FEDERAL COURT OF AUSTRALIA

Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority (No 2) [2014] FCA 444

THE COURT ORDERS THAT:

1.    The applicant pay the respondent’s costs of the appeal, fixed in the sum of $20,000.

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

REASONS FOR JUDGMENT

INTRODUCTION

1        On 4 April 2014, I ordered that the respondent’s objection to the competency of this appeal from a decision of the Administrative Appeals Tribunal be upheld, and consequently that the appeal be dismissed. I gave directions that the parties file and serve written submissions as to costs: Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority [2014] FCA 314.

2        On 11 April 2014, the respondent filed written submissions in compliance with those orders, accompanied by an affidavit of Mr Karst Hinderik Maat, sworn 11 April 2014, for which leave to file was sought from the Court. Leave was granted to both parties to file further affidavit material with respect to costs and, on 16 April 2014, the applicant filed an affidavit of Mr Simon Joseph Smith, sworn on that day. The applicant did not file any written submissions, although Mr Smith’s affidavit contained argumentative material. Where they were relevant, I have treated those aspects of the affidavit as submissions on the question of costs.

THE PARTIES’ SUBMISSIONS ON COSTS

3        The respondent seeks costs as the successful party in the proceeding, and applies for a lump sum costs order, pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth) (the Rules). In his affidavit, Mr Maat deposes that the costs incurred by the respondent’s solicitors to date are $52,863.70. He deposes to his experience in the conduct of litigation in this Court, and other federal courts, and to his work with costs consultants and costs recovery in respect of that litigation. Based on that experience, his evidence is that if the respondent’s costs were assessed on a party–party basis, which he estimates for this purpose at 65% of the total costs, the costs to be met by the applicant could be $34,361.45. Further, he estimates there would be approximately $3000–$5000 in additional costs for preparation of an itemised bill of costs for taxation purposes.

4        To avoid these additional expenses, and to bring finality to the proceeding, the respondent seeks an order that the applicant pay the respondent’s costs of this proceeding, to be fixed in the sum of $15,000.

5        The respondent also relies on evidence set out in the affidavit of Karst Hinderik Maat sworn on 5 February 2014. That evidence was admitted as part of the respondent’s resistance to the application for dispensation from compliance with r 4.01(2) of the Rules, which application was granted for a limited period of time: see Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority [2014] FCA 46.

6        That evidence sets out, from the respondent’s perspective, some of the conduct of Mr Smith, on behalf of the applicant, in this proceeding. Mr Smith is the sole director and shareholder of the applicant. He has conducted this proceeding on behalf of the applicant since it was issued. Belatedly, he sought dispensation from the requirement in r 4.01(2) of the Rules that a company must be represented by a lawyer. I granted dispensation for a limited time, until the hearing and determination of the respondent’s objection to competency of the appeal: Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority [2014] FCA 46.

7         The respondent submits that it has suffered prejudice by the conduct of the applicant, through Mr Smith. Both before and after the hearing on competency, Mr Smith sent numerous emails and made interlocutory applications to the Court, which included repetitive, serious allegations against the respondent, its officers and its legal representatives. Mr Maat deposes:

On each occasion where Mr Smith has correspondence with the Court and/or me, or sought orders or made allegations against the Respondent, as outlined in the preceding paragraphs, I have been required to inform the Respondent of these matters, and advise the Respondent as to its position. In addition I have had to consult counsel briefed on behalf of the Respondent in respect of some of the issues raised. The Respondent is incurring substantial legal costs as a result of these communications.

8        Further, the respondent contends that the Court should take into account s 37N of the Federal Court of Australia Act 1976 (Cth) (the Act), which requires parties to conduct proceedings consistently with the overarching purpose set out in s 37M(1): to “facilitate the just resolution of disputes … as quickly, inexpensively and efficiently as possible”. In particular, the respondent points to s 37N(4), which, relevantly, requires the Court, in exercising its discretion on costs, to “take account of any failure to comply with the duty imposed by subsection (1)”.

9        A further factor relied on by the respondent is a previous offer made to the applicant, through Mr Smith, on 2 December 2013. That letter was sent shortly after the proceedings in this Court were issued by the applicant. The letter draws Mr Smith’s attention to the need for compliance with r 4.01(2), and also puts forward in clear terms the respondent’s arguments as to why the appeal was not competent. The letter enclosed the respondent’s notice of objection to competency and made clear the respondent’s intention to ask the Court to deal with that objection as early as possible. The letter then put Mr Smith, and the applicant, on notice that the respondent would seek its costs of the proceeding if the appeal was unsuccessful. It noted, correctly, that the most likely outcome even if the appeal were successful is that the matter would be remitted to the Tribunal and the applicant was not assured of a different outcome.

10        The letter then invited the applicant to discontinue the appeal within a period of two weeks from the date of the letter, and on that basis proffered the respondent’s agreement not to pursue costs if that occurred.

11        Mr Maat deposes (and Mr Smith’s most recent affidavit confirms) that this offer was rejected by Mr Smith on behalf of the applicant on the same day: namely, 2 December 2013.

12        As I have noted, the applicant did not file any submissions as such. Despite Mr Smith’s affidavit being sworn some five days after the date of the respondent’s submissions, the affidavit does not deal with the question whether a lump sum costs order is appropriate. Indeed, save for reference to the applicant’s own “Calderbank offer”, the affidavit does not engage with the matters set out by way of submission by the respondent.

13        Instead, Mr Smith’s affidavit states that the applicant is seeking costs from the respondent. He challenges the decision and reasons of this Court in upholding the respondent’s objection to competency and dismissing the applicant’s appeal, and seeks orders in the applicant’s favour for its alleged losses, including application fees to the Court; lost income for time spent on the proceeding (which Mr Smith estimates at $2000 per day), “punitive damages of pain and suffering under the abuse of process provisions” in the amount of $100,000; legal fees before the Tribunal, in the amount of $40,000; “monetary loss of losing the 5 year registration [of the applicant as an RTO] in the estimated amount of $7,500,000”; and “costs to enter the false original appeal, the costs in attending those false hearings and the registration fees associated”. In his affidavit, Mr Smith also seeks “review of the evidence in the proceeding” by the Chief Justice of this Court.

14         Annexed to Mr Smith’s affidavit is some email correspondence between the parties concerning the offer made by the respondent on 2 December 2013, and to a counter offer made by Mr Smith on behalf of the applicant. The counter offer is contained in a letter on the letterhead of the applicant, dated 10 February 2014. That date is three days after the Court’s decision to grant limited dispensation to the applicant from the operation of r 4.01(2) of the Rules. In that letter, Mr Smith offered to settle the appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) on the basis of the respondent paying “half my costs”, which I take to be a reference to Mr Smith’s costs, rather than the applicant’s. The letter also then refers to what appears to be the second component to the offer: namely, the respondent agreeing to have “the real decision” remitted “back to the tribunal without opposition to the unnecessary objection to the extension of time, as that time was caused through no fault of our own, and with no force to answer any questions or attempt of accepting admissions prior to that hearing.” Later on, the letter refers to “2 declarations”.

15        This offer seeks to have the respondent pay $20,000 as “half my costs”, and then states that the figure does not include:

(a) Any damages in the event the court finds that it was an error of law to be forced into this jurisdiction unnecessarily;

(b) Any interest;

(c) Any special or punitive damages for health or stress incurred (which can be verified by medical reports) as a result of such

(d) Any regard to general costs at this point, despite being dispensation, and mirroring the work of a lawyer and barrister at my own risk and expense;

(e) Any sundry costs (transcriptions etc);

(f) Any damage or precedent affecting the public interest to ASQA and the industry in general.

16        In referring to this annexure, having set out his claims as to loss and damage, Mr Smith’s affidavit states that:

I provided a much much more favourable solution under the Calderbank vs Calderbank law submitted in Annexure CVC and denied for no reason but to abuse the process of the court, when no money could have been spent on their behalf whatsoever.

17        It is unclear on the evidence before the Court exactly what Mr Smith is referring to in this letter of offer. Perhaps the respondent was in a better position to understand the meaning of the letter by reason of previous correspondence not before the Court, or discussions with Mr Smith which are not in evidence. That is a matter of some speculation. I set out below why this “offer” from Mr Smith does not affect the way I consider it is appropriate to exercise the costs discretion in this case.

APPLICABLE LEGAL PRINCIPLES

18        Section 43 of the Act confers a broad discretion on the Court in respect of orders as to costs. Rule 40.02(b) provides:

A party or a person who is entitled to costs may apply to the Court for an order that costs: …

(b) be awarded in a lump sum, instead of, or in addition to, any taxed costs …

19        The discretion to order lump sum costs is “in quite general terms and may be exercised whenever the circumstances warrant it”: Black and Decker Inc v GMCA Pty Ltd (No 4) [2008] FCA 1737 at [3] per Heerey J. Lump sum costs may be appropriate both “in complex cases, where the costs of taxing a bill might be quite considerable” and “where the matter is more conveniently dealt with by reason of the relative simplicity of the matter”: Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51] per Emmett J. It is not necessarily the simplicity or complexity of a case which will be the governing consideration in a decision to award lump sum costs — there is, as Mansfield J observed, “no particular characteristic of a case which must exist before a gross sum costs order can be made”: Dunstan v Human Rights and Equal Opportunity Commission (No 3) [2006] FCA 916 at [23].

20        It is important to recall the purpose for the discretion being available. Exercising the costs discretion in this way is capable, in an appropriate case, of avoiding “the expense, delay and aggravation involved in protracted litigation arising out of taxation”: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120 per von Doussa J; Leary v Leary [1987] 1 WLR 72 at 76. It can achieve “finality, subject always to the need to ensure that unreasonable amounts of costs are not pursued and awarded”: Ualesi t/as Australian Empire Imports v Expeditors International Pty Ltd [2006] FCA 26 at [14] per Conti J.

21        The task of the Court in settling upon the appropriate quantum is not to conduct a detailed “taxation”, which, as Conti J observed, “cannot sensibly be the judicial task set by the Court Rules”: Ualesi [2006] FCA 26 at [14]. Nor is it one of “arithmetic calculation or precision”; rather, the task requires “the application of a much broader brush than that applied on taxation”, and must be approached in a way that is “logical, fair and reasonable”: Nine Films & Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 at [8] per Tamberlin J.

22        If it decides to fix costs in lump sum, the Court must examine the evidence before it relating to the charges made by the successful party’s legal representatives: Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 506 at [18]; Hamod v New South Wales [2011] NSWCA 375 at [820] per Beazley JA. The evidence should be sufficient for the Court to make a logical, fair and reasonable estimate: Seven Network Ltd v News Ltd [2007] FCA 2059 at [29] per Sackville J.

CONSIDERATION

23        It is appropriate in this case that costs be awarded in favour of the respondent. The respondent was successful in its objection to the competency of the appeal, and the appeal was dismissed accordingly. The applicant, as well as Mr Smith, were given opportunities to consider the applicant’s exposure on an objection to competency but nevertheless decided to oppose the application. The matter was fully argued by Mr Smith on behalf of the applicant in the way he wished to do. The respondent was thus obliged to deal with the evidence, submissions and oral contentions made on behalf of the applicant, which were lengthy and often difficult to follow. Nevertheless, the respondent’s legal representatives had to grapple with them, and obtain instructions.

24        There is nothing in Mr Smith’s affidavit of 16 April 2014 that supports a conclusion that costs should not follow the event. The claims made in Mr Smith’s affidavit are for pecuniary loss and damage, which are not relevant to a consideration of how costs should be awarded following judgment in a proceeding where the applicant has been unsuccessful.

25        Mr Smith appears to consider that his making of an offer he considered to attract the principles in Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333 should now affect the Court’s exercise of its discretion on costs, notwithstanding that his arguments, on behalf of the applicant, were not accepted and the other party was successful. The approach taken by Mr Smith on behalf of the applicant is misconceived and Calderbank principles cannot assist an unsuccessful party in circumstances such as those in the present case. The underlying premise for the operation of those principles is absent: namely, that a party who is ultimately successful and who had sought to persuade the opposing party of the validity of its case or cause of action at an earlier point in time, so as to bring the proceeding to an earlier end with a saving of costs and resources on both sides, had such an offer unreasonably rejected and so incurred additional, and unnecessary, costs. That is not the situation of the applicant. Indeed, it is the reverse of the applicant’s situation: as I set out below, it is Mr Smith, on behalf of the applicant, who unreasonably refused a timely and reasonable offer of settlement of the proceeding by the respondent.

26        Taking into consideration the broad discretion conferred on this Court in relation to lump sum costs, and the variety of circumstances in which courts have found it appropriate to make such an award, in my opinion a lump sum costs order in favour of the respondent is appropriate in this case. Several factors have informed this conclusion.

27        The first factor concerns the behaviour of Mr Smith, on behalf of the applicant, to date. Since he is the controlling mind of the applicant and its sole director and shareholder, I have no difficulty in treating his behaviour as that of the company for the purposes of looking forward to what can be expected of the applicant if the costs matter were not settled by a lump sum order. There is no evidence whatsoever, for example, that Mr Smith would change his approach on a personal level, or engage lawyers to act on behalf of the applicant. He has disavowed the cost associated with the latter course on many occasions in hearings before me and in writing.

28         Despite making an informal undertaking to the Court in submissions that he would “mirror” the rules and ethics of lawyers, Mr Smith has continued throughout this proceeding on behalf of the company to make unsubstantiated allegations of contempt, abuse of process, deceit, bias, incompetence and/or perjury, by the respondent, its legal representatives, the Administrative Appeals Tribunal, and this Court. He has done so with no regard to the seriousness of those allegations, instead repeating these inflammatory and inappropriate allegations in his correspondence and affidavit material many times in each document.

29        This behaviour, recorded in my previous judgments in this proceeding (see Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority [2014] FCA 46 at [8]; Avetmiss [2014] FCA 314 at [8], [96]-[105]), has continued with force since judgment was delivered on the objection to competency, continuing to impact significantly on the resources of both the Court and, as Mr Maat deposes, the respondent.

30        As Rares J observed in Keen v Telstra Corporation Ltd (No 2) [2006] FCA 930 at [4], a proceeding also involving an appeal from a decision of the Administrative Appeals Tribunal, the purpose of lump sum costs orders is to “save the parties the time, trouble, delay, expense and aggravation in having a taxation proceed on a matter”. The conduct of the applicant through Mr Smith, which I have described, is of such a nature that I am confident it would continue, and probably escalate, through any taxation process. Based on his behaviour to date, I do not believe Mr Smith, on behalf of the applicant, will be cooperative or reasonable about any step in this proceeding. To proceed to a taxation of costs even though the proceeding itself has not involved complex issues or many stages would nevertheless involve significant further time, trouble, delay, expense and aggravation, disproportionate to the complexity of the proceeding and inconsistent with the overarching purpose set out in s 37M(1) of the Act. I make that finding both as to the way in which I consider Mr Smith will unnecessarily, vexatiously and aggressively burden the resources of the respondent and its legal representatives, and of the Court, through any further process about the payment of costs.

31        The second factor concerns, in a different way, the relative lack of complexity of this proceeding. In my opinion, the lack of complexity means it is possible for the Court to make a sensible and reasonable estimate on a lump sum basis.

32        The third factor concerns the importance of finality in the circumstances of this case. The applicant has, it is evidenced from Mr Smith’s affidavits, other proceedings in the Tribunal seeking review of one or more decisions of the respondent. The question of accreditation of the applicant to provide courses is something that can be re-agitated by the applicant at the merits level through the application and decision-making process under the National Vocational Education and Training Regulator Act 2011 (Cth). Apparently, that is what the applicant is pursuing. The current appeal being incompetent and having been dismissed, it is in the interests of finality of this appeal process, and in the interests of the Tribunal being able to continue with any review currently before it, or to be brought before it, that all issues in this Court be disposed of expeditiously.

33        Fourth, and somewhat ironically, it is at least in the applicant’s financial interests for a lump sum to be awarded. That is because the respondent in its evidence and submissions has agreed to accept a substantial discount on what it estimates would be recoverable on taxation. I agree with the respondent’s position that this approach does involve a substantial discount which is, objectively, a favourable matter for the applicant.

34        In his affidavit of 11 April 2014, Mr Maat sets out his experience as a legal practitioner, and the method by which he analysed the costs incurred by the respondent in this proceeding. That method involved determining the total number of hours spent on the matter by the respondent’s solicitors, and multiplying that figure by the weighted average hourly rate, calculated by reference to the Court’s scale. That sum was then reduced by a percentage to reflect a figure that is likely to be recovered in a taxation exercise.

35        I accept that Mr Maat is a qualified legal practitioner with experience in assessment of costs. I also accept that the method used by Mr Maat to determine a likely costs estimate is appropriate, and consistent with the approach endorsed by other judges of this Court: see, eg, Seven Network Ltd [2007] FCA 2059. This is not a case where a lump sum costs order would require the expenditure of further time and expense to satisfy the Court that there is a proper evidentiary basis for a lump sum order: cf Saizeriya Co Ltd v Peregrine Management Group Ltd Pty [2005] FCA 1174 at [31] per Kenny J.

36        I accept Mr Maat’s evidence to which I have referred at [6] above. Frequent, lengthy and inflammatory communications with the Court, or with another party, may be undertaken for purposes important to the communicating party. However, they have a discernible impact on the legal costs incurred by the party who must receive, consider and sometimes respond to those communications. If the communicating party is ultimately unsuccessful and is subject to an adverse costs order, then a consequence of that communicating party’s earlier decision to engage in such frequent correspondence, or to file material found ultimately to be unnecessary or irrelevant, may well be an increase in the amount of costs the party is ordered to pay.

37        The matters contained in the postscript to my reasons for judgment on the objection to competency (see Avetmiss [2014] FCA 314 at [96]-[105]) demonstrate that Mr Smith, on behalf of the applicant, continued to engage in inappropriate, frequent and lengthy communications with the Court, and therefore also with the respondent, which were of little or no relevance to the matters in issue on the objection to competency, but which nevertheless caused the respondent to incur additional costs. Those costs should be recoverable.

38        Finally, it is true that the applicant was granted dispensation from the operation of r 4.01(2) and the need to be represented by a lawyer. It is true that, eventually, Mr Smith made an application for this dispensation and to the extent it was granted, that application was successful. However, that step in the proceeding was not, as Mr Smith characterised it in some of the affidavit material filed on behalf of the applicant, a “win”. It is correctly described as a dispensation — relief for the applicant from the effect the Rules would otherwise have. The respondent was entitled to oppose the grant of any such dispensation, as it did, and the subsequent conduct of Mr Smith bore out some of the points made on behalf of the respondent in its evidence and submissions in opposition to dispensation being granted. I consider it is appropriate in those circumstances to allow the respondent to include in its calculations the costs of and incidental to the dispensation application.

39        The respondent seeks an order for a lump sum of $15,000 to be paid by way of costs. That is less than half of the sum which the evidence I have accepted suggests the respondent would recover on a taxation. Although the authorities suggest that, in awarding a lump sum, it may be appropriate for the Court to apply a discount to its estimate of the sum a party is likely to recover on taxation, there is no basis in principle that such a discount need be more than 50% when there is already a discount applied as between the actual costs and what will be recoverable on taxation.

40        I consider that Mr Smith’s conduct in this proceeding has caused a significant increase in the costs incurred by the respondent. Almost all of Mr Smith’s communications were difficult to understand, lengthy, repetitive, and frequently offensive. These characteristics did not absolve the respondent’s legal representatives from considering each of them carefully and thoroughly, communicating with and advising their client and responding to the Court or Mr Smith as required. The fact that most of those communications also dealt with matters which were ultimately legally and factually irrelevant to the issues to be determined by the Court on either the dispensation application or the objection to competency adds to the lack of any justification for those communications, but does not diminish the reality of the additional costs incurred by the respondent.

41        I do not consider, taking into account all the circumstances of this proceeding, and all of the evidence, that a lump sum of $15,000 is an appropriate and adequate figure to compensate the respondent. In my opinion a more appropriate and adequate figure would be $20,000. That still represents only approximately 58% of the estimated taxable costs.

Accordingly, there will be an order that the applicant pay the respondent’s costs of this proceeding, fixed in the sum of $20,000.

Associate:

Dated:    7 May 2014