Renet v Owner - Strata Plan SP22143

Should a costs order be made in the Strata Plan's favour? 8 The Court is conferred jurisdiction to order costs by s 43 of the Federal Court of Australia Act 1976 (Cth). The power is broad and the discretion so conferred informed by the ordinary practice of this Court that an unsuccessful party usually is required to the costs of the successful party on a party and party basis: Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 at 152 (per Black CJ) and 156-157 (per Cooper and Merkel JJ). Such a course is not departed from unless the justice of the particular case warrants departure. 9 Nothing in Mr Renet's submissions point to any basis upon which there would be a departure. Rather Mr Renet's submission repeats certain of the unsuccessful bases of his appeal including the costs he says he has incurred, set out at [5] above, none of which have any bearing on the appeal save for the $3,000 Mr Renet says are for an unspecified period "to 24/5/2023". 10 As a consequence, in my view a costs order should be made in the Strata Plan's favour.

On what basis should the costs order be made? 11 Turning to the Strata Plan's claim that the award of costs be on a more generous basis (an indemnity basis) than the usual order (on a party and party basis): Whilst the categories of occasions on which such orders may be made are not closed, they include, as identified in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (per Sheppard J) (cited with approval in Wills v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43 at [20]): 4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes at 141 said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require". Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at p 6) similar views in Ragata (supra). (Citations omitted.) 12 I note the bases upon which the Strata Plan claimed that its costs ought to be paid on an indemnity basis, set out at [3] of these reasons above. I accept the factual foundation is made out for each of those submissions, save for (h) (I do not think the Strata Plan's costs in defending the appeal could be described as "significant"). However, I am of the view, that the circumstances do not warrant the awarding of costs on an indemnity basis. 13 As observed by Gray J in Hamod v New South Wales [2002] FCA 424; 188 ALR 659 at [20], cited in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246; 151 ACSR 26 at [9], the awarding of indemnity costs is not designed to punish a party for persisting with a case that ultimately fails. Rather, the award serves the purpose of compensating a party fully for costs incurred, as a normal costs order would not be expected to do. The more generous calculation is applied because the Court is of the view that the party being required to pay the amount acted unreasonably and subjected the innocent party to the expenditure of costs. 14 However, courts are and should, generally speaking, be more reluctant to make orders for indemnity costs against self-represented litigants than against legally represented litigants: Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792 at [45], cited in Pekar v Holden (No 2) [2021] FCA 343 at [5].

Seeking an order in a specified sum 15 The Court has the power to make an order in a specified sum: s 43(3)(d) of the Act and r 40.02(b) of the Federal Court Rules 2011 (Cth). The purpose being to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120, citing Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261. In Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; 253 FCR 403 at [16]-[17], the Full Court held: 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]. (Emphasis added.) 16 The exercise of discretion is informed by the following principles identified by Sackville J in Seven Network Ltd v News Ltd [2007] FCA 2059 at [25]-[30]: 25 The authorities establish a number of principles applicable to a claim for a gross sum costs order to be made pursuant to FCR, O 62 r 4(2)(c): (i) The purpose of the subrule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum v Johnson (No 2), at 120, per von Doussa J, applying Leary v Leary [1987] 1 All ER 261; Harrison v Schipp (2002) 54 NSWLR 738, at 742 [21] per Giles JA. (ii) An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62: Beach Petroleum v Johnson (No 2), at 120, 124, per von Doussa J; Harrison v Schipp, at 743 [22], per Giles JA. (iii) The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed: Beach Petroleum v Johnson (No 2), at 123, per von Doussa J. (iv) Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the 'necessary or proper' test) and those stated in Stanley v Phillips (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause): Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1, at 4-5 [12]-[15], per O'Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J. (v) Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Schedule 2 provide assistance in fixing an appropriate gross sum: Charlick Trading Pty Ltd v ANRC, at [10], per Mansfield J. 26 The last point should be developed a little further. FCR, O 62 r 4(2)(c) authorises the Court to order that, instead of taxed costs, the successful party should be entitled to a gross sum costs order. The subrule contains no express direction that the Court is to apply the detailed criteria that are laid down in O 62 and Schedule 2. On the contrary, the subrule apparently leaves the question of quantification at large. 27 Rule 4(2)(c) is, however, located within an Order that makes detailed provision for the assessment of party and party costs. It would be extremely odd if the more expeditious procedure contemplated by r 4(2)(c) resulted in either a successful or an unsuccessful party being exposed to an assessment of costs which simply ignores or overrides the basic principles applicable to a taxation of costs. I accept Mr Sheahan's submission that it would be an error for a Court to use its power under r 4(2)(c) to assess a gross sum clearly higher than that which would be allowed on a taxation of costs. 28 On the other hand, it must be borne in mind that r 4(2)(c) establishes a procedure that applies instead of taxed costs. As the cases have stressed, the object of the procedure is to avoid the expense, delay and aggravation that would be involved in a taxation of costs, especially in a lengthy and complex case such as this. The procedure is intended to replace the potentially elaborate process contemplated by O 62 and Schedule 2, whereby a taxing officer meticulously analyses a specially prepared bill of costs by reference to individual items, some of which have distinctly Dickensian overtones. 29 It is necessary for the Court to have sufficient information to enable it to make a logical, fair and reasonable estimate. In this respect, as the parties agreed, Telstra bears the onus of establishing that its claim to a gross sum satisfies the applicable test. In practice, this may involve the parties adducing evidence from expert costs assessors addressing whether the costs claimed by the successful party were 'necessary or proper for the attainment of justice or for maintaining or defending the rights of a party' (O 62 r 19) or, in more general terms, whether the amounts sought would have been recoverable on a taxation of costs. 30 Care should be taken, however, to ensure that the process does not take on too many of the characteristics of a taxation of costs. There is a danger, perhaps reflected to a limited extent in some of the evidence adduced on this application, that the parties will descend too far into the minutiae of the rules governing a taxation and will spend disproportionate time analysing the application of specific items in Schedule 2 to the costs claimed by the successful party. The process should direct attention primarily to issues of principle that explain the differences in the positions taken by each party in relation to the assessment of recoverable costs. For the most part, the reports and oral evidence of the experts in this matter concentrated on the more general issues. (Emphasis in original.) 17 Relevantly, the taxing officer is obliged to disallow costs that, in his or her opinion, have been incurred or increased, relevantly, unreasonably or through overcaution or by other unnecessary expense: r 40.30(b) of the Rules. 18 Mr Renet made no submission opposing the awarding of a lump sum costs order. Even if this is not the case, I am satisfied that this is an appropriate case for the payment of costs in a specified sum.

The quantum claimed 19 The Strata Plan sought an order that the sum of $6,228.45 be paid by Mr Renet. It relied upon the affidavit of Mr Anastasios Nicolaidis, affirmed on 21 June 2023, a solicitor at Baker, Deane and Nutt Lawyers. The affidavit contains a table of itemised amounts, including the person who performed the task, their experience and their charge out rate. It sets out the basis upon which the lump sum was calculated in accordance with the Federal Court Scale. 20 Mr Nicolaidis stated that the lump sum sought had been "calculated in accordance with the Federal Court Scale", referring to Sch 3 to the Rules. It appeared to me that this summary contained four inaccurate or inadequate entries. 21 First, a cost of $53 was applied to the entry "Peruse email from registry" dated 10 May 2023, though the applicable rate for reading correspondence up to 100 words is $40 (under Item 3.3). Mr Nicolaidis appeared to have used the rate applicable to the preparation of documents, rather than the rate applicable to reading documents. 22 Secondly, a cost of $53 was applied to the entry "Peruse email from Court" dated 11 May 2023, though the applicable rate for reading correspondence up to 100 words is $40 (under Item 3.3). Mr Nicolaidis appeared to have used the rate applicable to the preparation of documents, rather than the rate applicable to reading documents. 23 Thirdly, a cost of $880 (representing two hours at Mr Nicolaidis' ordinary rate of $440 per hour, or $44 per six minute unit) was applied to the entry "Compile Court brief and authorities bundles" dated 26 May 2023, where the applicable rate for the collation of documents for the purposes of court eBooks and eBooks of authorities is $12 per six minute unit (under Item 8.1, read together with Item 1.3). The appropriate amount for this entry is $240. 24 Fourthly, Mr Nicolaidis adopted two distinct approaches to the application of Item 2.1. The Costs Scale provides that parties can recover $65 "for each 100 words" for the cost of preparing documents that fall under this item. The first approach was to charge under Item 2.1 in 100 word blocks so that, as soon as the word count of a document exceeded 100 words, the Strata Plan was entitled to recover in respect of the next 100 word block. This approach is similar to how solicitors typically charge for time in six minute blocks, with the next block being moved into once the first is exceeded. This approach was used for the following entries: (i) The entry "Email to M Renet complying with Order 2 on 15/03/23" dated 16 March 2023, for which $130 was charged in respect of a 133 word email. (ii) The entry "Email to Owners update on appeal" dated 16 March 2023, for which $130 was charged in respect of a 156 word email. (iii) The entry "Draw affidavit, engross and affirm" dated 17 March 2023, for which $65 was charged in respect of a document that appeared to have been less than 100 words, according to Mr Nicolaidis' notation that it was "[u]p to 100 words". (iv) The entry "Email to Owners regarding appeal proceedings" dated 22 May 2023, for which $130 was charged in respect of a 198 word email. 25 The second approach was to calculate the amount by dividing the amount applicable to a 100 word block by 100 to arrive at a per word amount, which was multiplied by the number of words written. This approach was used in one entry only, "Draw submissions (1473 words)" dated 25 May 2023, for which $957.45 was charged. 26 I am satisfied that neither of these was the correct approach. Instead of charging on the basis that the party is entitled to the full amount once any part of a 100 word block is met, the correct approach is that a party is entitled to charge for a 100 word block only once that same block has been reached or exceeded in word count. I am of this view because, as a matter of construction, if it had been intended for the rule to allow for costs incurred for part of 100 words, it would be have been easy to draft the rule to include a phrase such as "or part of 100 words" or "or part thereof". The Scale prescribes generally, in a bilateral way, the method for assessing costs either by units of time or number of words. The use of the phrase "for each 100 words" (in Item 2.1) appears to be deliberate and may be contrasted with "up to 50 words" for correspondence in Item 2.2, "up to 100 words" in Item 2.3 or "over 100 words" for correspondence in Item 2.4. The effect of this construction is that, if a document is over 100 words but under 200 words in length, the party claiming costs is only entitled to $65 (being the amount chargeable for each 100 words). If a document is under 100 words, it does not appear to be covered by the Scale but allowance may be given for it under the discretion in Item 19.1. I have given such an allowance for the entry described above at [24(iii)]. 27 Cumulatively, the Strata Plan sought $1,412.45 in relation to the Item 2.1 entries discussed at [24] to [26]. Applying the approach I have outlined above, it should have sought $1,170. 28 In addition to these inaccurate or inadequate entries, I identified one inconsistency in the costs claimed. A cost of $80 was applied to the entry "Peruse transcript of proceedings" dated 5 April 2023 for a time spent of 10 minutes, even though Mr Nicolaidis's ordinary rate was specified as being $440 per hour (a 10 minute entry, at that rate, would result in costs of $88). The GST for this entry also appeared to have been calculated incorrectly but, noting that the $80 amount appeared in a column with the heading "COSTS INCL GST", that has no impact on the final amount. Where the Strata Plan has claimed a lower amount than they are entitled to under the Scale or their solicitors' ordinary rates, I have adopted the lower sum. 29 The costs amounts sought will be reduced as consequence of these reasons. While the Strata Plan sought $6,228.45, I am satisfied that this amount (before any discounts to account for what is "fair and reasonable") should properly be $5,320, being a reduction of $908.45 from the amount actually sought. This reduction reflects the difference between the proper amounts under the Costs Scale and those sought by the Strata Plan pursuant to the inaccurate or inadequate entries outlined at [21] to [27]. 30 In addition, when determining what is "fair and reasonable" I have given consideration to whether there should be a global reduction in the claimed itemised costs which were time based. There were 15 entries which fell within this category and they comprised $3,785 of the total $5,320. A review of the time attributed to each event appeared largely fair and reasonable. For example, a period of 15 minutes was attributed to the review of Mr Renet's affidavit. The Strata Plan claimed no costs for the preparation for the hearing save for 2 hours compiling the Court brief and the authorities. Accordingly, I will impose a discount of only 20% on the 15 entries which fell within this category. After the 20% discount is applied to the amount of $3,785, the ultimate amount applicable to time-based costs is $3,028. 31 The remaining amount for items in the Scale that are not time-based is $1,535. 32 As a consequence of these findings, the Strata Plan, is entitled, when applying the scale, to claim $4,563 and not $6,228.45.

Conclusion 33 For these reasons, given Mr Renet failed to make out his grounds of appeal, the ordinary costs order should be made that Mr Renet pay the Strata Plan's costs of the appeal in the sum of $4,563. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Raper.