FEDERAL COURT OF AUSTRALIA

Grabovsky v Secretary, Department of Social Services (No 3) [2015] FCA 1431

THE COURT ORDERS THAT:

1.    Costs be awarded to the Respondent in a lump sum of $6,000 instead of any taxed costs pursuant to r 40.02(b) of the Federal Court Rules 2011 for work up to 28 October 2014.

2.    The Applicant pay the Respondent’s costs of applying for lump sum costs pursuant to r 40.02(b) of the Federal Court Rules 2011.

3.    Costs be awarded to the Respondent in a lump sum of $1,500 instead of any taxed costs pursuant to r 40.02(b) of the Federal Court Rules 2011 for work since 28 October 2014.

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

REASONS FOR JUDGMENT

Background

1    Before me for determination is an interlocutory application filed on 16 September 2015 (the Interlocutory Application) by the Respondent, Secretary, Department of Social Services (the Secretary) seeking orders pursuant to r 40.02(b) of the Federal Court Rules 2011 (the Rules) that the Applicant, Mr Grabovsky, pay lump sum costs instead of any taxed costs in the amount of :

(a)    $6,500 for work up to 28 October 2014; and

(b)    $1,500 for work since 28 October 2014,

as well as an order that Mr Grabovsky pay the Secretary’s costs of the Interlocutory Application.

2    The costs orders in favour of the Secretary in relation to which he now seeks the lump sum costs order for work up to 28 October 2014 were made in Grabovsky v Secretary, Department of Social Services [2014] FCA 1121 and Grabovsky v Secretary, Department of Social Services (No 2) [2014] FCA 1130.

3    In support of the Interlocutory Application, the Secretary relies on the affidavit of Stephen Gordon Thompson sworn 14 September 2015. Mr Grabovsky opposes the application and relies on his affidavit sworn on 29 October 2015. Mr Grabovsky’s affidavit contains limited evidence and otherwise includes submissions setting out his grounds of opposition to the Interlocutory Application. Mr Grabovsky has also filed submissions dated 30 October 2015.

4    The solicitor for the Secretary explained in oral submissions that, despite the Interlocutory Application in its terms seeking an order for lump sum costs in the sum of $6,500 for work up to 28 October 2014, the Secretary in fact seeks a lump sum of $6,000 for that period as set out in the affidavit of Dr Thompson.

Facts

5    The events that give rise to the Interlocutory Application are set out in Dr Thompson’s affidavit. In summary, they are as follows:

(1)    on 21 December 2012, Mr Grabovsky applied for a disability support pension (DSP) pursuant to s 94(1) of the Social Security Act 1991 (Cth). That was rejected on 22 January 2013 by a Centrelink officer. On 9 October 2013, on internal review, the decision of the Centrelink Officer was affirmed;

(2)    Mr Grabovsky unsuccessfully applied to the Social Security Appeals Tribunal (SSAT) for review. He then applied to the Administrative Appeals Tribunal (AAT) for review of the SSAT’s decision;

(3)    on 31 July 2014, the AAT set aside the SSAT’s decision and remitted the matter to the Secretary;

(4)    on 19 August 2014, notwithstanding his success in the AAT, Mr Grabovsky filed in this Court a notice of appeal and an interlocutory application seeking a stay of the AAT’s decision;

(5)    on 10 September 2014, the Secretary filed a Notice of Objection to Competency;

(6)    on 25 September 2014, Mr Grabovsky filed a second interlocutory application seeking leave to file a supplementary Notice of Appeal. The Secretary opposed that application;

(7)    on 2 October 2014, Edmonds J refused leave to file the supplementary notice of appeal and on 21 October 2014 Edmonds J ordered Mr Grabovsky to pay the Secretary’s costs of the interlocutory application filed on 25 September 2014;

(8)    on 24 October 2014, Edmonds J dismissed the interlocutory application filed on 19 August 2014 seeking a stay of the AAT’s decision, dismissed the notice of appeal and ordered Mr Grabovsky to pay the Secretary’s costs of the appeal;

(9)    on 10 December 2014, Mr Grabovsky filed an application seeking an extension of time within which to file a notice of appeal from the decisions of Edmonds J (the Extension of Time Application);

(10)    on 20 March 2015, Katzmann J dismissed the Extension of Time Application;

(11)    in the period 5 September 2014 to 14 August 2015, the Secretary’s solicitors corresponded with Mr Grabovsky in relation to the Secretary’s costs of the proceedings before Edmonds J. The last letter in the series was from the Secretary’s solicitors, Sparke Helmore, to Mr Grabovsky dated 14 August 2015. It set out the Secretary’s total party and party costs incurred in the proceedings as follows:

However, the Secretary sought payment of a reduced amount of $6,000 to be paid by 1 September 2015 in satisfaction of the costs orders in his favour. In the letter the Secretary’s solicitors put Mr Grabovsky on notice that, if he disagreed with the amount of $6,000, they would ask the Court “to make an order for a lump sum of costs to be awarded to the Secretary in accordance with r 40.02(b)” of the Rules or alternatively they could seek a taxation of the Secretary’s costs;

(12)    in his affidavit sworn 29 October 2015, Mr Grabovsky says that he never received the letter dated 14 August 2015 and that the first time he saw it was as an annexure to Dr Thompson’s affidavit. He goes on to say that the fact he did not see this “letter makes no difference because it would not change my position”;

(13)    on 15 September 2015, the Secretary filed the Interlocutory Application.

6    Mr Grabovsky attaches to his affidavit two Notices to Admit both dated 17 August 2015. The Secretary was served with the Notices to Admit on or about 30 October 2015 when Mr Grabovsky’s affidavit was served. The solicitor for the Secretary submitted that, to the extent those notices include facts, the Secretary would have admitted many of them but that the notices also include propositions which are not facts. For that reason the Secretary did not respond to them.

The parties’ Submissions

The Secretary’s submissions

7    The Secretary submits that, having been successful in the proceedings before Edmonds J and having obtained costs orders in his favour, costs should be awarded in a lump sum of $6,000 pursuant to r 40.02(b) of the Rules in satisfaction of those costs orders. Dr Thompson says in his affidavit that the process used to determine the lump sum is the same as the process used to determine the offer set out in the letter from Sparke Helmore to Mr Grabovsky dated 14 August 2015. Dr Thompson includes the following in his affidavit by way of explanation and justification for the lump sum sought:

(1)    first the amount is calculated by a method by which the Secretary only seeks to recover his party and party costs and, in doing so, he does not seek to recover all of those costs: those costs referrable to certain minor steps taken in the proceedings have not been included;

(2)    the second step in calculating the lump sum was to estimate the costs that would be allowable, having regard to Sch 3 of the Rules, in relation to each of the main steps in the proceedings. That is in seeking the lump sum, the Secretary does not seek to recover the actual costs referrable to the main steps taken in the proceedings;

(3)    the third step was to take into account the costs in the invoices rendered by Sparke Helmore to the Secretary, which have been paid;

(4)    the fourth step involved the application of a discount, in addition to the discount already built into the first step.

8    The Secretary also seeks the costs of the Interlocutory Application and an order pursuant to r 40.02(b) of the Rules that Mr Grabovsky pay lump sum costs in the sum of $1,500 for the costs relating to applying for the lump sum costs order. The Secretary submits that those costs have been calculated adopting the same method used for calculating the lump sum the subject of the costs orders made by Edmonds J on 21 and 24 October 2014.

9    In oral submissions, the solicitor for the Secretary sought as an additional cost, to be added to the lump sum of the costs of the Interlocutory Application, the filing fee for the Interlocutory Application. I refused to permit that amendment, given the lateness of the application to include it.

10    The solicitor for the Secretary submitted that the reason for the passage of time between orders being made and the filing of the Interlocutory Application was due to the filing of the Extension of Time Application. The solicitor for the Secretary provided the Court with copies of the decisions of Katzmann J in Grabovsky v Secretary Department of Social Services [2015] FCA 244 and in Grabovsky v Secretary Department of Social Services (No 2) [2015] FCA 1255. The Secretary also relies on the decision of Yates J in Cameron v Secretary, Department of Human Services (No 2) [2015] FCA 1201 (Cameron) which, he submits, summarises the principles applicable to a lump sum costs application.

Mr Grabovsky’s submissions

11    In his affidavit sworn 29 October 2015, Mr Grabovsky raises the following “grounds” of objection to the Secretary’s application:

(1)    the Interlocutory Application is misconceived. By this ground Mr Grabovsky alleges that Sparke Helmore is representing the Secretary (or his Department), it is the Department that is responsible for payment of Sparke Helmore’s fees, the proper course is for Sparke Helmore to invoice the Department, the Department to then add its costs and produce a combined itemised invoice. If upon presentation of the combined invoice, Mr Grabovsky does not pay then Sparke Helmore might be instructed by the Department to take further action;

(2)    the ground upon which the application is made is not applicable to Mr Grabovsky. By this ground Mr Grabovsky alleges that r 40.02(b) of the Rules does not apply because Sparke Helmore is not a party to the proceedings and is not entitled to costs, the Department has not generated an invoice and Mr Grabovsky has reasonable grounds to doubt that it ever will;

(3)    costs have been incurred due to the misconduct of Sparke Helmore. By this ground Mr Grabovsky alleges that Sparke Helmore failed to “produce the Certificate under Division 10 of the Legal Profession Act 2004 stipulating grounds based on provable facts for the reasonable prospect of success” (emphasis in original) and that Sparke Helmore made submissions and filed documents “in violation of ss 345 and 347 of the Legal Profession Act 2004”;

(4)    the Department is not the party to the proceedings. By this ground Mr Grabovsky seeks to re-agitate issues which were raised in his appeal which has been determined;

(5)    Sparke Helmore failed to “reveal a valid defence”. By this ground Mr Grabovsky raises issues that go to the hearing and outcome of the appeal and issues which were raised on the appeal;

(6)    the costs have been improperly, unreasonably and negligently incurred. By this ground Mr Grabovsky alleges that, based on the preceding grounds, Sparke Helmore incurred costs improperly and without reasonable cause. He alleges that the Secretary was not a proper party to the appeal proceedings, refused to provide a certificate of reasonable prospect of success and refused to set out why it was a party.

12    Mr Grabovsky’s written submissions include a number of contentions and submissions which seek to challenge the orders of Edmonds J. Mr Grabovsky also raises his representation of his wife in a conflict with her employer as well as submissions concerning private prosecutions and allegations of misconduct by the Secretary’s Department. Mr Grabovsky also raises issues relating to an ongoing Job Capacity Assessment that is being undertaken by Centrelink following Mr Grabovsky’s appeal to the AAT. Mr Grabovsky submits in relation to the issue of costs that the AAT, who in his view should be the only respondent to the proceedings, has filed a submitting appearance, that the AAT should take part in the hearing of the Interlocutory Application and that all costs of the Secretary should be disallowed.

13    In oral submissions, Mr Grabovsky once again raised as an issue that the Secretary is not a proper party to the proceedings, that Dr Thompson had no entitlement to appear as the Secretary’s legal representative and that he should not be “penalised” by having to pay the Secretary’s costs.

14    Mr Grabovsky concludes his written submissions by seeking orders pursuant to r 40.07(1) and (2)(b)(i) of the Rules and pursuant to ss 23 and 29(b) of the Federal Court of Australia Act 1976 (Cth) (the Act) and r 1.32 of the Rules suspending the Orders made on 24 October 2014 in these proceedings. In oral submissions Mr Grabovsky informed me that the reference to r 40.07(1) and (2)(b)(i) is incorrect and the order he seeks is pursuant to r 40.06(a) of the Rules.

consideration

Mr Grabovsky’s application

15    Mr Grabovsky seeks an order pursuant to r 40.06(a) of the Rules that the Secretary’s costs be disallowed. That rule relevantly provides that a party may apply to the Court for an order that any costs that have been improperly, unreasonably or negligently incurred be disallowed. Mr Grabovsky has not filed an interlocutory application and affidavit in support seeking this order nor did he seek an order dispensing with compliance with the Rules in that regard. On that basis alone, the application should be dismissed.

16    Leaving that issue aside, the application cannot, in any event, succeed. Mr Grabovsky alleges that the costs have been improperly, unreasonably or negligently incurred because the Secretary is not a proper party to the proceedings. That issue has been raised by Mr Grabovsky and dealt with both on appeal by Edmonds J and in the Extension of Time Application by Katzmann J. The Secretary is a proper and, as has been found, a necessary party to the proceedings. Costs orders have been made in his favour which have not been set aside. Mr Grabovsky’s application cannot be made out.

17    Mr Grabovsky also seeks orders pursuant to ss 23 and 29(b) of the Act and r 1.32 of the Rules suspending the Orders made on 24 October 2014 in these proceedings. Section 23 confers on the Court a wide power in matters in which it has jurisdiction to make such orders which it thinks appropriate and s 29 gives the Court the power to order a stay where an appeal has been instituted. Rule 1.32 entitles the Court to make any order it considers appropriate in the interests of justice.

18    As with the order sought pursuant to r 40.06(a) of the Rules, Mr Grabovsky has not filed an interlocutory application and affidavit in support seeking this order nor did he seek an order dispensing with compliance with the Rules in that regard. Again I am of the view that on that basis alone, the application should be dismissed.

19    Having said that, in my view the application should in any event be dismissed. Mr Grabovsky appealed from the orders made by the AAT. That appeal was heard and dismissed by Edmonds J who made orders to that effect including an order that Mr Grabovsky pay the Secretary’s costs on 24 October 2014. Mr Grabovsky was then entitled to appeal from the decision of Edmonds J. Having failed to file his notice of appeal within the time prescribed by the Rules, he filed the Extension of Time Application which was heard by Katzmann J who made orders dismissing it on 20 March 2015. In seeking the order “suspending” the orders made by Edmonds J on 24 October 2014, Mr Grabovsky attempts to challenge the orders of Edmonds J. He has had that opportunity, which he exercised by the filing of the Extension of Time Application, which has been determined. He cannot now seek to avail himself of a second impermissible opportunity.

The Secretary’s Application

20    By the Interlocutory Application the Secretary seeks orders for quantified lump sum costs over two defined periods as well as his costs of applying for the lump sum costs. The orders for lump sum costs are sought pursuant to r 40.02(b) of the Rules which provides:

40.02    Other order for costs

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; …

21    Mr Grabovsky opposes the making of those orders. He does so on the grounds of opposition raised in his affidavit and included in his submissions. I will consider each of those in turn.

22    First, Mr Grabovsky submits that the application is misconceived. That is not so. Sparke Helmore acts for the Secretary in these proceedings. It makes the application on behalf of the Secretary in that capacity. It is not the case that the Secretary needs to render a combined account for its costs to Mr Grabovsky before any action can be taken in the nature of this application. The orders made by Edmonds J on 21 and 24 October 2014 require Mr Grabovsky to pay the Secretary’s costs of the interlocutory application filed on 25 September 2014 and of the appeal. The procedure adopted by the Secretary in attempting to recover his costs is proper and is not misconceived.

23    Secondly, Mr Grabovsky alleges the ground upon which the application is made is not applicable to Mr Grabovsky as Sparke Helmore is not a party to the proceeding. As noted, Sparke Helmore acts for the Secretary. The Interlocutory Application is made by those solicitors on the Secretary’s behalf. There is no requirement that the Secretary render an invoice to Mr Grabovsky for his costs. The Secretary can make the Interlocutory Application as he has. I do not accept this submission.

24    The fact that Sparke Helmore has not provided a “Certificate under Division 10 of the Legal Profession Act 2004 stipulating grounds based on provable facts for the reasonable prospect of success” and made submissions and filed documents “in violation of ss 345 and 347 of the Legal Profession Act 2004” is not applicable. Noting that the Legal Profession Act 2004 (NSW) has been repealed, those sections relate to a claim or a defence of a claim for damages where certification is required. They have no application to these proceedings. There has been no misconduct on the part of Sparke Helmore and this submission is rejected.

25    Mr Grabovsky’s grounds of opposition and submissions made on the basis that the Secretary is not a proper party to the proceedings and that there was no valid defence, attempt to raise the substantive issues which were determined in the appeal by Edmonds J and subsequently raised in the Extension of Time Application. They have been determined and are not relevant to the Interlocutory Application.

26    The submission that the costs have been improperly, unreasonably and negligently incurred is not persuasive. I repeat my comments at [16] above.

27    The Secretary relies on the decision of Yates J in Cameron in which a similar application was made. In that decision at [5] Yates J refers to the decision in Nine Films & Television Pty Limited v Ninox Television Limited [2006] FCA 1046 at [8] where Tamberlin J set out the following principles in setting a lump sum:

In fixing a lump sum, the exercise is one of estimation or assessment and not of arithmetic calculation or precision. As pointed out in Harrison v Schipp (2002) 54 NSWLR 738 at [22], the rule contemplates the application of a much broader brush than that applied on taxation. The approach must be logical, fair and reasonable, and should only be exercised when the Court considers that it can do so fairly as between the parties: see also Jacobson J’s discussion in Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788 at [198]-[199]. In that case, his Honour allowed the applicants to recover only 40 percent of the amount claimed. Counsel for Nine points out that in Sony, his Honour did not have the advantage of a detailed assessment of costs by an expert consultant as in the present case. However, I note that the amount sought by the applicants in Sony as a gross sum was only 60 percent of the actual costs incurred. His Honour reduced that claim by a further 20 percent. Although the circumstances in the present case differ from the circumstances presented in the Sony matter, I consider that the approach of Jacobson J affords a broad general pointer to an appropriate range when determining a gross sum. In Donohoe v Britz (No. 2) (1904) 1 CLR 662 at 666, Barton J pointed out that when considering the amount of costs to be awarded as between party and party, the luxuries of litigation must be paid for by those who indulge in them and only the necessary costs are to be paid for by the losing side. The principles and approaches are also set out and considered by von Doussa J in Sparnon & Ors v Apand Pty Ltd [1998] FCA 164 in which his Honour fixed a gross amount of $634,320.54 where the actual costs paid by the client totalled $1,040,135.80. This amounted to a discount of some 39 percent.

28    In Cameron Yates J found, on the evidence before him, that the sum claimed for work up to a certain period was modest and was satisfied that it was less than the amount that was likely to be awarded on a party/party basis should the respondent’s costs be taxed. Yates J was also satisfied that the respondent should have his costs of seeking the lump sum costs and made an order for a further lump sum to be paid for those costs.

29    I also note the decision of Middleton J in Playcorp Group of Companies Pty Ltd v Peter Bodum A/S (No 2) [2010] FCA 455 where Middleton J said at [3] and [4] of the predecessor rule to r 40.02(b) that it was “expressed in general terms and is not limited to only complex and protracted litigation. Even in very simple cases a gross sum assessment may be appropriate” and that the “purpose of the sub rule is to avoid the expense, delay and aggravation involved in protracted litigation arising from the taxation process”. Middleton J went on to observe at [6] that:

Further, the court should now be mindful in interpreting and applying the Rules of the Court to best promote the “overarching purpose” of the civil practice and procedure provisions, which is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: see s 37M of the Federal Court of Australia Act 1976 (“the Federal Court Act”).

30    In my view, the promotion of the overarching purpose of the civil practice and procedure rules is best served by making the orders for lump sum costs sought by the Secretary and not requiring the Secretary to go to the expense of preparing a bill of costs in taxable form and engaging in the taxation process. The Secretary made an attempt to avoid the need to file the Interlocutory Application by seeking to settle the claim for costs. While Mr Grabovsky says that he did not receive the relevant letter until he was served with Dr Thompson’s affidavit, he also says that earlier receipt of that letter would not have changed his attitude to the Interlocutory Application.

31    I have considered the calculation of the amounts sought. The Secretary has explained the basis of his calculation of the lump sums. He seeks only party/party costs, only those costs that would be allowed on a taxation and has applied a “discount” by not including minor items and by reducing the total calculated by approximately 30%. This method has been applied both to the amount sought up to 28 October 2014 and the amount sought since 28 October 2014. I am satisfied that the amounts sought are reasonable and are appropriate.

COnclusion

32    In light of the matters set out above, I will make the following orders:

(1)    Costs be awarded to the Respondent in a lump sum of $6,000 instead of any taxed costs pursuant to r 40.02(b) of the Federal Court Rules 2011 for work up to 28 October 2014.

(2)    The Applicant pay the Respondent’s costs of applying for lump sum costs pursuant to r 40.02(b) of the Federal Court Rules 2011.

(3)    Costs be awarded to the Respondent in a lump sum of $1,500 instead of any taxed costs pursuant to r 40.02(b) of the Federal Court Rules 2011 for work since 28 October 2014.

Associate:

Dated:    15 December 2015