FEDERAL COURT OF AUSTRALIA

De Brett Seafood Pty Limited v Qantas Airways Limited (No 7) [2015] FCA 979

REASONS FOR JUDGMENT

1    On 28 May 2015, this proceeding was finally dismissed. Earlier, I made orders in this proceeding pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (‘the Act’) approving the proposed settlement distribution scheme as agreed by the applicants and all respondents other than the sixth and seventh respondents (‘the Air New Zealand Parties’). The settlement sum was $38,000,000.00. Also in those orders, I granted leave for the applicants to file a Notice of Discontinuance against the Air New Zealand Parties and to pay their costs as a lump sum of $2,883,486.00. I outline the reasons for those orders below. Some paragraphs of the reasons remain confidential.

BACKGROUND

2    This proceeding was commenced by application on 11 January 2007. It was brought by Auskay International Manufacturing & Trade Pty Ltd (‘Auskay’) as a representative party on behalf of group members who had, directly or indirectly, paid for freight services provided by all or some of the respondents. The current applicants were subsequently substituted for Auskay as representative applicants in the proceeding.

3    The applicants’ central allegation was that the respondents, seven international airlines (two of which were sued by way of two companies, making nine respondents in all), entered into global cartel arrangements to fix charges for the carriage of international air freight to and from Australia. It was alleged that this conduct contravened ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) (‘the TPA’) and that the respondents were liable for damages under s 82 of the TPA, being the amount of the surcharges or corresponding increases in price paid by the applicants and their loss of the use of those funds.

4    As a result of a series of interlocutory proceedings, the application and statement of claim have been amended on a number of occasions, and various cross-claimants and cross-respondents have been added.

5    By interlocutory application dated 16 April 2014, the applicants sought approval of the settlement of these proceedings pursuant to s 33V of the Act and related orders dealing with disposal of the proceeding, the costs consequences of disposal and other orders pursuant to ss 33ZB and ZF of the Act.

6    All parties in these proceedings other than the Air New Zealand Parties have reached agreement for the settlement of the proceedings, subject to approval by the Court. The proposed settlement involved the applicants discontinuing against the Air New Zealand Parties.

SETTLEMENT APPROVAL

Applicable principles

7    The general approach that is applied in relation to s 33V applications is that the Court is to determine whether the proposed settlement is fair and reasonable, having regard to the interests of the group members as a whole, and not simply the interests of the applicants and respondents: see Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250 at 258 per Branson J.

8    The parties framed their submissions by reference to the criteria relevant to that test contained in Practice Note CM 17 — Representative Proceedings Commenced under Part IVA of the Federal Court of Australia Act 1976 (‘the Practice Note’), at [11.2], which provides:

11.2 When applying for Court approval of a settlement the parties will usually be required to address at least the following factors:

(a)    the complexity and likely duration of the litigation;

(b)    the reaction of the group to the settlement;

(c)    the stage of the proceedings;

(d)    the risks of establishing liability;

(e)    the risks of establishing loss or damage;

(f)    the risks of maintaining a representative proceeding;

(g)    the ability of the respondent to withstand a greater judgment;

(h)    the range of reasonableness of the settlement in light of the best recovery;

(i)    the range of reasonableness of the settlement in light of all the attendant risks of litigation; and

(j)    the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.

9    The criteria listed in [11.2] of the Practice Note mirror the “nine-factor test” adopted in the United States and applied by Goldberg J in Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459 (‘Williams’) at [19]-[20], with the addition of the tenth criterion “(j)” listed above. Whilst the nine-factor test has been adopted or referred to in Australian courts since Williams, that decision does not stand for the necessary simple adoption of the criteria used in an overseas jurisdiction: see, eg Jessup J in Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322 (‘Darwalla’) at [33] and Haslam v Money for Living (Aust) Pty Ltd (Administrators Appointed) [2007] FCA 897 per Gordon J at [20].

10    Those criteria are not to be seen as exhaustive, but rather as a useful guide. Particular cases may require different matters to be considered or emphasised: see, eg, Darwalla at [33]. In Darwalla, Jessup J stated (at [50]) that:

the court’s function is, relevantly, confined to the question whether the settlement was fair and reasonable. There will rarely, if ever, be a case in which there is a unique outcome which should be regarded as the only fair and reasonable one…the court should, up to a point at least, take the applicants and their advisers as it finds them…So long as the agreed settlement falls within the range of fair and reasonable outcomes, taking everything into account, it should be regarded as qualifying for approval under s 33V.

11    Justice Jacobson summarised the principles relevant to approval of the proposed settlement pursuant to s 33V in Taylor v Telstra Corporation Ltd [2007] FCA 2008 at [56]-[66]. Further in Vernon v Village Life Ltd [2009] FCA 516 at [45], his Honour clarified that:

It seems that the authorities to which I referred in Taylor v Telstra suggest that there might be some slight difference of emphasis between the approach taken by Goldberg  J in Williams v FAI Home Security Pty Ltd (No 4) (2001) 180 ALR 459 and Darwalla Milling Co Pty Ltd v F Hoffmann-La Roche Limited (No 2) (2007) 236 ALR 322. However, both of these approaches indicate that the essential question is whether the settlement is fair and reasonable having regard to the claims made by group members who will be bound by the settlement.

12    In Wepar Nominees Pty Ltd v Schofield (No 2) [2014] FCA 225 at [15], Besanko J stated that:

There are two limbs to the inquiry before the Court on an application such as the present, namely, whether the overall settlement is fair and reasonable and whether the internal distribution of the settlement sum is fair and reasonable (see Richards v Macquarie Bank Limited (No 4) [2013] FCA 438 at [28]; Australian Securities and Investments Commission v Richards [2013] FCAFC 89).

13    The applicants submitted that on the basis of their answers to each of the criteria in the Practice Note, the Court ought to conclude that the evidence in support of Court approval is compelling, and the Court should be persuaded of the factors set out in the Practice Note at [11.1], namely that:

(a)    the proposed settlement is fair and reasonable having regard to the claims made on behalf of the group members who will be bound by the settlement; and

(b)    the proposed settlement has been undertaken in the interests of group members, as well as those of the applicant, and not just in the interests of the applicant and the respondent/s.

CONSIDERATION — SETTLEMENT APPROVAL

14    In support of their application, the applicants relied upon the following affidavits:

(a)    the confidential affidavit of Ms Brooke Dellavedova (‘Dellavedova Affidavit’), including in particular the following confidential annexures:

(i)    Annexure BD1, Memorandum of Opinion of Counsel (‘Counsel’s Opinion’); and

(ii)    Annexure BD2, Statement of Professor Daniel McFadden (‘McFadden Opinion’);

(b)    the confidential affidavit of Mr Ian Ramsey-Stewart in relation to approval of the applicants’ legal costs and disbursements (‘Ramsey-Stewart Affidavit’); and

(c)    various confidential affidavits of the applicants and certain group members in support of reimbursement payments.

15    Evidence from both solicitors and counsel for the applicants, and independent advice from relevant experts where appropriate, is often necessary to prove that a settlement offer is fair and reasonable, and in the interests of group members: see, eg, Williams at [16].

16    I will consider in turn those criteria at [11.2] of the Practice Note which were relevant and relied upon by the parties.

The complexity and likely duration of the litigation

17    In the Dellavedova Affidavit, Ms Dellavedova deposed (and I accepted) that the proceedings were hard fought from commencement, involved significant legal and procedural complexity, multiple amendments to pleadings, complex and lengthy discovery, and considerable expert and lay evidence. It was also clear from her affidavit that the proceeding were likely to continue at great length and cost if the proposed settlement were not approved.

The reaction of the group to the settlement

18    Ms Dellavedova confirmed that the settling parties complied with all Court orders and related procedural requirements concerning the proposed settlement, and that notice of the proposed settlement of the proceeding was circulated to the registered group members. That notice contained instructions to members on how to object to the proposed settlement. The notice also invited members to contact Maurice Blackburn if there was anything of which they were unsure. The approximately 51 such enquiries which had been made by phone or email, had been answered apparently to the satisfaction of the enquirer. As far as the applicants and Maurice Blackburn were aware, the proposed settlement was not opposed by any group member.

The risks of establishing liability

19    The merits of the proceedings, as well as the risks of establishing liability were considered in Counsel’s Opinion, which concluded that whilst the applicants had a reasonably strong basis for establishing liability,

the litigation risk in this case [is considered] to be reasonably high because of the number of respondents and cross respondents, the volume of evidence, and the complexity of the proceeding generally.

20    That conclusion was based on the broad scope of dispute between the parties, for example as to the existence of a number of alleged geographic “markets” including a global market for international freight, in relation to the International Air Traffic Association Fuel Price Index, and in relation to the existence of arrangements and whether particular subsequent conduct was initiated on the basis of those arrangements.

21    I accepted that the complicated nature of those disputes and the amount and complex nature of evidence still required to be prepared to enable the Court to assess the relevant facts would be significant.

22    In addition, the determination of the relevant issues would require the assessment and application of complex and unsettled law, particularly in relation to the assessment and application of the concept of “market” in the global circumstances of this proceeding. In fact, defining the relevant market (or markets) would itself have involved complexities on account of its temporal nature and many factors such as the flexibility in routing goods between various hubs and modes of carriage, or the necessity for long haul routes to be divided into sectors. Further, the competitive effect of certain conduct in one market may take place in another, giving rise to difficult questions. Similarly, determining the relevant “activity” in each market, or supply and demand factors, which collectively supported conclusions made in the statement of claim, would have involved further complexities. The subsequent decision in Australian Competition and Consumer Commission v Air New Zealand Limited (2014) 319 ALR 388 has demonstrated the complexity involved in litigation concerning related factual circumstances to this proceeding.

23    Other issues raised in Counsel’s Opinion which could have affected the risk of establishing liability included the inferences which the Court would have been required to draw from the available circumstantial evidence in determining the existence and terms of an understanding or agreement for the purposes of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the TPA. Counsel’s Opinion noted that “proving a case in such a way carries with it a degree of litigation risk”, which risk may be further increased by the “generally unsatisfactory…[but] probably inevitable” necessity for the applicants to rely upon the respondents calling witnesses.

24    Other risks included the “uncertainty as to the precise reach of the cartel or cartels which the Court would find proven”, some risk concerning the relevant operation and effect of Hong Kong law, the risk that a limited authorisation in respect of particular routes between British Airways PLC and Qantas Airways Limited, if identified, could affect quantum, and risk in relation to limitations of actions issues.

The risks of establishing loss or damage

25    The applicants’ core allegation in relation to loss and damage was that the various alleged agreements and understandings caused prices to be higher than they would otherwise have been.

26    As highlighted in Counsel’s Opinion, there were no well-established domestic principles for assessing and quantifying loss or damage in such cases, which would necessarily introduce some degree of uncertainty in litigating the relevant issues to judgment.

27    Professor McFadden was retained by the applicants to quantify the price increases attributable to the alleged conduct, and the overcharges paid by the applicants, if any. He was also asked to provide an opinion on whether, and how, overcharges paid by group members other than the applicants can be calculated. Professor McFadden’s analysis involved the use of econometrics, and specifically multiple regression analysis, however he admitted that developing an econometric model appropriate to the particular circumstances of this case presented a number of significant challenges which introduce uncertainties.

The risks of maintaining a representative proceeding

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The range of reasonableness of the settlement in light of the best recovery

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31    Mr Ramsey-Stewart provided a summary schedule in his affidavit which outlined the applicants’ costs reasonably incurred, inclusive of professional costs, disbursements and GST, which totalled $26,595,598.36. He deposed that in his experience, those costs and the Maurice Blackburn retainer agreement were reasonable and appropriate.

32    Despite the above, the amounts proposed to be recovered for legal costs ($13,000,000.00) and disbursements ($5,575,897.74) were significantly less than the reasonable professional fees as assessed by Mr Ramsey-Stewart or as Maurice Blackburn would have been entitled to charge, and less than the estimated disbursements foreshadowed to group members in the Notice of Proposed Settlement ($5,930,000.00).

33    Counsel’s Opinion noted that the applicants sought to ensure that the proposed settlement involved consideration of a reliable estimate of the group members’ expenditures on air cargo services, Professor McFadden’s analysis, and recoveries achieved for plaintiffs in other jurisdictions.

34    Counsel further opined that there would be a “clear benefit” to group members if a lump sum settlement were distributed by an established formula, to avoid additional delay and cost.

35    The proposed distribution scheme was detailed in the Dellavedova Affidavit. It was based on the form and content of similar schemes which have been approved in other open class representative proceedings in this Court, and provides for a reasonable assessment of each group member’s claim, together with appropriate adjustments.

36    Counsel’s Opinion noted that the fact that group members were given notice of the proposed distribution scheme and had an opportunity to object, which was not exercised, further supported their conclusion that the proposed distribution scheme was fair and reasonable and in the interests of group members, which I accepted.

The range of reasonableness of the settlement in light of all the attendant risks of litigation

37    I have detailed the submissions as to the attendant risks of litigation above. XX XXXXXXXXXXXXXXXXXXXX XXXXX XXXXXXXXX XXX XXXXXX XXXXX

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The terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding

39    Counsel’s Opinion, the McFadden Opinion, and the Ramsey-Stewart Affidavit which form the basis for many of the reasons above, contained compelling reasons as to the fairness and reasonableness of the settlement.

Final assessment

40    I accepted on the basis of the above criteria that the settlement should be approved.

Confidentiality

41    I will now turn to deal briefly with the issue of confidentiality. The applicants sought and obtained confidentiality orders pursuant to s 37AF of the Act, as regards the Dellavedova Affidavit, Ramsey-Stewart Affidavit and the applicants’ and group members’ affidavits set out in the Dellavedova Affidavit.

42    Those orders were sought on the basis that those documents contained confidential and privileged legal and economic opinions prepared for the purpose of the proceeding. Such confidentiality orders are common in applications such as the present one.

43    However, given my approval of the settlement, and the time that has elapsed since those documents were prepared, it would be appropriate to either discharge or vary those orders so that (as far as the proper administration of justice allows) the full extent of the information the Court has relied upon is open to the public.

LUMP SUM

Background

44    In order for the proposed settlement to proceed, it was necessary for the proceedings against the Air New Zealand Parties to be resolved. The applicants sought leave to resolve this by filing a Notice of Discontinuance against the Air New Zealand Parties, with associated costs awarded in favour of the Air New Zealand Parties to be payable from the settlement sum.

45    The Air New Zealand Parties sent a bill of costs in non-taxable form and costs estimate to the applicants. The estimate was for an amount for costs and disbursements of $3,858,917.14. The applicants subsequently advised the Air New Zealand Parties that they did not accept the costs estimate.

46    The Court was asked to determine the amount that would be payable pursuant to a lump sum costs order pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth) (‘the Rules’).

47    As I mentioned above, the Court had determined that the amount that would be payable pursuant to a lump sum costs order pursuant to r 40.02(b) was $2,883,486.00 The reasons that follow relate to how the Court arrived at that figure.

Applicable principles

48    The Court has power to make a lump sum order for costs pursuant to r 40.02(b) of the Rules. The principles applicable to lump sum cost orders and the authorities that established them, were summarised by Sackville J in Seven Network Limited v News Limited [2007] FCA 2059 (‘Seven Network’). Although his Honour was dealing with a gross sum order pursuant to O 62 r 4(2)(c) of the Federal Court Rules 1979 (Cth) (‘the Former Rules’), there is no relevant distinction between that former rule and r 40.02(b) of the Rules.

49    His Honour stated the principles at [25] as follows:

…

(i)    The purpose of the subrule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum v Johnson (No 2), at 120, per von Doussa J, applying Leary v Leary [1987] 1 All ER 261; Harrison v Schipp (2002) 54 NSWLR 738, at 742 [21] per Giles JA.

(ii)    An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62: Beach Petroleum v Johnson (No 2), at 120, 124, per von Doussa J; Harrison v Schipp, at 743 [22], per Giles JA.

(iii)    The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed: Beach Petroleum v Johnson (No 2), at 123, per von Doussa J.

(iv)    Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the ‘necessary or proper’ test) and those stated in Stanley v Phillips (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause): Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1, at 4-5 [12]-[15], per O’Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J.

(v)    Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Schedule 2 provide assistance in fixing an appropriate gross sum: Charlick Trading Pty Ltd v ANRC, at [10], per Mansfield J.

50    At [26-7] his Honour continued:

[26]    The last point should be developed a little further. FCR, O 62 r 4(2)(c) authorises the Court to order that, instead of taxed costs, the successful party should be entitled to a gross sum costs order. The subrule contains no express direction that the Court is to apply the detailed criteria that are laid down in O 62 and Schedule 2. On the contrary, the subrule apparently leaves the question of quantification at large.

[27]    Rule 4(2)(c) is, however, located within an Order that makes detailed provision for the assessment of party and party costs. It would be extremely odd if the more expeditious procedure contemplated by r 4(2)(c) resulted in either a successful or an unsuccessful party being exposed to an assessment of costs which simply ignores or overrides the basic principles applicable to a taxation of costs. I accept Mr Sheahan’s submission that it would be an error for a Court to use its power under r 4(2)(c) to assess a gross sum clearly higher than that which would be allowed on a taxation of costs.

(Emphasis in original)

51    The principles in Seven Network have been applied in decisions of this Court, including by Barker J in Thompson v Department of Environment and Conservation (No 2) [2011] FCA 970 at [7] and Logan J in Wide Bay Conservation Council Inc v Burnett Water Pty Ltd (No 9) (2011) 194 FCR 250 at [31-4].

52    I note that assessments of lump sum orders (or “gross sum” costs as they were termed under the Former Rules) made in other cases are of limited relevance. They may indicate whether the amount determined is within a “usual” or appropriate range, but each case must be decided on its particular facts and circumstances. Particularly complex and lengthy cases such as the present proceeding are, by their nature, not “usual”.

53    I also note that it is inevitable, given the broad brush nature of the process, that the level of detail provided by the party claiming lump sum costs will be less than on a taxation. This is particularly the case where, as occurred here, the proceeding is on foot and a party may have been reluctant to disclose potentially privileged or confidential information. What is required is a level of detail sufficient to enable the Court to assess what is fair, logical and reasonable. The Court should be careful to apply its judgment so as to neither over-compensate nor under-compensate the party entitled to its costs.

CONSIDERATION — LUMP SUM

Evidence as to estimated costs

54    The parties have filed lengthy affidavits, submissions and supporting material. The materials relied upon by the applicants include:

(a)    the affidavit of Ms Dellavedova (solicitor with principal carriage of the matter) sworn on 4 April 2014; and

(b)    the report of Ms Elizabeth Harris (an accredited costs law specialist and director of Harris Cost Lawyers Pty Ltd, an incorporated legal practitioner), dated 4 April 2014.

55    The materials relied upon by the Air New Zealand Parties include:

(a)    the affidavits of Ms Michelle Carr (solicitor with principal carriage of the matter) sworn on 25 March 2014 (‘First Carr Affidavit’) and 9 April 2014;

(b)    the reports of Mr Roland Matters (a legal practitioner, legal costs consultant and director of Fairshare Pty Limited, a provider of legal cost consulting services), dated 26 March 2014 and 9 April 2014; and

(c)    the report of Ms Deborah Vine-Hall (a legal practitioner, legal cost consultant and director of DSA Legal Cost Consultants Pty Limited), dated 25 March 2014.

56    The evidence shows that the Air New Zealand Parties incurred legal costs from 1 February 2007 to 20 February 2014 (billed and unbilled) of $5,822,397.85, comprising professional fees of $5,285,919.34 and disbursements of $536,478.51. These figures are not materially different to the figures advised to the applicants in the Air New Zealand Parties’ bill of costs in non-taxable form. Exhibited to the First Carr Affidavit was a schedule of costs and disbursements prepared by Corrs Chambers Westgarth Lawyers (‘Corrs’) for the purposes of the costs determination. The Corrs costs schedule provides a breakdown of the Air New Zealand Parties’ billed and unbilled fees and disbursements for the period from 1 February 2007 to 20 February 2014. The breakdown shows the rank, name and date of admission (if applicable) for each person involved in the matter and their applicable hourly rates and time spent. The schedule gives a breakdown of disbursements by category.

57    I interpolate to note that the test for allowance of costs as between parties on taxation has changed under the Rules. Costs incurred prior to 1 August 2011 are to be allowed in accordance with the rates set out in Sch 2 to the Former Rules (see r 40.29(a)), whilst those incurred on or after 1 August 2011 are to be allowed in accordance with Sch 3 to the Rules: see r 40.29(b).

58    Over the period covered by the claim, the scales of costs were amended on a number of occasions. The costs claimed have been divided into eight separate time periods which largely equate to the changes in the scale rates. They are as follows:

Period 1        1 February 2007 – 31 December 2008

Period 2        1 January 2009 – 3 January 2010

Period 3        4 January 2010 – 31 December 2010

Period 4        1 January 2011 – 31 July 2011

_________________________________________________

Period 5        1 August 2011 – 8 May 2013

Period 6        9 May 2013 – 31 October 2013

Period 7        1 November 2013 – 31 December 2013

Period 8        1 January 2014 – 20 February 2014

As can be seen, four of these periods arise for consideration under Sch 2, and the remaining four periods under Sch 3.

59    Each of the cost experts (Ms Harris, Mr Matter and Ms Vine-Hall) has provided an opinion as to the amount they consider the Court would determine to be payable pursuant to a lump sum costs order under r 40.02(b).

60    Mr Matters gave his opinion that the amount that would be payable as a lump sum was $3,693,105.64, comprising $3,288,870.00 in professional fees and $404,235.64 in disbursements.

61    Ms Vine-Hall’s opinion was that the amount that would be payable as a lump sum was between $3,323,976.49 and $3,903,485.63, comprising between $2,787,497.98 and $3,367,007.12 in professional fees and $536,478.51 in disbursements.

62    Ms Harris concluded that the amount that would be payable as a lump sum was $2,091,077.61, comprising $1,761,075.64 in professional fees and $330,001.97 in disbursements.

63    The Air New Zealand Parties’ estimate of $3,858,917.14 represents 66.3% of their total costs incurred ($5,846,844.15). That falls within the range provided by Ms Vine-Hall (57-67%) and compares favourably with the estimate of Mr Matters (63.4%) and the amount allowed in Seven Network (63%). It differs from the estimate of Ms Harris, which represents approximately 36%.

64    The Air New Zealand Parties argued that their estimate was well within the appropriate range, taking into account the particular circumstances of the case, and that the Court should accordingly determine that the amount that would be payable pursuant to a lump sum costs order to be (or to be around) their estimate of $3,858,917.14.

65    They submitted that the number of documents discovered by the Air New Zealand Parties and other respondents and produced by the Australian Competition and Consumer Commission was vastly greater than that assumed by Ms Harris, and each needed to be read and analysed.

66    However, in my view all three cost experts have provided evident and intelligible justification for their views by reference to the court rules, the costs scales and the principles to be applied to the application. In any event, it is important to note that whilst expert reports are useful they are not determinative.

67    The applicants submitted that the various affidavits filed by the Air New Zealand Parties did not sufficiently identify the work performed nor generally justify the costs sought, and because the costs sought are not logical, fair or reasonable, the Court should decline to name a lump sum as appropriate. They argued that if that submission fails, then to the extent that it is possible to determine that any order ought to be made, it should be limited to amounts that fairly represent costs that had been demonstrably incurred in this proceeding and were necessary and proper for its conduct.

68    Doing the best they can, the applicants contended that, based on the material which Air New Zealand has chosen to put before the Court, the amount that fairly represents costs that have been demonstrably incurred in this proceeding and were necessary and proper for its conduct, was 50% of Ms Harris’ estimate. The applicants further contended that in any event, the necessary and proper costs could rise no higher than Ms Harris’ estimate.

Whether there should be a lump sum payment

69    While the level of supporting detail provided by the Air New Zealand Parties was not what might be expected for a full taxation, it was, in my view, sufficient to satisfy the requirements of Practice Note CM 4 —Lump Sum Costs under rule 40.02(b) of the Federal Court Rules 2011 and to enable the Court to determine whether the costs claimed were necessary and proper for the attainment of justice or for maintaining or defending the rights of the Air New Zealand Parties (the applicable test for costs as between party and party to 31 July 2011), or have been fairly and reasonably incurred by the Air New Zealand Parties (the applicable test from 1 August 2011). The Corrs costs schedule, the affidavits of Ms Carr and exhibits, and the reports of Ms Vine-Hall, were sufficient to enable the necessary and proper assessment to be made.

70    I was satisfied on the basis of the affidavit material filed by the Air New Zealand Parties that the proportion of the work charged to this matter which related to other investigations and proceedings involving the Air New Zealand Parties, if any, was unlikely to be significant.

71    In light of the above, a lump sum costs order was appropriate in the circumstances of this proceeding. I now turn to the question of the amount of that payment.

Lump sum amount

72    The amount claimed by the Air New Zealand Parties includes its costs of bringing and defending cross-claims. Those costs should form part of the costs ordered against the applicants.

73    The amount I determined would be payable pursuant to a lump sum costs order was $2,883,486.58, comprising $2,374,734.70 for professional fees and $508,751.88 for disbursements and representing 49.5% of the Air New Zealand Parties’ actual costs. The figures were arrived at as follows.

74    In relation to professional fees:

(a)    Ms Vine-Hall's lower end of the range for professional fees was $2,787,497.98. This included an amount of $1,727,283.44 for Period 1.

(b)    Ms Vine-Hall's figure for Period 1 assumes a discount of the fees claimed of 35% for lawyers, 40% for clerks and 20% for litigation support. This discount reflects possible duplication, unnecessary or unreasonable charges and work for which adequate support was not provided. However, in my view, a more appropriate discount, given the other matters which occurred in Period 1 which may have contributed to the costs, was a uniform rate of 50%, applied to all categories of personnel in the period, both lawyers and non-lawyers. That 50% discount reduces the fees for Period 1 to $1,314,520.15 and the overall fees to $2,374,734.70.

75    In relation to disbursements:

(a)    The total disbursements claimed (billed and unbilled) were $536,478.51. These included an amount for “General sundries” for which no details or breakdown was provided. I disallowed those general sundries on the basis of a total lack of detail or explanation. This brought the amount for disbursements to $508,751.88.

(b)    Ms Harris accepted the rates for counsels’ fees but “in the absence of information as to the work undertaken by counsel” applies a “failsafe discount” of 20% to those fees. Given the relatively modest involvement of, and fees charged by, counsel in this matter, I did not apply a discount to counsels’ fees.

(c)    Ms Harris applied a 30% reduction to the claimed travel costs. Given the matter was conducted out of Corrs’ Sydney office in circumstances where the use of that office seems reasonable and justified in the circumstances (including the fact that the applicants themselves unsuccessfully sought a transfer of the proceeding to Sydney), I did not consider the travel expenses claimed over the life of this proceeding ($72,000) to be disproportionate or unreasonable.

Associate:

Dated:    8 October 2015

Schedule A