FEDERAL COURT OF AUSTRALIA

Dunstan v Seymour [2006] FCA 917

COSTS – lump sum order for costs – whether lump sum order should be made where taxation of costs has already commenced

HELD – costs fixed in a lump sum

Federal Court of Australia Act 1976 (Cth)

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

Canvas Graphics Pty Ltd v Kodak (Australasia) Pty Ltd [1998] FCA 23 referred to

Brookfield v Davey Products Pty Ltd [1997] FCA 1462 discussed

Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 cited

Dunstan v Seymour [2002] FCA 1195 cited

COLIN GEORGE DUNSTAN v GEOFFREY SEYMOUR

ACD 31 of 1997

COLIN GEORGE DUNSTAN v JOHN GROWDER

ACD 32 of 1997

MANSFIELD J

20 JULY 2006

CANBERRA

THE COURT ORDERS THAT:

1.                       The costs ordered to be paid by Colin George Dunstan to Geoffrey Seymour by order of 14 September 1998 be fixed in the gross sum of $11,200.

2.                       The issue as to the costs of taxation of the costs ordered to be paid by order of 14 September 1998 be adjourned to a date to be fixed.

3.                       The fixing of a gross sum for the costs ordered to be paid by order of 13 September 2002 be adjourned to a date to be fixed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

THE COURT ORDERS THAT:

1.                       The costs ordered to be paid by Colin George Dunstan to John Growder by order of 14 September 1998 be fixed in the gross sum of $11,100.

2.                       The issue as to the costs of taxation of the costs ordered to be paid by order of 14 September 1998 be adjourned to a date to be fixed.

3.                       The fixing of a gross sum for the costs ordered to be paid by order of 13 September 2002 be adjourned to a date to be fixed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

Introduction

1                     In these two proceedings, Mr Dunstan laid an information against each defendant on 23 April 1997 for the alleged commission of an offence, and a summons to the defendant in each matter was duly issued.  The defendant in each matter unsuccessfully challenged the jurisdiction of the Court to have issued the summons.  The prosecution of the charges was then taken over by the Commonwealth Director of Public Prosecutions (DPP).

2                     On 28 August 1998, the DPP elected not to proceed with the prosecutions.  The charges were then dismissed.  The defendants each then made an application for costs against Mr Dunstan as the original prosecutor.  On 14 September 1998, a judge of the Court ordered in each matter that Mr Dunstan pay to the defendant his costs.  Under O 62 r 4(1) of the Federal Court Rules, in the absence of further orders, those costs were to be taxed.

3                     The process of taxing the costs has been prolonged.  The defendant in each matter lodged a detailed bill of costs for taxation on 20 February 2001.  During 2001, 2002 and 2003 there have been a number of occasions when the taxing officer has conducted hearings with a view to progressing the taxation of the costs.  The taxation of the costs has not progressed very far.  During that process, in each matter, Mr Dunstan by motions of 6 September 2002, applied for the costs orders made on 14 September 1998 to be set aside.  He alleged they had been procured through fraudulent conduct.  On 13 September 2002, a judge of the Court dismissed Mr Dunstan’s motion in each matter, and ordered him to pay the costs of the motions.

4                     The defendant in each matter has now applied to have the costs ordered to be paid on 14 September 1998 fixed at a gross sum pursuant to O 62 r 4(2)(c) of the Rules.  Each application is opposed by Mr Dunstan.

5                     Mr Dunstan’s submissions include that the costs orders made on 14 September 1998 should not have been made because he commenced the prosecutions in good faith.  The fact is that the costs orders have been made.  Mr Dunstan has already applied to have them set aside.  He did so unsuccessfully.  On this application, I will give effect to them.  The issue is whether those costs should now be fixed in a gross sum.

6                     Mr Dunstan also submitted that orders should be made that the DPP pay his costs and indemnify him for the costs he has been ordered to pay the defendants.  There is no formal application before the Court to entertain that application, and the DPP has not been given notice of it.  I do not propose to further consider that submission.

Whether there is power to fix a gross sum for costs

7                     As the normal process of taxation of costs has already commenced, the question has been raised whether the Court may now exercise the power to fix costs at a gross sum under O 62 r 4(2)(c).  In my view, it may do so.

8                     There appears to be little doubt that the Court has power under O 62 r 4(2)(c) to order that costs be fixed in a gross sum after an order that the costs of a party be paid.  Once an order for costs is made, the normal or default method of fixing those costs is by taxing them:  O 62 r 4(1).  It is expressed as an entitlement of the party in whose favour the costs order has been made.  Order 62 r 4(2) refers expressly to circumstances where the Court orders costs to be paid.  It contemplates further orders, including that instead of taxed costs the person shall be entitled to a gross sum specified in the further order.  In either event, the process involves the means of quantifying the costs ordered to be paid.  In the absence of a further order, the entitlement is to quantify them by taxation.  The further order may change the entitlement to quantification by the gross sum.

9                     Order 62 r 4(1) and (2), in my view, thus contemplate successively an order for costs, and for a means of quantifying those costs.  That is a view which has been adopted by the Court, apparently without remark:  see e.g. Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; Canvas Graphics Pty Ltd v Kodak (Australasia) Pty Ltd [1998] FCA 23.  I can see no reason why O 62 r 4(2)(c) should not be given that effect.

10                  Once that step is taken, there is in my view no reason why the further order fixing the costs in a gross sum may not be made at any stage of the taxation process, whether after a bill of costs in taxable form is lodged, or after it is partly considered.  The reasons for making a further order fixing the costs in a lump sum may only emerge after the initial order for costs is made, or indeed (as here) after the process of taxation has commenced.  In addition, as the gross sum costs order will almost inevitably be made on the application of the party who has secured the order for costs, it is that party’s entitlement (as to the means of quantifying its costs) which may be affected by any such further order so the party entitled to costs will not be exposed to disadvantage.  That view also is consistent with the breadth of the discretion as to costs in s 43 of the Federal Court of Australia Act 1976 (Cth) and in O 62 r 3(1) of the Federal Court Rules.

11                  An alternative way of reaching the same outcome, where a gross sum order for costs may be made after an order for costs to be taxed, was adopted by Branson J in Brookfield v Davey Products Pty Ltd [1997] FCA 1462.  In that matter, the costs order had expressly stated that the entitlement was to pay the ‘costs to be taxed’.  Her Honour considered that there was power under s 43 to vary the costs order so made by specifying a gross sum for costs.

12                  I observe that, on 21 December 2005 when this issue was raised, Mr Dunstan did not contend that there was no power to do so.

Whether costs should be fixed at a gross sum

13                  In Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 (the main costs judgment) delivered at the same time as this judgment, I referred at [22]-[24] to certain of the principles relevant to deciding whether to make a gross sum order for costs.  I will not repeat them.

14                  The course of the taxation of costs thus far in these matters indicates that the process of taxing costs to date in these matters has been prolonged and expensive.  Mr Dunstan contends that that is the defendants’ fault, and so should not be in the particular circumstances a reason to fix a gross sum for costs.

15                  The bills of costs lodged on 20 February 2001 totalled $20,967 (31/97) and $21,137 (32/97) respectively.  An accompanying memorandum indicated that, as the defendant in each matter was represented by the same solicitor and as each matter was conducted simultaneously, many item costs had been apportioned to each bill of costs.  Mr Dunstan by letter of 25 March 2001 raised a number of objections to those bills of costs.  The defendants indicated that, apart from the possibility that certain claimed costs relating to discovery ought not to have been included, they disagreed with Mr Dunstan’s objections.  They were nevertheless prepared to have the items objected to removed from the bills of costs.  That led to the bills of costs being reduced by $3808 to $17,159 (31/97) and by $3811 to $17,326 (32/97).  The disputed (and conceded) items were identified.

16                  The taxing officer then, pursuant to O 62 r 46(3), issued an estimate of the taxable costs by letter to the parties in each matter of 22 June 2001.  The estimates were $11,990 (31/97) and $11,907 (32/97).  Under O 62 r 46(3), Mr Dunstan objected to those provisional costs assessments so that process of taxation needed to be undertaken.

17                  Before the process of taxation, attempts to resolve the amount of the costs in each matter by mediation were undertaken.  They were unsuccessful.  The taxations were then re-activated after March 2002.

18                  Mr Dunstan outlined his general position by letter of 10 September 2001.  He asked that the process be deferred until he was released from prison.  He indicated also that he would take every point available on the taxations.  His attitude is reflected in the following quote from that letter:

‘1.        It is not accepted that each alleged item was actually carried out.

2.                  If the alleged item was actually carried out, it is not accepted that the alleged item was in any way connected with cases AG31/1997 and AG32/1997.

3.                  If the alleged item was actually carried out in connection with cases AG31/1997 and AG32/1997, it is not accepted that the alleged item was necessary or proper.

4.                  If the alleged item was necessarily and properly carried out in connection with cases AG31/1997 and AG32/1997, it is not accepted that the cost shown is in accordance with the appropriate cost schedule.’

There is clearly no realism in that approach.  It is, for instance, self-evident that upon each defendant being served with the summons in each matter, each defendant would consult solicitors, that the solicitors would consider the summons and would take instructions in relation to it, would attend the directions hearings, and the like.  There may be scope to dispute that all attendances for those purposes were necessary or proper, or that all needed to take as long as they did, but not that none of them were necessary or proper.  It is also self-evident that instructions were taken to challenge by motion the jurisdiction of the Court to hear the information, because Mr Dunstan was served with those documents and attended when the motion in each matter was addressed.  There may be scope to assert that that work should not be allowed on a party/party taxation, but not that some such work was not carried out, and also to challenge the need for all the work done in relation to those motions.  Mr Dunstan, however, signalled very early that his approach was to dispute every costs item on every conceivable ground.

19                  On 20 May 2002, Mr Dunstan filed his notices of objection to the bills of costs in each matter.  He claimed that the costs orders of 14 September 1998 should not have been made because the Court had been deliberately misled about material facts.  It was unrealistic to raise that issue at the taxation.  Any application to set aside the costs orders should have been made to a judge.  A taxing officer has no power to set aside or ignore orders of the Court.  The notices of objection took the four points quoted in [18] above in relation to every item in the bills of costs, and in respect of some items raised additional objections or expanded upon one or more of the objections.

20                  On 29 May 2002, directions were given for the taxing process.  It was to commence on 20 September 2002.  On 6 September 2002, Mr Dunstan applied by motion to set aside the costs orders in each matter.  On 13 September 2002, those motions were each dismissed with costs:  Dunstan v Seymour [2002] FCA 1195.  In the meantime, the taxations were rescheduled to commence on 4 October 2002.

21                  There have then been seven attendances between 4 October 2002 and 27 November 2003 totalling 15.5 hours for the taxing of costs.  There has been no progress since that date.  In that time, only five of 37 pages of the bill of costs in one matter (31/97) have been taxed.  That covers 45 of 326 items.  The taxation of the other bill of costs (32/97) has not yet started.  Mr Dunstan’s circumstances have restricted the sessions to no more than two hours, and it has been difficult to arrange his availability.  Some schedule sessions have not taken place, though events beyond Mr Dunstan’s control.

22                  I do not regard that material as supporting Mr Dunstan’s claim that responsibility for the slow progress of the taxation of costs rests with the defendants.  It shows that the defendants, for the purposes of the taxation, were prepared to concede Mr Dunstan’s first round of objections.  They did so, on the evidence, to progress the taxation.  They did not thereby acknowledge that those items should not have been claimed.  An issue arose as to the extent to which Mr Dunstan should have access to material the subject of legal professional privilege for the purposes of the taxation.  Another issue arose as to the extent to which time spent on research should be allowed on taxation.  They are common issues which arise.  They do not indicate the defendants consciously claimed work done which was not done, or claimed that time was spent which was not spent.  The taxing officer could adjudicate on the individual items of work claimed.  Indeed, the material referred to tends to indicate that Mr Dunstan, rather than the defendants, has approached the taxation of costs in an obstructive way by disputing each item of work claimed, even to the extent of saying that the work was not done.

23                  In my view, it is clear that the continued taxation of the bills of costs would be unduly protracted and unduly expensive, having regard to the amounts of the costs claim which are to be taxed.  The history thus far demonstrates that.  It is not necessary to identify precisely why progress has been so slow, save for the finding I have made that the defendants have not caused that slow progress by any improper conduct on their part.  I see no reason why progress might be accelerated if the taxation of costs were to resume.

24                  It is also clear, on the material, that the further expense of continuing to tax their costs in the normal manner would be an expense which the defendants are unlikely to recover from Mr Dunstan.  I adopt my findings at [29] of the main costs judgment.  That is a factor which weighs in the scales in favour of making a gross sum costs order.

25                  As I said in the main costs judgment, the need to ensure that Mr Dunstan is not disadvantaged by a gross sum costs order, by such an order fixing costs at a figure higher than would be fixed on normal taxation, can be accommodated by a careful and conservative approach to the fixing of a gross sum for costs in each matter.

26                  Mr Dunstan contends that it is not possible to do that in these matters because the process of taxation of costs to date reveals that, however conservative an approach is taken, there is too great a risk of fixing too high a gross sum for costs.  (He also argued in relation to the gross sum costs applications considered in the main costs judgment that the uncertainty about reaching a proper gross sum in these matters should indicate that similar uncertainty should be found to exist in relation to those costs applications as well.)

27                  I do not accept that submission.

28                  The means by which a gross sum for costs might be fixed are referred to by Kim Chapman.  For reasons given in the main judgment, I generally accept his evidence.  Mr Chapman’s starting point in these matters has been the taxing officer’s estimates of taxable costs in each matter of $11,990 (31/97) and $11,907 (32/97).  That starting point firstly took out of the bills of costs all items to which Mr Dunstan initially objected on 25 March 2001.  The estimates then represent about 70 per cent of the bills of costs as adjusted by the defendants’ concessions and about 57 per cent of the bills of costs as lodged.

29                  Mr Chapman has also reviewed the taxation of the bill of costs (31/97) thus far.  He has considered Mr Dunstan’s objections, the concessions made by the defendant in that matter, and has been alert to check that the work itemised does relate to the particular matter.  On the basis of the taxing officer’s rulings thus far, and his consideration, he considers it is unlikely that the two bills of costs will be taxed at less than the taxing officer’s estimates, a total of $23,897.

30                  The items to which Mr Dunstan initially objected on 25 March 2001 related in part to the discovery process, including making the relevant documents available for inspection by Mr Dunstan or his wife before the DPP took over the prosecution.  Mr Dunstan in his written submissions suggests that none of that work was done, at least not in these proceedings.  That is disputed in the correspondence between the parties.  Although the extent of that work may not all be recoverable on a party/party basis, I think that much of it would be recoverable.  They also relate to the defendants’ unsuccessful motion to challenge the jurisdiction of the Court.  I agree those items would not be allowed on taxation, including the conduct of the ‘pre-trial conference’ of 13 May 1998 (when the motions of the defendant were dismissed).  They further relate to the defendants’ request for particulars of the allegations.  I consider that topic is one in respect of which proper costs would be recoverable.  However, consistent with the defendants’ concession, I do not propose to take any of those matters into account in determining the present costs applications.

31                  Mr Dunstan in his written and oral submissions identified several other items which, he said, were improperly claimed.  It is not necessary to address them individually at this point, as I do not consider the points made – assuming them to be valid – go much distance towards demonstrating that no proper or reliable means of determining a gross sum for costs is available.

32                  Mr Chapman was cross-examined by Mr Dunstan.  Partly that related to items to which Mr Dunstan had objected on 25 March 2001 and had been conceded.  He raised with Mr Chapman the suggestion that the general care and conduct allowance had been claimed twice, but Mr Chapman did not accept that.  Mr Dunstan presented to Mr Chapman his analyses of the bill of costs (31/97) which indicate that duplication.  The care and consideration allowance of 20 per cent appears to have been applied to the whole bill, and not merely to the reduced amount reflecting the concessions.  The concessions which were originally the subject of that uplift totalled $2089 (31/97) and $2092 (32/97), so the possibly wrongly included component of the care and consideration element is $418 (31/97) and $418 (32/97) respectively.  The balance of the conceded items were disbursements, which were not subject to the uplift.  It is not clear that the taxing officer’s estimates made the necessary adjustment to the care and conduct allowance, although it is likely that they did so as the normal practice is to estimate the allowable costs items, and then to add the care and conduct component.  As Mr Chapman did not expressly say that had been done in this case, I will out of an abundance of caution make that adjustment to the figure I would otherwise fix as a gross sum for costs.

33                  Mr Dunstan also suggested to Mr Chapman that, on taxation, no costs would be allowed against Mr Dunstan in either matter from the time when the DPP took over the prosecutions until their dismissal on 28 August 1998.  Mr Chapman did not agree.  The short answer is that the costs orders made on 14 September 1998 ordered Mr Dunstan to pay the costs of the proceedings.  Those orders related to the whole proceeding, in each matter, and not only to the conduct of the proceeding to a particular time.

34                  There was nothing else elicited in cross-examination of Mr Chapman which, in my view, went in any material way to demonstrating that there was no sound basis for reliably fixing a proper gross sum for costs in these matters.

35                  Upon the whole of the material and submissions, I think the process of taxing the bills in these matters thus far does indicate that the bills as prepared do in general accurately reflect the material in the files of the defendants’ solicitors, and do in general reflect an attempt to identify the work attributable to the particular matter.  There may be errors in those processes, but they are not shown to be so unreliable that I should not have regard to their foundation, that is the working records, as lacking in general reliability. 

36                  For those reasons, in my judgment, these matters are ones where the strong preponderance of material is in support of an order for gross sum costs.  I propose to make such an order.

Quantum of gross sum costs orders

37                  Many of the relevant considerations have been discussed in the preceding section of these reasons for judgment.  In my view, an appropriate starting point is the taxing officer’s estimates of 22 June 2001.  Mr Chapman has reviewed the bills of costs to see the extent to which they may involve items of work not attributable to these matters, or unnecessary duplication of work, or inappropriate allowance for research and the like.  Having done those tests, he considered the estimates properly allowed for such matters.  Mr Dunstan’s contentions, except in one respect, have not indicated any reason to depart from those estimates.  The one respect, referred to above, is the further reduction I propose in case the allowance for care and conduct has been a little inflated, or more accurately not been deflated, in the way referred to.

38                  I am fortified in that view by Mr Chapman’s evidence that he has reviewed the taxation of costs, to the extent that it has proceeded (in 31/97).  He regards the estimates as likely to be lower than would have been allowed upon full taxation, based on the taxation to date.  He was not directly challenged in that opinion.  There was no cross-examination which sought to present the picture that what should have been allowed on taxation on the five pages of the bill (in 31/97) which have been taxed should be significantly lower.

39                  I propose to fix the costs in the gross sums of $11,200 (31/97) and $11,100 (32/97) respectively in respect of the work to which the costs orders of 14 September 1998 relate.  I have reduced the estimated costs by the possible over-allowance for care and conduct, and then by a further sum simply to adopt a conservative approach which has regard to the several items and issues which Mr Dunstan raised.

40                  The defendants have also claimed a further allowance in the gross sum for the costs of taxation to date, and for the unsuccessful motion to set aside the costs orders.  They rely upon Mr Chapman’s opinion about the costs recoverable on the bill of costs as taxed to date (in 31/97) to say that Mr Dunstan should also pay the costs of the taxation thus far as the bills of costs are unlikely to be taxed with more than 15 per cent deduction from the estimates of the taxing officer:  O 62 r 46(4A).

41                  The additional costs are said to be $43,616 comprising the fees of the defendants’ solicitors for taxing the bills of costs to date of $27,690, disbursements for filing fees of $2400, and Mr Chapman’s fees of $13,526.  Mr Chapman’s evidence is that those several items should be allowed at $12,000, $2400 and $5250 respectively, a total of $19,650.  Those adjustments reflect his application of the approach referred to in [39]-[42] of the principal costs judgment.  They allow for only one solicitor (the costs consultant) to attend the taxation.  Mr Chapman’s fees are reduced because the taxing officer’s estimates already allow for drawing the bills of costs.  The attendances on taxation have been allowed at the scale rate.

42                  Mr Dunstan made no submissions to challenge those matters.  I see no reason why I should not accept them, as far as they go.  I would, but for two matters, make gross sum costs orders to give effect to that evidence.

43                  The first matter concerns my power to deal with the costs of the taxation of costs to date.  Order 62 r 46(4B) empowers the taxing officer to make an order for the costs of taxation.  As it is not clear, in the circumstances, that I now have the power to make an order for the costs of the taxations, including a gross sum costs order, I will give the defendant in each matter (if so advised) an opportunity to make submissions in writing on that topic and will give Mr Dunstan an opportunity to respond before deciding that question.

44                  The second matter is that the evidence does not break up the costs claimed in respect of each of the two actions, including in particular the costs of the motions to set aside the costs orders in each action.  I think it is necessary that there be such a break-up of costs.  The power to fix costs in a gross sum should be exercised in respect of each matter separately.  That is evident from the fact that the persons in whose favour the costs are to be paid are different; it is not a joint liability to the defendants.

45                  I will therefore not make any gross sum costs orders in respect of the costs of the taxation to date, or in respect of the costs ordered to be paid on 13 September 2002 in each action when the motions to set aside the costs orders were dismissed.  I will give the defendant in each matter the opportunity (if so advised) to provide further evidence or submissions or both in each matter as to the relevant costs separately attributable to each, including those costs separately attributable to the two motions.  I will then give Mr Dunstan the opportunity to respond.  In the first place, the further evidence and/or submissions should be in writing and any responsive submissions also should be in writing.  If further evidence is adduced, Mr Dunstan in written submissions may also indicate if he wishes to cross-examine the deponent and the need for any such cross-examination.

Orders

46                  For the reasons given, in matter 31/97 I order that the costs ordered to be paid by Mr Dunstan to the defendant by order of 14 September 1998 be fixed in the gross sum of $11,200.  I presently do not propose to order that Mr Dunstan pay the defendant the costs of taxation of those costs to date.  I will give the defendant the opportunity to pursue that claim if so advised, and of course Mr Dunstan the opportunity to respond to it.  I adjourn that application to a date to be fixed.  I also adjourn to a date to be fixed the defendant’s application for a gross sum cots order in respect of the costs ordered to be paid on 13 September 2002, and will give the parties the opportunity to further address that claim.

47                  I also order in matter 32/97 that the costs ordered to be paid by Mr Dunstan to the defendant by order of 14 September 1998 be fixed in the gross sum of $11,100.  I will deal with the costs of taxation of those costs to date, and the costs ordered to be paid on 13 September 2002, in the same manner as I have dealt with the like claims in matter 31/97.

Associate:

Dated:              20 July 2006