THE COURT ORDERS THAT:

1.         The notice of motion is dismissed.

2.         The applicant is to pay the respondent’s costs of and incidental to the notice of motion on an indemnity basis.

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

REASONS FOR JUDGMENT

INTRODUCTION

1                          On 18 July 2007, the respondent (‘Peoplebank’) caused an order to be entered following an estimate of costs and the issue of a certificate of taxation in accordance with O 62 r 46 of the Federal Court Rules (‘the order’).  The applicant (‘Cytel’) seeks to set aside the order on the basis that Cytel did not receive a copy of the estimate of costs.

Background

2                          On 3 November 2006, I made certain costs orders with the consent of Cytel and Peoplebank.  Those costs orders provided that Cytel pay Peoplebank’s costs in respect of a number of different aspects of the litigation, some on a party/party basis and some on an indemnity basis.  Peoplebank retained a costs consultant to prepare a bill of costs in taxable form, being the costs that Peoplebank claimed to be payable in accordance with the costs orders.  That bill of costs was filed in the Court on 29 March 2007 (‘the bill of costs’).  The total sum for the costs and disbursements in the bill of costs was $195,350.38.

3                          Order 62 rule 46 of the Federal Court Rules relevantly provides:

(3)       (a)        A taxing officer may, in the absence of the parties and without making any determination on the individual items in the bill, make an estimate of the approximate total for which, if the bill were to be taxed, the certificate of taxation would be likely to issue.

            (b)        The Registrar will notify each party interested in the bill in writing of an estimate made under paragraph (a).

            (c)        A party interested may, within 21 days after the date of issue of a notice under paragraph (b), file and serve on each other party a notice of objection to the estimate.

            (ca)      If there is no notice of objection, the amount of the estimate is deemed to be the amount for which a certificate of taxation may be issued.

            (cb)      If a certificate of taxation has been issued for an amount determined under paragraph (ca), a party that has not received a notice under paragraph (b) may apply by motion to the Court for an order to set aside the certificate of taxation.

4                          The bill of costs was referred for consideration by a taxing officer of the Court on 24 April 2007.  The registrar assessed the bill of costs in accordance with O 62 r 46(3) of the Federal Court Rules.  The taxing officer, in the absence of the parties and in accordance with subrule (3)(a), made an estimate of the approximate total for which, if the bill were to be taxed, the certificate of taxation would be likely to issue (‘the estimate’).  The estimate was in the amount of $154,000.  That is, there was an approximate 25% reduction of the total amount claimed in the bill of costs.  The estimate was notified to the parties by letter of 1 May 2007.

5                          No complaint is made by Cytel of any step taken by the Court.  That is, Cytel accepts that the letter of 1 May 2007, addressed to the solicitors for both parties, was sent.  That letter to Cytel was addressed to its solicitors, Norman Waterhouse Lawyers (‘Norman Waterhouse’), at a document exchange address and endorsed ‘Your Ref: T Orlizki’.  Mr Orlizki was the solicitor at Norman Waterhouse handling the matter for Cytel.

6                          The 1 May 2007 letter made it clear that the letter constituted notice of the estimate under O 62 r 46(3)(b) and drew attention to the provisions of subrules 46(3)(c),(ca),(cb),(d) and (e).  The letter notified the parties that, if a notice of objection to the estimate was not filed, Peoplebank would be able to prepare and lodge a draft certificate of taxation.  Cytel had 21 days after the issue of the notice in the 1 May 2007 letter to file and serve a notice of objection to the estimate.  It did not do so.

7                          Cytel contends that the 1 May 2007 letter was never received.

8                          As Cytel did not file and serve a notice of objection to the estimate, the taxing officer issued a certification of taxation on 15 June 2007 in the sum of $154,000 (‘the certificate of taxation’).  On 20 June 2007, Peoplebank’s solicitors sent a copy of the certificate of taxation with a letter to Mr Orlizki at Norman Waterhouse.  The 20 June 2007 letter made it clear that the certificate of taxation was being formally served and made a demand for the sum of $154,000 within 14 days of the date of the letter.  On the same date, Peoplebank’s solicitors served Cytel at its business address.  The letter to Cytel also sought payment within 14 days of the sum of $154,000 as set out in the certificate of taxation.

9                          Cytel accepts that the letter of 20 June 2007 enclosing the 15 June 2007 certificate of taxation was received.

10                        No payment was made by Cytel within the 14 days of service of the certificate of taxation.  Peoplebank’s solicitors arranged for the certificate of taxation to be entered as a judgment of the Court and, on 18 July 2007, an order was entered pursuant to O 62 r 45(3) that Cytel pay the sum of $154,000 to Peoplebank.  A copy of that order was served on Norman Waterhouse on 25 July 2007 to the attention of Mr Orlizki.  The letter asked that an arrangement be made for payment of ‘the judgment debt immediately’.

11                        Cytel has not paid the amount sought or any part thereof.  Cytel seeks to set aside the order.  It also seeks orders that the certificate of taxation be set aside, that the enforcement of the judgment be stayed and that it be granted time to file a notice of objection to the bill of costs.  Cytel also seeks to set aside an order made on 26 July 2007 that the proceedings be stayed until such time as the costs are paid.

12                        Cytel says that it is entitled to apply for the orders as ‘a party that has not received a notice’, within O 62 r 46(3)(cb).  If Cytel received a copy of the estimate, it cannot apply under subrule (cb) to set aside the certificate of taxation or, it follows, the order based upon it.

13                        Cytel does not dispute that receipt by Mr Orlizki would be sufficient for the purposes of subrule (cb).  Cytel does not dispute that it carries the onus of establishing that it did not receive the estimate.

THE ISSUES

14                        The issues are:

·              Can Cytel establish that Mr Orlizki did not receive a copy of the estimate?

·              Is receipt by Norman Waterhouse, the solicitors on the record, receipt by Cytel?

·              Can Cytel establish that Norman Waterhouse did not receive a copy of the estimate?

·              If the estimate was not received by Cytel, must the certificate of taxation and the order be set aside?

·              If it is within the Court’s discretion to set aside the order, should the discretion be so exercised?

Did Mr Orlizki receive a copy of the estimate?

15                        Mr Orlizki worked as a solicitor at Norman Waterhouse between 15 May 2002 and 14 September 2007.  For the purposes of his evidence, Mr Orlizki did not have access to the hard copy Norman Waterhouse file.  He gave evidence based on his recollection and electronic copies of emails and documents that were saved on a DVD and given to him by Norman Waterhouse.

16                        Mr Orlizki said that he received a letter in April 2007 from Peoplebank’s solicitors enclosing the bill of costs.  He met with Mr Shroff who was instructing him on behalf of Cytel to discuss that document.  In effect, he and Mr Shroff agreed to defer a decision on objections to the bill of costs until they received a copy of the estimate.  Mr Orlizki recalls awaiting the estimate.  Mr Orlizki accepts that in June 2007 he received correspondence that made him aware that a certificate of taxation had been issued by the Court.  Mr Orlizki was quite certain that he personally did not receive the costs estimate or the letter of 1 May 2007.  He did, however, accept that it could have been received by Norman Waterhouse and did not come to his attention.

17                        I am satisfied that Mr Orlizki did not personally receive the estimate from the Court.

Is receipt by Norman Waterhouse receipt by Cytel?

18                        Cytel contends that even if Norman Waterhouse received the estimate, receipt by the solicitors is not sufficient.  Cytel submits that the reference to ‘a party that has not received a notice’ in subrule (3)(cb) should be read to mean only the person charged with the making of the decision ie Mr Orlizki.  This would introduce a requirement not provided for in the subrule.  It also would import into the notification of the estimate by the registrar to ‘each party interested in the bill’ in subrule (3)(b) a requirement for service that does not apply to any other document to be served in accordance with the Federal Court Rules. 

19                        Order 7 rule 1(1) of the Federal Court Rules does not require that an originating process be served on the person charged with the responsibility of making decisions as to that process.  It simply requires that there be personal service in accordance with O 7 r 2.  Order 7 rule 2 of the Federal Court Rules provides for personal service of a document on a corporation by service on its solicitors.

20                        I see no reason to import into O 62 r 46(3)(cb) the requirement that a document must be served on or received by a person charged with the responsibility of dealing with the document.  Receipt of the estimate by the solicitors on the record, Norman Waterhouse, is receipt by Cytel for the purposes of O 62 r 46.

Did Norman Waterhouse receive a copy of the estimate?

21                        Norman Waterhouse did not have a register of incoming mail and there is no record of the estimate having been received by the firm.  As there is no register, there is no missing entry that would indicate that the estimate was not received.

22                        Mr Orlizki made inquiries of some other employees of Norman Waterhouse and they had no recollection of the estimate or the letter enclosing it being received by the firm.  He made no inquiries of Mr Harb, the solicitor on the record, nor of the person who received all incoming mail, opened it and endorsed it with a date stamp.  He did not show a copy of the estimate or of the 1 May 2007 letter accompanying it to any person as part of his inquiries. 

23                        The 1 May 2007 letter enclosing the estimate was sent to Norman Waterhouse by way of the document exchange.  The general inquiries by Mr Orlizki of some of the staff, some time after it was sent do not establish that Norman Waterhouse did not receive the estimate.  I am not satisfied that the solicitors did not receive the notice. 

If the estimate was not received by Cytel, must the certificate of taxation be set aside?

24                        It is not necessary to answer this question.  However, I see nothing in the language of subrule (3)(cb) to indicate that, on application by motion to the Court to set aside the certificate of taxation, such an order must be made.  Cytel submits that this is necessary to ensure that natural justice is provided to a party who has not received the estimate.

25                        The requisite natural justice to be provided to the parties in relation to assessment procedures is provided by way of procedural fairness as set out in O 62 r 46.  The rule provides that a party may object at the stage of the costs estimate or, upon receipt of the certificate of taxation, to set that certificate aside or object to it.  The certificate of taxation was received and no such application was made.

26                        Rule 46 distinguishes between mandatory and non-mandatory procedures.  For example, it is mandatory that the registrar take certain action and notify each party of the estimate.  Subrule (3)(cb) does not mandate any matter.  It facilitates access to the Court.  It is then for the Court to make such order as it sees fit (s 23 of the Federal Court of Australia Act 1976 (Cth)).

Should the Court, in its discretion, set aside the order in the event that O 62 r 46(3)(cb) is satisfied?

27                        Again, it is not necessary to answer this question.  However,  the following matters are relevant:

·              Mr Orlizki is experienced in litigation and in the process of the issuing of bills of costs, the estimate process and the issue of a certificate of taxation.

·              Mr Orlizki was conscious of the fact that, if a notice of objection to a certificate of taxation is filed, significant costs attach to that objection including retaining a costs consultant, preparing the objections and if, after objection the objector does not succeed in significantly reducing the costs, the costs of the appearance on the objection.

·              By April 2007, Mr Orlizki had received the bill of costs.  At no time did Mr Orlizki seek a copy of the estimate.

·              On or about 5 April 2007, Mr Orlizki hand-delivered the bill of costs to Mr Shroff.

·              Mr Orlizki received the certificate of taxation issued by the Court on 15 June 2007 and a copy of the order.  Accordingly, he knew that the estimate had been made by the taxing officer, which had resulted in the certificate of taxation.  He knew that the sum claimed in the estimate and the sum claimed in the certificate of taxation represented an approximate 25% reduction in the amount sought in the bill of costs.

·              On 24 July 2007, Peoplebank served on Cytel a statutory demand seeking payment for the ‘judgment debt’.

·              At a directions hearing on 26 July 2007, I made an order that unless the costs were paid, the proceedings would be stayed.  At no time during that directions hearing or after receipt of the certificate of taxation or the service of the order did Mr Orlizki make a complaint that he did not receive the estimate or that Norman Waterhouse did not receive that document.  Indeed, Mr Orlizki acknowledged that the certificate of taxation had issued, that the order had been entered and that the money had not been paid.  On behalf of Cytel he sought an extension of time for payment.  Mr Orlizki, whom I am satisfied acted on instructions at all relevant times, acknowledged the liability for the amount sought for the costs as set out in the order following upon the issue of the certificate of taxation in accordance with O 62 r 46.  Mr Orlizki acknowledged that Peoplebank was in a position to enforce the judgment and that the costs had to be paid.

·              There was further correspondence from Peoplebank’s solicitors in relation to the costs.

·              Cytel commenced proceedings in August 2007 in the New South Wales Supreme Court seeking an order that Peoplebank’s statutory demand be set aside.  Mr Orlizki swore an affidavit in support of that application.  No reference was made in that affidavit to a failure to receive the estimate.  No reference was made to any alleged irregularity in the process described in O 62 r 46.

·              Mr Orlizki was aware that an application could be made to set aside a certificate of taxation if the costs estimate was not received.  No such application nor an application to set aside the order for payment was made until this notice of motion was filed by Cytel’s present solicitors on 7 January 2008.

·              On 8 August 2007, Mr Orlizki sent a copy of the bill of costs to Pattison Hardman, costs consultants.  At that time Norman Waterhouse had instructions to apply to have the certificate of taxation set aside and was asking Pattison Hardman to advise as to the information they would require to prepare objections to that certificate.  Pattison Hardman were not ultimately retained and no application was made by Cytel at that time.

·              Mr Orlizki was of the view that there was no irregularity in the obtaining of the costs order and that there had been no failure of procedure so far as the Court was concerned.

·              There has been no explanation for the delay in making this application from the time of the service of the certificate of taxation in June 2007.  At the very least, Cytel was aware from this time that the estimate had been made.  There is no evidence of the nature of the objections that might be made to that certificate nor as to the likely quantum of any further likely reduction.

·              There is no basis advanced by Cytel for the exercise of the Court’s discretion in its favour to set aside the order and the certificate of taxation.  I see no reason to do so even if I were satisfied that Cytel had not received a copy of the estimate.

CONCLUSION

28                        Cytel concedes that, if it is taken to have received a copy of the estimate, the notice of motion should be dismissed.  I am not satisfied that Cytel did not receive the copy of the estimate.  Order 62 rule 46(3)(cb) of the Federal Court Rules does not apply.

29                        The notice of motion should be dismissed.

COSTS

30                        Peoplebank seeks an order that Cytel pay its costs, and on an indemnity basis.

31                        It is appropriate that Cytel pay the costs of and incidental to the notice of motion.  Peoplebank points to the fact that the notice of motion was filed some time after the service of the order and after the acknowledgment of liability to pay those costs, as referred to above.  As Peoplebank points out, at no time have any objections to the amount sought been notified or formulated.  If it had a genuine concern as to the quantification of costs, Cytel had every opportunity to bring an application to set aside the certificate of taxation of which it acknowledged receipt.  Cytel did not do so.  Peoplebank has been forced to incur unnecessary costs in respect of an obligation to pay costs previously acknowledged.  The attempt to avoid that payment and to extend the litigation is without merit and the burden of the solicitor-client costs of the motion should not be borne by Peoplebank (Yang v American International Assurance Company (Australia) Ltd (No 2) [2008] FCA 493).

32                        It is appropriate that Cytel pay Peoplebank’s costs of the notice of motion on an indemnity basis.

Associate:

Dated:         21 April 2008