FEDERAL COURT OF AUSTRALIA

Patrick Stevedores No 2 Pty Ltd v The Proceeds of Sale of

MV “Skulptor Konenkov” [2000] FCA 1710

COSTS – costs of the Admiralty Marshal – whether the Marshal’s costs should be paid on an indemnity basis – whether Schedule 2 of the Federal Court Rules regulates the quantum of an indemnity cost order in favour of the Marshal

COSTS – variation of a taxation order – whether an order that the Marshal’s costs be taxed should be varied and replaced with an award of a gross sum

PROCEDURE – power of a single Judge to vary an order of the Full Court – whether a single Judge has power to vary an order of the Full Court that the Marshal’s costs be taxed

Bayside Air Conditioning Pty Limited v The Owners of the Ship “Cape Don” (Cooper J, 15 May 1997, unreported) followed

EMI Records Ltd v Ian Cameron Wallace Ltd (1983) 1 Ch 59 cited

Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 followed

Re Wilcox; Ex parte Venture Industries Pty Limited (1996) 141 ALR 727 followed

Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 followed

Bird v Free (1994) 126 ALR 475 cited

Haskins v Official Trustee in Bankruptcy (North J, 23 September 1996, unreported) cited

PATRICK STEVEDORES NO 2 PTY LTD (FORMERLY KNOWN AS STRANG PATRICK STEVEDORING PTY LIMITED),

PATRICK STEVEDORES NO 1 LIMITED (FORMERLY KNOWN AS AUSTRALIAN STEVEDORES NO 1 LIMITED)

AND BY AMENDMENT:

BERGEN BUNKERS A/S, ENSO-GUTZEIT OY, FINNPAP MARKETING ASSOCIATION, GLAVERBELL SA AND G JAMES AUSTRALIA PTY LIMITED,

ROMET LIMITED (FORMERLY METRO MEAT LTD) AND SHEED THOMSON INTERNATIONAL LIMITED, OPAL MARITIME AGENCIES PTY LIMITED v

THE PROCEEDS OF SALE OF THE VESSEL MV "SKULPTOR KONENKOV"

TAMBERLIN J

SYDNEY

24 NOVEMBER 2000

REASONS FOR JUDGMENT

MARSHAL’S COSTS

1                     The dispute before me arises in relation to a number of orders made by the Court over a period of several years that the Admiralty Marshal’s (“the Marshal”) legal costs in this matter be taxed on an indemnity or solicitor-client basis.

2                     Several earlier orders were made by me as to taxation of costs on an indemnity or solicitor client basis at various stages in this lengthy proceeding and in addition an order has been made by the Full Federal Court in relation to the costs of an appeal.

3                     The Amended Notice of Motion filed by the Marshal on 15 September 2000 seeks the following orders:

“1.       The Admiralty Marshal’s fees, expenses and legal costs in relation to the administration of the proceeds of sale and the conduct of this matter and matter NG 197 of 1998 be paid out of the fund established from the proceeds of sale of the ship pursuant to order no. 1(a) dated 17 December 1999.

2.         Opal Maritime Agencies Pty Ltd and any other interested parties notify the Admiralty Marshal with full particulars of the Marshal’s fees, expenses and legal costs which they contend are unreasonable on or before 6 October 2000.”

…

4                     Declarations are sought that:

“5.       The appropriate method of assessment of the Admiralty Marshal’s costs on an indemnity basis in this Court is all the reasonable costs of the Marshal having regard to the practice of commercial shipping legal practitioners in Sydney at the rates charged by the Marshal’s solicitor and counsel.

6.         The appropriate method of assessment of the Admiralty Marshal’s costs on a solicitor client basis in this Court is all the reasonable costs of the Marshal having regard to the practice of commercial shipping legal practitioners in Sydney at the rates charged by the Marshal’s solicitor and counsel”

5                     The main issue raised is whether notwithstanding the orders previously made the Marshal should be able to recover his costs without proceeding to taxation pursuant to the orders sought.  The Marshal seeks to have his legal costs and expenses paid in the form of a gross sum specified in an Order of the Court.

6                     The Motion is opposed by Opal Maritime Agencies Pty Limited (“Opal”) which has a claim for the balance of the funds.  There is no issue as to the standing of Opal on this application.  Opal contends that the bills for legal costs and expenses of the Marshal’s solicitor must be taxed.  The process of taxation, so it is said, would enable Opal to examine in detail an itemised list of the charges by the solicitor and would enable a challenge to be made, if appropriate, to particular items.  Opal submits that this is not possible on the present account presented by the solicitor for the Marshal.

7                     Order 62 r 4 of the Federal Court Rules relevantly provides:

“4(1)   Subject to this Order, where by or under these Rules or any order of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs.

(2)       Where the Court orders that costs be paid to any person, the Court may further order that as to the whole or any part of the costs specified in the order, instead of taxed costs, that person shall be entitled to -

(a)       a proportion specified in the order of the taxed costs; or

(b)       the taxed costs from or up to a stage of the proceedings specified in the order; or

(c)        a gross sum specified in the order; or

(d)       a sum in respect of costs to be ascertained in such a manner as the Court may direct.

(3)       The Court may make an order under subrule (2) at any time, whether or not an order that costs be paid to a person has previously been made or entered.”

8                     Counsel for the Marshal submits that as a general principle the Marshal is entitled to a full indemnity in respect of costs incurred in relation to the arrest and sale of the vessel “MV Skulptor Konenkov.”  This is in accordance with the observations of Cooper J in Bayside Air Conditioning Pty Limited v The Owners of the Ship “Cape Don” (Cooper J, 15 May 1997, unreported) where his Honour said:

“As to the position of the Marshal’s costs, I think the appropriate order is that those costs be the Marshal’s costs of sale and be paid out of the proceeds of sale.  As the Marshal in these proceedings acts as an officer of the Court and not as a party to the proceedings the Marshal should be fully indemnified for the costs he has incurred in discharging his duty.  Accordingly, the Court orders the costs of the Marshal of and incidental to today’s application be paid on a solicitor and own client basis.”  (Emphasis added)

9                     It is apparent from the foregoing that his Honour considered that the solicitor and own client basis provided a complete indemnity to the Marshal in respect of costs.

10                  A distinction is drawn in some of the authorities between  costs on an indemnity basis, cost on a solicitor-client basis, and costs on a solicitor-own client basis.  In the present case I am  satisfied that all the previous costs orders were intended to provide an indemnity to the Marshal of his costs as taxed.

11                  The breadth of order for indemnity costs was spelt out by Vice-Chancellor, Sir Robert Megarry, in EMI Records Ltd v Ian Cameron Wallace Ltd (1983) 1 Ch 59 at 71, in the following terms:

“To say that on a taxation ‘all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred’ seems to me to be giving the litigant a complete indemnity, shorn only of anything that is seen to be unreasonable. The litigant does not have to establish that the costs were necessary or proper, or that the costs were of a reasonable amount and reasonably incurred.  Provided they are costs of and incidental to the proceedings, he is entitled to recover them, subject only to the qualification that they are liable to be reduced in respect of anything that the taxing master considers to fall within the headings ‘unreasonable amount‘ or ‘unreasonably incurred’.  In a word, the difference is between including only the reasonable and including everything except the unreasonable.  In any taxation there must be many items or amounts that are plainly allowable, and many others which are plainly not allowable.  In between, there must also be many items or amounts which do not fall clearly within either extreme.  On a party and party taxation, or on a taxation on the common fund basis, many such items may fail to be allowed; on a taxation on an indemnity basis they will all be included.”

12                  Counsel for the Marshal points out that no suggestion of overcharging or over–servicing or of unreasonableness has been made by Opal.  Nor is there any evidence to warrant such an inference.  Mr Coleman, the solicitor for the Marshal, has sworn an affidavit annexing his account for $44,861.24 including Counsel’s fees.  Mr Coleman’s account is in the form of a detailed breakdown of the time spent on particular tasks.  The total time is then costed as follows:

13                  “Time spent to 30.6.00 118.6 hours @ $280                         $33,208.00

Time spent after 30.6.00 5.6 hours @ $308

            (including 156.80 GST)                                                  $1,724.80”

14                  Counsel’s fees are in a similar, although less detailed, form and total $9,904.

15                  It is these amounts which are in dispute in this matter.

16                  No attempt was made on the part of Opal to cross-examine Mr Coleman or to adduce any evidence that the number of hours or the rates charged were unreasonable or excessive.  Nor was any allegation levelled that they were not incurred bona fide, that they were not within a reasonable range, or that they could not be characterised as legal fees.  Rather, the position taken by Opal was that, although it presently had no reason to question the costs, it simply did not have enough information to form a view.  Opal points to the orders made over the past few years that the Marshal’s costs should be taxed on an indemnity basis, and emphasis is placed by them on the reference to taxation.  Reference was also made to r 72 of the Admiralty Rules which provides:

“72(1) The Registrar shall tax the fees and expenses of the Marshal in connection with the valuation and sale of a ship … ordered to be sold.

(2) A person who is an interested person in relation to the proceeds of the sale may appear before the Registrar on the taxation.”

17                  There is power in the Admiralty Rules, in an appropriate case, to dispense with compliance with any of the Admiralty Rules including r 72: see r 80.  For the reasons given below I think it is appropriate to exercise this power in the present circumstances.

18                  The Marshal has provided evidence in the form of an affidavit as to what is considered reasonable by an experienced professional practitioner in the Admiralty jurisdiction.  In addition, a number of accounts by solicitors have been provided to the Court by the Marshal’s solicitor.  There was no contradictory evidence, or cross examination to challenge this evidence.  The evidence of the practitioner, Mr Hetherington, is, however, not directed to the reasonableness of any specific item or claim in the present case but is rather directed to appropriate hourly rates.  In particular, Mr Hetherington states that a charge out rate of between $280 and $308 per hour is within a reasonable range, and that Counsel’s fees charged in this matter were based on reasonable rates.  Again, no challenge was made to this affidavit by Opal but reliance was placed on the qualification made by Mr Hetherington that he could not comment on the reasonableness of any particular claim. 

19                  Counsel for Opal submitted that any taxation of the solicitor’s award of indemnity costs should be undertaken on the basis of the costs prescribed by O 62 r 12 of the Federal Court Rules and Schedule 2 thereof. I do not accept this submission for two reasons.  Firstly, that Schedule only applies to party-party costs and not to costs on an indemnity or solicitor-client basis: see Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 226 and Re Wilcox; Ex parte Venture Industries Pty Limited (1996) 141 ALR 727 at 734.  Secondly the Schedule in terms only applies “except as otherwise ordered” and where an order is made for costs to be taxed on an indemnity basis there is, in my view, an order to the contrary.  The purpose of an order for indemnity costs is to compensate a party for costs reasonably incurred in relation to or in the course of litigation.  There is therefore an important difference between a bill of costs made on an indemnity basis and one which is made on a party-party basis.  In the latter case, the task is a more mechanical one in the sense that amounts are specified.   In the former case the emphasis is on the unreasonableness of the amount and the appropriateness of carrying out the work in respect of which the payment is claimed.

20                  Counsel for Opal also submits that because the Marshal is a court officer he should act in a reasonably open and accountable way and that to do otherwise would give a blank cheque to the Marshal’s solicitor and Counsel.  Reference is made to the requirement that Trustees in Bankruptcy are bound to tax their charges in the event of disagreement.  This submission in my view grossly overstates the position.   In the present case I am satisfied that the Marshal has acted in an open, reasonable and accountable way in relation to the incurring of legal costs.  Nothing has been suggested to the contrary. The analogy to the situation of a Trustee in Bankruptcy is not apposite because those costs are determined by a scale.

21                  As noted earlier the costs orders already made in this case required the Marshal’s costs to be taxed. However, it is apparent that the costs of taxation will be considerable  having regard to the period of time over which the costs were incurred and the complexity of the matters in issue and I consider that such expenditure of time and expense is not warranted.  I am satisfied that an order can and should be made under O 62 r 4(2) to provide for the payment of a lump sum: cf Brookfield and Septic Products Pty Limited (In Liquidation) v Davey Products Pty Limited (1997) (Branson J, unreported) and Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, where von Doussa J made an order for the payment of a specified gross sum instead of taxed costs notwithstanding his earlier order, in the proceeding, that as between certain of the parties costs be paid on a party-party basis, and as between others that costs be paid on an indemnity basis.  At 120 of his reasons his Honour said in relation to the question of jurisdiction:

“Pursuant to O 62 r3(1) the Court may exercise its powers and discretions at any stage of the proceedings or after the conclusion of the proceedings.  In my opinion the Court has power to make a gross sum order at this stage notwithstanding that costs orders were earlier made which envisaged taxation in the ordinary way.” (Emphasis added)

22                  One reservation which I have in relation to the award of a gross sum concerns the order made by the Full Federal Court on the appeal in this matter to the effect that the Marshal’s costs of the appeal should be taxed on an indemnity basis.  I do not consider that as a single Judge I have any power or discretion to vary this order: see Bird v Free (1994) 126 ALR 475 at 479; Haskins v Official Trustee in Bankruptcy (North J, 23 September 1996, unreported).  Accordingly, the Marshal’s costs of the appeal to the Full Federal Court must be taxed, subject of course to agreement between the parties to dispense with taxation.

23                  In the course of submissions Opal informed me that it would not seek any variation of previous costs orders made by Sheppard J in this long-running litigation.  I consider that it is appropriate (except in relation to the appeal) to dispense with the requirement for the Marshal’s legal costs to be taxed and that an award of costs in a gross amount is appropriate.

24                  This conclusion will require the Marshal to recalculate the gross amount after allowing for the taxed costs of the appeal.  I also consider that as the Marshal has been substantially successful on this application by Opal his costs should be paid on an indemnity basis from the proceeds of sale.

25                  However, I do not consider it is necessary or appropriate for me to make the declarations sought by the Marshal.

26                  I stand the matter over to 8 February 2001 and I direct the Marshal to bring in Draft Short Minutes of Orders to give effect to these reasons.

Associate:

Dated:              24 November 2000