Yeo v Australian Securities and Investments Commission, in the matter of Ji Woo International Education Centre Pty Ltd

Legal framework 6 Rule 40.02(1)(b) of the Rules provides that a party who is entitled to costs may apply to the Court for an order that costs be awarded in a lump sum, instead of, or in addition to, any taxed costs. 7 Section 4 of the Court's Costs Practice Note (GPN-COSTS) states the Court's preference, wherever it is practicable and appropriate to do so, for the making of a lump sum costs order. 8 The plaintiff's counsel, Mr John Baird, noted that the principles governing applications for lump sum costs orders are now well established. In Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 7) [2018] FCA 1217, McKerracher J made the following relevant observations: (1) The purpose of the power to make lump sum costs orders is to avoid the expense, delay and aggravation involved in protracted litigation arising out of a taxation. The Court does not apply a process similar to a taxation of costs, but a much broader brush (at [49]). (2) The Court must be satisfied that any lump sum costs order is made on the basis of a logical, fair and reasonable estimate of costs and should be astute to avoid both overstating the recoverable costs and underestimating the appropriate account by applying some arbitrary discount to the amounts claimed. The onus is on the moving party to demonstrate that there is a logical, fair and reasonable basis for the order (at [50]). (3) It would be completely pointless if the evidence produced in a lump sum application was the same as the evidence and the taxation process. The object of avoiding the need to adduce all that evidence is to save the time and cost to the parties in the public's resource - the Court (at [52]). 9 In Paciocco v New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 at [18] and [20], the Full Court (Allsop CJ, Besanko and Middleton JJ) said: [18] We emphasise that in making a lump sum award of costs, the Court in undertaking the task of assessing costs is not precluded from undertaking a close inquiry of costs relating to a particular issue or category of costs, should the Court consider it appropriate to do so: see e.g. Hudson v Sigalla (No 2) [2017] FCA 339 at [30] ('Sigalla'). The Court is able to adopt its own procedures in inquiring into costs, is able to be flexible in how it conducts that inquiry, including by the obtaining of suitable assistance whether by referee's report or other reporting, and is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable. … [20] There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. 10 Ms Drew did not argue that this is not a suitable case for the making of a lump sum order, and I am satisfied that it is a suitable case. 11 As Ms Drew observed, the costs that are payable in this case are costs on a party/party basis. 12 In Hislop v Paltar Petroleum Ltd (No 4) [2017] FCA 1632 at [6]-[9], I set out the following relevant matters: [6] Costs as between party and party are defined in the Dictionary (Sch 1 to the Rules) as "only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation". In contrast, an award of costs on an indemnity basis is intended to compensate a party fully for costs where it was unreasonable for the party to be subject to any expenditure of costs, such as where a hopeless proceeding is brought: see Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506; (2012) 290 ALR 288 ("Bitek") at [12]. [7] 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]. [8] 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 213; (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 at [18]. [9] In Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640, Brereton J made the following observations concerning the application of a discount in determining a lump sum costs order, where costs were ordered to be paid on an indemnity basis: [56] The first defendant submits that there should be a further global percentage reduction of 15%, for two main reasons: first, because on assessment, even on the indemnity basis, a successful party invariably recovers something less than its actual costs, typically 15% where the assessment is on an indemnity basis; and secondly, the necessarily broad-brush approach of the court to assessment on a lump sum basis - involving some risk that the sum includes costs that would not be recovered on assessment - coupled with the savings to the costs creditor in time and costs through avoiding a detailed assessment, and the loss to the costs debtor of the opportunity to scrutinise and object to a detailed bill, has resulted in a practice of applying a discount on lump sum assessments. [57] While it is undoubtedly the usual practice of the court when making a lump sum costs order to apply a discount for the reasons mentioned, that does not mean that the Court must apply a percentage discount to the sum sought by the successful party and the Court "must be astute not to cause an injustice to the successful party" by applying "an arbitrary 'fail safe' discount on the costs estimate submitted to the court". Thus if the court can be confident that there is little risk that the sum includes costs that might be disallowed on assessment, the case for a discount is seriously undermined. (Footnotes omitted) 13 The Court's guidelines are also a relevant benchmark: LFDB v SM (No 4) [2017] FCA 753 at [9] and Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506; (2012) 290 ALR 288 at [20]. Schedule 3 of the Rules sets out a scale of costs allowable or work done and services performed ("Court scale"). The Court also publishes a National Guide to Counsel Fees.

Plaintiff's lump sum costs claim 14 The amount of $181,018.17 comprises: (1) professional fees of $133,648.77 based on the opinion of Ms Solomon that the plaintiff would recover approximately this amount on a taxation or assessment of costs in accordance with the Court scale; (2) counsel's fees of $22,045.45, based on Ms Solomon's opinion that the plaintiff would recover approximately this amount on a taxation or assessment based on the Court's National Guide to Counsel Fees; (3) external disbursements of $6,552.95; and (4) professional fees (including counsel's fees) of $18,771.00, based on Mr Koffel's evidence of the costs of preparing and making the lump sum costs application. 15 In her 4 September 2018 letter, Ms Solomon reduced the allowance of $1,330.00 for AHNSE Law Offices (for video link to South Korea) by $166.25. At the hearing, Mr Baird conceded a duplication for interpreting fees, in an amount of $1,200.00. 16 Taking these matters into account, the amount claimed is $179,651.92. 17 Ms Solomon is a legal costs consultant with 27 years' experience, who has personally prepared over 2,000 bills of costs. Ms Solomon gave her opinion as to the party/party costs likely to be recovered by the plaintiff on a taxation of costs on a party/party basis in accordance with r 40.12 of the Rules. 18 Ms Solomon noted that the maximum rate allowable on the Court scale for solicitors' work claimable on an hourly rate basis is $580.00. She noted that a skill, care and responsibility loading would be added, and that a 10% loading to appropriate Scale item rates had been added. Ms Solomon considered a rate of $580 to be an appropriate rate to apply to work done by Mr Koffel, and $575.00 to be an appropriate rate to apply to work done by two senior associates with 10 and 20 years' experience. 19 Ms Solomon expressed views that the "proportionate staffing of the matter would be regarded as appropriate" and that "the work has been conducted in an efficient manner with respect to the time claimed for the work concerned", although she had made unspecified reductions where she considered that the time expended exceeded the reasonable allowances likely to be permitted for the work concerned. 20 Ms Solomon's figure of $133,648.77 is calculated as follows: Attendance Amount Work done by Principal in accordance with items 1.1, 3.1 and 4.1 @ $58.00 per 6 minutes $13,238.50 Work done by Senior Associates in accordance with items 1.1, 3.1 and 5.1 @ $57.50 per 6 minutes $62,718.13 Work done by Associates in accordance with items 1.1, 3.1 and 5.1 @$50.00 per 6 minutes $7,112.50 Work done by Junior Solicitors in accordance with items 1.1, 3.1 and 5.1 @$35.00 per 6 minutes $5,888.75 done by Paralegals in accordance with items 1.3 @$11.00 per 6 minutes $1,199.00 Preparing documents and correspondence over 100 words in accordance with items 2.1 and 2.4 $9,308.00 Preparing correspondence up to 50 words in accordance with item 2.2 $8,788.00 Preparing correspondence up to 100 words in accordance with item 2.3 $7,686.00 Reading correspondence up to 50 words in accordance with item 3.2 $4,192.00 Reading correspondence up to 100 words in accordance with item 3.3 $128.00 Photocopying @0.25 per page $1,250.00 Skill, Care and Responsibility @ 10% $12,149.89 Total $133,648.77

21 The report contains very little analysis from which the validity of this figure can be tested. 22 In her supplementary report, Ms Solomon gave evidence that the total relevant solicitor/client costs amount to $155,045.31 (including $8,280.94 for photocopying). Thus, the amount of $133,648.77 is approximately 86% of the relevant total solicitor/client costs. Ms Solomon said: In my experience, since the amendments to the Schedule 3 in 2011 and in particular since the amendments to the rates in January 2014, recovery of costs can be achieved in the range of 80-90% where matters are conducted efficiently as herein and where there are likely to be minimal reductions to counsel's fees both as to rate and time spent.

Mr Choi's arguments 23 Ms Drew is a solicitor with lengthy experience in legal costs disputes. In opposing the claim, Ms Drew submitted: (1) the allowance for professional fees is excessive and a more appropriate allowance would be in the range of 60-65% of total potentially recoverable fees of $146,764.37, being $88,058,62 to $95,396.84 (excluding photocopying fees); (2) the allowance (within professional fees) for photocopying of $1,250.00 (based on 25 cents per page) is excessive and an appropriate allowance is $750.00 (based on 15 cents per page). (3) the allowance for counsel's fees is not unreasonable; (4) an allowance of $3,165.46 for disbursements is reasonable; (5) an allowance of $941.85 for video link fees (relating to a witness who gave evidence from South Korea). The plaintiff's allowance of $997.50 is based on an excessive exchange rate; and (6) the balance of the claimed disbursements (relating to invoices from Australian Multi Lingual Services) is not reasonable because it reflects duplication of interpreters' fees.

Consideration 24 This case was not legally complex, although it had a degree of complexity arising out of the fact that it was conducted in the English language between protagonists whose first language was Korean rather than English. In the case of the plaintiff, she was also primarily located in South Korea, which probably increased the difficulty of communicating with her effectively. 25 Although Ms Solomon's evidence is otherwise, in my view, it is likely that communication difficulties arising from Ms Yeo's location in South Korea and the need for interpretation between a Korean speaking client and lawyers who did not all speak Korean led to professional costs being incurred that would not be payable on a party/party basis. 26 Further, in my view, it is notable that the professional costs relate to work undertaken by several legal practitioners including Mr Koffel, two senior associates and one or more associates, junior solicitors and paralegals. This is a large team in the circumstances. While there may be good practical reasons why it was necessary to deploy the practitioners in the particular circumstances, in my view, it is very likely to have necessitated a degree of duplication which would not be included in party/party costs. 27 Further, Ms Solomon's estimate is based on time costing at the maximum or almost the maximum allowable rate amounting to over 80% of time-costed work. In my view, that is such a high proportion of work undertaken by the most experienced legal practitioners and it is likely that, on a party/party taxation, some reduction would be made on that account. 28 Acknowledging her experience, Ms Solomon's analysis provides an indication as to the appropriate lump sum for professional costs in this matter, but the amount fixed should be less to take account of the likelihood that Ms Solomon has overestimated the plaintiff's recovery on a taxation based on the three matters I have identified above. In this regard, I note that Ms Solomon's analysis does not specifically consider whether the first two matters gave rise to costs that would not be allowable on a solicitor/client basis. As to the third matter, I acknowledge Ms Solomon's view that the seniority of the lawyers who undertook the work was appropriate to the relevant tasks. 29 In my view, the prospect that Ms Solomon's figure of $133,648.77 overestimates the likely recovery on a taxation is reinforced by her calculation that it amounts to 86% of total solicitor/client costs. If photocopying is excluded, the relevant percentage figure is 90% ($133,648.77 less $1,250 ÷ $146,764.37). Based on my experience and the reported cases, this would be an unusual outcome of a party/party costs taxation. In saying this, I do not doubt Ms Solomon's evidence that such an outcome can be achieved but I am not persuaded that it is a likely outcome in this case. 30 In my view, taking these matters into account, it would be fair and reasonable to apply a discount of one-third to the professional costs of $146,764.37, giving a figure of $97,942.91. 31 I will also include the following amounts in the lump sum costs order: (1) photocopying costs of $1,000.00; (2) counsel's fees of $22,045.45; (3) undisputed disbursements of $3,165.46; and (4) video link fees of $997.50 (75% of $1,330). Although there was no evidence, I was informed that Mr Koffel had explained to Ms Drew that the claim for video link fees reflected the amount actually paid. 32 I am not satisfied that the plaintiff's lawyers incurred a disbursement in connection with Australian Multilingual Services, having regard to the fact that the relevant tax invoices pre-date the date for provision of the services and there is a later invoice from Sydney Translation Services, apparently in relation to the same services. 33 I will make a lump sum costs order for the payment of the costs the subject of the 2 February 2018 orders in an amount of $125,151.32.

Costs of the lump sum costs application 34 Mr Koffel's evidence was that the amount of $18,771.00 comprises: (1) Costs Partners' fees in the sum of $6,496.00; (2) counsel's fees in the sum of $1,000.00 (based on an assumption that the application would be determined on the papers); (3) counsel's fees of $1,375.00 for work done between October and December 2017; and (4) solicitor's fees of $8,900.00 net of GST, comprising: (a) $2,581.00 for work done by Mr Koffel (3 hours and 42 minutes at $700 per hour; and (b) $6,319.00 for work done by Eric Bisloper, senior associate (11 hours at $575 per hour). 35 Mr Koffel's evidence was that the time engaged in preparation of the lump sum costs application and the conduct of the application significantly exceeded the amount claimed. 36 Mr Koffel also gave evidence of additional fees of $1,102.00 for Ms Solomon's supplementary report and estimated that Mr Baird's costs in relation to the application would be up to $6,000.00 (exclusive of GST). 37 Ms Solomon's evidence did not address the costs of the lump sum costs application. 38 Ms Drew contended that Mr Baird's fees of $1,375.00 were included in the amount of $22,045.45 specified for counsel's fees at [14] above. The invoice is attached to Ms Solomon's report and, although the position is not entirely clear, I am satisfied that Ms Drew is probably correct. 39 Ms Drew also made the following submissions: (1) the plaintiff was slow in making the application; (2) the plaintiff required an adjournment of the 27 August 2018 hearing in order to obtain more expert evidence to support the application; and (3) Ms Solomon's first report was inadequate to support the lump sum costs order. 40 In my view, it is appropriate to make a lump sum costs order in respect of the lump sum costs application with a view to achieving finality in this matter. The evidence is scant but, against this, it is necessary to acknowledge that more detailed evidence would have increased the costs of the application. It is also true that the costs of the application have been increased by the fact that the evidence initially filed was deficient in that it did not identify the total solicitor/client costs that were the subject of the February 2018 costs order, instead only identifying the total costs of the whole proceeding. 41 Taking all these matters into account, in my view, an appropriate lump sum for the costs of the lump sum costs application, including solicitor, counsel and costs consultant's fees is $15,598.00 comprising $5,000.00 for solicitor's costs, $3,000 for counsel's costs and Cost Partners' fees of $7,598.00.

Conclusion 42 Accordingly, I will make lump sum costs orders in the total amount of $140,749.32. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.