FEDERAL COURT OF AUSTRALIA

Coshott v Prentice (No 2) [2018] FCAFC 221

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s application for costs awarded as a lump sum be dismissed.

2.    The respondent pay the appellant’s costs of the interlocutory application.

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

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s application for costs awarded as a lump sum be dismissed.

2.    The respondent pay the appellant’s costs of the interlocutory application.

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

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s application for costs awarded as a lump sum be dismissed.

2.    The respondent pay the appellant’s costs of the interlocutory application.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 19 October 2018 this Court dismissed each of the appeals in NSD 1 of 2017, NSD 2 of 2017 and NSD 788 of 2017: see Coshott v Prentice [2018] FCAFC 179. The Court ordered that the appellant in each matter (James Coshott, Ljiljana Coshott and Fewin Pty Limited respectively) pay the respondent’s costs of the appeals.

2    The respondent, Maxwell Prentice, now applies for an order that his costs be awarded as a lump sum pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth) (the Rules). Consent orders were entered on 16 November 2018 granting leave to the parties to file and serve submissions on the appropriateness of the Court making a lump sum costs order.

Relevant principles

3    The Court’s discretion to award costs is conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act), which includes an explicit power to award costs in a “specified sum”: see s 43(3)(d). Rule 40.02(b) of the Rules provides that a party entitled to costs may apply for an order that costs “be awarded in a lump sum, instead of, or in addition to, any taxed costs”.

4    The purpose of these provisions 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 at 120. That is reflected in the Court’s Costs Practice Note (GPN-COSTS) (Costs Practice Note), issued by the Chief Justice on 25 October 2016, which states the following:

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.

5    However, a lump sum costs order is not mandated in all cases. Rather, it is a matter for the Court to exercises its discretion as appropriate: 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.

The parties’ submissions

6    Identical submissions were filed by Maxwell Prentice in each of the appeals. The appellants’ respective submissions were also identical, save for references to the file numbers.

7    Maxwell Prentice notes that the three appeals were heard together, and there were seven common grounds of appeal across the appeals. The appellants were ordered to pay Maxwell Prentice’s costs with respect to each appeal.

8    At [8], the respondent submits (unaltered):

[I]n any assessment if assessed on the basis of “costs as between party and party” the determination by the court as a “Lump Sum” amount would:

(a)    permit the trial court (in this case the Full Court) to consider the appropriateness of costs across the 3 appeals at the one time;

(b)    conveniently enable the Court being aware of the circumstances of the Appeals to determine an appropriate amount for costs;

(c)    take account of the saving of time in the ordinary taxation process as permitted by Part 40 of the Federal Court Rules 2011;

(d)    in circumstances where the costs are not likely to be substantial across the 3 Appeals to either fix a consolidated amount in respect of which the totality is jointly and severally applicable to each of the Appellants, or, alternatively, apportion the totality of the costs between the 3 proceedings exercising its powers in terms of s. 22 and s. 43 of the Federal Court of Australia Act 1976 consistent with the principles enunciated in the Practice Note.

9    The appellants submit that although the three appeals were heard together, they are separate proceedings commenced by different appellants, with different grounds of appeal. The making of a consolidated costs order for the three appeals would result in each appellant being jointly and severally liable for the costs of the others, which would be unjust and fall foul of s 37M of the FCA Act.

10    The appellants submit that the making of a lump sum costs order would require the Court to assess the proportion of the hearing devoted to each appeal and to apportion the parties’ written submissions between each appeal. The Appellants submit that this is a task for a taxing officer, not the Full Court. On that basis, the appellants submit that a lump sum costs order would not be appropriate.

Consideration

11    The Court is of the view that, convenient as it might seem, it would be inappropriate to make a consolidated costs order against the appellants, one of which is a company, because such an order would cover the costs of all three appeals and thereby wrongly impose costs on each appellant that were incurred in proceedings to which they were not a party.

12    Having regard to that conclusion, in our view, a lump sum costs order is not appropriate in the present circumstances. Such an order would require the Full Court to allocate costs as between each appeal. Such an exercise would be complicated by the fact that, although the grounds of appeal that were actually pursued were not identical, there was some crossover of the content of parties’ written and oral submissions. To require a Full Court to undertake such a task would not be, as is envisaged by the Costs Practice Note, “as inexpensive and efficient as possible.” Such a task, if required, is more appropriately to be conducted by a taxing officer.

13    In our opinion, the potential benefits of a lump sum costs order avoiding the expense, delay and aggravation of a taxation are illusory in the present appeals. We would, however, encourage the parties to recognise that the already protracted litigation over costs has proved to be of little advantage to any of their interests, and would encourage the use of other cooperative methods (as set out in the Costs Practice Note) to settle the costs of these appeals with the least transactional cost possible.

14    We have come to this conclusion without referring to the additional factor that James Coshott, the appellant in NSD 1 of 2017, has sought special leave to appeal to the High Court of Australia. We do not think that is a sufficient reason to not determine the question of principle of whether a lump sum costs order is appropriate in these circumstances.

15    The respondent should pay the appellants’ costs of this interlocutory application.

Associate:

Dated:    5 December 2018