FEDERAL COURT OF AUSTRALIA

Strategic Financial and Project Services Pty Limited v Bank of China [2012] FCA 1008

THE COURT ORDERS THAT:

1.    Pursuant to Rule 40.02(b) of the Federal Court Rules, the first respondent’s costs of the proceeding be awarded in a lump sum of $950,000, instead of any taxed costs.

2.    The District Registrar (NSW Registry) call on the bank guarantee for $250,000 lodged on or about 16 November 2009 as security for costs of the first respondent to the extent of $250,000, and that amount be paid out to the first respondent.

3.    The applicants having been credited in order 1 for the costs order made in their favour on the first respondent’s unsuccessful strike out application, any and all costs orders between the applicants and the first respondent be discharged.

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

REASONS FOR JUDGMENT

1    Before the Court is an interlocutory application filed on behalf of the first respondent, the Bank of China, on 29 August 2012. The interlocutory orders sought are:

1.    Pursuant to Rule 40.02(b) of the Federal Court Rules, the first respondent's costs of the proceeding be awarded in a lump sum of $950,000.

2.    The security that has been lodged with the Court in November 2009 for the first respondent’s costs and the amount of $250,000 be released to the first respondent.

3.    Such further or other orders as the Court thinks fit.

2    There was no appearance by or on behalf of the applicants. I am, however, satisfied that the application came to their attention and they had an opportunity to appear and be heard. There was also in evidence a letter dated 23 August 2012 by Mr Keller, the sole director of the first applicant and one of the two directors of the second applicant, expressing opposition to the first respondent’s application.

3    The immediate history of the matter is set out in the reasons I gave on 29 June 2012 and 13 July 2012: Strategic Financial and Project Services Pty Ltd v Bank of China [2012] FCA 701 and Strategic Financial and Project Services Pty Ltd v Bank of China [2012] FCA 757. It is also necessary to refer to the orders I made on 1 May 2012 that the applicants provide additional security for the first respondent’s costs of and incidental to the proceeding in the sum of $700,000, such that the total security for the first respondent’s costs of and incidental to the proceeding was $950,000: Strategic Financial and Project Services Pty Ltd v Bank of China [2012] FCA 445.

4    Relevantly, on 13 July 2012 I ordered that the proceeding against the first respondent be dismissed and the applicant pay the first respondent’s costs. This was in default of the applicants providing the additional security which I had ordered on 1 May 2012. It is implicit in the order that the applicants pay the first respondent’s costs that those costs were to be as agreed or taxed; see also r 40.12.

5    As to the security, referred to in proposed order 2 of the interlocutory application, a bank guarantee for $250,000 was lodged with the Court on 15 October 2009 on behalf of the applicants, and replaced on or about 16 November 2009, as security for the costs of the first respondent pursuant to an order of Moore J made on 5 June 2009.

6    On the present application, the first respondent read or tendered and relied on the following evidence:

(i)    the affidavit of Luke Bradshaw Hastings affirmed 22 February 2012;

(ii)    the affidavit of Valerie Edith Higinbotham sworn 17 February 2012;

(iii)    the affidavit of Andrew Stuart Murray affirmed 29 May 2012, in particular paragraph 13;

(iv)    the 34 pages of the affidavit of Kerrie-Ann Rosati sworn on 20 April 2012, in particular paragraphs 122 – 125 and 166;

(v)    the affidavit of Luke Bradshaw Hastings affirmed 12 September 2012 and exhibit LBH-4 to that affidavit which exhibit included a bundle of tax invoices, being invoices rendered by the solicitors for the first respondent for work done from February 2012 (the date of the application for top-up security) to the conclusion of the proceedings.

7    The first respondent relied on r 40.02 of the Federal Court Rules 2011 (Federal Court Rules), particularly its reference to a party “who is entitled to costs”, as the source of power to make an order that the costs be awarded in a lump sum instead of any taxed costs. I note also s 43(3)(a) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) which provides:

Without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following:

(a)    make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial;

I agree that I have power to make a lump sum costs order. Such an order is ancillary to the order I made on 13 July 2012 that the applicants pay the first respondent’s costs, and deals only with the mode of arriving at a figure.

8    To the extent necessary, the orders of 13 July 2012 having been entered, I would also act under r 39.05(f) of the Federal Court Rules on the basis that the first respondent consents to the varying of the order or under r 39.05(e) on the basis that the intention of the Court in making the order on 13 July 2012 was not to exclude the first respondent from applying as it has done for an order that its costs of the proceeding be awarded in a lump sum, instead of any taxed costs.

9    The factors which in earlier cases have been taken into account by the Court in exercising the discretion to make a lump sum costs order include where the delay, expense and inconvenience of taxing costs in the normal manner would be unduly protracted or unduly expensive and where the financial capacity of the party liable to pay costs is such that the additional cost of taxation would impose a significant burden on the party in whose favour costs are ordered without real prospects of recovering those costs: see CMA Corporation Limited v McSorley (No 2) [2012] FCA 732 (McSorley) at [6] where I applied Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506 at [15] per Kenny J and Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 at [23]-[24] per Mansfield J. This approach is consistent with the requirements of s 37M of the Federal Court Act.

10    In McSorley I also applied the observations of von Doussa J in Beach Petroleum v Johnson (No 2) (1995) 57 FCR 119 at 123 where his Honour referred to the need to balance the interests of the party against whom a lump sum costs order is sought as against the interests of the party seeking such a costs order and preventing prejudice to the unsuccessful party by overestimating the costs and preventing injustice to the successful party by adopting an arbitrary failsafe discount on the costs estimate.

11    I am satisfied that the preparation of a detailed bill of costs for the purposes of a taxation would be both time-consuming and expensive. I am also satisfied that the applicants are unlikely to be able to discharge the costs liability the subject of the orders I made on 13 July 2012 as they have been unable to satisfy the security for costs orders I made on 1 May 2012. The circumstances are referred to in my reasons for judgment on 29 June 2012 and 13 July 2012: Strategic Financial and Project Services Pty Ltd v Bank of China [2012] FCA 701 and Strategic Financial and Project Services Pty Ltd v Bank of China [2012] FCA 757. I am further satisfied that if the first respondent were required to proceed with a taxation of its costs that would produce further costs which would be likely to be unrecoverable from the applicants.

12    As to the relevant calculations I find that the first respondent has incurred solicitor/client costs in the proceedings of approximately $2,471,000.

13    I also estimate that the costs order made in favour of the applicants on the first respondent’s unsuccessful strikeout application would be in a sum less than $100,000.

14    I also take into account that the applicants’ expert costs consultant expressed the view that as at February 2012, on the assumptions there made by her, the first respondent was likely to recover between $924,789 and $1,024,175 for its party-party costs. The first respondent’s expert costs consultant expressed the corresponding view that the first respondent was likely to recover $1,165,547.48. In each case the figures excluded costs incurred by the first respondent in relation to its unsuccessful strikeout application.

15    Since February 2012 the evidence shows that the first respondent incurred, approximately, a further $500,000 in solicitor-client costs and disbursements.

16    I am satisfied that it is appropriate to make a lump sum order in the amount of $950,000. This sum represents, on the evidence, a substantial discount from the amount that would be recovered by the first respondent on any party/party taxation of its costs, allowing a credit in respect of the costs order in favour of the applicants to which I have already referred.

17    An appropriate form of order in relation to the security given by bank guarantee is:

The District Registrar (New South Wales Registry) call on the bank guarantee for $250,000 lodged on or about 16 November 2009 as security for costs of the first respondent to the extent of $250,000, and that amount be paid out to the first respondent.

18    Since no amount remains it does not seem to me to be necessary otherwise to make an order releasing the guarantee.

19    For these reasons I make the following orders:

1.    Pursuant to Rule 40.02(b) of the Federal Court Rules, the first respondent’s costs of the proceeding be awarded in a lump sum of $950,000, instead of any taxed costs.

2.    The District Registrar (NSW Registry) call on the bank guarantee for $250,000 lodged on or about 16 November 2009 as security for costs of the first respondent to the extent of $250,000, and that amount be paid out to the first respondent.

3.    The applicants having been credited in order 1 for the costs order made in their favour on the first respondent’s unsuccessful strike out application, any and all costs orders between the applicants and the first respondent be discharged.

Associate:

Dated:    13 September 2012