FEDERAL COURT OF AUSTRALIA

Coshott v Burke (No 3) [2019] FCAFC 23

ORDERS

THE COURT ORDERS THAT:

1.    The appellants pay the first respondent’s costs fixed in the sum of $18,610.17.

2.    The appellants pay the second respondent’s costs fixed in the sum of $15,606.55.

3.    The appellants pay the third respondent’s costs fixed in the sum of $40,699.58.

4.    The appellants pay the fourth respondent’s costs fixed in the sum of $15,606.55.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    On 22 November 2017 this Court delivered ex tempore reasons refusing the appellants leave to advance grounds of appeal not raised before the primary judge and to amend their notice of appeal: see Coshott v Burke [2017] FCAFC 230. The Court heard submissions on the remaining grounds of appeal and reserved its judgment.

2    On 25 May 2018 we dismissed the appellants’ remaining grounds of appeal: see Coshott v Burke (No 2) [2018] FCAFC 81 (Coshott No 2). Leave was given to each party to file submissions on the appropriateness of making lump sum costs orders; for each of the first to fourth respondents to file a Costs Summary; and for the appellants to file a Costs Response.

3    Each of the first to fourth respondents seeks lump sum costs. Each of the respondents seek full indemnity for counsel’s fees. The first respondent seeks costs on the basis that a discount of 15% be applied to solicitors’ costs. The second and fourth respondents seek to recover disbursements and two thirds of solicitors’ costs properly incurred. The third respondent seeks costs and disbursements on an indemnity basis.

Relevant principles

4    The Court has a broad discretion to award costs, as conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). Pursuant to s 43(3)(d) of the FCA Act, the Court may award costs in a specified sum, and pursuant to s 43(3)(g) it may order that costs be assessed on an indemnity basis. Rule 40.02 of the Federal Court Rules 2011 (Cth) (the Rules), provides as follows:

A party or a person who is entitled to costs may apply to the Court for an order that costs:

(a)    awarded in their favour be paid other than as between party and party; or

(b)    be awarded in a lump sum, instead of, or in addition to, any taxed costs; or

(c)    be determined otherwise than by taxation.

Note 1    The Court may order that costs be paid on an indemnity basis.

…

5    Costs on an indemnity basis are defined in Sch 1 to the Rules to mean “costs as a complete indemnity against the costs incurred by the party in the proceeding, provided that they do not include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them.”

6    It is well established that the purpose of s 43(3)(d) of the FCA Act is “to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”: Beach Petroleum NL v Johnson (No 2) [1995] FCA 350; 57 FCR 119 (Beach Petroleum) at 120. That purpose is reflected in the Court’s Costs Practice Note (GPN-COSTS) (Costs Practice Note), issued by the Chief Justice on 25 October 2016:

3.1    The Court recognises that the procedure for determining the quantum of costs for a party successful at a final hearing should not be delayed and should be as inexpensive and efficient as possible.

…

3.3    For those costs issues that are unable to be resolved by negotiation and require the involvement of the Court, the Court’s preference is to avoid, where possible, the making of costs orders that lead to potentially expensive and lengthy taxation of costs hearings. Rather, the Court will seek to adopt, and will encourage parties to utilise, the appropriate use of sophisticated costs orders and procedures, including lump-sum costs orders, consolidated costs orders, estimate of costs processes and Alternative Dispute Resolution (“ADR”). Taxation of costs hearings should be the exception and be confined to those matters that have genuinely been unable to be otherwise resolved or determined.

…

4.1    The Court’s preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order.

7    However, a lump sum costs order is not mandated in all proceedings, and the Court must exercise its discretion as appropriate in the circumstances: Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; 253 FCR 403 (Paciocco) at [19] citing Hudson v Sigalla (No 2) [2017] FCA 339 at [18]-[19]. In Paciocco, the Full Court (Allsop CJ, Besanko and Middleton JJ) noted (at [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.

8    With respect to the award of costs on an indemnity basis, we would adopt the summary of relevant principles set out by a Full Court of this Court (Jagot, Yates and Murphy JJ) in Melbourne City Investments Pty Ltd v Treasury Wines Estates Ltd (No 2) [2017] FCAFC 116 (Melbourne City Investments) at [5]:

In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for “compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made “which ought never to have been made”, where the case is “unduly prolonged by groundless contentions” (Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)).

The first respondent

9    Mr Burke, the first respondent, relies on the affidavit of John Patrick Miskell as a Costs Summary. Solicitors’ fees have been discounted by 15% to “give effect to both the saving arising from there not being a delay which would be occasioned by a full taxation … and work which might be regarded as being directly outside the defined work for a party party bill of costs” (at [12]). No reduction has been made with respect to counsel’s fees. Mr Miskell deposes that the work performed was as follows (at [13]):

(a)    [Mr Miskell], over 10 hours worked at $440 per hour, exclusive of GST. [He] was admitted as a solicitor in 1976. [His] firm has rendered invoices in the total amount of $10,000.00, which represents 49% of the total amount claimed; and

(b)    Edward John Walsh, an Australian Practising Solicitor, who had previously acted as Practising Solicitor for some 40 years, being admitted in 1976, who has been engaged by [Mr Miskell] as a consultant to assist in work and who is charged out at the rate of $400.00, exclusive of GST per hour. He worked over 12 hours

(c)    Our total of $4,400.00 for me and $5,600.00 for Mr. Walsh, is $10,000.00, which is then discounted 25% [sic – 15%] to $8,500.00

(d)    James Tom Johnson, of counsel, admitted to the bar in 1991 having previously been admitted as a Solicitor in 1975. He has also been retained by the First Respondent when as trustee of the Property of Robert Gilbert Coshott, a bankrupt, following his resignation from the position and in respect of the administration by the Third Respondent as subsequent trustee. That had the advantage in the retained [sic] of reducing actual costs incurred both by myself and counsel. Mr Johnson under his fee disclosure and costs agreement rendered fees at $500.00 per hour and applied a daily rate of $4,000.00, each exclusive of GST. He has rendered invoices in the total amount of $11,944.17. A copy of his invoices are annexed and marked “A” and “B”.

10    Mr Miskell deposes that most of the work related to the appeal was carried out by counsel due to his familiarity with the subject matter in an effort to minimise incurring unnecessary costs. As a result, the work undertaken by Mr Miskell and Mr Walsh was significantly reduced.

11    At [15] Mr Miskell deposes that GST has been applied to his invoices as he believes that Mr Burke is not entitled to input credits. At [21], Mr Miskell again states that Mr Burke is not entitled to input tax credits.

12    Mr Johnson of counsel applied GST to the fees rendered. No disbursements were incurred except for counsel’s fees, which are annexed to Mr Miskell’s affidavit.

13    Mr Miskell deposes that his rates are below the general hourly rate for attendances by a solicitor as set out in Sch 3 to the Rules, being $580 per hour. Mr Johnson’s daily and hourly rates are below the upper limit of the scale for junior counsel in the National Guide to Counsel’s Fees published by the Federal Court on 28 June 2013. Mr Miskell deposes that he has read the Costs Practice Note, and that Mr Burke is not claiming more than he is liable to pay for costs and disbursements. Mr Miskell deposes that the figures he has relied upon are capable of verification through his file records, which are available for production if required by the Court.

14    Under the heading “Special features of the Appeal Proceedings” Mr Miskell notes the appellants’ non-compliance with timetabling orders. He deposes that the affidavit of Robert Coshott dated 6 December 2017, relied on by the appellants in seeking a stay of enforcement of the lump sum costs order made by the primary judge, contained a sentence Mr Miskell considered to be false. He deposes:

29    In proceedings NSD1546/2017 styled John Christopher Burke v Fewin Pty Ltd, the Plaintiff, Mr. Burke, for whom I acted, sought an order for the winding up by the Court of Fewin Pty Ltd and the appointment of a liquidator to Fewin Pty Ltd. Mr. Prentice filed an appearance as a supporting creditor in that winding up application. At the time of swearing this affidavit, the Third Respondent had not sought to be heard in the winding up and had not made any application to be substituted as the Plaintiff in place of Mr. Burke.

30    By email sent to me at 3.21 pm on 5 December 2017, the solicitor for the Appellants Robert Coshott and Ronald Coshott demanded an undertaking from my client not to enforce the lump sum costs order which was the subject of the Appeal Proceedings. By email which I sent to the solicitor for the Appellants at 6.15 pm on 5 December 2017, I replied to the demand. Annexed and marked “C” is a copy of an email thread containing each such email.

15    Mr Miskell deposes that he reviewed a report of the hearing of the appeal on 22 November 2017 prepared by counsel, and the issue of a stay of enforcement of the primary judge’s costs orders was not raised. He deposes he believes the transcript will confirm this, and it is consistent with an email sent to the parties by the Associate to Farrell J on 7 December 2017. Mr Miskell notes the statement at [4] of Robert Coshott’s affidavit of 6 December 2017 that the respondents had indicated at the hearing of the appeal that a stay was unnecessary, which he considers to be false on the material available to him. The appellants then contacted the Court seeking a stay of the primary judge’s costs orders pending the delivery of the judgment on the appeal. The Court sought an indication as to whether each of the respondents intended to seek enforcement of the costs order prior to publication of the Court’s reasons. Mr Burke’s counsel advised that no undertaking to await the Court’s judgment before enforcing the costs order would be given.

16    Mr Miskell deposes that at the hearing of the stay application Robert Coshott accepted that he had erroneously deposed that the respondents had advised the Court that no stay of the primary judge’s costs orders was necessary at the hearing of the appeal.

17    Annexure A to Mr Miskell’s affidavit is an invoice from Mr Johnson setting out the work undertaken in the preparation and hearing of the appeal, totalling $9,744.17 inclusive of GST. Annexure B is an invoice from Mr Johnson setting out the work undertaken in relation to the appellants’ request for an undertaking not to seek enforcement of the primary judge’s costs orders and the hearing of the appellants’ stay application, totalling $2,200 inclusive of GST.

Mr Burke’s submissions

18    Mr Burke notes the Court’s discretion to award costs in a specified sum pursuant to s 43(3)(d) of the FCA Act. He submits that the power is appropriately exercised when the circumstances warrant it (citing Harrison v Schipp [2002] NSWCA 213; 54 NSWLR 738 (Schipp) at [59] and Starr-Diamond v Diamond (No 4) [2013] NSWSC 811 (Starr-Diamond)). The Court’s power is not confined to complex cases, but can be exercised in straightforward matters involving relatively modest costs (citing cases including LFDB v SM (No 2) [2017] FCAFC 207; Coshott v Prentice (No 2) [2018] FCAFC 1 (Prentice) at [19]; and Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863 (Bobb)).

19    Mr Burke submits that the Court must first consider whether it is appropriate to make an order for costs in a lump sum, and then determine the appropriate specific sum in the circumstances. The Court is entitled to have regard to the evidentiary material before it; its own observations of the proceedings; and the Court’s own experience. In reliance on Bobb, Mr Burke submits that the evidentiary material must give the Court “sufficient confidence” that it can arrive at an appropriate lump sum.

20    With respect to quantum, Mr Burke submits that the relevant principles are as follows (at [11]):

(a)    The specification of a gross sum is not the result of a taxation or assessment process, the Court will take a broad brush approach to the quantification of the gross sum: Harrison v Schipp [(2002) 54 NSWLR 738 at 743].

(b)    Whilst in the past the Courts have typically applied a discount against the contingencies of costs assessment the Court must be astute not to cause injustice to the successful party by applying a ‘fail safe’ discount, particularly where indemnity costs are awarded: Hancock v Rinehart (Lump sum costs) [[2015] NSWSC 1640].

(c)    If the Court does make a discount, the discount can be applied to either professional costs or disbursements or both, but it is acceptable not to apply it to disbursements, given that they are payable to third parties as incurred: see Black J in In the matter of Palladium Consulting Pty Limited [[2013] NSWSC 92 at [14]].

21    Mr Burke observes that recent examples of discounts in ordinary costs orders are: 30% overall (in Bobb); 20% overall (Starr-Diamond); 15% overall but allowing counsel’s fees and disbursements as charged and professional fees at two-thirds (citing In the matter of Palladium Consulting Pty Limited [2013] NSWSC 92). In Webster v Super Smart Strategies Pty Ltd (No 3) [2017] NSWSC 930 and Huang v Drumm [2017] NSWSC 1006, no reduction was applied to the lump sum costs claimed on a party and party basis.

22    With respect to costs awarded on an indemnity basis, Mr Burke submits that the reductions are typically less “because of the very nature of the entitlement” (at [13]).

23    Mr Burke submits as follows (at [18]):

(a)    the Appeal was in respect of an exercise of discretion in quantification of costs by Justice Markovic in the Court below in terms of s. 43(3)(d) of the Federal Court of Australia Act 1976 and to that extent was of short compass;

(b)    the relief claimed involved a review therefore of the otherwise unrestricted discretion conferred upon the Court in terms of s. 43(2) of the Federal Court of Australia Act 1976;

(c)    so far as the First Respondent is concerned no error in the manner in which Justice Markovic exercised her discretion was in fact shown or determined by the Full Court in the Appeal;    

(d)    matters involving the general administration of the bankrupt estate of Robert Gilbert Coshott particularly so far as they relate to taxation of costs in federal jurisdictions and assessment of costs in state jurisdictions have been shown to be lengthy costly and the subject of numerous appeals, to that extent resulting in substantial additional costs to the parties;

(e)    the making of a lump sum costs order will clearly facilitate the “overriding purpose” enshrined within s. 37M and s. 37N of the Federal Court of Australia Act 1976 in bringing this proceeding to an early end;

(f)    there are two components to the amount claimed in respect of costs, the primary hearing itself before the Full Court and the interlocutory hearing in which a stay was sought. The latter of those matters was of relatively short compass but because of the factual foundation upon which it was bought [sic] required serious consideration and work as there was a fundamental disagreement as to what had occurred before the Full Court – in circumstances also where the affidavit relied upon for the purpose of the relisting for the stay application was not to the extent of the contested issue read.

24    Mr Burke submits that only the discount suggested as appropriate in the affidavit of Mr Miskell (being 15%) should be permitted, or alternatively that “if [an additional] discount is made it should be lower than the discount typically made when costs are awarded on the ordinary basis.” Mr Burke notes that he ceased to be a trustee in bankruptcy during 2013 and has no entitlement to seek an input credit with respect to GST liability in invoices received in connection with the present proceeding.

The appellants’ submissions

25    The appellants submit that the primary objective of a lump sum costs order is to resolve the issue of costs with less expense than would result from a taxation. They submit that Mr Miskell’s affidavit appears to include the costs of this application, given that those costs are not explicitly excluded. Consequently, they submit, the Court cannot be satisfied that the costs of this application are less than the costs of a taxation. The appellants then submit that “[j]udging by the other respondent’s [sic] costs claimed for their application, it is likely the first respondent’s costs are not less than the costs of a taxation” (at [2]).

26    As the application for costs to be awarded as a lump sum is being determined on the papers, the appellants are denied the opportunity to cross-examine Mr Miskell on the content of his affidavit and to inspect and comment upon the source material. The appellants submit that these factors weigh against the appropriateness of the making of a lump sum costs order.

27    Party and party costs do not constitute a complete indemnity to all costs, and must be those that were reasonably and necessarily incurred. The costs of work which was not reasonably necessary for the conduct of the proceedings are not recoverable under a party and party costs order. The appellants note Mr Burke’s “concession” that it is the usual practice when making a lump sum costs order to discount the sum awarded, and submit that there is nothing in the circumstances of this appeal that would be “out of the usual” (at [5]). The question, therefore, is not whether to apply a discount, but how large a discount should be applied. The appellants submit that “[t]he authorities are to the effect that the usual discount for costs on an ordinary basis is 30%,” and that there is no basis for counsel’s fees to be exempt from that discount.

28    The appellants submit (at [6]-[7]):

6    Where the Court and the appellants have been deprived of the opportunity to inspect and object to a detailed/itemised bill and been deprived of the opportunity to cross examine the deponent of the affidavit relied upon by the first respondent, as it has been in this application, the case for applying for a discount is strengthened. The appellants rely on paragraph 62 of the judgment in Hancock v Rinehart.

7    The solicitor for the first respondent in his affidavit has claimed the costs of the whole proceedings. Yet, he was not appointed to act until 3 November 2017, that is several months after the commencement of the proceedings. Prior thereto, the first respondent represented himself. This mitigates against a lump sum costs order and, if a lump sum costs order s to be made, it strengthens the case for a discount of at least 30%.

29    In conclusion, the appellants submit that a lump sum costs order is not practical and appropriate in the circumstances, but if the Court is minded to make such an order, the costs claimed should be discounted by at least 30%. The appellants submit that the fact that Mr Miskell deposes at [12] of his affidavit that the costs sought were claimed on a “solicitor and own client basis” rather than on the “ordinary basis” supports the appellants’ position.

Consideration

30    The Court is of the view that in all of the circumstances of the present proceedings, it is practicable and appropriate to order that the appellants pay Mr Burke’s costs of the appeal as a lump sum. We have reached that conclusion having had regard to the voluminous litigation commenced by the appellants in relation to costs orders, and the desirability of resolving the issue of the costs of this appeal as efficiently, and with as little additional costs, as possible. In that regard, we note our observations in Prentice at [19]:

The circumstances in which a lump sum order will be made are not confined to matters limited in complexity but often that will be appropriate. Moreover as was noted in LFDB v SM (No 2) [2017] FCAFC 207 it may be appropriate to avoid a lengthy and expensive taxation where there has been prior protracted “trench warfare” between the parties. …

31    We reject the appellants’ assertion that their inability to cross-examine Mr Miskell on the content of his affidavit and to inspect and comment upon the source material relied upon in calculating the quantum of costs weigh against the making of a lump sum costs order. As is clearly articulated in the Costs Practice Note at [4.11], the lump sum costs procedure is intended to “streamline and expedite the determination or resolution of the quantum of costs question and not to replicate the taxation process.” In making an order for costs as a lump sum, the Court does not conduct a line-by-line assessment of the costs claimed, and the Court does not require the Costs Summary to exhibit the source material verifying the costs and disbursements claimed: seethe Costs Practice Note at [4.12]. However, Mr Miskell has annexed the invoices rendered by counsel to his affidavit, and deposes that his firm’s file records, including invoices and receipts, are able to be produced to the Court if required (at [25]).

32    We reject the appellants’ submission that Mr Burke’s costs should not be awarded in a lump sum because he was unrepresented until 3 November 2017. Although the appellants correctly identify that a Notice of Acting with respect to Mr Burke was not filed until 3 November 2017, that notice was signed by Mr Miskell and dated 23 July 2017, only 12 days after the appellants filed their Notice of Appeal.

33    Mr Miskell deposes that his fees are below the maximum hourly rate permitted in Sch 3 to the Rules, which he identifies as $580. In fact, the maximum hourly rate permitted for a solicitor pursuant to Sch 3 is $550. However Mr Miskell’s fees, being $440 per hour, are well below that limit.

34    There is an internal inconsistency in the affidavit of Mr Miskell in so far as he deposes that GST has been applied to solicitors’ fees because Mr Burke was not entitled to input credits (at [15] and [21]). However, the breakdown of costs set out at [13] of his affidavit explicitly excludes GST in respect of the costs for work undertaken by himself and Mr Walsh. The error, if it be an error, is that Mr Burke’s costs have been understated. We proceed on the basis that in determining an appropriate lump sum it would be inappropriate for the Court to include an additional amount to take account of GST.

35    We are unpersuaded that Mr Burke should have his costs of this application on what is, in effect, an indemnity basis. We acknowledge the appellants’ non-compliance with timetabling orders prior to the hearing of this appeal, and their reliance on what was later admitted to be an erroneous assertion in an affidavit filed in support of their stay application. As a result of the appellants’ conduct, the respondents necessarily incurred expenses that would not otherwise have been arisen. In this regard, we note the Costs Practice Note at [3.13]:

The purpose of a costs order is to compensate a successful party rather than punish an unsuccessful party. However, the Court will consider the appropriateness of the making of a special costs order in circumstances which may warrant it, including where parties have failed to comply with their pre-litigation “genuine steps” obligations, where the “overarching purpose” duty has not been met, where parties engage in an abuse of process, raise unmeritorious arguments before the Court or otherwise conduct themselves inappropriately in the litigation.

36    However, subject to our observation at [41] below, that does not justify a departure from the general rule that costs are awarded to the successful party on a party and party basis, having regard to the general principles set out in Melbourne City Investments, as set out above at [8].

37    In that regard, we note the observations of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 364; 81 ALR 397 (Fountain) at [21]:

… I believe that it is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts of the clearly established law.

38    We accept that the appeal had at best limited prospects of success. However, we are unpersuaded that the appellants’ appeal as against Mr Burke was so lacking in merit that it must have been commenced for an ulterior motive or with wilful disregard of the facts or law. Consequently, we will not award costs as against the appellants on an indemnity basis.

39    In the absence of an itemised account, we would apply a discount of 33% to the solicitors’ fees and disbursements sought in order to approximate the potentially lesser costs that would be recovered if the issue had proceeded to a full taxation and costs were assessed on a party and party basis.

40    However, we are mindful of the cautionary words of Brereton J in Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640 (Hancock) at [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 [citing Beach Petroleum NL v Johnson (No 2) [1995] FCA 350; 57 FCR 119] 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” [citing Beach at 164-165]. 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.

41    We would therefore not discount the costs incurred with respect to counsel’s fees, because there is no doubt that they were incurred (as evidenced by Mr Johnson’s invoices annexed to Mr Miskell’s affidavit). We accept, as deposed by Mr Miskell, that counsel’s involvement reduced costs by comparison with those that otherwise would have been incurred due to Mr Johnson’s familiarity with the proceedings. We see no basis for any suggestion that any part of counsel’s costs were inappropriately incurred. We note in particular (as we observed at [35] above) that it was the appellants’ own conduct which was responsible for the increased costs.

42    We proceed on the basis that the claimed figure of $29,444.17 is a typographical error. The sum of the amounts set out in Mr Miskell’s affidavit is $20,444.17, comprised of $8,500 (being the discounted fees of Mr Miskell and Mr Walsh), and $11,944.17 (being the total fees rendered by counsel).

43    However, given our view that the appropriate discount to be applied to the sum claimed for Mr Miskell’s and Mr Walsh’s fees is 33%, the appropriate figure is $6,666.00. The sum claimed for counsel’s fees should be awarded in its entirety (being $11,944.17). The appellants should pay Mr Burke’s costs in the sum of $18,610.17.

The second and fourth respondents

44    The Official Trustee in Bankruptcy (the Trustee) and the Inspector-General in Bankruptcy (the Inspector-General) (the second and fourth respondents respectively) rely on two affidavits of Donna Therese Boyce. In the first affidavit (dated 31 May 2018), Ms Boyce deposes that the Trustee and the Inspector-General are entitled to claim input tax credits in respect of any GST relevant to the costs claimed. At [13], Ms Boyce states:

13    It is submitted the work required to be undertaken for the Appeal related to both the Second and Fourth Respondents and from a practical perspective the work in relation to preparation of the Appeal required an equal amount of time in respect of each party. In so far as there may have been any material distinction it would be minor and it is difficult to separate out the amounts incurred by the Second and Fourth Respondents with any precision. It is for this reason that the lump sum costs amounts outlined above is being split 50/50 between the Second and Fourth Respondents.

45    Ms Boyce annexes an explanation of the calculation of the lump sum sought by the Trustee and the Inspector-General. That document sets out that the fees charged by AGS have been discounted by one third in light of Ms Boyce’s experience in this Court that AGS usually recovers between 60-70% of its actual costs following a taxation. The costs of this application have similarly been discounted by one third. Counsel’s fees and disbursements have not been discounted on the basis that it is expected that they would be recovered in full if assessed at a taxation. Ms Boyce deposes that the Costs Summary was not prepared with the assistance of a costs consultant.

46    The fees and disbursements incurred are set out at [16]-[19]:

Professional fees incurred

16    In connection with these proceedings, the AGS has incurred, on behalf of the Second Respondent and Inspector-General, total professional fees in the amount of $26,354.90 excluding GST.

17    The AGS solicitors who have incurred fees in relation to the appeal includes:

17.1    Donna Robinson, Senior Executive Lawyer (hourly rate: $465 exclusive of GST).

17.2    Donna Boyce, Senior Lawyer (hourly rate: $375 exclusive of GST).

17.3    Angelo Kallipolitis, Senior Lawyer (hourly rate: $372 exclusive of GST).

17.4    Bradley Dean, Senior Lawyer (hourly rate: $372 exclusive of GST).

17.5    Claudia Crause, Lawyer (hourly rate: $250 exclusive of GST).

17.6    Hemant Vijaykumar, Lawyer (hourly rate: $190 exclusive of GST).

18    Work performed by AGS personnel was performed:

18.1    As to 13.7 hours by Donna Robinson, Senior Executive Lawyer, a lawyer >20 years post admission. The hours worked by Ms Robinson represents about 18.6% of the total hours worked by AGS personnel on the matter.

18.2    As to 1.1 hours by me, Donna Boyce, Senior Lawyer, a lawyer with >10 years post admission. The hours worked by Ms Boyce represents about 1.6% of the total hours worked by AGS personnel on the matter.

18.3    As to 48.2 hours by Angelo Kallipolitis, Senior Lawyer, a lawyer >10 years post admission. The hours worked by Mr Kallipolitis represents about 68.6% of the total hours worked by AGS personnel on the matter.

18.4    As to 0.4 hours by Brad Dean, Senior Lawyer, a lawyer >10 years post admission. The hours worked by Mr Dean represents about 0.56% of the total hours worked by AGS personnel on the matter.

18.5    As to 3.4 hours by Claudia Crause, Lawyer, a lawyer <2 years post admission. The hours worked by Mr Dean represents about 4.8% of the total hours worked by AGS personnel on the matter.

18.6    As to 2.2 hours by Hemant Vijaykumar, Lawyer, a lawyer <3 years post admission. The hours worked by Mr Vijaykumar represents about 3.1% of the total hours worked by AGS personnel on the matter.

The remaining 2.8% (or thereabouts) of work performed by AGS personnel on the matter was worked by lawyers and fee-earning support staff who had relatively minimal involvement in the matter such as paralegals.

Disbursements incurred

19    In addition to professional fees, the AGS has incurred, on behalf of the Costs Applicants, total disbursements in the amount of $7,823.95 excluding GST. This comprises:

19.1    Printing and copying: $329.02 exclusive of GST (approximately 95.8% of the total amount claimed).

47    Ms Boyce states that “[t]he amounts claimed are capable of verification through source material should such material be required by the Court to be produced” (at [8]). She deposes that the charge rate for copying is 17.6 cents per page exclusive of GST, which is less than the 25 cents per side of printed page provided for in the Court’s National Guide to Discretionary Items in Bills of Costs (at Item 9.1). She deposes that AGS does not charge for copying tasks of up to 125 pages.

48    The amount claimed for counsel’s fees are within the range contained in the Court’s National Guide to Counsel’s Fees. Ms Boyce deposes that she was informed by Mr Heath that his usual commercial rate is $4,000 excluding GST per day, and $500 excluding GST per hour.

49    The appellants rely on an affidavit of Robert Coshott as a Costs Response. Mr Coshott deposes that despite the requirements of the Cost Practice Note, the Trustee and the Inspector-General’s Costs Summary has not been prepared with the assistance of an expert as to costs. Mr Coshott raises that the affidavit of Ms Boyce is articulated as having been sworn in support of an application for a consolidated lump sum costs order, rather than being sworn as a Costs Summary. Further, Ms Boyce states that the affidavit was prepared on the basis of information contained in the AGS file, but does not state what that information is. Nor does it produce the invoices.

50    Mr Coshott deposes:

6    In paragraph 6 of the affidavit, it is stated that the Costs Applicants (assumed to be the Respondents) are entitled to claim input tax credits. In paragraph 19 of the affidavit, it is stated that counsel’s fees total $7,494.93 exclusive of GST. It is most [un]usual for counsel to charge cents. If the invoices had been provided this anomaly could have been explained.

7    In paragraph 15, the deponent swears that the AGS fees were not paid by the respondents, but were paid by Comcover, which is not a legal entity and is not a licensed insurer. In contradiction thereof, at paragraph 7.1 of the affidavit, the deponent swears that the costs applicant (the second and fourth respondents to the appeal) are not claiming more than they are liable to pay for costs and disbursements. As Comcover has paid their costs and disbursements, the respondents have no liability to pay the costs and disbursements. Thus they have not satisfied the indemnity principle (Oshlack v Richmond River Council HCA) and therefore are not entitled to recover costs under the costs order. There has been no evidence produced as to the basis of subrogation if same is asserted. Given the status of Comcover as not a legal entity and not a licensed insurer and the lack of evidence, it is must be taken that there is no right of subrogation.

8    At paragraph 13, it is stated that "it is difficult to separate out the amounts incurred by the Second and Fourth respondents with any precision." This is not a ground for not doing so and leaving the Court and the appellants in a position of not being able to quantify what costs relate to which respondent and are reasonable.

9    As regards disbursements no details of what was necessary to be copied is provided. As this is an appeal and copies of the Appeal Book were provided by the appellants, it is difficult to see what documents needed to be copied. It is noted that the one lump sum is claimed for “Printing and copying”. I am not aware that printing is an allowable disbursement. The onus is on the respondents to satisfy the Court that this is a necessary and reasonable party and party cost. It has not. The other disbursement is counsel’s fees. As the invoices therefor have not been provided, the Court and the appellants are not in a position to determine what work these fees were for and/or whether these fees were necessary and reasonable. In particular, whether any of these fees relate to the Interlocutory Application where there was a no order as to costs made by the Court. The respondents bear the onus of satisfying the Court that these fees are recoverable.

10.    In annexure DB-1, it is asserted that party and party profit costs are taxed at 60 to 70% of solicitor and client profit costs. The appellants dispute this. However, the onus is on the respondents and they have not adduced any “evidence” other than this unsworn statement by a non-expert with no details as to her qualifications or experience in taxing costs. It is also asserted that 100% of counsel’s fees and other disbursements are allowed on a party and party taxation. The appellants dispute and repeat the grounds above.

The Trustee and the Inspector-General’s submissions

51    The Trustee and the Inspector-General submit that the work undertaken in the preparation of the appeal can be allocated equally between the Trustee and the Inspector-General, as any distinction would be minor and it would be difficult to separate the amounts incurred by each of them with precision. The Trustee and the Inspector-General therefore seek a total sum of $31,213.10, divided equally between them (being a lump sum of $15,606.55 each). The AGS is indemnified by Comcover (the Commonwealth’s self-managed fund for insurable risks) with respect to its costs of the appeal.

52    The Trustee and Inspector-General note that the Costs Practice Note acknowledges the Court’s preference in making a lump sum costs order wherever practicable or appropriate to do so, and they seek to resolve the issue of costs as inexpensively and efficiently as possible (citing s 37M of the FCA Act). They submit that the making of a lump sum costs order will “save the parties the time, trouble, delay, expense and aggravation in having a taxation proceed”, citing Keen v Telstra Corporation Ltd (No 2) [2006] FCA 930 at [4].

53    Nothing in the present circumstances would suggest that it would be impracticable or inappropriate to make such an order. The additional expenses incurred by a taxation would impose a significant costs burden on the costs applicants (the first to fourth respondents) without any certainty that those costs could be recovered from the appellants. In that regard, the Trustee and the Inspector-General rely on Julien v Department of Employment and Workplace Relations (No 2) [2009] FCA 1259 at [10]. They submit:

11    The claim for costs made by the Costs Applicant[s] is based on the solicitor client fees they have incurred and with the aim being for an expedient resolution of the costs liability and allocated in respect of each client as set out in the affidavit of Donna Therese Boyce sworn 31 May 2018 in support of this application. This allows the Court to be confident, without taxation, that the claim is reasonable and well within the sum that would be claimable through the taxation process.

12    It is submitted that the amounts sought in relation to costs outline below are reasonable given the scope of the appeal which contained narrow issues as far as the Costs Applicants were concerned.

13    AGS has charged the Costs Applicants for their fees on an hourly rate basis as set out below.

1)    Donna Robinson, Senior Executive Lawyer (hourly rate: $465 exclusive of GST).

2)    Donna Boyce, Senior Lawyer (hourly rate: $375 exclusive of GST).

3)    Angelo Kallipolitis, Senior Lawyer (hourly rate: $372 exclusive of GST).

4)     Bradley Dean, Senior Lawyer (hourly rate: $372 exclusive of GST).

5)     Claudia Crause, Lawyer (hourly rate: $250 exclusive of GST).

6)     Hemant Vijaykumar, Lawyer (hourly rate: $190 exclusive of GST).

14    The rates charged by the Costs Applicants’ counsel are towards the lower end of the range provided for in the Federal Court’s National Guide to Counsel’s Fees. The rates for photocopying are below those set in the Federal Court’s National Guide to Discretionary Items in Bills of Costs.

15    The lump sum claimed covers disbursements and 2/3rds of the solicitors’ costs properly incurred and paid by the Costs Applicants and allocated as described above.

16    A discount of 2/3rds of the solicitor’s fees to reflect the Costs Applicant’s current best assessment and estimate of recoverable party party costs is made for the purpose of this application in order to facilitate the expeditious resolution of these proceedings without further dispute.

54    By their reply submissions and the supplementary affidavit of Ms Boyce, the Trustee and the Inspector-General seek a revised sum with respect to both counsel’s fees and costs and disbursements. The sums sought have been reduced in the light of the fact that Farrell J made no order with respect to the Trustee and the Inspector-General’s costs in relation to the appellants’ interlocutory application heard on 14 December 2017.

55    The Trustee and the Inspector-General now seek a lump sum with respect to counsel’s fees of $6,328.29. Similarly, the sum claimed for professional fees and disbursements has been reduced to exclude fees incurred between 7 December 2017 and 20 December 2017 in relation to the appellants’ interlocutory application. The revised sum is $16,218.51 (which represents two thirds of the total costs and disbursements incurred).

The appellants’ submissions

56    At [2] of the appellants’ written submissions on the appropriateness of making a lump sum costs order, it is stated that:

The submissions of the second and fourth respondents although expressed to be in support of an application for a lump sum costs order only address the question of the appropriateness of making a lump sum costs order in paragraphs 6 to 11 of the submissions. The remaining 11 paragraphs do not go to this question. Accordingly, in accordance with Order 2, the appellants’ submissions will only go to this question and will only respond to paragraphs 6 to 11 of the second and fourth respondents’ submissions.

57    The appellants submit that the Trustee and Inspector-General’s submission (at [7]) that a lump sum costs order would resolve the issue of costs “as inexpensively and efficiently as possible” is contradicted by Annexure DB-1 of the affidavit of Donna Boyce. That annexure contains an estimate that the costs of this application would be $8,063.55 (at [28]), whereas the costs of a taxation would be less than 25% of that sum. The appellants submit that taxations are conducted by a Registrar, without requiring submissions or an appearance by parties, and incur a filing fee of $415. If a costs consultant were used to draw a bill of costs, the fee would usually be no more than 8% of the profit.

58    The appellants submit that the case quoted at [8] of the Trustee and Inspector-General’s submissions pre-dates the Rules and the Costs Practice Note. Further, the respondents to the appeal, as the costs applicants, bear the onus of satisfying the Court that it is appropriate to make a lump sum costs order. Instead, the Trustee and the Inspector-General submit only that there is nothing to suggest it would not be practicable or appropriate to make such an order (at [9]). The costs sought by the Trustee and the Inspector-General are four times the likely cost of the taxation process, making a lump sum costs order impractical. Further, the appellants submit that the Costs Summary affidavit relied upon by the Trustee and the Inspector-General makes no reference to the fact that when Farrell J dismissed the appellants’ interlocutory application to stay the lump sum costs order made by the primary judge on 14 December 2017, no order was made with respect to the Trustee and the Inspector-General’s costs. The appellants submit that there is nothing in the affidavit stating that the costs of that application, including counsel’s fees, have been omitted from their lump sum claim.

59    The appellants submit that there is no evidence in support of the Trustee and Inspector-General’s contention at [10] that the process of taxation would result in significant costs being incurred without any certainty of recovery from the appellants. On the contrary, based on the respondents’ Costs Summary, the lump sum costs procedure would impose a great costs burden. The appellants submit further that no evidence has been adduced as to the appellants’ financial status.

60    In response to the Trustee and Inspector-General’s submissions at [11], the appellants contend that there is nothing in the Costs Summary that provides a basis for the Court to be confident that the costs claimed are reasonable and within the sum that would be claimable through a taxation. Rather, the absence of evidence that the costs and disbursements of the interlocutory application have not been included “and the other matters raised herein and in the Appellants’ [Costs] Response/affidavit show that the Court could not be confident.” The appellants further submit (at [9]):

The respondents’ application for a consolidated lump sum costs order seeks the consolidation of two costs orders in favour of the two respondents. This is not something GPN-COSTS allows. Further, an [application] for consolidation of costs order should be made at the hearing of the proceedings (GPN-COSTS 3.9). The respondents did not apply for such an order at the hearing. The orders made on 25 May 2018 did not allow for such an order at the hearing. The orders made on 25 May 2018 did not allow for such an application to be made.

The Trustee and the Inspector-General’s reply submissions

61    The second and fourth respondents’ reply submissions address Mr Coshott’s affidavit. Generally, they note that a number of issues raised regarding form are unmeritorious, as the Costs Summary is compliant with the Costs Practice Note and the orders of 25 May 2018. For example, the Costs Summary does not require production of source material, and it is evident that that material is available if required by the Court.

62    They submit that there is nothing unusual in counsel having charged an hourly rate that was not a whole dollar figure, but in any event it is a breakdown of a daily rate of $2,000 divided by six hours.

63    With respect to the indemnity principle, the second and fourth respondent rely on the decision of Coshott No 2 at [89].

64    Despite the appellants having challenged the sum claimed for photocopying, the second and fourth respondent submit that this is “a proper disbursement claimed.”

Consideration

65    We consider that it is practicable and appropriate to make an order that the appellants pay each of the Trustee’s and the Inspector-General’s costs of the appeal in the sum of $15,606.55. As with the costs of Mr Burke, we consider that a lump sum costs order with respect to the second and fourth respondents will bring an end to this protracted litigation without the parties incurring additional costs. We reject the appellants’ assertion that a taxation of costs would incur only a $415 filing fee as a taxation is conducted by a Registrar alone and does not require submissions or appearances from parties. In our view, the appellants are mistaking the process of a costs estimate with that of a taxation.

66    The costs assessment process where a lump sum costs order is not made is set out in detail in the Costs Practice Note at Item 5. In summary, following the filing of a successful party’s long form bill of costs, a Registrar will prepare an estimate of the likely figure resulting from a taxation. Parties may then object to the estimate (which requires the payment of security for costs), and a confidential conference will then be conducted by a Registrar. If unresolved, the issue of costs will then proceed to a full taxation, which can be a lengthy and costly process whereby parties appear before a Registrar who assesses each item on a long form bill of costs.

67    The Coshotts’ criticisms of the submissions and Costs Summary filed by the Trustee and Inspector-General that are directed at form rather than substance are unhelpful. As we noted in Prentice at [21], the Costs Practice Note “is to be understood as a guide rather than an inflexible set of rules as to how such applications are to be made.” In any event, we do not consider that the Costs Summary is non-compliant with the Costs Practice Note.

68    The Coshotts’ assertion that it is “[un]usual for counsel to charge cents” and that production of invoices might have explained this “anomaly” is entirely without merit given that the fees charged by counsel are within the range contained in the Court’s National Guide to Counsel Fees.

69    The fact that the Trustee and the Inspector-General are insured does not preclude them from recovering their costs upon succeeding in the appeal: see Cristovao v Tan & Tan Lawyers Pty Ltd [2018] FCAFC 41; 16 ABC(NS) 123 at [38]-[42] (Cristovao). That issue was raised by the appellants in the substantive appeal with respect to Mr Prentice (the third respondent) and dismissed: see Coshott No 2 at [89]-[97].

70    We reject the appellants’ submission that the Court is not authorised to deal in an omnibus way with the costs sought by the two respondents. Each were identically represented. It would be a waste of judicial time and resources and productive of unnecessary expense to insist on a sophisticated disaggregation of claimed amounts as between the two respondents. Accepting the appellants’ submission would be inconsistent with the principles now applied routinely by this Court.

71    There is nothing to suggest that the solicitors’ and counsel’s fees set out in Ms Boyce’s affidavit were unnecessarily or improperly incurred, and each figure is below the upper limit set out in Sch 3 to the Rules and the Court’s National Guide to Counsel Fees. We accept that the discount to solicitors’ fees and disbursements of 33% proposed by the second and fourth respondents is appropriate for the same reasons as set out at [39]. In our opinion, that substantial discount is more than sufficient to address the appellants’ one particularised criticism of the quantum sought in respect of photocopying. We will not discount counsel’s fees.

72    The Trustee and the Inspector-General should be awarded costs in a lump sum of $15,606.55 each.

The third respondent

73    Mr Prentice relies on the affidavit of Nicholas Anthony James Dale as a Costs Summary. Mr Dale’s affidavit explains that the costs incurred are higher than might be expected because of the appellants’ failure to comply with orders of the Court in preparation of the appeal (which resulted in additional correspondence, case management, and written submissions) and the need to respond to the appellants’ application to stay the lump sum costs order made by the primary judge (dismissed by Farrell J on 14 December 2017).

74    Mr Prentice relies on Mr Dale’s affidavit in support of his application for lump sum costs on an indemnity basis. Mr Dale notes that he has not prepared his affidavit with the assistance of an expert as to costs.

75     Mr Dale’s affidavit is lengthy and detailed with respect to the costs claimed by Mr Prentice. Mr Dale deposes that Mr Prentice seeks indemnity costs in a lump sum of $46,288.33 with no GST applied. That figure is made up of:

     Gillis Delaney’s fees for the period 11 August 2017 to 14 December 2017 in the sum of $15,685.00 (excluding GST);

    Counsel’s fees in the sum of $23,533.33 (excluding GST);

    Gillis Delaney’s fees for the 25 May 2018 judgment delivery at which timetabling orders relating to the lump sum costs application were sought, being $1,170 (excluding GST);

    Counsel’s fees for the 25 May 2018 judgment delivery at which timetabling orders were sought, being $400.00 (excluding GST); and

    Gillis Delaney’s fees and Counsel’s fees in relation to the lump sum costs application in the sum of $5,500 (excluding GST).

76    Mr Dale deposes that GST has not been applied to fees for legal work as Mr Prentice is indemnified with respect to Gillis Delaney’s fees by Antares Managing Agency Limited. (Antares). As Antares is based outside Australia, GST is not applicable.

77    Mr Dale sets out a breakdown of the fees incurred by Gillis Delaney at [19], and a breakdown of counsel’s fees at [20].

78    Mr Dale deposes:

Special features of the Appeal Proceedings

26    As a solicitor with 24 years of experience in practice, I have acted for clients in numerous appeals and I am familiar with the amount and type of work typically involved in an appeal. The Appeal Proceedings involved more and different types of work to the work typically undertaken in an appeal. Counsel and myself undertook work, which was outside the usual scope of work in an appeal, both:

(a)    before the hearing of the Appeal Proceedings - which arose from the appellants’ failure to comply with case management orders; and

(b)    after the hearing in the Appeal Proceedings while judgment was reserved - in connection with the appellants’ application for a stay of the orders made on 23 June 2017 in the First Instance Proceedings.

79    Mr Dale expands on those two “special features” at [27]-[50]. It is unnecessary to set out those paragraphs of his affidavit in full. In summary, he deposes that the appellants’ non-compliance with timetabling orders and conduct in relation to their stay application resulted in additional unnecessary work for Mr Prentice. In particular, Mr Dale deposes that the appellants’ reliance on an erroneous assertion in an affidavit of Robert Coshott necessitated significant responsive work to be undertaken on behalf of Mr Prentice. Mr Dale estimates that the costs of the appeal were increased by 30 to 50% due to the appellants’ conduct.

Mr Prentice’s submissions

80    Mr Prentice, by his written submissions, seeks costs on an indemnity basis, rather than a party and party basis. In support of this, Mr Prentice relies on (at [3]):

a.    A letter sent to the appellants on 30 August 2017, explaining that the appeal was misconceived and that the third respondent would seek to dismiss the appeal with indemnity costs;

b.    That the appeal was doomed to fail;

c.    That the conduct of the appellants in failing to comply with Court orders up to the hearing and then after the hearing making an application for a stay on an ex parte basis based on a materially untrue affidavit, have unnecessarily increased the third respondent’s costs and enliven the exercise of the Court’s discretion.

81    Mr Prentice contends that the 30 August 2017 letter was accompanied by a schedule to the indemnity policy issued by his insurer, even though no notice to produce or subpoena had been sought with respect to the policy, and it had not been the subject of cross-examination. Mr Prentice had put the appellants on notice that he would seek the costs of the appeal, including any dismissal application, on an indemnity basis unless the appellants discontinued the appeal by 5 September 2017.

82    With respect to his contention that the appeal was “doomed to fail” Mr Prentice submits that the appellants sought to raise grounds of appeal that had not been the subject of argument before the primary judge, in circumstances where nothing had prevented them being raised at first instance. Mr Prentice notes that leave to advance those grounds was refused by this Court. He submits:

6    The insurance issue which was raised by the appellants, the central proposition of which was that in circumstances where the third respondent’s insurer had paid the costs there was a breach of the indemnity principle, was the subject of a decision involving Robert Coshott in the NSW Court of Appeal in 2008, and there was no reason to doubt the correctness of it: Coshott v Woollahra Municipal Council [[2008] NSWCA 176]. To establish such a proposition would be to turn insurance law on its head: it would mean that no insured who was awarded costs could recover under a party/party costs order. The appellants offered no authority for the proposition; none exists. The appeal was, accordingly, doomed to fail.

83    With respect to the appellants’ conduct, Mr Prentice submits:

7    The appellants were ordered, inter alia, to prepare appeal books on 28 August 2017. As part of the orders made by Farrell J on that day, the hearing of the appeal was set down for 22 November 2017. Three weeks prior to the hearing, the appellants had still not complied with the orders. This led to correspondence with the appellants’ solicitors and further orders being made by Registrar Morgan. Following the appellants’ failure to comply with Registrar Morgan’s orders the matter was re-listed before Farrell J on 10 November 2017. Her Honour’s orders were not complied with: such appeal books as were provided were deficient and the deficiencies which were communicated to the appellants were not rectified. By the time this occurred, it was 15 November 2017, one week prior to the hearing. This led Mr Dale to instruct Ms Castle (whose hourly rate was lower than his) to produce compliant Court Books and indexes.

8    The failure to diligently prosecute their own appeal, and cause the wasting by the Court and the parties of time, money and resources, is conduct which attracts the jurisdiction to order indemnity costs. The manner in which the Court makes orders for the preparation of appeals should ensure a smooth process whereby the parties, but mostly the appellants, achieve readiness for the appeal in accordance with the timetable. It should not require further appearances and orders to be made.

9    At the hearing, the appellants raised numerous grounds which had not been raised before Markovic J. Leave was not granted to run these grounds, but by then much of the cost of dealing with them, in written submissions, had been incurred.

10    Further conduct of the appellants which attracts the jurisdiction to order indemnity costs occurred after the hearing. In an attempt to obtain a stay of the orders made by Markovic J the appellants approached the Court on an ex parte basis in chambers. The application was supported by an affidavit which was untrue. It was false in relation to a matter which occurred in Court on the hearing of the appeal. The deponent, Robert Coshott, a former solicitor, was in Court. So was the witness to the affidavit, Mr Lyons, a solicitor. Whether it was deliberately untrue or carelessly untrue is irrelevant for the present purpose: such conduct [is] of the highest order of unacceptable behaviour in litigation.

11    The principles on which the Court may award indemnity costs are well developed: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors [[1988] FCA 202; (1988) 81 ALR 397] and “the conduct of the relevant party is of the utmost importance”: Bhagat v Global Custodians Ltd [[2002] FCAFC 51 at [58]].

12    It is submitted that the conduct of the appellants outlined is the type of conduct which attracts the jurisdiction to award indemnity [costs] and that the Court should do so in these circumstances, both to express the Court’s disapprobation and also so that the third respondent is not out of pocket as a result of the conduct.

(Citations omitted except where expressly set out.)

84    Mr Prentice seeks an order for lump sum costs in the amount of $46,288.33. He notes that there is no particular characteristic that a case must have before a gross sum costs order can be made; the Court can exercise its discretion wherever the circumstances warrant it (citing Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916, Su v Australian Fisheries Management Authority (No 3) [2008] FCA 2018 at [1] per Reeves J and Schipp).

85    Mr Prentice refers to the Court’s Costs Practice Note at [4.1], and submits that the following factors are relevant to the exercise of the Court’s discretion to award costs in a lump sum (at [17]):

a.    The conduct of the party ordered to pay costs;

b.    Where the conduct of the proceedings has wasted the successful party’s resources;

c.    Whether the unsuccessful party has failed to comply with court orders;

d.    Where the unsuccessful party has failed to pay previous costs orders.

(Citations omitted.)

86    Mr Prentice submits that each of those factors is relevant in this proceeding, noting that the appellants have not yet paid the costs ordered by the primary judge, other than an amount of $6,714 as a result of a garnishee order. He submits that those factors “point strongly to the appropriateness of the exercise of the lump sum power.”

87    Mr Prentice submits, similarly to Mr Burke (above at [19]), that the Court must consider two questions: firstly, whether it is appropriate to order costs in a lump sum; and secondly, what is the appropriate specific sum in the circumstances? In doing so, the Court may have regard to the evidentiary material before it, the Court’s own observations of the proceeding, and the judges’ own experience (citing Bobb). The evidentiary material before the Court must give it “sufficient confidence” that it can arrive at an appropriate gross sum.

88    With respect to quantum of any lump sum costs, Mr Prentice submits that the relevant principles are:

    the charges rendered by the successful party’s solicitors, if the successful party is liable to pay costs (which must be established) (citing Beach Petroleum at 124 and the Costs Practice Note at [3.16];

    the sum fixed should be proportionate to the nature and complexity of the case (citing Canvas Graphics Pty Ltd v Kodak (Australasia) Pty Ltd [1998] FCA 23);

    the Court will take a broad brush approach to quantification, rather than undertaking a taxation or assessment (citing Schipp);

    the Court will typically discount the sum against the contingencies of costs assessment, but must not cause injustice to the successful party by automatically discounting the sum, especially if costs have been awarded on an indemnity basis where a large discount will undermine the purpose of indemnity costs (citing Hancock); and

    the Court may have regard to evidence from the successful party’s solicitor, but does not require expert evidence.

89    Mr Prentice sets out the rates charged at [27]-[28]:

27    Mr Dale’s fees are charged out at $450 per hour. Schedule 3 of the Federal Court Rules permits [solicitors’] professional fees to be recovered at up to $550 per hour, or $55 per six-minute unit. Mr Dale was admitted to practice in 1994 and practices in insolvency and commercial law. It is submitted that, in view of Schedule 3 and also the Court’s own knowledge of hourly rates charged by Sydney solicitors, that his rate is reasonable.

28    Ms Castle was admitted to practice as a solicitor in 1991 and was called to the Bar in 2007. Ms Castle charged at $400 per hour and $4,000 per day. Her hourly and daily rates are well within the range of the National Guide to Counsel’s Fees. The Guide – which is over three years old – is a benchmark of reasonableness. It doesn’t have binding effect but, it is submitted, may be taken into account in considering whether charges made by counsel are reasonable.

90    Mr Prentice submits that because his solicitor’s and counsel’s fees are within the relevant scales, they should not be discounted. Neither should there be a discount on the basis of the work done if the Court awards cost on an indemnity basis, in order to give full effect to the indemnity order. Mr Prentice notes that this is the approach taken by the primary judge, and by Brereton J in Hancock.

91    If the Court is not persuaded to order that the appellants pay Mr Prentice’s costs on an indemnity basis, he submits that a discount of 10% is appropriate. A discount of 10% would not overcompensate Mr Prentice, but would ensure that he is properly compensated for the work actually undertaken in the present appeal (which has been greater than that of a typical of an appeal). Mr Dale’s evidence is that the appellants’ conduct caused additional work prior to, and following, the hearing of the appeal. As a consequence, the costs incurred were 30 to 50% greater than would normally be expected. Mr Prentice submits that, in these circumstances, it would be unfair if the appellants’ conduct resulted in a substantial reduction of his costs. He further submits that the other disbursements, being a filing fee and transcript fee, are “the ordinary incidents of litigation of this nature” and should be allowed in full.

The appellants’ submissions

92    The appellants contend that Mr Prentice has failed to disclose to the Court paragraph 3 of orders made by Lee J on 3 May 2018 in proceeding NSD786/2015, which is in the following terms:

Until further order, [Mr Prentice] on the one hand and the applicants, James Coshott, Ljiljana Coshott, Robert Coshott and Schlotzsky’s Nominee Company Pty Ltd on the other are forbidden, whether by themselves, their respective servants or agents, from taking any or any further enforcement action or steps (including in relation to any insolvency proceedings, but excluding any process for the quantification or assessment of costs) in respect of any debts that they have or may have as against each other.

93    In that regard, the appellants rely on the affidavit of Robert Coshott of 29 June 2018 annexing a copy of the orders of Lee J. The appellants submit that, although seeking a lump sum costs order may fall within the exception set out in those orders, Mr Prentice would be unable to enforce any order for costs in a lump sum, thereby nullifying the expedition normally achieved through the lump sum costs process.

94    The appellants refer to the fact that the costs of this application claimed by Mr Prentice are $5,500 (see [13(e)] of the affidavit of Nicholas Dale of 5 June 2018), and submit that the cost of a taxation would be less than half that sum. The appellants submit that a taxation is conducted by a Registrar and does not require an appearance by parties or the preparation of written submissions in the majority of cases. The filing fee for a taxation is $415, and a costs consultant (if used) would charge a fee of generally no more than 8% of the profit to draw the bill of costs. That would mean a figure no more than $1,254. On that basis, the appellants submit that a taxation would be the less expensive option.

95    The appellants note that Mr Prentice’s solicitor’s fees are being paid by his insurer, Antares. The appellants submit that Antares is not an authorised general insurer, relying on the affidavit of Robert Coshott of 29 June 2018 which annexes a copy of a printout from the Australian Prudential Regulation Authority website listing “General insurers covered under the Financial Claims Scheme”. Antares does not appear on that list. The appellants submit that Antares therefore does not have a right of subrogation, and Mr Prentice has not adduced any evidence to suggest that Antares does have a right of subrogation or “any right to claim on the third respondent”. Mr Prentice’s legal fees have been paid for by Antares, rather than Mr Prentice himself. Mr Prentice has not shown that he is liable to Antares for his legal fees, and as such the indemnity principle has not been satisfied. Mr Prentice has no costs liability regarding his legal fees and cannot therefore seek his costs pursuant to this Court’s orders of 25 May 2018. The appellants submit that the annexures to Mr Dale’s affidavit do not assist Mr Prentice’s position, and that the content of [18] of Mr Dale’s affidavit contradicts what is deposed at [22].

96    The appellants submit as follows (at [6]-[7]):

6    Without prejudice to the above submissions, the third respondent has not annexed any invoices for counsel’s fees, nor Gillis Delaney’s invoices. This has left the Court without any detail on which to be satisfied as to the reasonableness of the claim. It is noted that the third respondent has not included in its affidavit/costs summary the required undertaking to produce the materials evidencing its claim (GPN-Costs).

7    As these applications are to be dealt with on the papers, the appellants are denied the opportunity to cross examine Nicholas Dale on his affidavit and the opportunity to inspect and comment upon the source documents. The absence of the source documents and opportunity to cross examine mitigate against a lump sum costs order being practical and appropriate.

97     With respect to Mr Prentice’s application for indemnity costs, the appellants submit that the 30 August 2017 letter sent by Mr Prentice’s lawyers to the appellants cannot provide a basis for an order for costs incurred prior to 30 August 2017 to be awarded on an indemnity basis. Yet Mr Prentice claims indemnity costs for the entire proceeding. The appellants submit that the 30 August 2017 letter was not a true offer of compromise; it was “an invitation to capitulate”. The appellants submit that they “did better” in the judgment as costs were not awarded against them on an indemnity basis, which had been proposed in the 30 August 2017 letter.

98    The appellants note that the Trustee and the Inspector-General have not sought costs on an indemnity basis. They submit that the Court did not make an order that the appellants pay costs on an indemnity basis, nor did not make orders permitting Mr Prentice to make an application for indemnity costs. Mr Prentice’s submission that the appeal was not weak and doomed to fail is simply an expression of opinion, and is not supported by the judgment.

99     The appellants submit (at [14]-[19]):

14    A party and party costs order is not a complete indemnity. Even if the costs are ordered on an indemnity basis, it is still not a complete indemnity. The amounts claimed must be reasonable. If a party retains legal representatives who charge well above the going rate, an indemnity costs order does not mean these fees are recoverable in full. Further, work which was not reasonably necessary for the conduct of the proceedings are not recoverable as party and party costs.

15    In its submissions, the third respondent (paragraph 23 (f) concedes that it is undoubtedly the usual practice of the court when making a lump sum costs order to apply a discount. There is nothing which would take these proceedings out of the usual. The question is not whether to apply a discount, but what percentage of discount should be applied.

16    A consideration of recent authorities shows that the usual discounts applied are 30% for costs on the ordinary basis and 15% on an indemnity basis. These discounts are applied to both solicitor’s profit costs and counsel’s fees. There is no authority that the discount is not applied to counsel’s fees.

17    The third respondent has quoted from the judgment of Brereton J in Hancock v Rhine [sic] (paragraph 57). However, he has not quoted the whole of paragraph 57 which is:

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 ‘failsafe’ 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.

18    Where the Court and the appellants have been deprived of the opportunity to inspect and object to a detailed/itemised bill and been deprived of the opportunity to cross examine the deponent of the affidavit relied upon by the third respondent, as it has been in this application, the case for applying a discount is strengthened. The appellants rely on paragraph 62 of the judgment in Hancock v Rhinehart [sic].

19    The appellants submit that a lump sum costs order is not practical and appropriate, nor is there is no grounds for an order for party and party costs on an indemnity basis.

Mr Prentice’s reply submissions

100    Mr Prentice filed submissions in reply in accordance with orders of 25 May 2018 and 22 June 2018. Mr Prentice submits that the appellants’ submissions contain the following inaccuracies and omissions (at [2]):

a.    There was no requirement or proper reason to attempt to adduce evidence of the orders made by Lee J in the third respondent’s application for lump sum costs. Those orders do not prohibit quantification but, rather, enforcement, as the appellants conceded;

b.    It was the Full Court, not the respondents, who invited the application for lump sum costs (Order 2, 25 May 2018) and it is now Federal Court practice to order lump sum costs where appropriate: GPN-Costs at [4.1];

c.    The suggestion that taxation of costs would “less than half” of the $5,500.00 estimated by Mr Dale as the costs of the lump sum application is unsupported by evidence, but demonstrably unlikely. Taxations involve the parties sitting before Registrars going through bills of costs in a line-by-line fashion, sometimes for days. The appellants confuse the process of estimation by a Registrar, with the process of taxation by a Registrar. The submission should be disregarded;

d.    The submission as to the involvement of an insurer is an argument which was run and lost, albeit in a slightly different fashion, on the Appeal itself. The Full Court rejected the argument that the fact that Mr Prentice was insured, and that his legal fees were paid by an insurer, disentitled him to recovery of costs. That finding is a complete answer to the submission now made;

e.    Mr Dale did not annex invoices of counsel or Gillis Delaney because the Practice Note specifically provides that a party claiming costs should not do so: GPN-Costs at [4.12]. Contrary to the appellants’ submissions however, Mr Dale did depose in his affidavit that the invoices were available should the Court order production: at [25];

f.    There is authority that the discount may not be applied to counsel’s fees: In the matter of Palladium Consulting Pty Limited [2013] NSWSC 92 at [14]; In the matter of Cardinal Group Pty Ltd (in liq) and Cardinal Project Services Pty Ltd (in liq) (Lump Sum Costs) [2018] NSWSC 895 at [4], [10]; and

g.    Gillis Delaney’s fees and Ms. Castle’s fees are below scale: Dale affidavit [9], [10], [14] and [15].

Consideration

101    In our view, it is practicable and appropriate in the circumstances to order that the appellants pay Mr Prentice’s costs of the appeal as a lump sum.

102    We reject any submission that the orders of Lee J in proceeding NSD786/2015 prohibiting the enforcement of any debt between these parties until further order would operate to prevent Mr Prentice from seeking an award of lump sum costs in these proceedings. That order specifically excludes “any process for the quantification or assessment of costs.” This application is for an award of costs in a specified sum. It is not an enforcement proceeding. The expedition and cost efficiency achieved through the lump sum process is not nullified as a result of Lee J’s orders, even if Mr Prentice is not yet able to enforce a lump sum costs order.

103    With respect to the appellants’ submission that a taxation would be less expensive than the lump sum costs process, we reiterate our observations at [65]-[66]. The appellants’ contention that a taxation would incur only a filing fee of $415 and potentially a costs consultant fee is incorrect. We also reject the appellants’ submission that Mr Prentice has not satisfied the indemnity principle and therefore is not entitled to seek his costs of this appeal. That argument was raised by the appellants and explicitly rejected by this Court: see: see Coshott No 2 at [89]-[97].

104    The appellants’ submissions that the Court cannot be satisfied that the sum claimed is reasonable because no invoices are annexed to Mr Dale’s affidavit and that Mr Prentice has not provided the required undertakings to produce source material are also without merit. The Costs Practice Note at [4.12] states:

…The Costs Applicant is not required to exhibit to the Costs Summary the source material verifying the costs and disbursements claimed. However, such material must be available at the costs hearing.

105    Mr Dale’s breakdown of the costs claimed by Mr Prentice at [16], [19] and [20] of his affidavit satisfy the Costs Practice Note. Moreover, contrary to the appellants’ submission, Mr Dale deposes at [25] that the amounts claimed are capable of further verification if required.

106    We accept that the appeal as against Mr Prentice was weak. However, having regard to the contentions advanced by the Coshotts, we do not consider that the appellants’ appeal was so entirely devoid of merit as to conclude that it must have been commenced for an “ulterior motive” or with “wilful disregard of the known facts or clearly established law”: Fountain at [21].

107    We reject Mr Prentice’s contention that the 30 August 2017 letter sent by Gillis Delaney to the appellants’ solicitors provides a basis for his claim for indemnity costs. The fact that the letter foreshadows that Mr Prentice would seek his costs on an indemnity basis does not establish his entitlement to such costs. However we accept the submission advanced by Mr Prentice that his being insured and his having been indemnified by his insurer is no bar to his entitlement to recover those costs: see Cristovao. As would be expected, any recovery would be obliged to be disgorged to the insurer.

108    For those reasons, we would not award Mr Prentice his costs on a complete indemnity basis.

109    However, Mr Prentice was especially burdened by reason of the inappropriate conduct of the appellants which required him unreasonably to incur costs as an innocent party. He was obliged, in a practical sense, to prepare the appeal book in these proceedings. That was an unnecessary and improper burden to have been imposed on him.

110    Having regard to the statement of Gray J (Carr and Goldberg JJ concurring) in Hamod v New South Wales [2002] FCA 424; 188 ALR 659 at 665, we think it just that that additional factor distinguishes the costs orders to be made in his respect from the other respondents. In our opinion, it is just that his costs be discounted to a lesser degree. We are satisfied that Mr Prentice should have his counsel’s costs in full where they have been distinctly identified. The Court rejects that any of those costs were other than entirely properly incurred. We see no reason to discount them. We would discount the balance of Mr Prentice’s costs (including the composite sum of $5,500 for counsel and solicitors’ fees in relation to this application) by 25%. The lesser discount recognises that Mr Prentice was put to additional and unjustified expense and that a more significant discount would fail to recognise that factor.

111    Lump sum costs will be awarded in Mr Prentice’s favour according to the following:

    75% of $15,685.00;

    100% of $23,533.33;

    75% of $1,170;

    100% of $400.00; and

    75% of $5,500.00

112    We would order that the appellants pay Mr Prentice’s costs fixed in the sum of $40,699.58.

Associate:

Dated:    14 February 2019

SCHEDULE OF PARTIES