Wenkart v Pantzer

Solicitor for the First Respondent/ Cross-Claimant: Bartier Perry

Solicitor for the Second Respondents/ Second Cross-Respondent: Mr Pembroke-Birss of S Moran & Co, Solicitors

IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 7051 of 2002

AND: WARREN PANTZER AS FORMER TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART

HAPDAY HOLDINGS PTY LTD (ACN 001 185 253), MACQUARIE HEALTH CORPORATION LIMITED (ACN 003 531 860) AND THROVENA PTY LIMITED (ACN 001 738 763)

BETWEEN: WARREN PANTZER AS FORMER TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART

JUDGE: FLICK J DATE OF ORDER: 17 DECEMBER 2010 WHERE MADE: SYDNEY

1. The Notice of Motion as filed by Mr Pantzer on 23 November 2010 is dismissed. 2. The Notice of Motion as filed by Dr Wenkart on 23 November 2010 is dismissed. 3. The proceeding is stood over to 24 December 2010 at 9.30 am with a view to then making orders to finalise this proceeding. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 7051 of 2002

AND: WARREN PANTZER AS FORMER TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART

HAPDAY HOLDINGS PTY LTD (ACN 001 185 253), MACQUARIE HEALTH CORPORATION LIMITED (ACN 003 531 860) AND THROVENA PTY LIMITED (ACN 001 738 763)

BETWEEN: WARREN PANTZER AS FORMER TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART

JUDGE: FLICK J DATE: 17 DECEMBER 2010 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The background facts relevant to this long-running proceeding have been previously recounted: Wenkart v Pantzer (No 8) [2004] FCA 280 at [2] to [37] per Lindgren J; In the matter of Thomas Richard Wenkart, Wenkart v Pantzer [2007] FCA 1589 at [1] to [35] per Branson J; Wenkart v Pantzer [2009] FCA 1086 at [1] to [10]. They need not now be repeated. 2 Presently before the Court are two Notices of Motion both filed in Court on 23 November 2010 and heard instanter. 3 One Motion is that filed by Mr Pantzer seeking an order for costs in several proceedings (including that which is presently before the Court) to be paid in a gross sum of $472,077.38 pursuant to Order 62 r 4(2)(c) of the Federal Court Rules; the other is a Motion filed by Dr Wenkart seeking an order that Mr Pantzer pay his costs up to and including 29 May 2009 or, alternatively, an order that Mr Pantzer pay costs up to and including 10 January 2005. The precise amount claimed by Mr Pantzer was later revised. 4 These Motions now need to be resolved in order to resolve the one matter left unresolved by Wenkart v Pantzer (No 2) [2010] FCA 1408. 5 Of present concern is the conclusion previously reached that Dr Wenkart should be ordered to pay 90% of the costs of Mr Pantzer: Wenkart v Pantzer [2010] FCA 866 at [142] and [155], 269 ALR 641 at 671 and 672. That judgment: (i) left unstated (or so it was contended) whether such costs should be taxed on a solicitor/client basis or on a party/party basis; and (ii) left open for future resolution the appropriateness of making an order pursuant to Order 62 r 4(2)(c). 6 It is concluded that costs are to be taxed on the usual party/party basis and that it is not possible to make an order for costs in a "gross sum". It is also concluded that Dr Wenkart's Motion is to be dismissed.

Costs - Party/Party or Solicitor/Client? 7 Rejected is a submission advanced on behalf of Mr Pantzer that he should recover 90% of his costs taxed on a solicitor/client basis. 8 That submission was apparently founded upon a statement previously made that the "sole function now being discharged is to attempt to bring together the various conclusions reached by others and to make orders to give effect to those conclusions": [2010] FCA 866 at [115]. That statement was made after setting forth observations made by Branson J in Wenkart v Pantzer [2007] FCA 1589 where Her Honour had also said: [47] In the taxation judgment at first instance I placed weight on the nature of certain costs orders against Dr Wenkart sought and obtained by Mr Pantzer in this Court. Order 62 r 4(1) of the Federal Court Rules provides that, subject to that Order, where under any order of the Court costs are to be paid to any person, that person is entitled to his costs to be taxed. Costs "to be taxed" in the context of O 62 r 4 means costs taxed in accordance with O 62 (O 62 r 1). Unless the order for costs provides otherwise that will ordinarily mean costs on a party/party basis. By contrast, costs recoverable under the Act are recoverable on a solicitor/client basis. In a bankruptcy proceeding the usual costs order is that the successful party's costs "be taxed and paid in accordance with the Act". Nonetheless, the Court has a wide discretion as to the appropriate costs orders to be made even in a bankruptcy proceeding (Labocus Precious Metals Pty Ltd v Thomas [2007] FCA 1154 at [87]). In a particular bankruptcy proceeding the Court might, for example, prove willing to allow a trustee his or her legal costs to be taxed under the Federal Court Rules on a party/party basis but not his or her costs paid in accordance with the Act. This observation, it may be noted, was not expressly extracted in the August 2010 judgment. 9 The foundation for the submission advanced on behalf of Mr Pantzer, with respect, is misplaced. A statement as to the function sought to be discharged says nothing as to the basis upon which a final order for costs should be made. 10 Moreover, it is not considered that the August 2010 judgment left the question as to the basis upon which costs were to be recoverable in any doubt. After assessing the percentage of costs that should be recovered at 90% it was there further concluded: [152] In assessing that percentage, consideration has been given to whether any separate order should be made for costs on an indemnity basis for any part or parts of the proceeding. Ultimately it is not considered that any such order should be made. The 90% assessment is a fair and proper accommodation of all of the competing considerations relevant to the exercise of the discretion. It may well have been preferable to have further expressly stated that Mr Pantzer should be entitled to an order for the payment of 90% of his costs and that such costs were to be assessed and taxed on a party/party basis. But the intent was clear. No other basis was then either stated or contemplated. Such costs as should be paid are to be paid on what is sometimes referred to as the usual basis, namely costs taxed on a party/party basis.

Order 62 11 The principles relevant to the exercise of such powers as are conferred by Order 62 were not in issue - but those provisions and some of the relevant principles should be briefly noted. 12 Order 62 r 4 of the Federal Court Rules provides as follows: Taxed costs and other provisions (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 taxed 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 proceedings 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 or not an order that costs be paid to a person has previously been made or entered. The power, it may be noted, may be exercised "at any time" and may be exercised "whether or not an order that costs be paid to a person has previously been made or entered": see Eat Media Pty Ltd v Mulready Media Pty Ltd [2010] FCA 392, 267 ALR 573. 13 The purpose of the rule is to "avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation": Beach Petroleum NL v Johnson (1995) 57 FCR 119. There, von Doussa J made the following observations in respect to this rule: Pursuant to O 62, r 3(1) the Court may exercise its powers and discretions as to costs at any stage of the proceedings, or after the conclusion of the proceedings. In my opinion the Court has power to make a gross sum order at this stage notwithstanding that costs orders were earlier made which envisaged taxation in the ordinary way. … The purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation. The power is appropriate to be used in complex cases. 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, but the power must be exercised judicially and after giving the parties an adequate opportunity to make submissions on the matter … (1995) 57 FCR 119 at 120. His Honour later observed: I agree, however … that before exercising the power to fix a gross fee, the Court should be confident that the approach taken to estimate costs is logical, fair and reasonable. On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary "fail safe" discount on the cost estimates submitted to the Court: Leary v Leary at 76; 265. (1995) 57 FCR 119 at 123. See also: Sony Entertainment (Australia) Pty Ltd v Smith [2005] FCA 228 at [189], 215 ALR 788 at 812 per Jacobson J; Playcorp Group of Companies Pty Ltd v Peter Bodum A/S (No 2) [2010] FCA 455 at [1] to [8] per Middleton J. 14 In Seven Network Ltd v News Ltd [2007] FCA 2059, Sackville J has further usefully summarised the applicable principles as follows: PRINCIPLES [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: …. (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: … (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: … (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): … (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 Sch 2 provide assistance in fixing an appropriate gross sum: … [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. His Honour also went on to observe that "[c]are should be taken, however, to ensure that the process does not take on too many of the characteristics of a taxation of costs": [2007] FCA 2059 at [30]. 15 Reference should also be made to Order 62 r 46 which provides for the assessment procedures to be applied.

The DESIRABILITY of an Order 16 Leaving aside questions as to whether it is possible to make such an order given the state of the evidence, factors which would otherwise warrant the making of an order for costs in a "gross sum" in the present proceeding include: the desirability of bringing all issues dividing the parties in this long-running proceeding to a final conclusion; the desirability of avoiding what may be potentially a complex and protracted taxation process; and the desirability of avoiding what may well prove to be yet a further source of disagreement between these litigants and the seemingly inevitable incurring of further legal costs. 17 Notwithstanding the considerable desirability of making an order pursuant to Order 62 r 4(2)(c) and the "wide discretion" of the Court in making costs orders, it is regrettably concluded that there is not a sufficiently certain evidential basis upon which such an order could be made if costs are to be assessed on a party/party basis.

A Gross Sum? - The Evidence 18 Counsel on behalf of Dr Wenkart: opposed the making of an order for costs in a "gross sum"; and maintained that the state of the evidence relied upon by Mr Pantzer was such that even if an order were to be made it was not possible to properly assess the amount that should be ordered. 19 The order as initially sought by Mr Pantzer in his Motion that costs be fixed in a gross sum of $472,077.38 was supported by evidence of a Legal Costs Consultant, Mr Dickinson. Two affidavits of Mr Creais were also relied upon. The evidence relied upon by Dr Wenkart was two affidavits of Mr Gorczyca. 20 A number of objections were taken to the evidence of Mr Dickinson ranging from objections founded upon s 69(3) of the Evidence Act 1995 (Cth) through to objections founded upon the proposition that Mr Dickinson had expressed opinions without disclosing the basis upon which those conclusions had been reached. Those objections were noted and a decision as to the fate of those objections was reserved. There was little merit in resolving the objections in advance of any cross-examination as such cross-examination as thereafter took place was within a limited compass. The objections, it may be noted, were not without some merit. Objection was also taken to some parts of Mr Creais' affidavits and Mr Gorczyca's affidavits. But it is ultimately concluded that it is unnecessary to resolve any of the objections. 21 The quantum of the costs relevantly incurred by Mr Pantzer was varied from time to time but at one stage was said to be $600,399.24. The task entrusted to Mr Dickinson, and the task he discharged, was "to provide an opinion on the likely quantum of party party costs and disbursements recoverable by [Mr Pantzer] as against [Dr Wenkart], taxed on a solicitor client basis, for work performed from 22 October 2003 to the present". Adopting that approach, he maintained that the costs that would be recoverable would be $472,077.38. 22 Mr Dickinson expressed no opinion as to the quantum of costs that would be recoverable if costs were to be taxed on a party/party basis as opposed to costs recoverable if taxed on a solicitor/client basis. The difference between the two approaches was nevertheless briefly touched upon by Mr Dickinson in his first affidavit when he said: [23] The test to be applied on a solicitor client taxation is more generous than a taxation conducted on an ordinary party party basis, particularly as the costs are not constrained by the Federal Court scale of costs. … He continued on to refer expressly to the following observations of His Honour Justice Finkelstein in Australian Competition and Consumer Commission v Boral Ltd [2007] FCA 14: [12] More usually an order for costs to be taxed on a solicitor/client basis is understood to mean that the person should recover that which he ought properly pay to his solicitor: Goodwin v Storrar [1947] 1 KB 457 at 458. The purpose of the order is to allow "as many of the charges which [the party] would have been compelled to pay to his own solicitor for costs of the action as fair justice to the other party will permit": Smith v Smith [1906] VLR 78 at 80, citing from Daniels Chancery Practice. Oliver, Law of Costs (1960) p 1 states this is substantially "a party and party taxation on a more generous scale". In providing the opinion that he did, Mr Dickinson set forth the methodology he pursued, including the need to apply "a global percentage reduction to the profit costs and disbursements to reflect a party party taxation determined on a solicitor client basis". 23 But the absence of evidence as to the amount that would in all likelihood be recoverable if costs were taxed on a party/party basis makes it difficult to assess the amount of any order fixing costs in a "gross sum". 24 Based upon his experience, Mr Gorczyca, the solicitor for Dr Wenkart, maintained that "the percentage of legal costs allowed to a receiving party … when payable on a party/party basis is approximately 50% to 80% of those costs". If costs are payable upon an indemnity basis, he said that the percentage allowed to a receiving party was approximately 80%. A separate review undertaken by Mr Gorczyca of costs claimed from 5 March 2002 until 13 April 2003 disclosed that the costs claimed were $29,556.50. The amount assessed for these costs was about 80% of the amount claimed. 25 The amount of $472,077.38, it may be noted, is about 78% of the total costs of $600,399.24. 26 Leaving aside such adjustments as may emerge by reason of differences in recovery (for example) of profit costs as opposed to disbursements, it would be tempting to fix a "gross sum" of costs that may be recoverable by Mr Pantzer as a percentage (for example) of 70%. But whether that percentage would be any more reliable than 60% or 80% would be open to question. All that could be said is that a percentage so fixed would be a percentage within the range of costs envisaged by Mr Gorczyca and may be less "generous" than the figure assessed by Mr Dickinson. 27 Given the amount initially claimed of $600,399.24 (which was later revised to be $559,618.32), it is stating the obvious to acknowledge that any one percentage figure rather than another has significant cost implications. If 60% of the initial amount was the appropriate percentage, the sum would be about $360,240; if the percentage was 70%, the sum would be about $420,280. 28 Although the power conferred by Order 62 r 4(2)(c) may be particularly suited to complex litigation (cf Sony Entertainment (Australia) Ltd v Smith), in the present proceeding the difficulty of attempting any assessment, without the benefit of more focussed evidence, is peculiarly exacerbated by the course which the proceeding has taken over the best part of this last decade. For the Court to fix any percentage would have the potential to cause injustice to Mr Pantzer by fixing a "fail safe" discount and may also occasion prejudice to Dr Wenkart by over-estimating the costs that may be recoverable: Beach Petroleum NL v Johnson. 29 It is regrettably concluded that any inclination for the Court itself to fix the percentage of costs that may be recoverable if taxed on a party/party basis would be an uncertain process guided by only the most generally expressed opinions as to costs that may be recoverable. The fact that a number of requests were made for such evidence to be adduced on behalf of Mr Pantzer highlights why the Court should now proceed cautiously. Leave was given when Mr Dickinson was called to adduce supplementary oral evidence. But no such evidence was forthcoming. In the absence of Mr Dickinson venturing into a process of quantifying costs recoverable if taxed on a party/party basis, it would be unwise for the Court to attempt to do so. 30 Notwithstanding the breadth of the discretion conferred upon the Court when fixing costs in a "gross sum" pursuant to Order 62 r 4(2)(c) and the desirability of doing so in the present proceeding, it is concluded that there is an absence of a sufficiently certain evidential basis to assess those costs in any particular amount.

Conclusions 31 The Notice of Motion as filed on behalf of Mr Pantzer seeking an order for costs in a fixed sum is to be dismissed. 32 There is no merit in the Notice of Motion as filed on behalf of Dr Wenkart. It had previously been decided that Mr Pantzer was to have 90% of his costs. The Motion sought to re-agitate that conclusion. But the filing of the Motion preserved the position of Dr Wenkart should there be an appeal. 33 The matter of substance before the Court was the order sought by Mr Pantzer that costs be fixed in a "gross sum." He has been unsuccessful. But there should be no order for costs either in favour of Mr Pantzer or Dr Wenkart with respect to the matters canvassed on 28 October, 18 November or 23 November 2010. Although Mr Pantzer was substantially successful in the matters dealt with in the judgment delivered yesterday (Wenkart v Pantzer (No 2) [2010] FCA 1408), he has been unsuccessful in now obtaining costs fixed in a "gross sum". There should be no order as to costs in respect to the issues canvassed on these dates. 34 Other than the order now made dismissing these two Motions, the order that should now be made to give effect to the issues as to costs resolved in Wenkart v Pantzer [2010] FCA 866 is that Mr Pantzer should have an order for costs in his favour in the present proceeding, those costs to be 90% of the costs incurred as taxed on a party/party basis. Had an order been made pursuant to Order 62 r 4(2)(c), it may have been appropriate to consider whether any such order should also embrace any orders as to costs previously made, including (if possible) costs orders in the other proceedings referred to in his Notice of Motion filed on 23 November 2010. But such an order is not to be made. Existing orders as to costs are not to be varied. It should be noted that that Motion includes an incorrect reference to NSD 2549/2005 which should be NSD 2459/2005. 35 It should also be noted in respect to costs orders that should now be made that Hapday Holdings Pty Ltd ("Hapday Holdings") filed an Outline of Submissions on 27 October 2010 surprisingly seeking an order that Mr Pantzer pay Hapday Holdings' costs "on an indemnity basis, as agreed or taxed". No such order should be made. Nor should any order be made that Hapday Holdings or Macquarie Health Corporation Limited or Throvena Pty Limited (jointly referred to from time to time as the Second Respondents) be entitled to recover their costs, or that any costs order should be made against these entities. These entities should bear their own costs.

ORDERS 36 The Orders of the Court are: 1. The Notice of Motion as filed by Mr Pantzer on 23 November 2010 is dismissed. 2. The Notice of Motion as filed by Dr Wenkart on 23 November 2010 is dismissed. 3. The proceeding is stood over to 24 December 2010 at 9.30 am with a view to then making orders to finalise this proceeding. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.