Westpac Life Insurance Services Ltd v Estate of the Late Graham Brian Ugle

Federal Court of Australia|2019-09-03|Before: Thawley J

The applicant's costs payable in accordance with order 3 of the orders made on 8 August 2019 be fixed in the lump sum amount of $4,425.
By way of direction made nunc pro tunc under regulation 2.03(1) of the Federal Court and Federal Circuit Court Regulation 2012 (Cth), no filing fee is payable by the applicant in respect of the Originating Application.
The matter be referred to a Registrar of this Court for any consequential administrative action arising out of order 2 herein.
On or before 20 September 2019, the applicant file an affidavit setting out the steps taken under orders 5, 6 and 7 of the orders made on 8 August 2019 and the result of those steps being taken.
Reserve liberty to the applicant to apply in relation to order 2 herein. THE COURT NOTES THAT:
By reason of order 2 herein, and in accordance with regulation 2.19 of the Federal Court and Federal Circuit Court Regulation 2012 (Cth), the applicant is entitled to a refund of the filing fee of $4,100 paid in relation to this proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background 6 Certain aspects of the relevant background were explained in Ugle No 1: [2] On or about 11 March 2003, the applicant issued to Mr Graham Ugle a policy of insurance bearing the number DM169617 with a commencement date of 5 March 2003 (Policy). Under the Policy, Mr Ugle was entitled to a lump sum benefit in the sum of $50,000 if (relevantly) he died in an accident. Mr Ugle was both the life insured and the policy owner under the Policy. [3] On or about 22 December 2004, the applicant received written notice of Mr Ugle's death. The applicant conducted various investigations which indicated to its satisfaction that Mr Ugle died by accidental drowning. The applicant accepts that it is liable to pay a death benefit to the Estate of Mr Ugle under the Policy. The amount of the death benefit payable as at 25 July 2019 was $51,500 (the death benefit). [4] The applicant has also determined that Mr Ugle did not leave a valid will. The applicant understands that Mr Ugle's next-of-kin are his siblings. Mr Ugle had no wife, de facto partner or children. The affidavit sworn by Mr Parsons reveals that, in the course of seeking to pay the death benefit, a lady (Ms Pickett) claimed to be the only child of Mr Ugle. However, Nicholson Celement Barristers & Solicitors wrote a letter to the applicant enclosing a signed note from Ms Pickett acknowledging that she was not in fact the daughter of Mr Ugle. Nicholson Clement acted for Ms Colleen Ugle, one of four sisters of the late Mr Ugle. Ms Colleen Ugle has advised that Mr Ugle had a total of four sisters and one brother. The applicant has not had any contact from Mr Ugle's other sisters or brother, nor - as I understand the position - attempted contact with them. [5] In its Concise Statement, the applicant states: Despite requests by the applicant starting in March 2006, Colleen Ugle has not (to the applicant's knowledge) applied for or obtained Letters of Administration, and has not provided same to the applicant. On or about 22 January 2018 the applicant agreed to release an advance of the death benefit (in the amount of $1,000.00) payable to a solicitor nominated by Colleen Ugle to assist her in obtaining Letters of Administration. This advance was released to the solicitor on or about 4 July 2018. On or about 24 July 2018, the solicitor returned the advance, indicating that he had ceased acting for Colleen Ugle (for reasons he has not disclosed to the applicant). In light of the facts above, the applicant has formed the view that the only method by which it may obtain sufficient discharge of the benefit payable to Graham Ugle's Estate is to pay the money into Court. 7 As recorded in that extract, Mr Graham Ugle had four sisters and one brother. The deceased's sister, Ms Colleen Ugle, requested that the applicant advance an amount of $1,000 from the death benefit to enable her to obtain Letters of Administration. The applicant obliged. However, the amount was returned when Ms Ugle's solicitor ceased to act for her. Letters of Administration have not been obtained. 8 Ms Ugle has at various times between 2006 and 2019 received legal assistance from Nicholson Clement, the Citizens Advice Bureau (a not-for-profit organisation which provides low-cost legal advice and referral services to the community in Western Australia) and Peel Community Legal Service Inc (a community legal centre that prioritises people living on an income of under $50,000 per year with special interest in those on pensions and benefits). I infer that she faces some challenges, including limited financial resources. 9 The death benefit, although modest, might have significant benefit to those potentially entitled to a portion of it. I infer that it is likely that Mr Ugle's siblings have limited resources and limited access to legal advice. 10 The applicant confirmed on 8 August 2019 at the first case management hearing when the orders and declarations were made that it sought a fixed sum of $10,000 in costs. This estimate represented a reduction from the total set out in the applicant's summary of costs tendered on that day. The summary of costs was: (1) $6,526 in fees due and payable at 30 July 2019; (2) $4,100 filing fee for the Originating Application; and (3) $500 for the solicitor's appearance on the application. 11 The summary of costs was appropriately prepared, indicating briefly and concisely the work undertaken, the amount of time spent in respect of the identified tasks and the rates of each lawyer undertaking relevant work. This was sufficient to determine an appropriate amount for costs. To prepare something in the nature of a formal bill of costs would have been unnecessary and the expense which would have been involved in such an undertaking would have been a needless expense in a case of this nature. 12 I will deal separately with the costs and the disbursement comprised by the filing fee.

Costs in proceedings under s 215 of the Life Insurance Act 13 The Court has jurisdiction to award costs in all proceedings before the Court, other than proceedings in respect of which the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) or any other Act provides that costs must not be awarded: s 43(1) Federal Court Act. 14 Neither the Federal Court Act nor any other statutory provision prevents costs being awarded in respect of an application under s 215 of the Life Insurance Act. 15 The discretion to award costs is a "broad and ample power not to be read down otherwise than by judicial principle conformable with the amplitude of the power": Westpac Life Insurance Services Limited v Mahony (No 2) [2017] FCA 277 at [11] (Allsop CJ). 16 It has been said that the usual order in applications made under s 215(1) of the Life Insurance Act is that the insurer obtains its costs of its application from the funds in question: Swiss Re Life & Health Australia Ltd v Public Trustee of Queensland [2017] FCA 963 at [16] (Allsop CJ). Indeed, the Court made an order to that effect in this proceeding on 8 August 2019: Ugle No 1. 17 In determining costs, it is relevant to have regard to relationship between the amount of the costs claimed and the work involved in the application, on the one hand, and the size of the insurance benefit on the other - cf: Swiss Re at [18]. 18 In Swiss Re Life & Health Australia Ltd v Public Trustee of Queensland (No 2) [2017] FCA 1146, Allsop CJ stated at [3]: I have on earlier occasions articulated my concerns about the costs incurred by insurers in bringing applications under s 215: see Westpac Life Insurances Services Limited v Mahoney [2016] FCA 1017; MLC Limited v Crickitt (No 2) [2017] FCA 937. In both of those cases, I acknowledged that to a certain extent such an application can be considered an aspect of doing business as a life insurer and that one must appreciate that in many cases the sum of money paid into Court will be modest. However, it must also be recognised that an insurer is ultimately put in such a position through no fault of its own and so it is both fair and appropriate that an insurer have some indemnification for its reasonable costs: see Mahoney at [34]-[35]. 19 In a typical case, one would expect external lawyers to be retained after an insurer had reached the view, or at least the preliminary view, that the insurer might be unable to obtain a sufficient discharge unless the monies were paid into Court under s 215(1) of the Life Insurance Act. This position would ordinarily have been determined with the assistance of those with relevant expertise employed by the insurer and, in the case of an insurer such as the applicant, quite probably with the assistance of internal lawyers. This work is a part of the insurer's cost of business. It was, properly, not the subject of any claim for costs in the present case. 20 The context just mentioned is relevant to an assessment of the costs it would be reasonable to award an applicant insurer in respect of its legal costs, namely the costs charged by an external lawyer the insurer chose to instruct on the application. The insurer would ordinarily have done significant work in determining its position before instructing external lawyers, identifying the relevant critical events and documents and the reasons why it had taken the view or preliminary view that a sufficient discharge could not be obtained without making the application. The nature of the s 215 application might be such (as in the present case) where it would not be reasonable for an external lawyer to be instructed to engage in a complete review of a client's file in a manner which might commend itself, for example, in a piece of commercial litigation which is likely to be hotly contested. Many applications under s 215 of the Life Insurance Act raise quite confined questions and can be dealt with in a quick and efficient way. This particular application was one which was always likely to be uncontested and which, although unusual, was not factually or legally complex. I do not wish to suggest that those representing the applicant treated it otherwise. 21 Whilst it always depends on the particular case, it is also relevant to take into account that this Court encourages applications of this kind to be brought before the Court early and, to the extent appropriate, before significant legal costs are incurred, to promote the objective of the matter being disposed of in an expeditious and cost-efficient way. Again, I should not be taken as suggesting that those representing the applicant in the present case have done otherwise.

Lump sum costs orders 22 The Court may award costs in a specified sum: s 43(2) and (3) Federal Court Act. 23 In Hislop v Paltar Petroleum Limited (No 4) [2017] FCA 1632 at [7] and [8], Gleeson J observed: [7] Specification of a lump sum is not the result of a process of taxation or assessment of costs; the sum can only be fixed broadly having regard to the information before the Court; the approach taken to estimate costs must be logical, fair and reasonable: Harrison v Schipp [2002] NSWCA 313; (2002) 54 NSWLR 738 at [22]. The task is one of estimation or assessment and not of arithmetic: Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2014] FCA 346 at [17(e)]. The sum of costs fixed should be proportionate to the nature, including the complexity, of the case: Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506 at [23]. [8] The starting point for the fixing of costs is the charges rendered by Mr Hislop's solicitors. Then, there may be an "impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment": Bitek at [18], citing Hamod v New South Wales [2011] NSWCA 375 at [820]. However, the court must be "astute not to cause an injustice": Bitek at [23]. 24 If the Court were to embark upon a detailed examination of the kind that would be required on taxation or a formal costs assessment, that would defeat the purpose of making a lump sum costs order - cf: Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506 at [23]; Harrison v Schipp (2002) 54 NSWLR 738 at [21]-[22]; Hadid v Lenfest Communications Inc [2000] FCA 628 at [35].

Consideration 25 The legal costs of $7,026 (noting that only $5,900 was claimed) relate to charges for legal work performed by three legal practitioners (a solicitor, a special counsel and a partner). They can be broken down as follows: (1) reviewing the client's file and material relating to the application; (2) conducting research and considering issues relating to the application; (3) drafting and filing court documents; (4) preparing correspondence and providing advice to the client; and (5) appearing on the application. 26 In applying the principles summarised above, I have taken into account the following considerations: (1) The death benefit is small. (2) The work of the insurer, including the difficulties locating potential beneficiaries, the majority of the communications with Ms Colleen Ugle and the complications caused by the assertion of Ms Maureen Pickett as to her being a daughter of Mr Ugle, were matters which predated the involvement of external lawyers and were a true cost of business. Although those communications extended over many years, there was not shown to be a large amount of correspondence generated which would have had to be reviewed by external lawyers. It was the end result of the aforementioned efforts by the insurer which was of particular relevance to the application under s 215 of the Life Insurance Act and any advice given by external lawyers. (3) In one sense, the costs of the application were costs incurred in the applicant's usual course of business as a life insurer. It is inherent in an insurer's business that it will issue policies in respect of which it may ultimately need to resort to s 215 of the Life Insurance Act to obtain a sufficient discharge. On the other hand, the evidence in this case demonstrated that the insurer took reasonable steps to identify potential beneficiaries and, further, that it assisted in seeking to have a legal representative appointed with a view to obtaining a sufficient discharge without needing to make an application. Ultimately, the applicant had to make the application under s 215 through no fault of its own and despite its efforts. It indicated to Ms Ugle and her representatives that it would seek its costs be paid out of the death benefit. (4) The rates charged by the applicant's solicitors were within the scale of costs allowable for work done and services performed under Sch 3 of the Rules (Federal Court Scale): see, in particular, para 1.1 of the Federal Court Scale. I am satisfied that it is appropriate to determine the lump sum costs on the basis of the rates used by the applicant's solicitors, having regard to the relative lack of complexity and the brevity of the proceeding, and the modest sum of the monies the subject of the original decision. (5) Whilst being astute not to cause injustice, some reduction should be made to reflect the fact that, on assessment, a successful party invariably recovers something less than its actual costs. A reduction is appropriate to reflect the fact that there is no opportunity to scrutinise a detailed bill, or, in the circumstances of this case, hear from a contradictor. I have taken into account that the applicant only sought $5,900 of the actual charges of $7,026. (6) The proceeding was not factually or legally complex and was determined at the first case management hearing. The costs were incurred in a short period of time, did not involve any interlocutory procedures and required only one attendance before this Court. I doubt that extensive instructions would have been required from the applicant after proceedings were commenced - cf: Hislop at [13] and Bitek at [21]. (7) In determining how much to allow for costs, I take into account that - for the reasons given below - the applicant should receive a refund of the filing fee. (8) Finally, I have taken into account that the costs should be proportionate to the nature and complexity of the case and the amount the subject of the proceeding. If the whole of the costs and disbursements claimed had been awarded this would have amounted to approximately 20% of the death benefit to be paid into Court. 27 I consider an amount of $4,425 is appropriate for the applicant's legal costs. On the basis that the applicant asked for an amount of $5,900 for costs, this represents 75% of its claim. I recognise that the claim of $5,900 was already a discount on the costs identified in the applicant's summary of costs, which totalled $7,026.

The Filing Fee 28 Regulation 2.03 of the Regulation relevantly provides: 2.03 Persons liable to pay fee (1) A fee in relation to a proceeding is payable as set out in this section, unless the relevant court for a proceeding, or a Judge or Registrar of that court, directs otherwise. Filing Fee (2) A filing fee is payable by the person for whom the document is filed. 29 Regulation 2.03 permits a direction that a fee not be payable or that a reduced fee be payable - see: Linke v T T Builders Pty Ltd [2014] FCA 672 at [9]-[11] (White J). Schedule 1 of the Regulation sets out a number of fees payable in relation to proceedings in the Federal Court, including, for example, fees for filing an originating application, a bill of costs, a cross-claim and fees payable for the hearing of an application: Sch 1, Items 101, 105, 115 and 118. Regulation 2.03 permits a direction either waiving or reducing particular fees incurred during a proceeding pursuant to Schedule 1, or all fees in relation to a proceeding. 30 Division 2.2 of the Regulation sets out who is liable to pay court fees. In the present case, the applicant was liable to pay a filing fee in respect of the Originating Application: Sch 1, Item 101. The fee paid was $4,100. 31 The legislative scheme contemplates that there are classes of people who cannot or should not pay Court fees in certain circumstances. Division 2.3 sets out certain exemptions from liability to pay court fees. For example, persons exempt under reg 2.05, include a person who has been granted legal aid and a person who holds a health care card, a pensioner concession or a Commonwealth seniors health card. 32 Regulation 2.06 provides an exemption based on financial hardship. With respect to the financial hardship exemption, the Explanatory Statement: Select Legislative Instrument 2012 No. 280 provides: This section provides a fee exemption where the registrar or authorised officer is of the opinion that payment of the fee would cause financial hardship to an individual. In considering whether payment of a fee would have that effect, the registrar or authorised officer is required to consider the individual's income, day-to-day living expenses, liabilities and assets. These considerations are the same as those considered in exercising the power under regulation 11B of the Federal Court Regulations and regulation 9 of the Federal Magistrates Regulations to reduce court fees on the basis of hardship. 33 The applicant is not exempt under reg 2.05. The applicant does not meet the financial hardship requirement in reg 2.06. 34 Regulations 2.05 and 2.06 are part of the statutory context which informs the question whether the discretionary power under reg 2.03 to direct a waiver or reduction of a fee should be exercised in the particular circumstances of a case. The discretion cannot be confined to the circumstances in regs 2.05 and 2.06; the discretion would be superfluous if it were only to be exercised where a person was in any event exempt. The nature of the proceeding and the circumstances of those likely to benefit from the proceeding might be shown to be relevant to the exercise of the discretion, notwithstanding that the applicant itself is not exempt. 35 The evidence adduced on the application indicates that those ultimately likely to benefit from the proceeding - those most likely to be entitled to payments out of Mr Ugle's estate - are probably persons who would have been exempt under regs 2.05 and 2.06 from payment of a filing fee had they been applicants. Whilst the proceeding was clearly commenced by the insurer in its own interests, the proceeding also promotes the interests of those entitled to a share in Mr Ugle's estate. I infer that those people face challenges which are out of the ordinary. Ms Colleen Ugle did not refuse to assist. Indeed, it appears she sought to assist. Although it is not clear why she was unsuccessful in obtaining, or why she ceased to attempt to obtain, the Letters of Administration, it appears one reason was financial hardship. There may be others. Mr Ugle's remaining siblings have not been contacted. 36 The circumstances of this case are particularly unusual. In my view it is appropriate to make an order, nunc pro tunc, that the filing fee not be payable. In reaching that conclusion, in addition to the matters mentioned, I have taken into account the nature of the proceeding, the fact that those likely to benefit from the estate have not acted inappropriately or in a way which can be seen as precipitating the proceeding, the financial and other circumstances of those likely to benefit from the estate, the fact that the death benefit is small and likely to be of significant benefit to those who might be entitled to share in it, the proportion the filing fee bears to the death benefit as a whole (approaching 10%), and the fact that the proceeding has occupied little Court time. 37 Regulation 2.19 governs the refund of fees and relevantly provides: 2.19 Refund of fees General (1) A person is entitled to a refund of an amount in relation to the payment of a fee mentioned in Schedule 1 if the person pays more than the person is required to pay for the fee under this regulation. (2) The amount to be refunded is the difference between the amount paid by the person and the amount that the person is required to pay for the fee. (3) A person is entitled to the refund of the amount paid by the person as a fee mentioned in Schedule 1 if: (a) the fee had already been paid by another person; or (b) the fee was not payable under this regulation. 38 Given that I now make an order, nunc pro tunc, in the form of a direction under reg 2.03 that there be no filing fee payable by the applicant in respect of the Originating Application, the applicant is entitled to a refund under reg 2.19 in the amount of $4,100 which it paid.

Conclusion 39 The applicant should have its costs of and incidental to the proceedings determined on 8 August 2019 in the amount of $4,425. The filing fee of $4,100 should be refunded to the applicant. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley.

Federal Court and Federal Circuit Court Regulation 2012(Cth)

Life Insurance Act 1995(Cth)ss 211, 215

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