FEDERAL COURT OF AUSTRALIA

Territory Realty Pty Ltd v Garraway (No 3) [2013] FCA 914

THE COURT ORDERS THAT:

1.    The application is refused.

2.    The applicants pay to the respondents their costs of the application.

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

REASONS FOR JUDGMENT

INTRODUCTION

1    On 1 April 2009, I gave judgment in this matter: Territory Realty Pty Ltd v Garraway [2009] FCA 292. Subsequently, on 10 July 2009, I ordered that the fourth, fifth and sixth respondents (the respondents) pay to the applicants 50% of their costs of the proceedings: Territory Realty Pty Ltd v Garraway (No 2) [2009] FCA 739. On 17 February 2010, an appeal from those orders was dismissed: Garraway v Territory Realty Pty Ltd [2010] FCAFC 9.

2    This judgment relates to the taxation of the costs of the proceedings at first instance.

3     On the material before me, in September 2010, the solicitors for the applicants commenced the process of recovering the costs which had been so ordered. To prepare a detailed bill of costs was quite complex. The bill of costs was eventually filed on 13 December 2012 in accordance with r 40.17 of the Federal Court Rules 2011 (Cth) (the 2011 Rules), which came into operation from 1 August 2011. One of the two issues raised on this application concerns the difference between the prescription for assessing “party-party” costs in the 2011 Rules compared to the test to be applied in the taxation of costs pursuant to O 62 r 19 of the previous Federal Court Rules 1979 (Cth) (the previous Rules). The previous Rules provided for such costs to be determined as were “necessary or proper”, whereas the prescription in r 40.01 of the 2011 Rules is costs that have been “fairly and reasonably incurred”. It is assumed that costs taxed on a “necessary or proper” basis as between the applicants and the respondents would be in a lesser sum than those fixed on a “fairly and reasonably incurred” basis as between the applicants and the respondents.

4    It was appropriate for the bill of costs to be lodged pursuant to the 2011 Rules and for the costing process to take place pursuant to the 2011 Rules. Rule 1.04(2) provides that the 2011 Rules apply to a step in the proceeding that was started before 1 August 2011 if the step is taken on or after 1 August 2011. It is appropriate, however, to note that r 1.04(3) provides:

However, the Court may order that the Federal Court Rules as in force immediately before 1 August 2011 apply, with or without modification, to a step mentioned in subrule (2).

5    Consequently, it was also appropriate for the Registrar as the taxing officer for the purpose of taxation of the costs to make an estimate of the approximate total for which, if the bill of costs were taxed, the certificate of taxation would be likely to issue: r 40.20(1). Under r 40.20, that estimate is to be made in the absence of the parties and “without making any determination on the individual items in the bill”. The estimate was duly made, and provided to the applicants and the respondents on 19 March 2013. It appears that on 26 March 2013, the solicitor for the applicants spoke to the taxing officer about the basis upon which the estimate had been made, and according to his file note he was told (among other things) that the taxing officer “reviewed each item of the bill”; that is as recorded in the file note of the solicitor.

6    On 2 April 2013, the applicants filed a notice of objection to the estimate in accordance with r 40.21 of the 2011 Rules.

7    One of the grounds of the present application is to have the costs taxed applying the “fairly and reasonably incurred” test in the 2011 Rules, although the taxing officer has indicated that she proposes to apply the “necessary and proper” test under the previous Rules. The applicants accept that the applicable scale for quantifying the items of work or expense for which costs are recoverable is that applicable to that work from time to time. But, despite that, they say that the test under the 2011 Rules should be applied to determine what work or expenses should be recoverable on a party-party basis.

8    That gives rise to the second issue raised on this application. The Registrar as the taxing officer proposes now to proceed with the taxation of the bill of costs in accordance with the procedures in Div 40.2 of the 2011 Rules. The solicitors for the applicants have asked that she disqualify herself from doing so on the grounds of a reasonable apprehension of bias, by reason of prejudgment on the taxation, as demonstrated by the costs estimate process. They rely upon the observations of the High Court in Livesey v NSW Bar Association (1983) 151 CLR 288 at 300.

9    The taxation has now been scheduled to take place commencing on 7 October 2013.

10    On both of the issues now ventilated, the taxing officer indicated that she intends to proceed to the taxation, notwithstanding the objection to her doing so on the ground of apprehended bias, and that she proposes to apply the test for eligibility of costs on the “necessary and proper” basis as existed under the previous Rules, as that was the expression in the Rules applying at the time the work the subject of the bill of costs was carried out. Those matters were confirmed by letters to the parties through their solicitors on the decision of the taxing officer not to disqualify herself from conducting the taxation being made and conveyed on 18 June 2013, and in respect of the applicable costs formula on 4 July 2013.

11    The present interlocutory application seeks orders, in effect, to reverse those two decisions of the taxing officer.

12    To the extent that the applicants invoke r 3.11, it is said by the respondents that the interlocutory application now made is out of time and should not be entertained. That is clearly correct.

13    However, the applicants rely on r 3.04, which entitles a person to apply to the Court without notice for an order that a Registrar do any act or thing that the Registrar is required or entitled to do but has refused to do.

14    I do not consider that either r 3.04 or r 3.11 is available to support the present application. I preface the following observations by noting that, understandably, counsel for the parties did not embark upon a comprehensive review of all potentially relevant authorities, or detailed argument. My views nevertheless reflect my currently considered views.

the foundation of the application

15    Part 3 of the 2011 Rules deals with the powers of Registrars of the Court. Rule 3.11 entitles a party to apply to the Court under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) for review of the exercise of a power of the Court by a Registrar. The application must be made within 21 days after the day in which the power was exercised.

16    Part 3 – “Registrars” Div 3.1 – “Power of Registrars” in my view has a different focus from the process for taxing costs.

17    The role of a taxing officer under Pt 3 is a designated function under the 2011 Rules. Section 43 of the Federal Court of Australia Act 1976 (Cth) deals with costs. It gives the Court or a Judge power to award costs in the discretion of the Court or a Judge, and s 43(3) specifically empowers the Court to make particular forms of orders of costs. Part 40 of the 2011 Rules then operates to indicate the process by which the amount of costs ordered should be determined: see generally Div 40.2 and r 40.12. That requires costs to be taxed in accordance with Pt 40 of the Rules. It is plain that it then becomes the function of a taxing officer to determine costs in accordance with Div 40.2. By definition, a taxing officer must be a Registrar: see the Dictionary in Sch 1 to the 2011 Rules.

18    The next step is the processes under Part 40 – “Costs” of the 2011 Rules. It is not necessary to set that out in detail. Once a costs decision has been made or a taxation of costs has been made by a taxing officer, r 40.34 provides the right to a party to apply to the Court for a review of the taxation and any consequential orders. That is a discrete right independent of the review rights given by rr 3.04 and 3.11. It is appropriate to note that, because the applicants on this taxation have raised the objection to the taxing officer’s decision not to disqualify herself from proceeding with the taxation, and because they have raised the matter as to the appropriate test to be applied in fixing the taxed costs, they are matters which could be raised on an application for review under r 40.34(3).

19    In my view, in any event r 3.04 is not available to the applicants to challenge what are determinations by the taxing officer in the course of the taxation process being undertaken. That is simply because I do not think that the taxing officer, by giving the indicative rulings which have been the subject of this application, is exposed to an order to require the Registrar to do an act or thing which the Registrar is required or entitled to do, but has refused to do. I do not read r 3.04 as accommodating the sort of decisions which are the subject of this application. I was referred only to one decision on the scope of r 3.04 (and its predecessor under the previous Rules, O 46 r 7(2)), namely Re Pickering [2009] FCA 809. In that matter an applicant unsuccessfully applied under O 46 r 7(2) of the previous Rules for a direction to a Registrar to issue two applications where the Registrar, under the then O 46 r 7A(1), had refused to do so because they appeared on their face to be an abuse of process. Such a decision is an administrative one: Manolakis v District Registrar, South Australia District Registry, Federal Court of Australia (2008) 170 FCR 426. It is clearly a different circumstance, and not one which informs one way or the other the entitlement of the applicants in this matter to seek such a direction. The powers and functions of a taxing officer are of a different character.

20    Even if that power were available, I would not exercise it in the present circumstances. It is almost always the case that it is more appropriate, in a matter such as the present, to await the final decision and to exercise such rights of review or appeal as exist after final orders have been made, rather than to interrupt the procedural process then in place. In this matter, the taxation itself is listed for hearing with five days set aside on 7 October 2013. Presumably, the parties are well-advanced towards raising their notices of objection, and clearly refining their issues.

21     Nor is r 3.11 available. It concerns reviews of the exercise of the powers of the Court by a Registrar in respect of designated categories of the exercise of powers of the Court. The only potentially relevant one is that in s 35A(1)(h). The role of a taxing officer is not a power of a Court prescribed by the rules of Court as capable of delegation to a Registrar by direction of the Court or the Judge. Consequently, in my view r 3.11 does not apply in the present circumstances. In any event, any application under r 3.11 is out of time.

22    More generally, the role of a taxing officer under Pt 40 of the 2011 Rules is not one which, in my view, falls within the ambit of Pt 3 of the 2011 Rules.

the TWO issues

(a)    Apprehended bias

23    In my view, the applicants have not demonstrated conduct on the part of the taxing officer in the process she has undertaken to date or in the indicative ruling which she has given which would give rise to apprehended bias.

24    The principles upon which apprehended bias may be shown to exist are quite straightforward. I do not need to refer to them.

25    The contention is that the taxing officer, by the method of undertaking the estimate of costs which has been made – that is by looking at the individual items on the bill of costs lodged – may be seen to have pre-judged the entitlement of the applicants to those costs as sought. I do not think that is made out. The taxing officer has made an estimate. It may be addressed and substantially altered in the process of the costs taxation which is carried out. To have formed the estimate by looking at individual items does not mean that the taxing officer has separately assessed and decided to allow or disallow any particular individual items. Obviously, practices differ between taxing officers as to how an estimate of costs may be made. Obviously, too, necessarily such estimates must be made having regard to the nature of the matter and having looked at the bill of costs which has been lodged. Sometimes, a degree of duplication of work claimed might be perceived, but which may not be evident upon further explanation. Sometimes unnecessary work might be perceived, but may not be made out upon further explanation. Sometimes disbursements may seem to be excessive, and sometimes there may be work perceived to be disallowable on a party and party basis, but which on explanation or further information may be allowed. A perception about those matters sufficient to provide an estimate may involve the taxing officer looking in some detail at the nature of the items in the bill of costs and their amounts.

26    None of that can demonstrate the reasonable prospect of a closed mind. In my view, there is no foundation upon which it can be shown that a fair-minded lay observer might reasonably apprehend that the taxing officer might not bring an impartial and unprejudiced mind to the taxation of costs in due course. The fact that an estimate has been made, and perhaps an estimate which the applicants regard as a very low one, would not lead a fair-minded lay observer to such a conclusion. The fact that the taxing officer in reaching her conclusion, has looked in detail at the bill of costs as lodged, and looked at some of the items in more detail than others would also not lead a fair-minded lay observer to reasonably apprehend that the taxing officer might not then bring an impartial and unprejudiced mind to the resolution of whether each particular item of the bill of costs should be allowed.

27    In my view, the claim of apprehended bias should not be accepted.

(b)    Correct prescriptive test?

28    As to the second issue, it may be accepted that as a general rule, a statute changing the law will not be given retrospective effect in the absence of clear language, but with a well-recognised exception in relation to statutes affecting procedure or for costs: Maxwell v Murphy (1957) 96 CLR 261. In the case of changes affecting procedure or costs, there is authority to support the proposition that such changes do operate retrospectively unless the opposite effect is clearly stated. See the discussion of the authorities in Sykes v Queensland Gas Company [2009] QCA 163 at [66]-[83] and the brief discussion in Diver v Neal [2009] NSWCA 54 at [78]. In each of those matters, and in the cases referred to, generally the observations were made in relation to the Court assessing the appropriate order for costs, rather than assessing the basis upon which an order for party and party costs should be taxed.

29    But there is a clear intention that work done in (say) 2007 should be taxed at the scheduled rate applicable at the time the work was done. There is also an obvious reason in fairness why the prescription for that work to be allowed for taxation should not be changed by a subsequent change in the Rules. As here, on the assumption the parties appear to have made, that would mean that the fact that the applicants did not lodge their bill of costs until more than three and a half years after the costs order was made may lead to them recovering more for costs than if they had lodged their bill of costs more promptly. To state that is to demonstrate the injustice which would result if the applicants’ contention were correct. I do not accept that the 2011 Rules had that intention; in my view the contrary is the case.

30    It is unclear whether the taxing officer has made a formal direction under r 1.03(3) that, in respect of the taxation of costs, the quantification of those costs should be determined by reference to the previous Rules. In my view, that is implicit in what the taxing officer has done. In any event, that is still an avenue which can be available to the taxing officer. If it were done, it would be an obvious order to make. It would put the matter beyond doubt. It is difficult to see why work done prior to the commencement of the 2011 Rules should be taxed and allowed on a basis other than that which applied at the time of the work being carried out. It is accepted by the applicants that Sch 3 of the 2011 Rules, that is the costs allowable for work done and services performed, indicates the basis upon which the item allowance for costs should be set; the decision about which particular items of work or expense should be so quantified should also carry through on the test for allowable work or expenses. The applicants did not contend that they were entitled to benefit from a scale of costs other than that applicable at the time the work was done. It is, in my view, inconsistent with that position that they should claim to be entitled to those costs fixed on that scale but on a different basis from that which applied at the time they were incurred.

(c)    Lump sum costs

31    I was also asked by the applicants to fix a lump sum for their costs under s 43(3)(d) of the Federal Court of Australia Act 1976 (Cth). I decline to do so. That would, at this point be a complex exercise, if it were to be undertaken towards a fair result, and it would divert and delay the process towards taxation which the applicants have chosen.

32     For those reasons, I refuse to make the interlocutory order sought. The parties were agreed that the costs of this application should follow the event. I order that the applicants pay to the respondents their costs of the application.

Associate:

Dated:    11 September 2013