FEDERAL COURT OF AUSTRALIA

Nine Films & Television Pty Limited v Ninox Television Limited [2006]

FCA 1046

COSTS – Application for costs to be fixed rather than taxed – respondents applied for ajournment at hearing – dismissed - respondents had notice of amount claimed for four months prior to hearing –discretion of Court to award lump sum – relevant factors to consider – principles to be applied in fixing quantum of lump sum.

Federal Court Rules 0 62 r 4(2)(c) and r 26

Beach Petroleum NL Johnson (1995) 57 FCR 119

Harrison v Schipp (2002)54 NSWLR 738

Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788

Donohoe v Britz (No. 2) (1904) 1 CLR 662

Sparnon & Ors v Apand Pty Ltd [1998] FCA 164

NINE FILMS & TELEVISION PTY LTD (ACN 066 040 024) AND NINE NETWORK AUSTRALIA PTY LTD (ACN 008 685 407) v NINOX TELEVISION LIMITED (FORMERLY KNOWN AS NINOX FILMS LIMITED), TELEVISION NEW ZEALAND LIMITED AND JOHN CHARLES McEWEN

NSD 1820 OF 2004

TAMBERLIN J

SYDNEY

11 AUGUST 2006

THE COURT ORDERS THAT:

1. The costs of the applicants be fixed at an amount of $650,000 pursuant to O 62 r 4(2)(c). Of the total amount, the costs payable by the first and third respondents pursuant to Order 4 of the costs order made 30 September 2005 are fixed at a gross sum of $487,500. Costs payable by the first respondent pursuant to Order 5 made 30 September 2005 are fixed at a gross sum of $162,500.

2. Pursuant to O 62 r 26, the applicants are granted leave to discontinue the proceedings insofar as it relates to the applicants’ claims for pecuniary relief, with no further or other orders as to costs.

3. The respondents are to pay the costs of this application.

4. The amount of $100,000, and such interest as has accrued on that sum, which is held in the joint bank account of Dale Francis Cliff and Michael John Williams pursuant to the order made by the Court on 7 June 2005, is to be released to the applicants for the purpose of payment of Nine’s costs.

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

REASONS FOR JUDGMENT

1                     The applicants seek an order that the costs of the primary Application and Cross-Claim, payable by Ninox and Mr McEwen pursuant to orders made on 30 September 2005, be fixed under 0 62 r 4(2)(c) of the Federal Court Rules at a total sum of $843,199.42 instead of being taxed.

2                     The rule provides that where a person is ordered to pay costs as taxed, the Court has a discretion, which must be exercised judicially, to order a gross amount instead of an amount determined after taxation.

3                     This judicial discretion is broad and unfettered by any specified considerations. Taxation of costs in a case such as the one before me is a lengthy, expensive and time-consuming process. The rule is directed to the avoidance of such expense, delay and protraction of litigation, and it may be appropriate to apply the rule in either a complex case or simple one: see Beach Petroleum NL Johnson (1995) 57 FCR 119 at 120.

4                     When the application came on for hearing before me, Counsel for the respondents sought an adjournment. I refused that application because the respondents had been on notice of the amount claimed for over four months and had been served approximately five weeks before the hearing with an expert assessment from a costs consultant, Ms Suzanne Bevacqua, setting out the details of the amount claimed to support the lump sum order. Although not in taxable form, the detailed breakdown is comprehensive and extends over some forty-eight pages together with a Report of fifteen pages (“the expert Report”) that sets out the reasoning behind the assessment. In my view, this estimate and outline of the approach adopted by the applicants gave sufficient information to enable the respondents to properly prepare and challenge the claim. Instead of challenging the claim in respect of specific items, the respondents served two affidavits on the applicants one day before the matter was due to be heard. At the hearing, the respondents sought to base an application for adjournment on the information contained in these affidavits. Neither of these challenged any specific item or group of items. One affidavit, prepared by Ms Deborah Vine-Hall, was filed on 2 August 2006. Another affidavit prepared by Mr John McEwen was handed up to me at the hearing as it had not been filed as at that date. Ms Vine-Hall is an experienced costs expert and carried out an examination of Nine’s material and the expert Report, but in her affidavit there is no indication of any specific objection to any item or line of reasoning in these documents. Having regard to the protracted history of this matter and the failure of the respondents to provide any satisfactory explanation as to why the hearing should not proceed, I refused the adjournment. There was no cross-examination of any of the deponents to any of the affidavits filed by Nine on this costs application.

5                     The first question is whether it is appropriate, in the circumstances of this case, to fix a lump sum instead of permitting the matter to proceed to taxation. The answer must be in the affirmative. This litigation was hard fought and had a lengthy history with numerous interlocutory applications concerning service outside the jurisdiction, a security for costs application, discovery, setting aside of subpoenas and adjournment of the proceedings. The estimate prepared by the costs assessor for Nine is detailed and lengthy, and its preparation has clearly involved the investigation of individual items. A bill in taxable form would also involve extensive and detailed preparation.

6                     Evidence indicates that it is likely that the taxation procedure would take at least several weeks to complete with extensive additional work by legal advisors. The fees of the applicant’s cost consultant alone in preparing a detailed bill of costs is estimated to be in the order of $40,000, without taking into account the costs of any appearances and the preparation costs required for counsel and solicitors on the taxation. In addition, there is a real concern and some evidence to suggest that the respondents may not be in a position to meet the costs order. Delay would only aggravate this concern. In the light of these considerations, it appears to me that this is clearly a case where it is appropriate to make an order that the whole of the costs should be fixed as a gross sum without taxation.

7                     The second question concerns quantum. Nine says that the starting point in considering this question is that the costs as between solicitor and client are said to amount to $965,671.47. The amount claimed by Nine represents approximately 87 percent of this figure. The figure estimated by the cost assessor as reasonable for both the Cross-Claim and the hearing at first instance is $843,199.42, which comprises solicitors’ profit costs of $482,046.81 and disbursements of $365,691.61 less work done for taxation in an amount of $4,539.00. This is said to be a proper and necessary figure for Nine to recover on a party-party basis. It is evident from the report of Nine’s costs consultant that the matter was approached on the basis that the charges were necessary given the extreme importance and significance of the proceedings, together with the range of complex issues involved.

8                     In fixing a lump sum, the exercise is one of estimation or assessment and not of arithmetic calculation or precision. As pointed out in Harrison v Schipp (2002)54 NSWLR 738 at [22], the rule contemplates the application of a much broader brush than that applied on taxation. The approach must be logical, fair and reasonable, and should only be exercised when the Court considers that it can do so fairly as between the parties: see also Jacobson J’s discussion in Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788 at [198]-[199]. In that case, his Honour allowed the applicants to recover only 40 percent of the amount claimed. Counsel for Nine points out that in Sony, his Honour did not have the advantage of a detailed assessment of costs by an expert consultant as in the present case. However, I note that the amount sought by the applicants in Sony as a gross sum was only 60 percent of the actual costs incurred. His Honour reduced that claim by a further 20 percent. Although the circumstances in the present case differ from the circumstances presented in the Sony matter, I consider that the approach of Jacobson J affords a broad general pointer to an appropriate range when determining a gross sum. In Donohoe v Britz (No. 2) (1904) 1 CLR 662 at 666, Barton J pointed out that when considering the amount of costs to be awarded as between party and party, the luxuries of litigation must be paid for by those who indulge in them and only the necessary costs are to be paid for by the losing side. The principles and approaches are also set out and considered by von Doussa J in Sparnon & Ors v Apand Pty Ltd [1998] FCA 164 in which his Honour fixed a gross amount of $634, 320.54 where the actual costs paid by the client totalled $1,040,135.80. This amounted to a discount of some 39 percent.

9                     I have case-managed this matter since its inception, and I am aware of the events and applications prior to the hearing as well as the conduct of the hearing itself. The case was in substance simple but involved a detailed comparison of a number of television series each involving some degree of home renovation. The case called for the application of settled legal principles, and resolution of the matter was to a considerable extent one of impression. The case was very hard fought and no doubt, Nine perceived it to be extremely significant and important. But I do not agree that objectively the case had any outstanding or particular degree of complexity or significance in a legal or factual sense. The actual hearing before me took place over only four days and there were detailed submissions made in writing. It is apparent that the amount now claimed is a very high percentage of the solicitor-client costs, and it appears to me that some substantial allowance must be made for challenges to the items referred to in the expert Report and detailed in the schedule compiled by Nine’s costs consultant. The cost consultant agrees that the rates charged by senior counsel were higher than the range published by the National Guide to Counsel Fees effective 1 January 2005, but says that there has been some moderation of the rates and also that regard ought to be had to the context of the current market for legal services. I agree that this is the correct approach, but nevertheless I consider that bearing the market in mind, the total amount sought is in excess of that which is necessary and appropriate.

10                  In all the circumstances, and having regard to the history of this matter, the relative simplicity of the issues, the limited duration of the hearing, the individual items described and the evidence of a costs consultant, I consider that an appropriate and reasonable figure which is in the interests of both parties is an amount of $650,000. I therefore fix the amount recoverable pursuant to O 62 r 4(2)(c) in the amount of $650,000, which is approximately 77.1 percent of the total amount claimed by way of estimate.

11                  This figure should be apportioned in respect of the first and third respondents’ liability under Orders 4 and 5 made on 30 September 2005 that are now in force. In apportioning the amount of $650,000 as between Orders 4 and 5, I note that at [29] of the expert Report, Ms Bevacqua has estimated that 75 percent of the costs should be apportioned in favour of the Application, leaving 25 percent of the costs allocated to the Cross-Claim. I have used these relative percentages in apportioning the total amount of $650,000. Of the total amount, the costs payable by the first and third respondents pursuant to Order 4 made 30 September 2005 are fixed at a gross sum of $487,500. The costs payable by the first respondent pursuant to Order 5 made 30 September are fixed at a gross sum of $162,500.

12                  The amount of $100,000, and such interest as has accrued on that sum, which is held in the joint bank account of Dale Francis Cliff and Michael John Williams pursuant to the order made by the Court on 7 June 2005, is to be released to the applicants for the purpose of payment of Nine’s costs.

13                  I also order that pursuant to O 62 r 26 of the Federal Court Rules, the applicants have leave to discontinue the proceedings insofar as it relates to the applicants’ claims for pecuniary relief, with no further or other orders as to costs.

14                  The respondents are to pay the costs of this application.

Associate:

Dated: 11 August 2006