FEDERAL COURT OF AUSTRALIA

Hudson v Sigalla [2016] FCA 1204

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be dismissed.

2.    The notice of appeal be dismissed as incompetent.

3.    The appellant pay the respondents’ costs.

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

REASONS FOR JUDGMENT

1    This judgment is concerned with an appeal or proposed appeal about the variation of a costs order. In brief, at the conclusion of the proceeding the primary judge dismissed the appellant’s application and ordered him to pay the respondent’s costs as agreed or taxed. Costs were not agreed and the taxation process commenced. In the meantime, the respondent failed to pay his own lawyers, the lawyers asserted a lien over the fund constituted by the costs order, and they later applied to the court for relief. The primary judge granted this relief and ordered that Mr Hudson pay costs directly to the practitioners in lump sums. The appellant claims that in so doing his Honour fell into appealable error.

Background

2    The appellant, Frank Hudson, and the respondent, Andrew Sigalla, are former business allies, who fell out. Mr Hudson, who is a licensed bookmaker, claims that Mr Sigalla owes him more than $1.9 million in respect of unpaid gambling debts. Mr Sigalla became bankrupt upon the making of a sequestration order but, at a meeting of his creditors, which Mr Hudson did not attend, a composition was agreed to and the bankruptcy was annulled. Mr Sigalla then sued Mr Hudson in the Supreme Court to recover monies he claims Mr Hudson owes him. Mr Hudson filed a cross-claim in respect of the alleged gambling debts.

3    After Mr Sigalla applied for summary dismissal of the cross-claim, Mr Hudson applied to the Federal Circuit Court to set aside or terminate the composition. At the same time he sought leave under s 58(3) of the Bankruptcy Act 1966 (Cth) to pursue the cross-claim. The primary judge made an order granting leave but otherwise dismissed the application: Hudson v Sigalla [2014] FCCA 1652.

4    Two months later, Mr Sigalla moved the court for orders that the proceedings be reopened and the grant of leave to proceed with the cross-claim be revoked. The primary judge was persuaded to accede to the motion and to make those orders: Hudson v Sigalla (No.2) [2015] FCCA 542. At the time judgment was pronounced on 30 March 2005, his Honour invited submissions as to costs. After hearing from the parties he made an order (order 4) requiring Mr Hudson to pay Mr Sigalla’s

costs and disbursements of and incidental to the entire proceedings, including the re-opened proceedings, to be taxed and paid in accordance with the Federal Court Rules, in the absence of agreement.

5    Mr Hudson appealed unsuccessfully to a Full Court of this Court: Hudson v Sigalla [2015] FCAFC 140. The Full Court made no order as to costs and did not interfere with the primary judge’s costs orders.

6    On 4 November 2015 Mr Sigalla’s solicitors, Kemp Strang, wrote to Mr Hudson’s solicitors, Marque Lawyers, asking them to indicate whether Mr Hudson was willing to pay $437,776.44 in respect of Mr Sigalla’s costs. Evidently he was not. Consequently, on 9 March 2016 Mr Sigalla filed a bill of costs, thereby initiating the process of taxation: see Federal Court Rules 2011 (Cth) (FCR), r 40.17. The bill was in the amount of $377,313.96, comprising solicitors’ costs of $159,260.75 and disbursements (including counsel’s fees) of $218,053.21.

7    Before a bill is taxed, a taxing officer must make an estimate of the approximate total for which, if the bill were taxed, the certificate of taxation would be likely to issue: FCR r 40.20(1). The estimate is to be made in the absence of the parties and without making any determination on the individual items in the bill: FCR r 40.20(2). Unless a party interested in the bill objects to the estimate within 21 days after the issue of the notice of estimate in accordance with r 40.21, the amount of the estimate is the amount for which the certificate of taxation will be issued: FCR r 40.20(4). On 2 May 2016 Registrar Ng estimated the tax costs at $241,767.35. Twenty-one days later, on 23 May 2016, Mr Hudson filed a notice of objection to the estimate. On 31 May 2006 a request was made of the parties to attend a mediation.

The genesis of the present dispute

8    As Mr Sigalla had failed to pay his lawyers, both his senior and junior counsel (Guy Reynolds SC and Christopher Botsman) and his solicitors (the practitioners) filed interlocutory applications in the Federal Circuit Court (styled as “applications in a case”) seeking declarations that they each held a lien over the fund constituted by order 4, and orders that Mr Hudson pay certain sums into court to secure the liens, and pay their unpaid fees, once agreed or assessed/taxed, directly to them. As well as their fees, the lawyers asked for the costs of enforcing their liens and interest. Following a case management conference on 27 June 2016, the practitioners filed submissions in which they also sought alternative relief in the form of lump sum costs orders.

9    The three applications were consolidated and heard together on 10 August 2016. At the end of the hearing the primary judge made the following declarations:

1.    Kemp Strang Lawyers, Mr Guy Reynolds and Mr Christopher Botsman of Counsel (the Practitioners) each hold a particular lien over the fund constituted by “... the costs and disbursements of and incidental to the entire proceedings, including the re-opened proceedings...” in Order 4 of the orders made in these proceedings on 30 March 2015 to the extent of their unpaid fees, plus any interest and the costs of enforcing these particular liens.

2.    Mr Sigalla and his assigns have no legal title to that portion of the Costs Order that corresponds to the unpaid fees of the Practitioners.

10    His Honour reserved judgment on whether order 4 should be varied to substitute a lump sum order and, if so, in what amount. In the meantime, he ordered that no further steps be taken “in pursuance of the existing costs order”, pending further order of the court.

11    On 5 September 2016, over the opposition of Mr Hudson, his Honour made orders in the following terms:

(1)    Order 4 made on 30 March 2015 is varied as follows:

(4)    The applicant (Mr Hudson) is to pay the respondent’s practitioners (Kemp Strang, Mr Guy Reynolds and Mr Christopher Botsman) their costs and disbursements of and incidental to the entire proceedings, including the re-opened proceedings, fixed in the lump sum of $317,106.

(2)    For the purposes of order 1, Mr Hudson is to pay the lump sum of $317,106 to Kemp Strang Lawyers within 28 days.

(3)    Upon receipt of the lump sum, Kemp Strang are to pay Mr Reynolds the sum of $66,000 and Mr Botsman the sum of $75,000 in respect of their fees, and are to pay to Mr Sigalla any disbursements paid by him.

12    The proposed appeal relates to the orders made on 5 September 2016 and challenges certain aspects of the primary judge’s reasons in the judgment published on that day (Hudson v Sigalla (No.3) [2016] FCCA 2140). In a nutshell, Mr Hudson contends that the primary judge had no power to vary order 4 and, assuming that he had, that his approach to the assessment was flawed.

The hearing and judgment below

13    The primary judge received affidavits from the practitioners as to their fees, and detailed submissions.

14    Mr Hudson did not oppose the making of the declarations concerning the practitioners’ liens. The controversy related to the variation of the costs order.

15    Mr Hudson submitted that he should not have to pay any more than he would be required to pay on a party and party assessment and, in particular, that he should not have to pay costs “approaching indemnity costs” absent an order for indemnity costs. Although Mr Hudson opposed a variation of the costs order, he nonetheless conceded that it would be beneficial to bring “all elements of the disputes” to a prompt and firm end.

16    His Honour decided that the court had both the jurisdiction and the power to make a lump sum costs order. In so doing he rejected an argument by Mr Hudson that r 21.02 of the Federal Circuit Court Rules 2001 (Cth) (FCCR) precluded it because no application to vary the costs order was made within 28 days of the original order, holding that the limitation did not apply to a variation.

17    In determining that a lump sum costs order should be substituted for the original costs order his Honour said at [12]–[13]:

12.    As noted above, the parties have been unable to reach any agreement as to costs. No taxation has been commenced, although Registrar Ng provided an estimate pursuant to rule 40.20(3) of the Federal Court Rules to Mr Hudson and Mr Sigalla on 2 May 2016 in the sum of $241,767.35. A registrar has also ordered a mediation prior to any taxation but that has not yet occurred. The conduct of a mediation would involve (scil) further time and expense and, given the acrimonious relations between Mr Hudson and Mr Sigalla, and the way in which all issues in the proceedings have been hotly contested, a productive outcome of a mediation is, in my view, unlikely.

13.    A taxation would resolve the issue of quantification but would put the parties to further trouble and significant additional expense. The estimate provided by Registrar Ng was based on different material to that presented to me by the practitioners. I heard argument over a full day in relation to the issues on 10 August 2016. Except for one directions hearing in June this year before Judge Barnes, I have had the sole conduct of the entire proceedings in this Court over several years and am intimately familiar with the work done on behalf of Mr Hudson and Mr Sigalla. Further, the practitioners were not parties to the assessment process before the registrar. In addition, the establishment of their particular liens over the fruits of the costs order arguably alters in a subtle but important way the manner in which costs should be assessed. There is a risk that that subtlety may be lost in the taxation process.

18    His Honour said that he also took into account a number of “discretionary considerations”. They included the facts that:

    Mr Hudson filed no interpleader relief;

    he waited until the last available day to object to the Registrar’s estimate;

    he did not respond to a request for a mediation date for three weeks;

    when he did respond he “used the limited availability of the solicitor with carriage of the matter as a reason for excluding the months of August and September”; and

    he did not file any evidence challenging the reasonableness of the practitioners’ costs.

19    His Honour said that it would be inconsistent with the economical resolution of the present costs dispute to refrain from fixing a lump sum because of the existing taxation process where:

a)    a taxation pre-supposes that a party has an interest in a costs order whereas in this case the dispute between Mr Sigalla and his former lawyers has been resolved in favour of the practitioners;

b)    taxation involves a mode of quantification appropriate to recovery by a party;

c)    the practitioners are not (at least at this stage) parties to the taxation;

d)    the taxation estimate is a global sum that does not differentiate between the costs of the respective practitioners; and

e)    the taxation process is protracted.

20    His Honour added that where the recipient of the lump sum is a legal practitioner, a court would be “less concerned” that the lump sum might be “overcompensatory” if the practitioner’s invoices are reasonable and payment pursuant to a lump sum order is the practitioner’s “only potential source of payment”.

21    His Honour’s starting point in determining the appropriate amounts was the evidence of what the lawyers had charged but he reduced the fees claimed by all practitioners: in Mr Botsman’s case by 20%, in Mr Reynolds’ by 25%, and in Kemp Strang’s by 30%. Furthermore, he declined to award either interest or costs on any of the three interlocutory applications.

The proposed appeal

22    Mr Hudson filed a notice of appeal and later an amended notice of appeal. The amended notice of appeal contains six grounds, which read as follows:

1.    His Honour erred in finding he had the power to vary Order 4 made on 30 March 2015 (Costs Order), or alternatively in exercising the discretion to dispense with rules 16.05 and/or 21.02 of the Federal Circuit Court Rules 2001 (Cth) or to extend the time under rule 21.02.

2.    Further or in the alternative, his Honour failed to take into account the fact that the lien was an equitable right in the Costs Order which could not be greater than the Costs Order over which it operated.

3.    Further or in the alternative, his Honour erred in taking into account irrelevant considerations in deciding to vary the Costs Order, deciding to fix a lump sum costs order and/or the quantification of the lump sum costs order.

Particulars

(a)    At [18] his Honour took into account:

(i)    the fact that no interpleader relief was filed by Mr Hudson

(ii)    the fact that Mr Hudson filed an objection to Registrar Ng’s estimate within the prescribed time, but at the end of that period; and

(iii)    the fact that Mr Hudson did not respond [in] a particular way to a request for a mediation, and sough[t] to have the mediation fixed at a time the solicitor with carriage of the matter was available;

(b)    At [21] his Honour took into account the fact that the practitioners were not parties to the action or the taxation;

(c)    At [19] his Honour took into account the fact that Mr Hudson had not put on any evidence challenging the reasonableness of the costs;

(d)    His Honour took into account the practitioner’s invoices, rather than Registrar Ng’s estimate as a starting point for the quantification of costs.

4.    Further or in the alternative, his Honour erred at [13], [21] and [22] in holding that the entitlement to a lien over the fruits of the costs order, or the fact that the people claiming the lump sum order were practitioners, alter the way in which costs should be assessed or qualified.

5.    Further or in the alternative, even on a broad brush approach his Honour failed to give reasons and failed to take into account the matters Mr Hudson raised on the quantification of the order.

6.    His Honour erred in refusing Mr Hudson’s application for the costs of the applications in a case dated 30 May, 31 May and 24 June 2016, in that his Honour failed to take into account the fact that the Applications in a Case were made unnecessary by Mr Sigalla’s failure to pay his practitioners, and not by any conduct of Mr Hudson.

23    Mr Hudson asked for leave to appeal to the extent that leave was required and the following substantive orders:

(1)    that the appeal be allowed;

(2)    that the orders made on 5 September 2016 be set aside (but not disturbing the declarations made on 10 August 2016);

(3)    that the interlocutory applications filed by the practitioners be dismissed; and

(4)    that the practitioners pay Mr Hudson’s costs in the court below and in this Court.

24    By an interlocutory application filed on 30 September 2016 Mr Hudson sought orders that:

1.    Within 14 days, Mr Hudson make the following payments:

(a)    $50,319.59 to Mr Guy Reynolds in respect of the declaration of his lien in the costs order of 30 March 2015;

(b)    $57,181.36 to Mr Chris Botsman in respect of the declaration of his lien in the costs order of 30 March 2015; and

(c)    $94,543.74 to Kemp Strang in ... respect of the declaration of its lien in the costs order of 30 March 2015

Upon terms that, if the appellant is successful in the appeal and any taxation results in the certification of an amount that exceeds the amount paid by Mr Hudson under these orders, the recipients are to repay to Mr Hudson within 14 days of certification, the amount by which the payment exceeds the costs order (the amount that represents that recipient’s proportion of the excess)

2.    The orders of Judge Driver of 5 September 2016 be otherwise stayed, pending further order.

3.    Such other order as the Court sees fit.

4.    Costs.

25    At the case management hearing on 17 October 2016 I ordered that, in the event that the application for a partial stay was pursued, by close of business on 24 October 2016 Mr Hudson pay the above-mentioned sums. The partial stay was pursued and on the last day for compliance with the order the sums were paid.

26    The interlocutory application was supported by an affidavit affirmed by Damian Sturzaker, Mr Hudson’s solicitor. Mr Botsman also filed an affidavit. Both affidavits were read without objection at the hearing.

Issues

27    Two questions arise for determination: first, whether leave to appeal is required (as the practitioners contended but Mr Hudson disputed) and, if so, whether leave should be granted. The application for a partial stay was abandoned during the course of the hearing.

Is leave to appeal required?

28    To answer this question it is necessary to decide whether the orders and judgment being challenged were interlocutory. That is because s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) provides that an appeal shall not be brought from such a judgment without leave. Mr Hudson argued that the orders under challenge are final, not interlocutory. I am unable to accept the argument.

29    A judgment or order is final if it finally determines the rights of the parties in a principal cause pending between them: Hall v Nominal Defendant (1966) 117 CLR 423 (Hall) at 443 (Windeyer J); Bienstein v Bienstein [2003] HCA 7; 195 ALR 225 at [25] (McHugh, Kirby and Callinan JJ). An “interlocutory order” may be made before or after the conclusion of proceedings in the action: Smith v Cowell (1880) 6 QBD 75, cited with approval in Hall.

30    Mr Hudson submitted that there is a difference between an order for costs in an interlocutory matter and an order for costs as part of the final disposition of proceedings, citing Hacker v Weston [2015] FCA 790 at [3] (Allsop CJ). That is not, however, what the Chief Justice said in that case. What his Honour said was that there may be a difference. His Honour floated the idea that the Federal Court Act be amended to make the position clear, noting that in New South Wales there are specific provisions requiring that leave be obtained if the appeal is only concerned with costs (s 127(2)(b) of the District Court Act 1973 (NSW) and s 101(2)(c) of the Supreme Court Act 1970 (NSW)). In Hacker v Weston the would-be appellant was prepared to accept that leave “may” be required. His Honour did not grant leave, but not because he determined that leave was unnecessary. Rather, he referred the leave application to a Full Court. As it happened, the appeal did not proceed.

31    There is some authority for the proposition that costs orders made as part of the final orders determining the rights of the parties in a proceeding are final, not interlocutory. In Probiotec Ltd v The University of Melbourne (2008) 166 FCR 30 at [79] Rares J (with whom Finn and Besanko JJ agreed) expressed the “prima facie” view that they were and in Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27 at [291] another Full Court (Bennett, Besanko and Beach JJ) endorsed this view.

32    Be that as it may, here the orders being challenged were not made as part of the final disposition of proceedings. They did not finally determine the rights of the parties in the principal cause. They were concerned with the vindication of the third parties’ rights. Moreover, they were made more than a year later on interlocutory applications filed by non-parties to vary a previous costs order. Mr Hudson contended, without authority, that a variation of an earlier costs order made as part of the final orders is a final order. I reject the contention. The judgment under appeal determined a satellite dispute with third parties over an application to vary the mechanism for the payment of costs. On any view of the matter the order the subject of the proposed appeal was interlocutory.

33    Thus, leave to appeal is required.

Should leave to appeal be granted?

34    The practitioners oppose the grant of leave — and for good reason.

35    Mr Hudson faces a number of hurdles.

36    First, while the discretion to grant leave to appeal is not subject to any express fetters, generally speaking an applicant must show that the decision in question is attended with sufficient doubt to warrant it being reconsidered on appeal and that, supposing the decision were wrong, substantial injustice would result if leave were refused: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398–400.

37    That said, I accept that where, as here, the practical effect of the order is to prevent the applicant from pursuing a remedy, leave may more readily be granted: Ex parte Bucknell (1936) 56 CLR 221 at 225–6. I also accept that leave may more readily be granted where the proposed appeal raises a point of legal principle or a matter of general public importance (Younan v Queensland Building Services Authority [2011] QCA 1 at [7]).

38    Second, the decision to vary the earlier costs order, the decision to substitute a lump sum costs order, and the decision as to the amount of costs, were all discretionary decisions on matters of practice and procedure. Mr Hudson’s submission to the contrary is untenable. An appellate court will only interfere with a discretionary decision if the appellant is able to demonstrate an error of the kind referred to in House v The King (1936) 55 CLR 499. In the interests of the proper administration of justice, appellate courts exercise “particular caution” in reviewing discretionary decisions on matters of practice and procedure: Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 at 177. No doubt that is why Wilcox and Gummow JJ described the task of establishing appealable error in such a case as “formidable”: Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 at 393–4.

39    Contrary to Mr Hudson’s submission, however, no question of general public importance arises in the present case, and at the case management conference it was common ground that the appeal did not raise any question of general principle which would warrant the consideration of the Full Court. Notwithstanding the argument mounted in support of this application, that remains the position.

40    In his written submissions Mr Hudson did not address the grounds of appeal in terms and he made a desultory effort to show that he had any reasonable prospects of success. To the extent that he dealt with the substance of the appeal at all, his submissions were directed only to one ground: ground 2. He contended that “[t]he unusual approach of the primary Judge stands (incorrectly) as authority for the proposition that the costs respondent should pay more when the costs are being paid to practitioners, not reimbursing a litigant”. He asserted that he was being required “to effectively indemnify” the lawyers. He claimed that he always wanted the benefit of the original taxation order and that, had he not objected to the Registrar’s estimate, the estimated amount would have been payable as a judgment of the court, and the fund from which the practitioners could “recover” their liens would have crystallised, and be payable from the $241,767.35. He complained that the primary judge’s order increased the Registrar’s estimate by around 30% so that the amount ordered “represents a considerable uplift”. He did not in terms address the question of substantial injustice.

41    The first ground of appeal challenges the court’s power to vary the costs order.

42    The orders made in March 2015 had been entered. The practitioners relied on r 16.05(2)(f) of the FCCR, which enables the court to vary or set aside an order after it has been entered if the party in whose favour the order is made consents. The evidence before the primary judge was that Mr Sigalla, the party in whose favour the order was made, consented. Nevertheless, the primary judge did not consider that r 16.05(2)(f) applied. He said:

I found that order 4 … contained two elements. The first element was an unquantified order for costs in favour of Mr Sigalla. Rule 16.05(2)(f) would support an order sustituing the practitioners for Mr Sigalla as the beneficiaries of the cost order, given Mr Sigalla’s consent. However, the second element in the order was the establishment of a mechanism for the ascertainment of the costs due and payable (agreement or in lieu thereof, taxation). The mechanism put in place was not an order for the benefit of either party, or if it was, it was for the benefit of both of them. It follows, and I found, that rule 16.05(2)(f) would not confer power on the Court to substitute a different mechanism for the ascertainment of the quantum of costs, based simply on the consent of Mr Sigalla.

43    With respect I consider that the primary judge was wrong. There was one order which the practitioners were asking the court to vary. It was an order that was unquestionably in favour of Mr Sigalla. In my opinion, r 16.05(2)(f) was engaged. The fact that the mechanism benefited them both was a factor his Honour could have taken into account in deciding whether to vary the order but it did not deprive him of the power to do so. This is consistent with the approach taken by Merkel J in Australian Securities and Investments Commission v Yandal Gold [2003] FCA 77.

44    In any event, I am not persuaded that there is sufficient cause to doubt the correctness of the primary judge’s view that he had the power to vary order 4.

45    The primary judge accepted the practitioners’ alternative submission that a combination of rr 16.05(3) and r 1.05 of the FCCR, r 40.02 of the FCR and ss 14, 15 and 16 of the Federal Circuit Court of Australia Act 1999 (Cth) (Federal Circuit Court Act) confer power on the Federal Circuit Court to vary the costs order in the manner sought.

46    Rule 16.05(3) of the FCCR (which has no equivalent in the FCR) states that r 16.05 (subrr (1) and (2) of which deal with the power to vary or set aside a judgment or order) “does not affect the power of the Court to vary or terminate the operation of an order by a further order”. Mr Hudson did not argue that the primary judge’s order was a variation or termination of the operation of order 4 by a further order. Rather, he argued that r 16.05(3) does not confer such a power. That may be true. It is at least arguable that subr (3) operates on the premise that the court has the power. But the primary judge did not only rely on r 16.05(3). He also relied on ss 14 and 15 of the Federal Circuit Court Act. Sections 14 and 15 of the Federal Circuit Court Act are the analogues of ss 22 and 23 of the Federal Court Act. In Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1997) 72 FCR 386 at 395 Drummond J said:

The jurisdiction conferred on this Court by ss 22 and 23 of the Federal Court of Australia Act is jurisdiction to determine the entire controversy involving the parties [and to avoid a multiplicity of proceedings] provided it is a controversy arising under federal law. The Court’s jurisdiction can also extend to the determination of related but non-federal causes of action: see s 32 of the Federal Court of Australia Act and Fencott v Muller … Common law superior courts of record do not become functus officio merely upon the making and entry of the judgment or order that determines the rights of the parties: they retain power in the same suit to make supplemental orders thereafter, not limited to orders in aid of the enforcement and working out of the orders determining the rights of the parties, but including orders affecting persons who are not parties to the litigation; the Federal Court has these same ancillary powers. See Caboolture Park Shopping Centre Pty Ltd (In liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 235 and Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510 at 521 and 525–526. This Court’s ancillary powers flow from its authority under ss 22 and 23 to resolve the whole of each controversy that comes before it.

47    While the Federal Circuit Court is not a superior court of record, its power to make supplemental or ancillary orders is no different. It has the same authority as this Court to resolve the whole of each controversy coming before it.

48    Furthermore, in Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 235 the Full Court held that this Court’s jurisdiction to award costs in all proceedings contained in s 43 of the Federal Court Act (which is in relevantly identical terms to s 79(2) of the Federal Circuit Court Act) was not spent once there was no longer a proceeding before the Court.

49    Mr Hudson’s argument that r 21.02 of the FCCR precluded an application for variation of the costs order because the application had not been made within 28 days of the original costs orders was doomed to fail. Subrule 21.02(1) provides that an application for an order for costs may be made at any stage in a proceeding, or within 28 days after a final decree or order, or within any further time allowed by the court. I rather doubt that r 21.02 excludes applications to vary costs orders but even if the primary judge were wrong to confine its operation in this way r 21.02(1)(c) empowered the court to allow further time for the making of the application.

50    In any case, the equivalent r 1.05, upon which the primary judge also relied, provides in subr (2) that:

[I]f in a particular case the [Federal Circuit Court] Rules are insufficient or inappropriate, the Court may apply the Federal Court Rules … in whole or in part and modified or dispensed with, as necessary.

51    Rule 40.02 of the FCR relevantly permits “a party or a person who is entitled to costs” to apply for an order that costs be awarded in a lump sum instead of, or in addition to, any taxed costs (para (b)). It is not different in substance from its predecessor (O 62 r 4).

52    In Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 (Beach Petroleum) von Doussa J made an order for the payment of a specified gross sum (the terminology used in O 62 r 4 of the former Federal Court Rules) after an earlier order had been made which envisaged that costs would be taxed.

53    In Salfinger v Niugini Mining (Aust) Pty Ltd (No 5) [2008] FCA 1119 Heerey J ordered payments of costs in lump sums although he had previously made several costs orders which contemplated that the costs would be taxed in the usual way.

54    Moreover, in Dunstan v Seymour [2006] FCA 917 Mansfield J held that an order of this kind could be made even after the normal process of taxation had begun – in other words, after the original costs order had been entered (an order must be entered if some step is to be taken under the order: FCCR r 16.07, cf. FCR r 39.31(1)(d), O 36 r 2). In that case an order had been made dismissing charges laid by information by a Mr Dunstan but later taken over by the Director of Public Prosecutions. On the application of the defendants, the Court ordered that Mr Dunstan pay their costs. Under O 62 r 4(1) of the FCR, in the absence of further orders the costs were to be taxed. The process of taxation was prolonged and the defendants applied to have the costs ordered to be paid fixed at a gross sum pursuant to O 62 r 4(2)(c) (the predecessor of para 40.02(b) of the current Rules). His Honour said at [7]–[8]:

7    As the normal process of taxation of costs has already commenced, the question has been raised whether the Court may now exercise the power to fix costs at a gross sum under O 62 r 4(2)(c). In my view, it may do so.

8    There appears to be little doubt that the Court has power under O 62 r 4(2)(c) to order that costs be fixed in a gross sum after an order that the costs of a party be paid. Once an order for costs is made, the normal or default method of fixing those costs is by taxing them: O 62 r 4(1). It is expressed as an entitlement of the party in whose favour the costs order has been made. Order 62 r 4(2) refers expressly to circumstances where the Court orders costs to be paid. It contemplates further orders, including that instead of taxed costs the person shall be entitled to a gross sum specified in the further order. In either event, the process involves the means of quantifying the costs ordered to be paid. In the absence of a further order, the entitlement is to quantify them by taxation. The further order may change the entitlement to quantification by the gross sum.

55    Order 62 r 4(3) stated that an order under subr (2) could be made at any time, “whether or not an order that costs be paid to a person has previously been made or entered”. The current Rules do not contain a provision in these terms. Rule 40.02 is silent as to whether it applies where a previous order has been made or entered. But there is no reason to think that this silence signifies an intention to limit the Court’s existing powers.

56    The primary judge referred to Short v Crawley (No 45) [2013] NSWSC 1541 in which White J varied a number of costs orders years after they were made and after they had been entered. The original orders provided for costs as assessed on the ordinary basis (the equivalent of taxed costs in this jurisdiction). The variation that was sought was for a gross sum costs order. His Honour said at [27]:

I accept Mr Ogborne’s submission that if a gross sum costs order were made the previous costs order would be varied. But the variation would not be as to the substance of the order, that is, as to the extent of the defendants’ liability to pay costs. The variation would only be as to the mode of quantifying what sum of money was payable under the costs orders. To that limited extent a gross sum costs order would vary all of the costs orders pursuant to which costs are to be assessed … The variation would not be in respect of a claim for relief or of any question arising on a claim for relief that has been determined.

57    His Honour went on to say at [29] that, regardless of the way in which the order may be expressed, the gross sum is paid pursuant to the previous costs order and in respect of it and is payable instead of assessed costs. He added at [33]:

[A] gross sum costs order is a supplemental order that makes more specific provision for the implementation of the earlier costs order by providing an alternative mode of enforcing it, that does not alter the substantive relief given by the previous costs order, and falls within the narrow class of exceptions to the principle that when proceedings have been disposed of by a final order they are at an end …

58    That is the position here.

59    Grounds 2 and 4 are directed to two passages in the primary judge’s reasons. The first appears in [13]. It is an observation that “the establishment of [the practitioners’] liens over the fruits of the costs order arguably alters in a subtle but important way the manner in which costs should be assessed”. His Honour thought that there was a risk that the subtlety could be lost in the taxation process. While this observation is somewhat enigmatic, its meaning is apparent from the second passage in the reasons which these grounds challenge. That appears in [22] where his Honour said:

[W]here the recipient of a lump sum is a practitioner, different considerations should apply than in the ordinary case, where the recipient of a lump sum is a party. Specifically, a court would be less concerned about a lump sum being “overcompensatory” to a practitioner where the practitioner’s invoices are reasonable and payment pursuant to a lump sum order represents the only potential source of payment.

60    This is an obvious allusion to what was said in Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051 at [24] (Ginos Engineers) about the manner in which a court determines the appropriate lump sum. There, Finn J referred to adjustments to the amount charged, amongst other things, to produce a sum which is “neither overcompensatory nor prejudicial to the successful party”. If the practitioner’s invoices are reasonable, it is difficult to see what room there is for concern about over-compensating the successful party.

61    These passages do not support the proposition advanced by Mr Hudson that the primary judge considered that “the costs respondent should pay more when the costs are being paid to practitioners, not reimbursing a litigant”. Furthermore, the submission that “Mr Hudson should not be required to effectively indemnify the practitioners” is belied by the orders the primary judge made, reducing the fees by between 20 and 30%, and the decisions not to award them interest or the costs of the enforcement proceeding.

62    I now turn to ground 3.

63    Particular (a)(i) relates to the primary judge’s reference to Mr Hudson’s failure to file a stakeholder interpleader. At first blush, the relevance of this omission is indeed obscure. Some context is required.

64    There was evidence in the court below that Mr Hudson was aware on 30 March 2015 that both Kemp Strang and Mr Botsman claimed to be beneficially entitled to the portion of the costs order corresponding to the costs and disbursements they had charged. On 9 February 2016 Mr Botsman wrote to Mr Hudson’s solicitors advising them that due to Mr Sigalla’s failure to pay his fees, he asserted a lien over them. Kemp Strang asserted a lien in respect of its costs by letter dated 26 February 2016. Mr Sigalla filed a bill of costs on 9 March 2016, thereby initiating the taxation process. Mr Botsman submitted that by then, Mr Hudson knew that there was a dispute between Mr Sigalla on the one hand and Kemp Strang and Mr Botsman on the other over the beneficial entitlement to the costs order and in these circumstances “the only appropriate course” for Mr Hudson was to file a stakeholder’s interpleader pursuant to r 18.01 of the FCR. Rule 18.01 relevantly provides:

A person (the stakeholder) may apply to the Court for relief by way of interpleader if:

(a)    the stakeholder is liable for a debt …; and

(b)    the stakeholder:

…

(ii)    has received competing claims about the property in dispute;

…

65    Mr Botsman submitted that, despite his knowing of the existence of the dispute between him and Mr Sigalla a month before the taxation process had begun, it was not until after he had foreshadowed the application for relief in respect of the lien that Mr Hudson apparently concluded that the application involved a “fight between Mr Sigalla and Mr Botsman” and that the existence of the asserted liens was a matter for the Court. Mr Botsman submitted to the primary judge that it was not clear why he did not reach the same conclusion soon after Mr Sigalla began the process of taxing the costs order (on 9 March 2016). Mr Botsman contended that one reason not to apply for interpleader relief was because Mr Hudson had decided that he could benefit from pursuing the taxation. Mr Botsman also submitted that the Registrar’s estimate could provide “no meaningful guidance” in determining a sum that was fair and reasonable because it is a global amount which does not differentiate between the costs of the several practitioners and because it only exists because Mr Hudson failed to file a stakeholder’s interpleader.

66    It seems from the primary judge’s reference to the failure to seek interpleader relief that he accepted these submissions. By not doing so, Mr Hudson allowed the taxation process to continue and delayed the payment of the practitioners’ fees. For this reason I am not persuaded that it was irrelevant.

67    Particulars (a)(ii) and (iii) go to the protracted nature of the taxation process and are plainly not irrelevant. As Finn J pointed out in Ginos Engineers at [22], rules empowering a court to order a gross amount of costs instead of referring the question of costs to taxation “are well accepted as being directed to the avoidance of expense, delay and the protraction of litigation”. See also Beach Petroleum at 120. While the matters referred to in particulars (a)(ii) and (iii) reflect on Mr Hudson’s conduct in the past, past conduct is a proper basis from which to infer future conduct.

68    Nor do I consider it was irrelevant that the practitioners were not parties to the action or the taxation (particular (b)). As Mr Botsman submitted in the court below, the rationale for a lien is “to prevent the client from deflecting the moneys away from the solicitor” (Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470 at 483) and it would frustrate the lien to require the fund to be quantified by a taxation when the practitioners are not parties to the taxation and the party who incurred the costs, Mr Sigalla, no longer has any incentive to prosecute the taxation. The primary judge referred to the remarks of Scarman LJ in In the Estate of Fuld (No 4) [1968] P 727 at 736 that “[i]t would be an absurdity if [the court’s equitable jurisdiction] could be stultified by the failure of the client to take the steps necessary to realise the solicitor’s security”. Mr Hudson submitted that the practitioners would have a right to be heard on the taxation. But this proposition is at least doubtful. The practitioners are neither parties to the action nor persons in whose favour the order for costs was made. Yet, only parties and persons in whose favour or against whom an order for costs has been made have that right under the Rules.

69    I fail to see how it was irrelevant that Mr Hudson failed to put on any evidence to challenge the reasonableness of the amounts claimed (particular (c)). In Ginos Engineers Finn J took into account a similar omission (see [29]).

70    There was evidence before the court to justify the fees which was served on Mr Hudson. His Honour referred to it in his reasons. In Mr Reynolds’ case his Honour noted that his rates reflected his experience and standing in the profession. Yet, because they were higher than those of most senior counsel he discounted those fees by 25%. In Mr Botsman’s case his Honour noted that he was engaged throughout the proceedings and played a leading role on his client’s behalf for a significant part of them. His Honour found his rates to be “fair and reasonable”, yet reduced them by 20%. I have already referred to the 30% discount applied to the Kemp Strang claim. In these circumstances, if Mr Hudson wished to challenge the reasonableness of the amounts claimed he should have cross-examined the deponents or called evidence of his own. The absence of any evidence from Mr Hudson meant that unless, on the face of things, the fees were manifestly unreasonable the court could act on them.

71    The notion that the practitioners’ invoices (particular (d)) were irrelevant is a startling one. As Finn J observed in Ginos Engineers at [24], it is not uncommon for a court to take as its starting point the evidence of the charges for professional costs incurred and disbursements made by the lawyers of the party awarded costs, regardless of whether costs are to be assessed on an indemnity basis. Indeed, it is a matter of common sense that in fixing the amount the Court would begin by examining what had been charged.

72    Consequently, I am of the opinion that ground 3 enjoys little chance of success on appeal.

73    No submissions were made either orally or in writing in support of grounds 4, 5 or 6, presumably because Mr Hudson had nothing to say.

74    No error was identified in the three other costs decisions which are challenged in ground 6.

75    In all these circumstances, I am not persuaded that the decision of the primary judge is attended by sufficient doubt to warrant its reconsideration on appeal.

76    In any event, I am not satisfied that substantial injustice would result if leave were refused. The purpose of the proposed appeal is to enable the taxation of the costs to proceed, but the evidence does not indicate that Mr Hudson’s position would be improved on taxation. Mr Hudson asserted that by making the payments to the practitioners on 24 October he had paid more than he would have to pay “if he fares well on taxation”. This is little more than a pious hope, however, as the primary judge discounted the practitioners’ fees and did not award interest. The fact that his Honour’s order increased the Registrar’s estimate is of little, if any significance. His Honour observed (and it is not in dispute) that the material before the Registrar was “less comprehensive” than that which he had available to him.

Conclusion

77    Leave to appeal should therefore be refused and the notice of appeal dismissed as incompetent. Costs should follow the event.

Associate:

Dated:    28 November 2016

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