Masters v Lombe

CONSIDERATION

The first issue that arises is in relation to the source of power to make an order that the appeal costs order be quantified as a lump sum. I raised this issue, drew the parties' attention to the decision of the Full Court in Backo v Australian Competition and Consumer Commission [2005] FCAFC 89 (Spender, Dowsett and Hely JJ) and invited short supplementary written submissions on this issue.
In Backo, the cost applicant had the benefit of a costs order which was made by a Full Court following an appeal (Cooper, Kiefel and Emmett JJ). The cost applicant subsequently obtained from one of the judges who sat on the Full Court (Kiefel J) an order that the costs order made by the Full Court be determined as a lump sum costs order. The cost respondent was successful in obtaining leave to appeal the lump sum costs order and in setting that order aside. Backo was decided under the previous iteration of the Rules, Federal Court Rules 1976 (Cth). Order 62 r 4 of the previous iteration of the Rules is the antecedent to r 40.02 of the Rules. Rule 40.02 is extracted above. In Backo, the Full Court said at [3]-[4]: 3 It is wrong to think that there is power to vary or go behind the orders of the Full Court in respect of costs, by reliance on O 62 r 4 of the Federal Court Rules. Order 62 rule 4 provides: '(1) Subject to this Order where by or under these Rules or any order of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs. (2) Where the Court orders that costs be paid to any person, the Court may further order that as to the whole or any part of the costs specified in the order, instead of tax costs, that person shall be entitled to: (a) a proportion specified in the order of the taxed costs; or (b) the taxed costs from or up to a stage of the proceeding specified in the order; or (c) a gross sum specified in the order; or (d) a sum in respect of costs to be ascertained in such manner as the Court may direct. (3) The court may make an order under subrule (2) at any time, whether an order that costs be paid to a person has previously been made or entered.' 4 In our judgment, there is no power in a single judge of the Federal Court, either pursuant to O 62 r 4, or otherwise, to entertain the notice of motion filed by the present applicants in September of last year, which, in effect, sought to provide for the payment of costs in a way other than that provided by the costs orders made by the Full Court. As the Full Court did not self-assess the costs, there was no power in a single judge of this Court to do so.
In Backo, the Full Court recognised that an order for an extant costs order to be assessed on a lump sum basis is an interlocutory order (at [5]).
Subsequent to Backo, s 25(2B)(ab) was introduced into Part III of the Act with effect from 7 December 2009: Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (Cth). Part III of the Act provides for the jurisdiction of the Court. Section 24 provides for the appellate jurisdiction of the Court. Section 25 provides, amongst other things, for the circumstances in which the appellate jurisdiction of the Court may be exercised by a single judge. Section 25(2B)(ab) provides that a single judge (sitting in Chambers or in open court) or a Full Court may make an interlocutory order pending, or after, the determination of an appeal to the Court. The machinery in the present Rules in relation to taxation was also changed. The position under the present Rules in relation to taxation as the means of determining the quantum of costs is set out above at paragraphs [23]-[25] and is subject to the potential for a party or a person who is entitled to costs to apply for a lump sum determination under rule 40.02.
The problem that arose in Backo has been alleviated by the introduction of s 25(2B)(ab) into the Act which authorises a single judge of the Court to exercise the appellate jurisdiction to make an interlocutory order after the determination of an appeal to the Court. As mentioned, an order that an extant costs order be determined as a lump sum is an interlocutory order. Section 25(2B)(ab) expressly permits a single judge to make interlocutory orders after the determination of an appeal and does not stipulate that the single judge must have been part of the Full Court which determined the appeal. An order that an extant costs order be determined as a lump sum has been recognised as an order that is supplementary in nature. In my view, having regard to the current scheme of the Rules, making such an order does not operate to vary the order of the Full Court which is directed to the entitlement to costs but rather operates by way of supplementation utilising the machinery provided for alternate means of determination in the Rules.
Section 25(2B)(ab) of the Act has been relied on by single judges of the Court to make interlocutory orders, including that costs orders made by a Full Court be quantified by a lump sum determination. In most cases, but not all of these cases, the single judge who made the interlocutory order under s 25(2B)(ab) was also a member of the Full Court which awarded costs - see, for example, Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2020] FCA 598 (Bromwich J) in relation to indemnity costs, where the parties accepted the issue could be determined by a single member of the Full Court after the costs order was made by the Full Court; Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 7) [2018] FCA 1217 (McKerracher J) in relation to a lump sum costs order application; and McMillan v Warner as trustee in the bankruptcy of McMillan [2024] FCA 525 (Logan J) in relation to a lump sum costs order application cf. Cassimatis where SC Derrington J considered the issue but was not a member of the original Full Court, discussed further below. The chapeau of s 25(2B) does not by its terms constrain the exercise of the appellate jurisdiction to a single judge who is, will be, or was, a member of the Full Court. To add such a gloss to the clear terms of s 25(2B) would cut across the purpose to which the section is directed, namely, to aid more efficient management in the appellate jurisdiction.
In Cassimatis, SC Derrington J rejected an argument that the Court, constituted by a single judge not sitting as the Full Court, could not, or ought not, exercise the jurisdiction of the Full Court who heard the appeal and made the relevant order as to costs. To be clear, SC Derrington J was not a member of the Full Court that made the cost order: Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52 (Greenwood, Rares, Thawley JJ). Her Honour reasoned that the application for a lump sum costs determination was plainly an application for interlocutory orders after the determination of the appeal. Further, that the issue of whether costs should be awarded in a lump sum is distinct from the issue of the entitlement to costs, which was the issue that had been determined by the Full Court. It does not appear that her Honour was referred to Backo.
In the present case, I am satisfied that pursuant to s 25(2B)(ab) of the Act, the Court constituted by a single judge who was not a member of the Full Court, may exercise the appellate jurisdiction of the Court to make an interlocutory order after the determination of the appeal. As I have indicated above, I respectfully agree with SC Derrington J that there is a distinction between making an order that costs be determined by lump sum and the substantive order as to the entitlement to recover costs. In my view the order which I am asked to make is not only interlocutory, but also, by its nature, supplementary to the costs order made by the Full Court and it is addressed to an issue which was not ventilated before the Full Court. The issue which arose in in Backo does not arise in this case because of the introduction of s 25(2B)(ab) into the Act.
Finally, I note that the present application may be readily distinguished from the circumstances considered by the Full Court (Allsop CJ, Besanko and O'Callaghan JJ) in Hancock Prospecting Pty Ltd v Rinehart (No 3) [2021] FCAFC 23; 284 FCR 663 at [10]-[11], where the Court recognised, in obiter, that although part of the relevant application could be dealt with by a single judge utilising the power in s 25(2B)(ab), the whole of the application could not because one part of it required consideration of the proper construction of orders made by the Full Court and accordingly had to be dealt with by the Full Court. The present application is of an entirely different variety.
Accordingly, I am satisfied that pursuant to s 25(2B)(ab) of the Act I have power to entertain the Cost Applicant's application in so far as it relates to the appeal proceedings costs orders.
The second issue relates to the issue of power in relation to both the costs orders in the primary proceedings and the appeal proceedings. The Cost Respondents' submissions on this issue were difficult to follow. The Cost Respondents appeared to submit in effect that because the primary judge (and by extension all three members of the Full Court) were not available to undertake a lump sum costs determination, that the Court as presently constituted was not capable, as a matter of power, of making an order that the costs payable pursuant to the extant costs orders be quantified by lump sum determination. I reject that submission. It is not consistent with the principles I have outlined above and ignores the commonplace occurrence in this Court of lump sum determinations being referred to a Registrar for determination. In so far as the Cost Respondents' submissions on this issue were directed to the exercise of the discretion as to whether to make an order for a lump sum determination, I will address it separately below.
I now turn to the substantive issues, namely whether it is appropriate to exercise the Court's discretion to make orders that the extant costs orders in the primary proceedings and the appeal proceedings be quantified as a lump sum.
Having considered the parties' respective written and oral submissions, I am satisfied that I should exercise the discretion to order that the costs payable under the existing orders be determined as a lump sum. I do not intend in these reasons to engage seriatim with the submissions advanced for and against proceeding by way of a lump sum determination. I am satisfied on the basis of the evidence before me that to do so is appropriate in the whole of the circumstances attendant on these six proceedings. I am further persuaded that to order that costs be determined as a lump sum is consistent with the overarching purpose embodied in s 37M of the Act. My reasons are as follows.
On the basis of the Cost Applicant's evidence, I am persuaded that proceeding by way of a lump sum determination in each of the proceedings will enable the six costs orders to be quantified in a way that is both fair and efficient and is most likely to significantly reduce the time and expense incurred by the parties and the demands on Court resources.
The proceedings involved common issues, a common party (the Cost Applicant) and were the subject of joint judgments (primary and on appeal). It is logical, efficient and appropriate to deal with the six costs orders on a lump sum basis rather than through taxation. By way of contrast, a formal taxation process would be arduous, lengthy and expensive as it would require a review of extensive bills of costs expected to comprise thousands of line items. Mr Scarcella deposed to his belief that the preparation of a bill of costs in each proceeding may involve up to a year of preparation and that the process would result in substantial solicitor fees and costs consultant fees being incurred.
Mr Scarcella deposed to his experience in a long form taxation process in comparable primary and appeal proceedings, involving the same opposing solicitors and the same funder as in these proceedings (the Grant-Taylor proceeding). The Grant-Taylor proceeding involved similar claims by various Babcock & Brown shareholders against the Cost Applicant. The Grant-Taylor proceeding was conducted by the on behalf of the plaintiffs by the same solicitors as presently represent the Cost Respondents. On 4 March 2015, Perram J delivered the primary judgment, dismissing the application with costs: Grant-Taylor v Babcock & Brown Limited (In Liquidation) [2015] FCA 149; 322 ALR 723. On 21 April 2016, the plaintiffs' appeal to the Full Court was dismissed and they were ordered to pay the respondents' costs of and incidental to the appeal: Grant-Taylor v Babcock & Brown Limited (in liquidation) [2016] FCAFC 60 (Allsop CJ, Gilmour and Beach JJ). A special leave application to the High Court was dismissed with costs on 12 October 2016. Mr Scarcella deposes to the fact that the preparation of the bill of costs in the Grant-Taylor proceeding took 11 months and was filed on 27 September 2017. The costs consultant's fees for preparing the bill of costs, which incorporated 1768 items spanning 248 pages, was approximately $21,000. The Cost Applicant submits that the determination of costs was "delayed" by the objections taken by the plaintiffs and a detailed response schedule prepared by the plaintiffs, with the result that the certificate of taxation was finalised almost three years later on 15 July 2020. It is more accurate to describe the determination of costs as necessarily awaiting consideration of the materials submitted by the plaintiffs.
Based on his experience in the Grant-Taylor proceeding, Mr Scarcella estimates the costs for preparing long form bills of costs in each of the primary proceedings is $42,350 to $45,000, amounting to a total cost between $127,050 to $135,000 for these proceedings. The Cost Applicant acknowledges that this estimate does not take into account the time and expense of a review of any objections or the appeal proceedings costs.
The Cost Applicant submits that, based on the conduct of the Cost Respondents and their representatives to date, further delays are likely to ensue if the formal taxation procedure is followed. The Cost Applicant relies on Martin v Norton Rose Fulbright Australia (No 2) [2020] FCAFC 42 at [18] (Besanko, Flick and Abraham JJ) in support of making a lump sum costs order in circumstances where there was a protracted history within the litigation, even where the proceeding does not bear the features of a large and complex matter of the nature referred to in Paciocco, where the applicant's conduct was characterised as being directed to delaying the resolution of the dispute. The Cost Applicant characterises the Cost Respondents' approach to date as combative. It is not necessary for me to weigh in on which party bears responsibility for the inability of the parties to reach agreement on matters of timetabling and the like. My strong impression is that the responsibility is shared. The Cost Applicant has not brought this application in a timely fashion, has not sought to explain key periods of the delay and has tried to proceed to a lump sum determination in a way that was contrary to the clear process required by the Rules. In any event, regardless of where the responsibility lies, the conduct of the parties to date suggests that the taxation experience in the Grant-Taylor proceeding may be a reliable harbinger for how a taxation may unfold in these proceedings.
I do not accept that proceeding by way of a lump sum determination will necessarily prejudice the Cost Respondents. There are well-established mechanisms in the process for lump sum determination that will enable the Cost Respondents to object to the Costs Summaries within the ambit of that process. In this respect, I note that the Cost Respondents have had the Cost Summaries since April 2024 and the Cost Respondents' representative have the benefit of having participated in a full-scale taxation process against the Cost Applicant in other proceedings of a similar nature and so are likely to be well-versed in relation to the areas where the costs may be negotiable or otherwise vulnerable to reduction.
I have considered the Cost Respondents' submissions to the effect that the unavailability of the trial judge renders it inappropriate to order that costs be determined in a lump sum. The Cost Respondents submitted that as I was not the trial judge or a member of the Full Court, I could not satisfy myself of the matters that would warrant ordering that costs be determined as a lump sum. I reject that submission. The inescapable fact is that the primary judge is not available and so the issue of whether the costs should be determined by way of lump sum costs falls to be decided on the evidence lead on the application. Both parties have had ample opportunity to lead evidence for this purpose and have done so. Having reviewed that evidence, I am satisfied that the process of assessing costs on a lump sum basis will likely provide an advantage over the usual process of taxation. The balance weighs in favour of a lump sum determination. It is more likely to be concordant with the overarching purpose of the costs determination being conducted quickly, inexpensively and efficiently, and to avoid the procedure becoming mired in process driven costs.
The Cost Respondents rely on Foster J's comment in GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser (Australia) Pty Limited (No 3) [2018] FCA 183 at [61] that the particular advantages of a lump sum order in complex proceedings "would not be achieved if the entire process were delegated to a Registrar or to another judicial officer who did not have the same familiarity with the issues in the case as the trial judge". While there is force in those observations, the procedural history of these proceedings and the stage at which this application is brought necessitates a comparison of a formal taxation to a lump sum determination in the prevailing circumstances which will require someone other than the primary judge to undertake the process. The Cost Applicant has identified actual benefits of adopting a lump sum approach in terms of time and cost efficiencies in the context of these particular proceedings.
The Cost Applicant's delay in bringing the present application for lump sum costs is a factor that is relevant to the exercise of the discretion. As mentioned, key parts of the delay have not been adequately explained and would usually weigh against the Court exercising its discretion in favour of the application.
However, I am unable to accept the Cost Respondents' submission that if the Cost Applicant made a lump sum costs application in a timely manner, the impediment created by the unavailability of judges with knowledge of these proceedings may have been avoided.
There would have been an obvious inefficiency in the Cost Applicant seeking a lump sum costs assessment before the final determination of the proceedings, which proved to be the dismissal of the special leave applications. To do otherwise risked unnecessarily wasting costs and the Court's and the parties' resources. In practical terms, having regard to the timing of the primary judge's retirement, it is highly unlikely that any application for a lump sum determination, even if it had been brought earlier, would have been determined by the primary judge. The process would have been delayed by pending appeals, including the special leave applications. In all likelihood, the procedural history would have necessitated any lump sum determination being undertaken by someone other than the primary judge, most likely a Registrar.
The elapse of time between the dismissal of the special leave applications and the making of this application is regrettable. The Cost Applicant appears to either have overlooked or been ignorant of the need to apply to the Court for an order for costs to be determined as a lump sum rather than being taxed. However, I am not satisfied that that fact undermines the likely benefits attendant on a lump sum determination over a taxation in the circumstances of these proceedings. I adhere to that view, even if I make the assumption which the Cost Respondents urge, that it would be possible for the taxation processes in each of the six proceedings to be managed in an efficient and coordinated fashion by a single assessor available to undertake the whole process in all the proceedings.
The Cost Respondents also submitted that a lump sum determination would not be appropriate because the different primary proceedings were started at different times and involved differing numbers of plaintiffs (including plaintiffs who abandoned their claims late in the proceedings). I do not agree. The Cost Summaries that have been served distinguish between each of the proceedings - they are not an amorphous collation of the costs in all the proceedings. While I note that there was a substantial reduction in the number of plaintiffs between the end of the hearing in the primary proceedings and the appeals lodged in the Full Court - this is a matter which is addressed in the Full Court's reasons and orders. The Cost Respondents did not elucidate how this would adversely impact proceeding by way of lump sum determination. Similarly, the attrition of plaintiffs in the primary proceedings to which the Cost Respondents point, was announced in submissions on the final day of the hearing and was not formalised by any order of the Court. In these circumstances, the Cost Respondents did not explain on what basis there would be a need to differentiate between the Cost Respondents in each of the primary proceedings who abandoned their claims for relief on the final day of the hearing and those who did not. I would not readily infer that the Cost Respondents continued to incur costs after judgment was reserved and before judgment was delivered. In so far as I could follow the Cost Respondents' submissions on this issue, I am not satisfied that these details weigh against proceeding by way of a lump sum determination.
The Cost Respondents relied on Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael [2024] NSWSC 735 at [14] (Black J), citing the observations made by Ball J in Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) [2018] NSWSC 431 at [21]: However, the Court will not make a gross sum costs order unless it can be satisfied that it has sufficient information before it to be satisfied that "it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available": Harrison v Schipp [2002] NSWCA 213 at [22] per Giles JA. The calculation of that sum must be "logical, fair and reasonable" after an informed assessment of the available information: Beach Petroleum NL & Claremont Petroleum NL v Johnson (1995) 57 FCR 119; (1995) 135 ALR 160 at 164-5 per von Doussa J. The Court is entitled to take a "broader brush" approach than would be applied on assessment, but in doing so "it must be confident that the material before it enables it to make a sufficiently reliable calculation or estimate of an appropriate costs sum. And a decision as to what is an appropriate sum will depend to a large extent on reaching some kind of view on what the outcome of an assessment might be": Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11 at [21] per Barrett J.
The Cost Respondents submitted that a "broad brush" approach cannot be applied when there is a degree of differentiation between the proceedings based on the differences in pre-trial procedures and plaintiff participation in the proceedings and the evidence before the Court is not sufficient to enable me to say that this is a complex case to the necessary degree. The Cost Respondents' reliance on Tzaneros is misplaced. The Costs Respondents have conflated two distinct inquiries: first, whether costs should be determined as a lump sum and secondly, if so, by whom. The issue that the Cost Respondents raised applies to every lump sum determination made by a Registrar. The Registrar will have control of the lump sum determination process, including what material is produced in support of a calculation or estimate of an appropriate costs sum. The parties will have an opportunity to address the Registrar on issues of procedural fairness.
For these reasons, I am satisfied that I should exercise the discretion to order that the costs be determined as a lump sum pursuant to s 43 of the Act and r 40.02(b) of the Rules. Given the nature and protracted history of the proceedings, a lump sum costs determination will likely avoid the expense, delay and aggravation arising out of a lengthy and complicated taxation process and lead to a more efficient resolution of the costs issue in accordance with the objectives of s 37M of the Act.
I have carefully considered what procedural orders I should make to facilitate the lump sum determination being conducted through to finalisation in a way that is as quick, inexpensive and efficient as possible. Having regard to the procedural complexity and longevity, and the relationship between the parties, I am satisfied that the most appropriate way forward is for a Registrar to be appointed as a Referee pursuant to s 54A of the Act for the purpose considering and quantifying the lump sum determinations in each of the proceedings after receiving such materials (including written submissions and any affidavits) as the Referee may direct from each of the parties. I will make orders accordingly.
Having regard to the unorthodox way in which this application was brought before the Court by the Cost Applicant and weighing that against the fact that the Cost Applicant has succeeded in substance in this application, I am satisfied that the parties should bear their own costs of this application.

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Judgment (6 paragraphs)

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Cases Cited (28)

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