Natch v Stennson Pty Ltd

Federal Court of Australia|2024-12-20|Before: Colvin J, O'Bryan J

Introduction

In May 2019, the applicants commenced proceeding number VID 569 of 2019 (which will be referred to as the principal proceeding) against Stennson Pty Ltd (Stennson) (as first respondent) and three other respondents. The claims made in the principal proceeding are not relevant to the present application which concerns the costs of the proceeding. At the commencement of the principal proceeding, the applicants were represented by Johnston Construction Lawyers. In November 2019, Johnston Construction Lawyers ceased to act. In May 2020, the applicants appointed Matthew Delahunty (lawyer) to represent them.
The principal proceeding was heard by Anastassiou J in October 2021. At the start of the fifth day of the hearing, the parties told his Honour that proceedings against Stennson were sought to be discontinued to give effect to the terms of compromise between the applicants and the second to fourth respondents. On 27 October 2021, his Honour made the following order giving the applicants leave to discontinue their claims against Stennson subject to the payment of costs: The Applicants have leave to discontinue their claims set out in the Applicants' Further Amended Statement of Claim dated 1 October 2020 against the First Respondent on the condition that the Applicants pay the First Respondent its costs of and incidental to this proceeding, and its costs of bringing its cross claims and defending the Second Respondent's cross claim, including all reserved costs, on a party and party basis, to be taxed in default of agreement.
In November 2021, the applicants terminated the retainer of Matthew Delahunty in the principal proceeding.
On 2 December 2021, the applicants filed an application for an extension of time in which to seek leave to appeal the costs order made by Anastassiou J on 27 October 2021 (being proceeding number VID 720 of 2021, which will be referred to as the appeal proceeding). The applicants were self-represented in that proceeding. On 2 June 2022, O'Callaghan J dismissed that application and ordered the applicants to pay the costs of Stennson (as first respondent). His Honour's reasons are published in Natch v Stennson Pty Ltd [2022] FCA 641 (appeal judgment), which sets out the background to the litigation before Anastassiou J.

The discovery application

By their application dated 5 August 2024, the applicants sought discovery pursuant to r 20.15 of the FC Rules in the following four categories:
Documents in legal file VID569/2019 and VID720/2021 for inspection.
Document of the cost agreements between it and KCL Law in the proceeding VID569/2019 and VID720/2021.
Document of the banks statements which evidence the payments made to KCL Law and all legal expenses incurred in the proceeding VID569/2019 and VID720/2021.
Documents on agreements between Stennson Pty Ltd and the other respondents in the proceeding in relation to payment of costs, and cost sharing, contributions, indemnity and reimbursements.
By their amended application dated 18 August 2024, the applicants sought to amend the four categories as follows (the amendments marked with underlining):
Documents in legal file VID569/2019 and VID720/2021 for inspection.
Documents of the cost agreements between it (Stennson) and KCL Law in the proceeding VID569/2019 and VID720/2021 including all correspondence between Stennson and KCL Law, file notes, etc on the cost agreements and costs disclosure.
Document of the banks statements which evidence the payments made to KCL Law and all legal expenses incurred in the proceeding VID569/2019 and VID720/2021 including all correspondences between Stennson and KCL Law regarding invoice payments, file notes on the same, etc.
Documents on agreements between Stennson Pty Ltd and the other respondents (Camillo Pty Ltd and BCG(Aust) Pty Ltd T/as Checkpoint Building Surveyors) in the proceeding in relation to payment of costs, and cost sharing, contributions, indemnity deed/contracts and reimbursements including all correspondences between Stennson, Camillo, BCG (Aust) regarding the same, file notes related to the costs sharing, etc.
The Judicial Registrar heard the discovery application as part of the taxation hearing. At the hearing, Mr Natch represented the applicants and Ms A Terranova represented Stennson. As noted earlier, on 12 September 2024, the Judicial Registrar made an order dismissing the discovery application. The reasons for that order can be discerned from the transcript of the taxation hearing. It is also relevant to note related decisions taken by the Judicial Registrar with respect to the discovery application.
Discovery category 1 was all documents in the file of Stennson's solicitors, KCL Law, in the principal proceeding and the appeal proceeding. The Judicial Registrar ruled at the taxation hearing that she would not order discovery in that category, but where the applicants had objected to specific items in the bills of costs, they could call for a copy of the underlying document on the solicitor's file. Mr Cain deposed that he was informed by Ms Terranova that she had the KCL Law files with her at the taxation hearing and could have produced a document if requested by Mr Natch. It appears from the transcript that Ms Terranova did not have the file on the first day of the hearing (on 19 August 2024), but did have the file on the second day of the hearing (on 20 August 2024).
Categories 2, 3 and 4 concerned the commercial relationship between Stennson and KCL Law with respect to legal fees, including the costs agreement and bank statements evidencing payment of the legal fees, as well as any agreements between Stennson and the other respondents in relation to payment of costs, cost sharing, contributions, indemnity and reimbursements. Mr Natch submitted at the hearing that those categories were relevant to his principal concern, which was whether the bills of costs contravened the indemnity principle: that Stennson was seeking to recover an amount in respect of costs which it was not liable to pay to KCL Law or in respect of which it was indemnified by another respondent.
On the issue of the indemnity principle, Ms Terranova stated at the hearing that she was instructed that the costs had been billed to Stennson and paid. The transcript records that Ms Terranova said (emphasis added): Well, in relation to the indemnity principle, I can state from the bar table that the costs that were billed to the client, Stennson Proprietary Limited, are less than the costs that are sought to be recovered in the bill of costs, and they have been paid.
On the present application for review, Stennson submitted, and I accept, that the foregoing statement contains an error which was either made by Ms Terranova or was made by the transcript taker. As discussed below, the indemnity principle is that a party cannot recover an amount on account of costs that exceeds the amount paid by the party in costs. It is clear from the context that, at the taxation hearing, Ms Terranova either conveyed, or intended to convey, that the costs that were billed to Stennson were more than the costs that were sought to be recovered in the bills of costs.
At the hearing, Mr Natch submitted that the Judicial Registrar should not accept Ms Terranova's assertion with respect to the indemnity principle. The Judicial Registrar asked Mr Natch if he sought Ms Terranova's statement to the Court to be put on affidavit, and Mr Natch confirmed that he did. Ms Terranova agreed to do so. As a consequence, Stennson's solicitor, Mr Cain, affirmed an affidavit on 20 August 2024 in both proceedings, which were read at the hearing, and in which he deposed that the solicitor-client legal costs rendered by KCL Law and/or Counsel to Stennson in each of the principal proceeding and the appeal proceeding:
exceeded the legal costs sought on a party/party basis in the taxation by Stennson; and
had been paid in full by Stennson.

De novo hearing

Ordinarily, a review of a Registrar's decision under s 35A(5) of the FCA Act is by way of a hearing de novo: Harris v Caladine (1991) 172 CLR 84; Bechara v Bates (2021) 286 FCR 166 at [17]. That can be contrasted with a review of a taxation (and any consequential orders) under r 40.34 of the FC Rules, which has elements of a hearing de novo but in which new evidence is not permitted and in which the Court considers the conclusions reached by the taxing officer: Cassimatis v Australian Securities and Investments Commission [2016] FCA 131; 334 ALR 350 at [13]-[14] (Edelman J).
In the present matter, the Judicial Registrar made a decision with respect to discovery in the context of a taxation process. A question might arise whether a review of the Registrar's decision on discovery in that context is properly made under s 35A of the FCA Act or should be characterised as a review of a "consequential order" under r 40.34. It is unnecessary to address that question as both parties proceeded on the basis that the application for review was properly brought under s 35A of the FCA Act and that the Court was required to conduct a de novo hearing.
There are a number of consequences flowing from the conduct of a de novo hearing. First, the Court is not reviewing the Registrar's decision for error but is conducting a new hearing. Second, the Court determines the matter on the evidence adduced at the new hearing, which can include evidence previously relied upon and supplementary evidence. Third, complaints about procedural fairness during the hearing before the Registrar are not material if and to the extent that the conduct of the review hearing is able to remedy any procedural unfairness in the earlier proceeding. In the present case, I consider that the matters of procedural unfairness raised by Mr Natch in his written submissions have been remedied in the current review hearing. It is therefore unnecessary to determine whether Mr Natch's complaints involved procedural unfairness.

Registrar's power to order discovery for the purposes of taxation

The discovery application was an application for non-standard discovery under r 20.15 of the FC Rules. A preliminary question arises with respect to the powers of a Registrar of this Court, acting as a taxing officer, to order discovery under r 20.15 for the purposes of taxation. The parties did not address that question.
In this Court, one method of quantifying an entitlement to costs is through taxation. The process of taxation "involves the examination of a bill of costs, and the determination of the amount, fair and reasonable in the circumstances, to which the successful party is entitled, bearing in mind the scale of costs applicable": Tarry v Pryce (No 2) (1987) 37 NTLR 209 at 211. Under Div 40.2 of the FC Rules, the power of taxation is delegated to a taxing officer, who is a Registrar of the Court. The delegation of power under the FC Rules reflects the previous general law position which was described by Mahoney AP in Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 680 in the following terms: ... The office of taxing costs is, under the general law, "the business of the court itself". It has delegated that office to one of its officers, but "the Court has necessarily jurisdiction to control this delegated authority, and therefore, a right to review" what is done: Sandback Charity Trustees v North Staffordshire Railway Company (1877) 3 QBD 1 at 4-5 per Brett LJ; see also Re McMillan (1905) 5 SR (NSW) 350 at 362; Schweppes' Ltd v Archer (1934) 34 SR (NSW) 178 at 183; 51 WN (NSW) 71 at 72-73; Saddington, Taxation of Costs Between Parties (1919) at 116-117.
The powers conferred on a taxing officer in conducting a taxation are set out in Div 40.2 of the FC Rules. Relevantly, those powers include the powers conferred by r 40.28 which provides as follows: A taxing officer may, for the purpose of the taxation of costs under this Division, do any of the following: (a) summon and examine witnesses either orally or on affidavit; (b) administer oaths; (c) direct or require the production of books, papers and documents; (d) issue subpoenas; (e) make separate or interim certificates of taxation.
The power to direct or require the production of books, papers and documents has similarities to the power to order discovery, but the power has been framed with the taxation process in mind. There is no doubt that a taxing officer can require the production of documents from a solicitor's file, and that is the usual course followed in a taxation. As the Judicial Registrar explained to the applicants during the taxation hearing in the present matter, the applicants could call for the production of specific documents (which the Judicial Registrar could require to be produced). Further, in Frigger v Banning (No 13) [2023] FCA 923 (Frigger (No 13)), Colvin J concluded that a Registrar conducting a taxation has the authority to determine whether the indemnity principle is satisfied and, for that purpose, may exercise the powers conferred by r 40.28 (at [20] and [41]).
The discovery application made by the applicants in the present matter was not made under r 40.28. It was made under r 20.15. Absent an express delegation of power by a judge of the Court, it is less clear that a taxing officer has power to order discovery under r 20.15 for the purposes of taxation.
In Giannarelli v Wraith (No 2) (1991) 171 CLR 592, McHugh J concluded that, in the High Court, discovery is not available in a taxation of costs (at 599). A different position prevails in the Victorian Supreme Court. Rule 63.35 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (SC Rules) provides that, on a taxation of costs, the Costs Court has the same powers which an Associate Judge has on the hearing of an application in a proceeding. In Kuek v Devflan Pty Ltd [2011] VSCA 25, Hansen JA (at [12], with whom Neave and Harper JJA agreed) expressed agreement with the conclusion of Smith J in Ausvest Holdings Pty Ltd v Russell Kennedy (a firm) [2004] VSC 365 that the power under r 63.35 incorporates the power to order specific discovery under r 29.07, but not general discovery. However, there is no equivalent to r 63.35 of the SC Rules in the FC Rules.
A judge of this Court has power to order discovery in any proceeding under Div 20.2 of the FC Rules. There can be little doubt that that power extends to disputes that arise in the course of taxation: see for example Director of the Fair Work Building Industry Inspectorate v Abbott (No 5) [2013] FCA 522 at [22], which was referred to with approval in Mango Boulevard Pty Ltd v Whitton [2018] FCA 399 (Mango Boulevard) at [13]. Pursuant to ss 35A(1)(c) and (1)(h) of the FCA Act (the latter being read with r 3.01 and item 159 of Sched 2 to the FC Rules), a judge may direct that the power to order non-standard discovery under r 20.15 be exercised by a Registrar. It follows, in my view, that a Registrar, acting as a taxing officer, may exercise the power to order non-standard discovery under r 20.15 for the purposes of taxation if a direction to that effect has been given by a judge of the Court. I consider it doubtful, however, that a Registrar is empowered to order non-standard discovery under r 20.15 for the purposes of taxation in the absence of a direction by a judge.
In the present matter, no such direction was given to the Judicial Registrar by a judge of the Court, and it is therefore doubtful whether the Judicial Registrar had power to order discovery under r 20.15 in the categories sought by the applicants. I do not propose, however, to resolve this application on that basis. As the Judicial Registrar's decision (not to order discovery) is the subject of an application for review, and as the review requires a de novo hearing, I propose to determine the application on the basis that it has been brought before me. As already noted, I consider that a judge of this Court has power to order discovery for the purposes of taxation if the circumstances warrant such an order. Further, if the Judicial Registrar did not have power to order discovery in the categories sought by the applicants under r 20.15, I consider that the Judicial Registrar would have had power to order the production of documents in those categories under r 40.28(c). For the purposes of this review, the decision of the Judicial Registrar not to order discovery under r 20.15 can also be treated as a decision not to order production of documents under r 40.28(c).

Form of the bills of costs

The applicants submitted, and I accept, that the bills of costs filed by Stennson in each proceeding were not in accordance with Form 127 and, accordingly, did not comply with the requirements of r 40.18. Specifically, the bills of costs did not contain Parts A, B and C as required by Form 127, and only contained Part D.
Stennson was not able to explain why the bills of costs were not in the prescribed form. It submitted, however, that the practical effect of the non-compliance was less than submitted by the applicants and that the non-compliance was largely cured by Mr Cain's affidavits made on 20 August 2024 in both proceedings which were read at the taxation hearing.
Comparing the bills of costs with Form 127 and the requirements of r 40.18, it is apparent that the bills of costs were deficient in the following respects.
First, the bills of costs did not contain a lawyer's certification, as required by para 3(a) of Part A of Form 127, that the "costs applicant is not claiming more than the costs applicant is liable to pay for costs and disbursements". However, the bills of costs did contain a certification, made by Mr Cain, equivalent to para 3(b) of Part A that the "additions in the bill of costs are correct".
Second, the bills of costs did not contain a lawyer's certification, as required by para 4 of Part A of Form 127, that "[t]he amounts claimed in the bill are capable of further verification through source material (such as file records, tax invoices and receipts for payment) should such material be required by the Court to be produced".
Although the bills of costs did not contain Part B in the form required by Form 127, the bills did contain the information required by Part B, being the hourly rates charged by solicitors and counsel. The bills disclosed that Mr Cain was the only solicitor who provided legal services and that he charged at $700 per hour plus GST in both proceedings. It can also be ascertained from the bills that counsel charged at $5,000 per day and $500 per hour (plus GST) in the principal proceeding and at $5,800 per day (plus GST) in the appeal proceeding.
Although the bills of costs did not contain Part C in the form required by Form 127, no issue was raised with respect to that omission.
Apart from the foregoing, the bills of costs contained particulars of the work done, the costs claimed and the disbursements incurred and had attached to them a copy of the receipt for each disbursement.
I accept Stennson's submission that the failure to include in the bills of costs a lawyer's certification in the form required by para 3(a) of Part A of Form 127 was, in a practical sense, cured by Mr Cain's affidavits dated 20 August 2024. As noted earlier, Mr Cain deposed that the solicitor-client legal costs rendered by KCL Law and/or Counsel to Stennson in each of the principal proceeding and the appeal proceeding exceeded the legal costs sought on a party/party basis in the taxation by Stennson.
I also accept Stennson's submission that the failure to include in the bills of costs a lawyer's certification in the form required by para 4 of Part A of Form 127 was, in a practical sense, cured at the taxation hearing. The Judicial Registrar informed Mr Natch, who appeared on behalf of the applicants, that he was entitled to call for production of any document from the solicitor's file relevant to an objection to the bills of costs. As noted earlier, a copy of the solicitor's file was available at the taxation hearing on the second day for inspection of documents if required.
It follows from the foregoing that I do not consider that the defects in the bills of costs that were filed in the proceedings have any material bearing on the determination of the discovery application.

Category 1

By category 1, the applicants sought discovery of all documents in the files maintained by the solicitors for Stennson in respect of the principal proceeding and the appeal proceeding. At the review hearing, this category was not strongly pressed by Ms Alampi who properly conceded that such an order is not usually required or made in the context of a taxation.
In my view, the applicants have not established a sufficient basis for discovery to be given in this category. In his written submissions, Mr Natch advanced two reasons for the request for discovery.
The first reason is that the applicants are self-represented and they require discovery of the solicitor's files in order to make "informed objections to the bill of costs". I do not accept that submission. Discovery of the solicitor's file is not required to make objections. Further and in any event, at the time of the review hearing the applicants were no longer self-represented. This argument was not advanced by Ms Alampi.
The second reason is that the applicants are "distrustful of the costs sums presented by the Respondent because of earlier communications received from the Respondent's solicitor to attempt to reach a settlement". Mr Natch's submissions made reference to without prejudice communications between the parties. At the review hearing, Stennson waived privilege in certain communications, while privilege was maintained in others. In so far as the settlement discussions were admitted into evidence (after Stennson waived privilege), the documents revealed that, in the course of settlement discussions, Stennson's solicitors provided the applicants with an estimate of the likely party-party costs of both proceedings. Ultimately, the bills of costs filed on the taxation were for a lesser sum. In my view, those circumstances do not provide a reasonable basis for the applicants' distrust of the bills of costs, nor provide a basis for an order for discovery. There is no reason to doubt that the estimate provided by Stennson's solicitors was an estimate made in good faith, but that the process of preparing a bill of costs under the FC Rules generated a lower costs amount.
I therefore reject the application for discovery in category 1.

Categories 2, 3 and 4

By categories 2, 3 and 4, the applicants seek discovery of a range of documents which they say are relevant to the question whether the costs being sought by Stennson on its bills of costs breached the indemnity principle.
An order for costs against an unsuccessful litigant aims to provide the successful party with some level of indemnity for the legal costs the successful party would not have incurred had it not been necessary to uphold his or her rights in court: Cachia v Hanes (1994) 179 CLR 403 at 410 (Mason CJ, Brennan, Deane, Dawson and McHugh JJ); Harold v Smith (1860) 157 ER 1229 at 1231 (Branwell B); G E Dal Pont, Law of Costs (5th ed, 2021) at [7.5]. Such a costs order does not entitle the successful party to recover more than they have paid or are liable to pay to their own lawyer, and this forms the basis of the indemnity principle - that a party ordered to pay any other party's costs is obliged to pay only those costs which the other party is legally obliged to pay to their lawyers: General of Berne Insurance Co v Jardine Reinsurance Management Ltd [1998] 2 All ER 301 at 308 (May LJ) and 312 (Sir Brian Neill), see also Mainieri v Cirillo (2014) 47 VR 127 at [43]; Mango Boulevard at [4].
Mr Natch submitted that he was concerned about the indemnity principle and, specifically, he was concerned that third parties may have paid some or all of Stennson's legal costs in circumstances which may constitute a breach of the indemnity principle.
In Frigger (No 13), Colvin J concluded (at [40]) that the question whether the indemnity principle had been complied with is a question that can be raised in the course of taxation and determined by a Registrar as taxing officer. His Honour also explained (at [41]) the process that should be followed if a party seeks to raise a question about compliance with the indemnity principle: It seems to me that the following would apply to the taxation to be conducted by the registrar: (1) It is reasonable to expect that a party who seeks the exercise of the powers conferred by r 40.28 to obtain further information on the basis that it is relevant to whether the indemnity principle has been met will first make a request for that information of the relevant party and then request a conference before any scheduled date for taxation to consider whether any of those powers should be exercised. (2) It may be appropriate for a party who has not taken the steps described in (1) before the scheduled date for taxation to be refused any request for the exercise of the powers conferred by r 40.28. (3) It is also reasonable to expect that a party who claims that the indemnity principle has not been met to give notice of the claim and the basis for the claim before any scheduled date for taxation (irrespective of whether the party also seeks the exercise of the powers conferred by r 40.28). (4) It may be appropriate for a party who has not taken the steps described in (3) before the scheduled date for taxation to be refused the opportunity to raise any such claim at the taxation. (5) It is appropriate for a registrar to approach the conduct of the taxation (and the question whether any of the powers conferred by r 40.28 to provide further information should be exercised) on the basis that a lawyer has a professional obligation to confine any claim to costs pursuant to a costs order to those costs in respect of which the lawyer has a proper basis to conclude that the party claiming the costs has incurred a liability to meet those costs. (6) Therefore, a party who seeks to raise such an issue must bring forth material that is sufficient to persuade the registrar taking account of the matters in (5) that there is a proper basis, as part of the assessment, to inquire into whether there is a liability on the part of the party claiming the costs to meet some or all of the costs claimed (noting the flexibility of the indemnity principle).
Further to point (6) in the above passage, the existence of a contract of retainer and the liability of the client for the solicitor's costs will be presumed, and the party who challenges the existence of the retainer in such circumstances bears the onus of establishing the absence of it: Shaw v Yarranova [2011] VSCA 55 (Shaw) (Redlich and Mandie JJA) at [19], see also Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 at 507-508 (Younger LJ). Circumstances must be placed before the taxing officer which give reason to order production of the documents sought. As was stated in Shaw (at [26]): … where an application is made … that the party in whose favour a costs order has been made produce documents asserted to be relevant to the application of the indemnity principle, the applicant must identify a legitimate forensic purpose for which access is sought, and establish that it is 'on the cards' that the documents will materially assist his case. There will be no legitimate forensic purpose if, 'all the party is doing is trying to get hold of the documents to see whether they may assist him in his case.' The court must both be satisfied that the documents are relevant to an issue and that there is something in the material then before the court that makes it appear likely that the documents will materially assist the applicant.
The material must be sufficient to raise the likelihood that the party/party costs may have exceeded the successful party's actual liability to its lawyers: there must be evidence that renders it likely that the indemnity principle has either in whole or part been displaced: Shaw at [28].
The question that arises on this application is whether the basis for the applicants' suspicion that the costs being sought by Stennson on its bills of costs breached the indemnity principle is sufficient to require discovery in categories 2, 3 and 4. In the absence of a sufficient basis for such a suspicion, discovery would be a mere fishing expedition which the Court would not indulge.
The applicants identified three bases for their suspicion.
First, Stennson had filed a cross-claim in the principal proceeding against the other respondents seeking indemnification, contribution or apportionment for any damages that Stennson may be liable to pay to the applicants in the proceeding. In the cross-claim, Stennson claimed indemnification, contribution or apportionment on a number of bases including:
indemnification under the terms of a building contract entered into with the second respondent (in respect of the building works which gave rise to the principal proceeding);
indemnification under the terms of a contract to provide building surveying services entered into with the third respondent (again, in respect of the building works which gave rise to the principal proceeding);
contribution under ss 23B and 24 of the Wrongs Act 1958 (Vic) (Wrongs Act); and
apportionment under s 87CB(1) of the Competition and Consumer Act 2010 (Cth) and Part IVAA of the Wrongs Act.
The applicants' argument is that the cross-claim affords evidence that the other respondents may be required to indemnify Stennson for its legal costs incurred in the proceeding. The argument is misconceived. The indemnity sought by the cross-claim is in respect of any liability that Stennson incurred to the applicants. Stennson did not claim an indemnity for its legal costs in circumstances where it has no liability to the applicants. The matters referred to in the cross-claim provide no foundation for the discovery sought.
The second basis advanced by the applicants was the order made by Anastassiou J on 27 October 2021 dismissing Stennson's cross-claim, which was as follows: The First Respondent's cross-claim against the Second, Third and Fourth Respondents dated 8 July 2021 is dismissed.
The applicants submitted that the dismissal of the cross-claim suggests that there may have been a settlement agreement entered into between Stennson and the other respondents, and that agreement may have contained an indemnity in respect of Stennson's legal costs.
I reject the submission. As stated by O'Callaghan J in the appeal judgment (at [12]), the applicants discontinued the proceedings against Stennson to give effect to the terms of a compromise between the applicants and the other respondents. As the proceeding was discontinued against Stennson, it followed that Stennson's cross-claim against the other respondents would be dismissed, as the cross-claim sought indemnification, contribution or apportionment in respect of Stennson's liability to the applicants. The order made by Anastassiou J to that effect provides no basis for a suspicion that the other respondents agreed to indemnify Stennson for its legal costs.
The third basis advanced by the applicants was the failure by Stennson's solicitor to certify in the bills of costs, in accordance with para 3(a) of Part A of Form 127, that Stennson is not claiming more than it is liable to pay for costs and disbursements. This issue has been addressed above. The failure to include the certification was, in practical terms, remedied by Mr Cain's affidavits of 20 August 2024 filed (and read) in both proceeding in which he deposed that the solicitor-client legal costs rendered by KCL Law and/or counsel to Stennson in both proceedings:
exceed the legal costs sought on a party/party basis in the taxation by Stennson; and
have been paid in full by Stennson.
In my view, none of the matters to which the applicants adverted provides a sufficient foundation for a suspicion that the costs being sought by Stennson on its bills of costs breached the indemnity principle. It follows that the application for discovery in categories 2, 3 and 4 is rejected.

Conclusion and costs

For the reasons given above, the applications filed in the principal proceeding and the appeal proceeding seeking a review of the Judicial Registrar's decision to dismiss the discovery application are dismissed.
As the applicants were unsuccessful on their review applications, they should pay Stennson's costs of those applications. To avoid the prospect of further disputation on taxation, I propose to order that the costs be awarded in a lump sum. Timetabling orders will be made for Stennson to file evidence and submissions with respect to the costs incurred and the amount sought on a party/party basis by way of lump sum, and for the applicants to file submissions in reply. I will then determine the quantum of costs payable by the applicants on the papers.
I will also make timetabling orders to hear and determine the applications filed in the principal proceeding and the appeal proceeding seeking a review of the Judicial Registrar's taxation decisions pursuant to r 40.34 of the FC Rules. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.

Supreme Court (General Civil Procedure) Rules 2015(Vic)rr 29.07, 63.35

Federal Court Rules 2011(Cth)rr 3.11, 20.15, 40.17, 40.18, 40.20, 40.21, 40.25, 40.26, 40.28, 40.34, 40.35, Sched

Federal Court of Australia Act 1976(Cth)ss 35A(1)(h), 35A(5)

3 February 2025 In paragraph 29, the final sentence has been deleted and replaced with "Further, in Frigger v Banning (No 13) [2023] FCA 923 (Frigger (No 13)), Colvin J concluded that a Registrar conducting a taxation has the authority to determine whether the indemnity principle is satisfied and, for that purpose, may exercise the powers conferred by r 40.28 (at [20] and [41])."

At a glance

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