Masters v Lombe

Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61

Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) (Lump Sum Costs Judgment) [2025] FCA 1336

McCallum, in the matter of Re Holdco Pty Ltd (Administrators Appointed) (No 3) [2021] FCA 913

Quach v MLC Limited [2022] FCA 586

Shannon (in his capacity as receiver and manager of North East Wiradjuri Co Limited) v North East Wiradjuri Co Limited (No 3) [2012] FCA 106

Sheehan v Lloyds Names Munich Re Syndicated Ltd [2017] FCA 1340

Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork Pty Ltd (1992) 29 NSWLR 549

Telstra Corporation Ltd v Phone Directories Company Pty Ltd [2011] FCA 1463

IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)

1. Pursuant to s 54A(3) of the Federal Court of Australia Act 1976 (Cth), the Report of the Referee, Judicial Registrar Segal, dated 21 March 2025, be adopted in the whole.
2. The Plaintiffs pay to the Defendant in proceeding NSD2525/2013 costs in the lump sum of $391,584.90.
3. The Plaintiffs pay to the Defendant in proceeding NSD947/2014 costs in the lump sum of $524,802.04.
4. The Plaintiffs pay to the Defendant in proceeding NSD501/2015 costs in the lump sum of $355,910.30.
5. The Appellants pay to the Respondent in proceeding NSD1915/2019 costs in the lump sum of $77,477.91.
6. The Appellants pay to the Respondent in proceeding NSD1929/2019 costs in the lump sum of $78,383.52.
7. The Appellants pay to the Respondent in proceeding NSD1930/2019 costs in the lump sum of $81,852.32.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. These reasons concern the adoption of the report of a referee following a referral made under s 54A of the Federal Court of Australia 1976 (Cth) (the FCA Act) and in accordance with Division 28.6 of the Federal Court Rules 2011 (Cth). Familiarity with my decision in Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) (Lump Sum Costs Judgment) [2025] FCA 1336 (the Lump Sum Costs Judgment or LSCJ) is assumed. I will not repeat the detail of the Lump Sum Costs Judgment and will adopt the same defined terms unless otherwise noted. In adopting that course, I do not wish to in any way detract from the extensive procedural history of these proceedings: see LSCJ [7]-[19] and [60].
2. Relevantly, for present purposes, the outcome of the Lump Sum Costs Judgment was that I ordered on 21 November 2024, over the opposition of the Plaintiffs/Costs Respondents, that:

(1) costs orders made in six separate but related proceedings be determined on a lump sum basis; and

(2) pursuant to s 54A of the FCA Act, the quantification of the lump sum costs be referred to a Registrar of the Court appointed to act as a referee.

1. The Referee was required to provide a written report that:

(1) attached any submissions relied upon by the parties before the Referee;

(2) set out the Referee's opinion as to the lump sum of costs payable in each of the six proceedings; and

(3) set out the Referee's reasons for the opinion reached in each of the proceedings.

1. On 21 March 2025, the Referee, Judicial Registrar Segal, provided his Report (or R) to the Court, which was then provided to the parties on 28 April 2025. The Report, including attachments, comprises 274 pages in total.
2. The way in which the Referee conducted the inquiry is described at paragraphs 6 to 8 of the Report. The evidence and submissions provided by the parties is catalogued in paragraph 9 of the Report.
3. On 23 May 2025, the Costs Respondents filed written submissions (RWS). Those submissions are somewhat confused for reasons to which I will come. Insofar as relevant submissions are made in support of the Costs Respondents' overarching contention that the Report not be adopted, the principal argument is that the Report should not be adopted because the Court could not be satisfied that the broad-brush approach inherent in the quantification of costs as a lump sum had produced a "logical, fair and reasonable result". The Costs Respondents submitted that the Report should not be adopted. The Costs Respondents submission as to what would flow from a rejection of the Report should they succeed on this application is based on a false premise. They apprehend that if the Report is not adopted the Court will revisit the orders that require costs to be determined on a lump sum basis. That is not correct. If the Report is not adopted, the quantification of the lump sum costs to be awarded will have to be undertaken in another way, most likely by a Judge or a Registrar of the Court.
4. On 3 June 2025, the Defendant/Costs Applicant filed written submissions (AWS) contending that the Costs Respondents' submissions did not provide an adequate basis on which to refuse to adopt the Report and amounted to an attempt to have the Court reconsider the Lump Sum Costs Judgment.
5. For the reasons that follow, I am satisfied that I should adopt the Report in whole and make orders in accordance with it.

1. Rule 28.67(1)(a) of the Rules relevantly provides that after a referee's report has been given to the Court, a party may, on application, ask the Court to adopt, vary or reject the report, in the whole or in part.
2. The principles applicable to the exercise of the Court's discretion in the context of an application under r 28.67 of the Rules are well-established: Shannon (in his capacity as receiver and manager of North East Wiradjuri Co Limited) v North East Wiradjuri Co Limited (No 3) [2012] FCA 106 (Jacobson J) (noting that r 28.67 is equivalent in substance to its predecessor under the former rules O 72A); Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork Pty Ltd (1992) 29 NSWLR 549 at 563-564 (Gleeson CJ); Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7] (McDougall J); and Sheehan v Lloyds Names Munich Re Syndicated Ltd [2017] FCA 1340 at [10] (Allsop CJ).
3. I summarised the applicable principles in Quach v MLC Limited [2022] FCA 586 at [8] as follows:

(1) The application is not an appeal. The Court does not conduct a hearing de novo or a rehearing. A party who is dissatisfied with a referee's report is not entitled to require the Court to reconsider and re-determine afresh matters, whether of fact or law, which the party wants to contest.

(2) The discretion to adopt, vary or reject a referee's report is to be exercised in a manner consistent with the context and purpose of the relevant rules. The purpose of the Rules is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, and it would frustrate that purpose to allow the reference to be treated as a rehearsal for the real contest.

(3) If the source of a party's dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(4) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, "patent misapprehension of the evidence" means a lack of understanding of the evidence and not the weight attributed to it; and "perversity or manifest unreasonableness" means a conclusion that no reasonable tribunal of fact could have reached.

(5) In general, the referee's findings of fact should not be re-agitated before the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee has expertise. It is not enough for an aggrieved party to point to errors of fact which would be amenable to correction by an appellate court.

(6) Even if it were to be shown that the Court might have come to a different conclusion in some respect from that reached by the referee, absent any error of the kind referred to above, it would not be a proper exercise of the discretion conferred by r 28.67 of the Rules, to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report.

(7) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee the evidence and submissions upon which they wish to rely.

(8) Although the reasons given by the referee may appear to be adequate, where the party challenging the report contends that they are not because the referee did not deal with "very significant evidence", the Court may examine the evidence to see whether the reasons were in fact inadequate because they omitted to refer to such evidence.

1. The Costs Respondents submit that the Court should not adopt the Report.
2. I will deal with each of the Costs Respondents' submissions in turn and the context in which they are made. Two preliminary aspects of this application bear emphasis at the outset.
3. First, in the hearing that culminated in the Lump Sum Costs Judgment, the Costs Respondents sought to resist the making of an order that the extant costs orders in the six proceedings be determined as lump sums. They did so on the basis of their contention that the unavailability of the primary judge made it impractical to determine costs as a lump sum and therefore a lump sum costs order should not be made. I rejected that argument: LSCJ [50]. For completeness, I note that the order for the costs determinations to be by way of lump sum was made after a fully contested hearing. The Costs Respondents were represented by the same counsel and solicitor at that hearing, at the reference, on a failed urgent stay application and in the present proceedings. Any appeal from that order is out of time, would require leave and would have to establish a House v R error. The question on this application is whether the Report should be adopted. The Costs Respondents attempt to relitigate the Court's order that the extant costs orders be determined as lump sums is rejected. The present application does not give rise to a legitimate opportunity to revisit that order.
4. Secondly, the Costs Respondents:

(1) do not doubt the experience of the Referee; and

(2) accept that the Referee has correctly identified the legal principles relating to the assessment of costs on a lump sum basis at R [13]-[16].

1. The Costs Respondents' acknowledgement is well made in both respects. In relation to the experience of the Referee, I note that in assessing quantum, the Referee has drawn on his 35 years' experience as a Federal Court taxing officer: R [16], citing Hislop v Paltar Petroleum Limited (No 4) [2017] FCA 1632 at [12] (Gleeson J) as authority for his approach in that regard. To that I would add the observations made by Gordon J in Telstra Corporation Limited v Phone Directories Company Pty Ltd [2011] FCA 1463 at [5]:

It is also trite that a judge's experience in taxing costs is limited: see, by way of example, Re Clynton Court Pty Ltd [2005] FCA 543; (2005) 53 ACSR 432 at [21]. In the Federal Court, taxation of costs is conducted by Registrars of the Court. They have substantial experience in taxation of costs covering a wide range of matters (both in terms of substance and size).

1. I now move to the substance of the Costs Respondents' submissions in so far as the submissions are addressed to the relevant issue, that is the adoption of the Report. The following arguments were advanced to support the Costs Respondents' overarching submission that the Referee's approach was not "logical, fair and reasonable."
2. The Costs Respondents' submissions are characterised by commentary which cherry picks and fragments the Report in order to raise carping quibbling complaints. This is illustrated by RWS [9]-[19] and [38(a)-(c)] where the Costs Respondents point to observations made by the Referee in relation to the duration and complexity of the proceedings. It is not particularly clear what submission the Costs Respondents seek to advance based on this commentary on the Report. What is clear is that the commentary is premised on a misconstruction by "inference" of the Costs Applicant's written submissions made to the Referee and of the Report itself. The Costs Respondents' submission ignores that the Referee's opinion was informed by his view that:

(1) the considerable complexity of the proceedings required a careful and detailed consideration of a large number of documents and the applicable law regarding serious allegations of corporate misconduct and the potential for substantial monetary compensation: R [17];

(2) that there was a degree of difficulty and novelty in some of the questions raised: R [27]; and

(3) and that there was a degree of complexity in the factual and legal issues which together with the commercial value of the litigation justified a higher fee for senior counsel: R [31].

1. At RWS [12], the Costs Respondents submitted that the Referee's finding that the three proceedings were similar should have led to a reduction in the costs assessed for the Broome proceeding (NSD 947 of 2014), which were higher than those for the other proceedings. The Referee explained his methodology in assessing costs in each matter, for which the starting point was the total costs incurred by the Costs Applicant which was then discounted by reference to particular matters. At R [38], the Referee noted that it was agreed between the parties, that the same discounts should be applied to each of the primary proceedings. It followed that the lump sum assessed by the Referee for the Broome proceeding would be higher, because the total costs claimed by Costs Applicant in those proceedings were higher than the other proceedings. The Costs Applicant pointed out that the submission made at RWS [12] was not made by the Costs Respondents in their written submissions to the Referee and it was not recorded in the Report. It seems to me that had such a submission been made to the Referee, it would have been inconsistent with the agreed position as to similarity that was recorded in the Report, which the Referee accepted to be appropriate and on which the Referee acted.
2. At RWS [22]-[27] and [38(d)-(e)], the Costs Respondents submitted that the failure of the Referee to consider the evidence and submissions of the primary and appeal proceedings (the hearing materials) meant that I could not be satisfied that the broad-brush approach in assessing lump sum costs would result in a fair and reasonable estimate of costs. This submission is without merit. I reject it for three reasons.
3. First, it is a stark illustration of the fact that the Costs Respondents seek to relitigate the issue determined against them in the Lump Sum Costs Judgment which is not permissible for the reasons I have already given.
4. Secondly, the Costs Respondents did not provide the hearing materials to the Referee as relevant evidence to be considered for the purpose of the Reference. It may be observed that at least at that stage the Costs Respondents may have recognised that the inquiry before the Referee was not a proxy appeal from the order for a lump sum determination.
5. Thirdly, the Costs Respondents accepted that the consideration of the hearing materials, which included a 5,000 page joint Court Book, would have been a "large task". It would have involved the kind of time and expense that the making of a lump sum costs order was intended to avoid. The Report was based on the costs summaries and submissions listed at R [9] which were provided to the Referee. The approach taken was in keeping with modern practices for the determination of lump sum costs and consistent with s 37M of the FCA Act and the parties' obligations under s 37N of the FCA Act. The approach advocated by the Costs Respondents is inimical to the overarching purpose embodied in s 37M.
6. At RWS [28]-[34] and [38(f)-(g)], the Costs Respondents submitted that the Referee erred by failing to take into account the Costs Respondents' success on a discrete legal issue relating to non-disclosure by Babcock and Brown. The Costs Respondents submit that "[b]ecause the process of assessing a lump sum requires a broad-brush approach, there is a requirement to discount the claim to take account of the measure of success on issues": RWS [31]. The Costs Respondents cite two authorities as purportedly standing for that "requirement": McCallum, in the matter of Re Holdco Pty Ltd (Administrators Appointed) (No 3) [2021] FCA 913 (O'Bryan J) and Telstra. The authorities cited do not support the proposition advanced by the Costs Respondents. There is no such inflexible requirement - the method for calculating a lump sum costs order is not rigid.
7. Whilst I accept that it may generally be appropriate to consider the relative success of parties on discrete issues when making a lump sum costs order, there is no rigid rule to that effect. An award of costs is in the discretion of the Court: s 43(2) of the FCA Act. The discretion is unconfined, but must be exercised judicially, that is according to relevant considerations and taking account of the contextual features and facts of the litigation: Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCAFC 86 at [98] (Allsop CJ, Colvin and Anastassiou JJ); Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136; 197 FCR 113 at [4] (Greenwood and Rares JJ). In Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61 at [301] (Bennett, Besanko and Beach JJ), the Full Court said (citations omitted):

the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party's costs of them ..., although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable ... and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.

1. In this case it would not have been appropriate for the Referee to proceed on that basis. To have done so would have run the risk of the Referee undertaking a de facto taxation under the guise of a lump sum costs assessment, which was the very thing that the order directing the quantification of costs by lump sum was directed to avoiding.
2. At first instance, the primary judge made an order in each of the proceedings that the Costs Respondents pay the Costs Applicant's costs of and incidental to each of the proceedings. On appeal, the Full Court made an order in each of the proceedings that the Costs Respondents pay the Costs Applicant's costs of and incidental to each of the appeals. As the Referee correctly observed, the mandate for the assessment of costs in these proceedings (whether by lump sum or otherwise) derives from the costs orders made by the primary judge in each proceeding and the Full Court in each appeal: R [24]. These orders are not qualified so as to exempt those costs which related only to the discrete issue on which the Costs Respondents prevailed, even if one assumes that it was possible to parse the costs in such a way. As a single judge coming to the proceedings after the relevant costs orders had been made, I made orders as to the method by which those costs orders were to be determined. Those orders were interlocutory in nature and made by way of supplementation to the extant costs orders: LSCJ [31]-[40]. No application has ever been made to vary the extant costs orders. The Referee was correct to reject the course urged by the Costs Respondents to exclude from the lump sum determination the costs which related to the issue on which the Costs Respondents succeeded.

1. The Costs Respondents' submissions do not provide a reasoned or sufficient basis to reject or vary the Referee's report. As I have sought to explain in these reasons, the Costs Respondents' submissions do not survive close scrutiny. The Referee has undertaken the quantification exercise in a way that is logical, fair and reasonable in the circumstances of these proceedings. I am satisfied that the Referee's Report should be adopted. I will make orders accordingly.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.