Modra v State of Victoria

REASONS FOR JUDGMENT 1 There is before the Court an application by the respondent, the State of Victoria, for an order to be made that a costs order, made against a solicitor, Mr Gabrielle Kuek, personally by Gray J on 19 March 2012, be taxed immediately. 2 The background to the application is to be found in the reasons for decision of his Honour Gray J, and need not be repeated in great detail: see Modra v State of Victoria (2012) 205 FCR 445. Suffice it to say that the order was made because his Honour considered that costs had been thrown away in the proceeding because of the filing of two successive deficient statements of claim by Mr Kuek's firm which, at the time, was acting for the applicant in the proceeding, Luke Modra. 3 His Honour's order was subject to an application for leave to appeal that was considered by Jessup J: see Kuek [2012] FCA 494. His Honour, having carefully considered the circumstances in which the application came to be made, determined to refuse leave. 4 Mr Kuek then made application for what would once have been described as prerogative relief and declaratory relief in the High Court. On 30 October 2012, Hayne J refused the application: see Kuek v The Honourable Justice Gray & Ors [2012] HCATrans 273. 5 Mr Kuek then made an application for leave to appeal to a Full Court of the High Court from his Honour's order. Although that application was made some nine months ago, I am advised from the bar table that inquiries of the High Court Registry have elicited the information that it has yet to be fixed for hearing. 6 The present application is made pursuant to the Rules of Court. Rule 40.13 of the Federal Court Rules 2011 (Cth) provides that: "If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished." 7 The State of Victoria seeks a dispensation from the operation of that rule. 8 The general rule is that orders for costs, made at the interlocutory stage of a proceeding should not be taxed until the end of the proceeding in order to avert the need for multiple taxations to occur and because the possibility plainly exists for any interlocutory costs order being set off against other interlocutory or final costs orders made in the proceeding. 9 There is also a concern, reflected in the rule, that a successful party on an interlocutory application for costs should not, by taxing and enforcing the order, prior to the outcome of the principal proceeding, thereby be able to apply financial pressure to the detriment of the other party. 10 The circumstances of the present case differ from the norm in a number of respects. The first is that the order his Honour, Gray J, made is an extraordinary order. It is not made against a party to a proceeding, rather it is made against the solicitor who was then acting for the applicant. 11 The burden of the order does not fall upon the applicant, nor could it because of the provisions of section 37N of the Federal Court of Australia Act 1976 (Cth) ("the Act") which prohibits a legal practitioner against whom such an order is made from recovering such costs from his or her client. 12 The second departure from the normal situation is that, for good ethical reasons, Mr Kuek ceased to act for the applicant once Gray J raised the prospect of making an order personally against him. 13 The result is that he is no longer the solicitor on the record and his involvement in the proceeding has therefore ceased. 14 The proceeding itself is a long way from being concluded. At a recent directions hearing, I fixed the trial to commence on 5 May 2014 on an estimate of 11 weeks. If the matter does proceed to trial, it is therefore likely that a judgment and orders will not be forthcoming until the latter part of next year. 15 Mr Kuek resists the application on four bases. It accepts that the Court has discretionary power. The first two can be considered together. In substance, what is said is that the orders were made by Gray J in March last year and that an appreciable time has, therefore, elapsed before an application for dispensation from the operation of rule 40.13 has come to be made. Mr Kuek complains that the application should have been made promptly and that there should have been an explanation for the delay. 16 When applications are made for dispensations from rules such as rules fixing the time for the taking of various steps in a proceeding with which a party has failed to comply, the issue of delay in making an application and the reasons for that delay may well bear heavily upon the exercise of the discretion of the court. 17 In a case such as the present, however, it seems to me, as I indicated in the course of argument, to be a neutral consideration. Mr Kuek was not able to point to any detriment that he may suffer by reason of the delay, and, in any event, the delay is to some extent, at least, understandable in that no application for taxation could be made until there was a bill in proper form and various other preparatory steps had been taken. 18 I therefore do not consider that either of the first two discretionary matters which have been raised either assist or harm the case made in opposition by Mr Kuek. 19 Mr Kuek then raises the possibility that his application for leave and, if successful, the appeal from the decision of Hayne J would be likely to give rise to an order by the High Court that the orders made by Gray J be quashed. 20 It is always difficult in exercising discretionary powers where appellate processes are pending to form a judgment as to the likely outcome of those proceedings. Nonetheless the authorities establish that the likelihood of success is a matter properly for consideration by the Court. 21 The judgment of Gray J was, with respect, very carefully reasoned. It was found by Jessup J not to be attended by sufficient doubt as to warrant the grant of leave to appeal to a Full Court. Hayne J considered substantially the same arguments that had been raised before Jessup J and some additional arguments in support of the application for prerogative and equitable relief to the High Court. 22 His Honour declined to refer the application to a Full Court and dismissed it. 23 In these circumstances I cannot be satisfied that there is any strong or substantial prospect of the presently outstanding application for leave to appeal from Hayne J's decision being successful. 24 This element of Mr Kuek's argument cannot weigh heavily against the making of the orders sought by the State of Victoria. 25 The fourth point made by Mr Kuek in opposition to the State of Victoria's application is that, were he to be ordered to pay the costs ordered by Gray J, he would suffer financial problems and that this may necessitate his making a demand on the applicant for the payment of the costs incurred by his firm in prosecuting the principal application in the period while the firm was acting. 26 There are a number of difficulties with this argument. The first is that what is being sought is, in substance, an order for taxation. It is not an order that Mr Kuek pay anything to the State of Victoria. Taxation is a necessary preparatory step to the making of any demand for such payment by the State. 27 From a practical point of view all the order sought will lead to is the conduct of a taxation of the bill of costs which has been furnished by the solicitors acting for the State to Mr Kuek. The result of that taxation will be that the amount that Mr Kuek may, subject to the outcome of his High Court proceeding and any appeal from the taxing officer, be liable to pay pursuant to Gray J's order will be fixed. He will not be obliged to make a payment immediately and, in any event, the completion of the taxation proceeding will, in the normal course, not occur for some months at least. 28 It may well be that by that time the application for leave to appeal to a Full Court of the High Court will have been resolved or at least a date for hearing fixed. It will be open to Mr Kuek once the bill is taxed and should he be so minded, to make application to the Court for a stay of the payment of the taxed sum pending the outcome of the High Court proceeding. 29 Mr Kuek, in his submissions, seeks to relate the question of him making payment pursuant to Gray J's order to the enforcement of a demand for payment of his firm's costs incurred in acting for the applicant. 30 There are a number of difficulties with that submission. The first is that section 37N of the Act prevents a solicitor against whom an order for personal payment of costs is made from recovering those costs from the client for whom the solicitor was acting at the time at which the liability was incurred. So there can be no set-off. 31 Next there is no evidence before the court as to the arrangements for payment of fees entered into between the applicant and Mr Kuek's firm. 32 As a result, there is no evidence of any present entitlement on the part of Mr Kuek's firm to enforce immediate payment of costs against the applicant. 33 In any event the arrangements between the applicant and the firm are a separate matter from the one presently under consideration and the choice of whether or not to exercise any rights, assuming there to be any, to enforce immediate payment of outstanding costs by the applicant is a matter for Mr Kuek and one that does not impact significantly on the exercise of the discretion which I am called upon to perform. 34 For these reasons I consider that the State of Victoria's application should be granted. I will, therefore, order that, notwithstanding rule 40.13 of the Federal Court Rules, the costs orders made in paragraph 1 of the orders made by Gray J on 19 March 2012 be taxed immediately. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey.