27 For those reasons I will make an order requiring LFDB to pay MS S M's costs on a lump sum basis in the sum of $20,950. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.

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